Time to evolve or perish in a changing world

Time to evolve or perish in a changing world

Like many industries before it, business education is witnessing the disintegration of its value chain. This is creating opportunities for a new breed of participants and presenting incumbents with an unprecedented set of challenges.

The prototypical business school of the 20th century thrived on a model that offered everything required to produce knowledge, recruit students, design courses, deliver instruction, certify the students’ learning and help them land jobs. However, the combined effects of new technology, competition from other producers and distributors of knowledge and the need for greater economic efficiencies have destabilised this model.

What are the implications for the industry? It creates opportunities for new players to position themselves on one or a few lucrative links of the value chain. For example, it might be argued that few things are more central to the work of an educational institution than evaluating student performance, but EduMetry specialises in grading college students’ exams and term papers with the work being done by specialists in Asia.

Pearson Education – part of the group that owns the Financial Times – has developed a digital repository, Equella, that, with Moodle, can serve as the source of myriad course development options. Private-for-profit companies in the massive open online course space, such as Coursera, do not invest in research or in course design but instead focus on delivery. Corporate universities focus on programme design and use publicly available knowledge. Consulting firms and authors produce high-impact research that is widely used in business school curriculums. Each of these competes with links in the old value chain. 

So what are the implications for established business schools? They are being forced to question the viability of their traditional model. While a few elite schools with strong global brands may be able to keep the competitors at bay, most will not. Most will have to decide what their core business is and withdraw from or outsource non-core areas. For example, some schools may decide research is no longer a viable option and might focus on teaching and programme design. Some may withdraw from course design and focus on value-added delivery of Moocs, by a more malleable and less expensive cadre of instructors. Others may outsource student selection, grading of students’ work or career services to specialists who can perform these tasks for a fraction of the cost.

The disintegration of the business education value chain will force wrenching choices for existing players. “Strategic planning” in the business school world used to revolve principally around imitation – adding more teachers, programmes, alliances, buildings, IT infrastructures, etc; deans were fundraisers whose mission was not so much to make tough strategic choices but to feed the beast.

The good news for deans today is that they should use disintegration to undertake a fact-based, realistic look at their school’s position in the value chain and invent strategic alternatives. This may involve abandoning some activities, including sacrosanct research, or entering newer ones such as consulting services where students handle projects under the supervision of practice-oriented staff, or ramping up the use of virtual teaching technologies. These solutions will put their schools and staff at risk, since they will often bump up against the strong forces of old habits, rankings and accreditation. But the platform is burning and staying with the old model is not an option.

Many teachers and researchers see the new era as full of threats for business schools (and themselves), but we believe it brings opportunities. To thrive in a disintegrating market, schools need progressive deans who dare to confront the many sacred cows in our profession and who have the skills to avoid losing their heads in the process.

Published in The Financial Times. Co-authored with John R. Kimberley, Professor of Entrepreneurial Management, University of Pennsylvania, The Wharton School.

ESSEC Knowledge on X