The new normal for B-schools

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Most business schools are hanging on tight to their bundled view of the world. Most business schools are hanging on tight to their bundled view of the world.
SummaryTo unbundle or not to unbundle—that is the question

While business schools have been busily preaching to future business leaders how to avoid the threats of disruptive technologies and business models, they themselves are being disrupted. What was considered historically normal—the development and delivery of a programme on campus in exchange for a fee—is changing fast. The advent of new technologies (big data analytics) and new offerings (MOOCs—massive open online courses) is creating a new normal: the unbundling of the real value that programmes can provide for future business leaders.

Unbundling is not new. Far from it. Many vertically-integrated industries have unbundled—such as when personal computers emerged in the 1980s from the mainframe and minicomputer industry. Today’s airline industry has taken this unbundling one step further. If you want a flight from A to B, then there’s a price for that. If you are taking any extra luggage, there’s an extra service charge. If you want a special seat, you incur another charge. There are separate fees for paying by credit card or boarding faster. And so on.

Most business schools are hanging on tight to their bundled view of the world. They say their programmes provide a ‘holistic’ education for their participants, who get an excellent learning experience from great faculty while at the same time building their network. Furthermore, because of the way business schools and universities in general are structured, the attempt to ‘hang on’ will continue. Traditional business school faculty are trained to be true researchers in their field of specialisation and to impart their wisdom in these areas. Only through experience do some faculty learn to engage participants in applying their knowledge and integrating it with other content. Whether this knowledge is in fact having any impact and whether the participants are gaining valuable networks is nice to know but simply irrelevant in their career trajectory of making full professor.

This inability to change has encouraged non-business school players to develop a plethora of new unbundled offerings. If future business leaders want to assess where they are compared to others, large-scale assessment services are available in their companies. If they want to know and understand new content, they can take a free MOOC online. Many large consulting firms offer large-scale online programmes for a fee with coaches helping these future leaders to apply the knowledge to their situation. Other consultancies give workshops that use business leaders’ knowledge and experience to create new knowledge for the organisation. Executive coaches are providing in-depth services on how future leaders can learn to ‘be’ in their own business contexts. Finally, a number of social network providers offer services for business school alumni networks that are in some cases far superior to those provided by the schools themselves.

Which road to take?

Faced with this unbundling trend, business schools can take one of two potential roads in the future. The well-travelled one sees business schools retreating to their ‘roots’—creating knowledge through great research and relying on their stellar brand name. The less-travelled one sees schools providing a suite of unbundled offerings that focus on the leader’s development journey.

Most if not all business schools are following the first path, hoping that new knowledge ‘content’ will attract future business leaders.

But since the new knowledge lies in the heads of the faculty, good professors may bypass the traditional business school delivery system and go direct to MOOCs in the hope of reaching a wider audience. Should the programme prove to be widely popular, the benefit will revert primarily to the professor and not the school. We have already started to witness the creation of the star professor through this mechanism. Their speaking fees increase and consulting opportunities improve, and the business school idly watches as its ‘reputation’ apparently starts to benefit. To maintain or improve its reputation, the school must search for star faculty; as a result, recruitment costs inevitably increase. It is no wonder that the size of fund-raising campaigns for business schools is very large—from 100 million euros to several billion. Paradoxically, with increased funds from ‘fund-raising’, these business schools can become even more removed from market forces. Only a few schools will be able to continue playing this game. Others will start to lose their lustre.

The second, less-travelled road is to create an unbundled offering from which individual executives or their companies can choose. And this, I believe, is the better path to take for business schools that are serious about developing business leaders.

What sort of unbundled options might such a school offer? These could include an index for executives to measure where they are on their development journey, as well as access to new knowledge about areas where they need to develop. Leaders wanting to understand and apply new content could take online programmes, while others might prefer face-to-face programmes with content that is connected to other aspects of business leadership. These programmes could be complemented by personalised executive coaching, either online or face-to-face. Finally, ‘unbundled’ schools can offer valuable networking tools for business leaders looking to develop networks with their peers. But only those business schools that put the development of the business leader, not the production of great research, as their core focus will be able to make this option a reality.

This ‘new normal’ presents the business school world with one of its toughest challenges so far. But there are opportunities too. Schools must decide whether or not to unbundle their real value they provide business leaders—and they should decide sooner rather than later.

James Henderson

The author is professor of Strategic Management at IMD, Lausanne, Switzerland

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