Soapbox

May 18, 2014 11:30 pm

Time for business schools to unbundle their offering

The historically normal on-campus model is changing fast

It is time for business schools to separate the education product they offer to executives. With business education being disrupted as never before, unbundling represents a great opportunity for bold, nimble schools to bolster their competitive position. Yet, too few schools are doing anything about it.

At first glance, their lack of movement seems strange. After all, countless business school case studies appear each year about how industries have unbundled. In the 1980s for example, the computer industry evolved from vertically integrated mainframe computer companies to an ecosystem of unbundled players focusing on specific standardised elements of the personal computer industry. In the airline industry a full-fare air travel service has evolved, with the help of technology, into an unbundled offering where passengers pay separately for the flight, baggage, priority boarding, seat choice, food, payment method and so on.

The signs of unbundling in business education are quite clear. Many companies offer large-scale assessment services to help executives benchmark themselves against their peers. Executives can take a massive open online course (Mooc) and get fresh content for free. They can go to a consulting firm and take online programmes or workshops with coaches. Executive coaches offer further options. Finally, several social network providers offer alumni networking services that may be much better than those provided by business schools themselves.

Faced with these intrusions on their established territory, business schools have two broad options. The first is to stick with their existing “bundled” model of selling on-campus programmes taught by tenured faculty where assessment, teaching, application, coaching and networking are all part of the product. The second option is for schools to unbundle and provide a suite of programmes and services that focus on the executives’ leadership development journey.

Most if not all business schools are taking the traditional bundled option, relying on great research, tenured professors and a stellar brand name to attract top executives. These schools say their programmes provide a ‘holistic’ education for executives, who receive an excellent learning experience from great faculty while at the same time building their network. They also think – with justification in some cases – that their brands are strong enough to withstand disruption.

This bundled approach is likely to persist, not least because tenure-track professors would rather focus on research than work closely with executives. However, the risk for bundled schools is that their best professors bypass the classroom and go directly to Moocs and other online outlets (such as Ted talks) to seek greater fame and fortune. We have already started to witness the creation of star professors through this mechanism. Their speaking fees increase and consulting opportunities improve, while business schools idly watch as their ‘reputations’ apparently benefit.

The problem is that such schools must now search for star faculty to maintain or improve their reputations. As a result, recruitment costs inevitably increase. Little wonder, then, that the size of fundraising campaigns for business schools is very large – from €100m to several billion. Only a few schools will be able to continue playing this game in the medium to long term.

The second, less-travelled road is to create an unbundled menu of programmes and other services 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 executives’ leadership capabilities.

These unbundled options might include an index for executives to assess their leadership capabilities or their levels of responsibility relative to peers; online programmes providing new content; face-to-face programmes involving more interaction with other executives and deep application to their own leadership challenges; personal executive coaching (online and face-to-face); and finally high-powered online tools to help them improve their networks. Instead of a traditional bundled “take it or leave it” option, executives can take an à la carte approach and choose what they want.

However, if a business school wants to take this second “unbundled” option, it must focus on developing business leaders rather than only producing great research. And I question how many schools, especially those with entrenched tenure systems focused traditionally on research for other academics, are genuinely willing to do that.

Business schools are great at telling executives how to cope with disruptive technologies and business models, but are less good at dealing with these challenges themselves. Now they have little choice.

Disruptive new players are presenting the business school world with one of its toughest challenges so far. What was considered historically normal – the development and delivery of a programme on campus in exchange for a fee – is changing fast. Now it is time for schools to practise what they have been preaching and decide whether or not they are prepared to unbundle what they offer.

James Henderson is professor of strategic management at IMD.

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