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Where will innovation in business schools come from? Over the past three years, the sector has indulged in intense navel-gazing while trying to understand its role in the financial crisis. As denial turned to horror, and horror to acceptance, business schools declared they would change. But how are they going to do that?
As yet, few signs of change are visible. In spite of the creation of the most overused phrase in business school history – “doing well by doing good” – MBA students still graduate deeply in debt and take jobs in investment banks; professors still have a job for life through the tenure system, enabling them to churn out yet more impenetrable research; and business schools continue to put up their prices and tap their alumni for money.
The question about innovation is particularly apt for this edition of Business Education, which focuses on executive MBA programmes – MBAs for working managers. Over the past decade, EMBAs have delivered some of the most innovative developments in management education. Online study groups that use networking technology were pioneered in EMBA programmes and are now widespread, even among campus-based MBAs. And global travel – now the norm in any top-ranked business degree – was first introduced in EMBAs.
But will EMBAs be the catalyst for change again? In search of answers, I turned to The Innovator’s Dilemma, by Clayton Christensen, a professor at Harvard, in which he expounds his theory of disruptive technologies. One of my favourite case studies shows how Johnson & Johnson rewrote the business model for contact lenses with the disposable lens. These were more convenient and cheaper than traditional lenses, but wearers bought far more of them, making the business very profitable. The move fits neatly into Christensen’s definition: “Products based on disruptive technologies are typically cheaper, simpler, smaller and, frequently, more convenient to use.”
If this is a message that business schools should take on board, it is pretty scary. Christensen says: “There are times at which it is right not to listen to customers, right to invest in developing lower-performance products that promise lower margins, and right to aggressively pursue small, rather than substantial, markets.”
Are there traditional business schools that have effectively launched cheaper, simpler, smaller and more convenient products? One of the few examples I can find is TecMilenio University, set up by Monterrey Tech in Mexico in 2002 as a sort of diffusion brand to fend off competition from low-cost, imported online education. It has done pretty well, but it is hard to imagine the top US schools setting up cheap-and-cheerful diffusion brands in the way fashion houses do.
Of course, schools such as Chicago Booth, Columbia and Stanford made a stab at this a decade ago when they became partners in the dotcom start-up UNext, supplying online courses through a central provider. But the experience was a decidedly unhappy one for the schools, and the experiment was quickly swept under the carpet.
So where will the disruptive innovator come from this time? Talking to schools, there is a clear assumption that it will be a technological application that will change the market; that devices such as the iPad combined with high-speed internet connections will deliver management education at a lower cost and in a more convenient fashion. At the heart of the argument is the fact that the best professors are in the US and western Europe, while the greatest need and future demand for management education is in Asia. There are many converts to this view. Even Jack Welch, the former chief executive of General Electric, has signed up to offer his own online MBA.
Of course, no one is suggesting this would be a replacement for a Wharton MBA. These programmes might simply deliver education at a price point and with a convenience that would appeal to a different clientele. They could wipe out many of the lower-quality MBA programmes, though.
But are these assumptions valid, or will the breakthrough come from somewhere else completely?
My favourite case study of all time also involves contact lenses, but includes chickens too. The classic Harvard case concerns a business plan to sell contact lenses for chickens, on the grounds that chickens with bad eyesight are less likely to establish a pecking order, so protecting the farmer’s profits. The alternative is debeaking – a nasty process. Only when students have agonised for hours does the professor reveal the awful truth. Fitting the chicken coops with red light bulbs works just as well.
The lesson? Always question your assumptions.