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Launching a business school in a global slowdown carries pluses and minuses.
Russia’s Skolkovo School of Management, due to open to full-time MBAs at the end of this year, is banking on a focus on the emerging economies that many hope will become drivers of growth to pull the world out of the slump.
“Our focus is on fast-moving economies – Russia, India, China…Our belief is that they will come out of the recession much faster than the established economies,” says Wilfried Vanhonacker, the school’s international dean and a former dean and vice-president of the China Europe International Business School in Shanghai.
Skolkovo, on the outskirts of Moscow, cleared a hurdle late last year, taking a $245m line of credit from Sberbank, the Russian state-controlled bank. The school was granted the 10-year term credit in October, just after the global financial crisis took hold in Russia.
“It is primarily motivated by cash flow issues that we knew we would have because we are a new school starting with nothing, so we don’t really have much revenue,” Prof Vanhonacker says.
“The fact that we managed to get such a huge credit line in the depth of the crisis says a lot about the importance of this project, that it has to happen.”
The school was founded in 2006 with pledges of $10m each from 14 investors, including Chelsea football club owner Roman Abramovich and Alexei Mordashov, head of steel giant Severstal, both of whom are believed to have suffered significantly from the credit crisis.
The school sought additional investors and has boosted the number to 17, but is looking for a further four to six. That, Skolkovo hopes, will all add up to an endowment of $150m by 2010 and a venture fund worth $100m, 75 per cent of which has already been gathered.
Prof Vanhonacker admits that the financial crisis, which has wiped 80 per cent off the value of Russia’s bourses and 30 per cent off the value of the rouble, has affected the school’s fund-raising hopes.
“The founders are affected, everybody is affected,” he says. He declines to reveal which investors have failed to follow through on their pledges, saying only that they number “two or three” and insists that all have paid at least some of the amount.
“It’s not because they could not [pay], but because a lot of people panicked at the beginning…There is some adjustment, like with any situation. Most of our founders are pretty fine.”
A large proportion of the founding money has been put into start-up operational costs – hiring faculty and building a $250m campus. Currently, the school’s only revenue comes from its executive education programme, which was launched in 2007.
The school’s 18-month EMBA began in January with a 30-strong cohort of mainly small and medium-sized business owners.
The final stage of the school’s opening will be the MBA programme. It has received 40 applications and anticipates a couple of hundred all together.
Earlier this month, Skolkovo and Massachusetts Institute of Technology’s Sloan School of Management announced a series of joint programmes that will strengthen the Russian school’s international capacity, while exposing Sloan’s faculty and students to different global challenges.
Skolkovo is the brainchild of Ruben Vardanian, chairman of Troika Dialog, the Russian investment bank. It has the political blessing needed to do business in Russia, with a board chaired by Dmitry Medvedev, the country’s president.
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Ruben Vardanian, president of Skolkovo School of Management, says business education is crucial for Russia’s development.
Much of the current management education available he says is not particularly applicable to a country of emerging markets. He cites the example of case studies of companies in established countries, which whilst offering a significant learning experience are nevertheless irrelevant in rapidly emerging markets.
“It is very difficult to find case studies about failure and failed companies. In emerging markets the ratio of failure is much higher and changes happen very quickly.” A case study on a company in an emerging market is likely to date quickly as the markets are changing so rapidly.
Instead says Mr Vardanian, Skolkovo is taking a project-based approach to its management teaching.
Students will carry out three projects - a venture start-up, a project with an established corporate and also a public sector project. As well as spending nine months in Russia, participants will also spend time in China and India.
“We are not following the old rules,” adds Mr Vardanian The world is changing he says and as a consequence demand for business school education is changing as well.
“It is easy to say, but not easy to execute and trying new things is quite risky. We are trying to respond to the new realities and not replicating [existing models]. We are trying to be inventive.”