January 31, 2011 12:33 am

Time to innovate: the future of traditional business schools

 
The Singapore campus of Insead business school

Selling point: the Singapore campus of Insead, whose one-year MBA involves study on two campuses

For Monisha Varadan and Joachim Vandaele, life is not quite how they envisaged it when they enrolled in the Insead MBA just a year ago. Next month, they are due to become owners of a large internet training company. It has been a particular surprise for Varadan – a former journalist who then worked in the City of London – because it was at Insead, she says, where she had her first experience of entrepreneurship.

Indeed it was just six months ago that Varadan, 30, and Vandaele, 32, first worked together, during a course designed to identify companies ripe for a buy-out. Now they have constructed a business plan, raised private equity capital and put their lessons into practice. “The real test of the MBA is when you go back to the real world to test your learning,” says Vandaele, a former banker and consultant.

Although the numbers are still small, a growing percentage of MBA graduates are opting to become entrepreneurs. At MIT Sloan, 8.4 per cent of MBA students who graduated in 2010 started their own companies on graduation, one of the highest proportions to date. At Harvard Business School, between 35 and 45 students followed the same path.

The move is a direct reaction to the recession, says Jana Kierstead, managing director of MBA career and professional development at Harvard. “These people have seen a lot. They have seen their parents laid off; they have seen their friends laid off. They were profoundly affected by seeing their colleagues pack their boxes and leave.”

The banking scandals of 2008-09 and the subsequent breakdown of trust in business have led business schools to an inflection point. The coming year will be critical for their continued bid to rebuild the tarnished MBA brand and for laying the foundation for the business schools of the future.

Traditional, campus-based MBA programmes in the US and Europe are facing more competition than ever owing to accelerating growth in the number of schools in developing countries and an explosion in online learning. How will the world’s top business schools, especially those in the US, become global players? And how will they build scale while retaining quality?

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Paul Danos, long-term dean of the Tuck School of Business at Ivy League Dartmouth College in New Hampshire, describes traditional business schools as a “throwback” model. “Nobody has a big market share. We’re all big fish in our small ponds,” he says.

Elite business schools have also been slow to innovate, says Karl Ulrich, vice-dean for innovation at the University of Pennsylvania’s Wharton School. “The lead institutions have been the last to innovate. The second- and third-tier institutions have been doing really interesting things, because they have had to.”

Leading the way among the top schools has been the Kenan-Flagler Business School at the University of North Carolina, which will launch a distance-learning MBA this year that adheres to all the entrance and content criteria used for its other MBA programmes – including a requirement for applicants to take the Graduate Management Admission Test. James Dean, the school’s dean, says he is in no doubt that others will follow.

While some schools concentrate on the need for size and scale, others are tackling the suite of programmes they offer. Santiago Iñiguez, dean of IE Business School in Madrid, refers to the “hybridisation” of the market. “After years of commoditisation when an MBA meant the same thing, we will now see an explosion of differentiation,” he says.

For example, MBAs are increasingly offered as joint or double degrees with other subject areas or business schools. There is also growing interest in masters and other types of degrees.

David Schmittlein, dean of MIT Sloan, is one US business school boss who has always valued degree plurality. “If management education is really valuable, how much of it should be for 28-year-olds who have worked for five or six years? I don’t have anything against the MBA programme; it just isn’t the be-all and end-all.”

Moreover, the traditional divide between one-year MBAs in Europe and two-year degrees in the US, though never clear-cut, could blur even further, with traditional US schools such as Kellogg School of Management, just outside Chicago, building up their accelerated one-year degrees.

Eric Weber, associate dean of Iese Business School in Spain, which offers one of Europe’s few two-year MBAs, says one drawback to a one-year degree is that it usually does not include a summer internship. “The obstacle to [one-year programmes] is that recruiters use internships to ‘test-drive’ students,” he says.

Many disagree. Carol Stephenson is dean of the Richard Ivey School of Business at the University of Western Ontario, which reduced the length of its MBA from two years to one. In 2010, 92 per cent of the class had jobs three months after graduation. “There is the idea that you need an internship,” she says. “That turned out to be a myth.”

Jake Cohen, dean of the MBA programme at Insead – arguably the best-known one-year programme in the world, enrolling 1,000 students a year – says the one-year time frame with study on two campuses has become the school’s value proposition. “This is the big reason they apply to Insead,” he says.

Though many business schools are poised for change, conservative forces may yet mean they become complacent, reverting to the pre-recessionary model. For although some students have eschewed the traditional MBA job route, most have not.

Graduates are considering a wider range of jobs than a decade ago, but recruiters are looking for very much the same skills as before the recession, says Susan Kline, director of MBA career development at MIT Sloan. “I have no sense that corporations are asking for something different from our students,” she says.

With the recession ending and recruitment opportunities up overall – the schools at the top of this year’s Financial Times MBA ranking report increases in students employed of roughly 10 percentage points – business schools would usually expect to see a decrease in applications as managers seek job opportunities with their existing employers.

But over the past year, there have been few signs that applications have fallen. That could change. J.J. Cutler, deputy vice-dean of MBA admissions, financial aid and career services at Wharton, predicts applications at the school will be down slightly over the next cycle as a result of the growth in opportunities in emerging markets such as India and China.

The more things change, it seems, the more they stay the same.

As the recently appointed leader of your business school, what was your New Year’s resolution?

Sally Blount, dean, Kellogg School of Management, Northwestern University, US
Sally Blount
Dean, Kellogg School of Management, Northwestern University, US

“To initiate discussions among faculty, students and alumni that explore what it takes to educate wise, collaboratively minded leaders – leaders who will build strong organisations and transform markets for the betterment of society.”

Dominique Turpin, president, IMD, Switzerland
Dominique Turpin
President, IMD, Switzerland

“In one word – innovate. As IMD president for my first full year, I want to commit myself to working with my colleagues on regularly updating our programmes, and the way we deliver them, to best serve our learning partners. We must remain at the forefront of innovation in executive education.”

Nitin Nohria, dean, Harvard Business School, US
Nitin Nohria
Dean, Harvard Business School, US

“In 2011, I resolve to seize the moment by mobilising our faculty to drive innovation at Harvard in ways that equip our students to be leaders with the competence and character to address emerging global business and social challenges.”

Mark Taylor, dean, Warwick Business School, UK
Mark Taylor
Dean, Warwick Business School, UK

“My resolution for 2011 is for Warwick Business School to put critical and creative thinking at the heart of everything we do. I firmly believe this is the best way to align excellence in research and teaching and to provide a strong return on investment for our alumni over their entire career.”

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