Three Radical Changes That Can Save Business Schools From Extinction

If online education is a tsunami threatening the future of business schools, consider a recent report from two professors at the University of Pennsylvania’s Wharton School an emergency manual on where top business schools should seek high ground.

Karl Ulrich, Wharton’s vice dean of innovation, and Christian Terwiesch, a professor of operations and information management, write in a paper published on Wednesday that the video technology used in massive open online courses (MOOCs) would make MBA classes 40 percent cheaper to produce. A shift to this cheaper model would radically alter the traditional full-time MBA, which relies on lots of professors to offer in-class lectures.

Business schools have tiptoed around big shifts so far (for example, only a handful of top B-schools have put their MBA programs online), but full-time MBA programs have three options if they want to avoid irrelevance or extinction, the authors write:

Give students a bigger, better MBA program

The professors, who have both taught popular MOOCs, calculated that schools spend about 100 times less for each student to finish an online course than a traditional course. They write that schools should harness those potential cost savings by remaking full-time MBA programs into campus programs that give students less classroom time, but more time for experiential learning or study abroad.

This is pretty close to the status quo for B-schools, they admit, but schools could still enhance the student experience. “You can either leave the old customer satisfaction in place and you have cost savings, or you hold cost per students constant and you can provide a more worthwhile experience for students,” says Terwiesch.

“Dramatically” downsize tenure-track faculty

The professors pose a question in the title of the paper: “Will video kill the classroom star?” They don’t answer the question definitively, but do say B-schools have the clear option of “dramatically” slicing the number of tenure slots once online education becomes dominant. Professors that can become masters of video will likely get higher salaries as a result, they write.

This route isn’t as likely to happen at top B-schools that have strong enrollments and don’t face serious cost pressures, but would appeal to other colleges and universities under financial duress, they write. The point hits a nerve across higher education: Moody’s Investors Service reported on Monday that higher education faces a negative financial outlook in part because MOOCs have “accelerated the pace of change in online delivery models over the last two years.”

To avoid the ax, business faculty “should think about what can we do to deliver value to our customers so when the world changes, we’re not a Kodak married to an old technology,” Terwiesch says.

Switch to an iTunes model

The professors compare a full-time MBA program to a Swiss army knife that students can buy today to bone up on basic finance, management, and marketing to “use it one day in the future.” MOOC technology could make that model irrelevant because too much time elapses between when students learn a skill and then put it into action in the workplace.

Instead, “business education has the potential to move to mini-courses that are delivered to the learner as needed, on demand,” they write. B-schools could also certify specific skills instead of bundling courses together. That kind of shift would “dramatically change the way in which business education is delivered.”

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