How Western Business Schools Should Play Asia

Asia is where the growth is, so B-schools need to prepare their MBAs for an Asia-centric future. Here are a few things smart B-schools can do to keep up

As the ice hockey legend Wayne Gretzky astutely noted, one should "skate to where the puck will be, not where it is now." In management education, the puck is moving rapidly toward Asia. Western business schools that do not figure out how to play the Asia game effectively run a serious risk of ending up as regional players.

Consider a few facts: Asia today accounts for over a quarter of the world's gross domestic product and is growing at more than twice the pace of other regions. Within two decades it will constitute almost half of the world's GDP and be larger than the U.S. and Europe combined. Asia is also becoming more Asian. Intra-Asia trade presently accounts for about 54% of all cross-border trade by Asian countries. By 2025 this figure will be closer to 75%.

Importantly, too, the composition of the world's 500 largest corporations is changing rapidly. In 1995. companies headquartered in China or India accounted for only five of the 500 largest corporations in the world. By 2009 the number had grown to 44. It could easily reach 150 by 2025. Add to this the large number of corporate giants headquartered in Japan, South Korea, Southeast Asia, and West Asia, and it is not unlikely that by 2025, half of the world's 500 largest corporations could be headquartered in Asia. Note also that, in the case of many non-Asian multinationals, Asia accounts for a large and growing proportion of its middle and senior managers' responsibilities. In short, the global market for management education is rapidly becoming Asia-centric.

smarter to partner up

Most business schools are analogous to diversified companies with multiple product lines—related yet distinct in terms of target customers, value propositions, and value-creation and delivery systems. As such, the rise of Asia has different implications for different product lines: undergraduate, MBA, EMBA, and executive education. Since faculty research and doctoral programs have always been extremely global, these require the least amount of tinkering.

In the case of programs that involve large numbers of students over a multi-year time frame (such as the four-year undergraduate degree program, the two-year full-time MBA, and the three-year part-time MBA), we deem it unwise to consider building an Asian footprint, except in those rare cases where a generous host government is willing to underwrite all or most of the costs. Large numbers and long duration make these programs very resource-intensive. For such programs, creating an Asian footprint would subject the Western business school to heavy startup costs, tough competition from local players, lower fee structures, and extremely severe resource constraints in terms of top-tier faculty.

The right approach for these programs is to stay confined to the home campus, attract a reasonable proportion of bright Asian students, and transform the learning content and format with the goal of making graduates "Asia smart." One of the best ways to do this is to require that every student undertake immersion field visits to at least two Asian countries—preceded by intensive classroom learning about the country to be visited and capped by systematic debriefing and analysis of the lessons learned. Field visits, however, cannot be the sole strategy to transform the content of learning. Business schools also need to invest in helping their faculties become more knowledgeable about Asia so the content of regular on-campus courses becomes more global and less Western-centric.

For a growing number of business schools, the executive MBA has moved from the periphery to the center and is rapidly becoming one of the core programs. The short duration (typically 18 months) and modular format (four to six consecutive days once per month) of the EMBA program makes such offering extremely amenable to globalization.

We predict that by 2020 the most successful EMBA programs will be those that are taught across multiple continents, include at least two Asian locations, and are the product of a formal long-term collaboration among two or three business schools, each with its home base at one of the teaching locations.

immersive stays in Asia are essential

Our logic is straightforward. First, in order to excel, managers need deep, on-the-ground understanding of the world's major economies. In most cases such understanding will be better provided by local experts than by a faculty member based in the U.S. or Europe on a short visit to the foreign location. Second, ambitious managers also need tight interpersonal linkages with colleagues who are native to, grew up in, and are embedded in these economies. These linkages (in terms of both number and strength) are most naturally developed when the EMBA student undertakes the entire 18-month program with a cohort of peers rooted in different economies and cultures. Third, by leveraging the geographically complementary resources, relationships, and reputations of partner schools, collaborative EMBA programs are likely be both more effective and more efficient on all key dimensions: marketing, the teaching-learning process, operations, and placement. Finally, students who graduate from dual-degree programs (such as the INSEAD-Tsinghua EMBA or the Kellogg-Hong Kong UST EMBA) will have the added advantage of lifelong memberships in different and non-overlapping alumni networks across two or more continents.

Given their short duration and near-complete freedom from institutional constraints, nondegree executive-education programs offer Western business schools the greatest degree of flexibility. A business school's Asia strategy for these programs should be extremely market-centric and tailored to the peculiarities of each specific country and, if need be, even a particular industry within the country. Even questions such as whether or not to partner with another institution (such as a business school, a government agency, an industry association, or a law firm) should be viewed as tactical questions to be addressed on a case-by-case basis.

For many of the leading Western business schools, the toughest issue regarding nondegree executive-education programs pertains to pricing. Notwithstanding the fact that companies such as Tata Motors (TTM), Infosys (INFY), Huawei, and Haier are large global corporations by any measure, it is critical to remember that they are creatures of an extremely cost-conscious environment. More often than not, a lower cost structure is also one of their primary sources of global competitive advantage. As a result, they tend to be price-conscious buyers and tough negotiators.

western b-schools must prove their premium

Whether or not a Tata Motors or a Huawei will be willing to pay a premium price to a Western business school—relative to a top-tier local school—will depend entirely on two factors: one, whether or not the Western business school can make a persuasive case that it offers added value; two, whether or not it brings brand cachet as a "thought leader." Faculty from a top-tier local school will almost always bring a better understanding of the local environment. The Western business school must be able to prove that the expertise of its faculty on globally important subjects will more than compensate for any weaknesses in local knowledge.

Partnering with a local school on an as-needed basis can be another strategy to address this weakness. Aside from making the case for added value, it is also important to note that premium pricing is impossible without a top-tier brand image. Even schools such as Harvard, Wharton, or INSEAD that enjoy the highest rankings in global surveys need to keep investing in brand-building efforts. Several of the leading local players in countries such as China, India, South Korea, and Singapore are extremely ambitious. They are also rapidly building the financial muscle to recruit top-tier PhD graduates and faculty from Western business schools to try to leapfrog into the ranks of the leading global schools.

In sum, Asia is different, diverse, and dynamic. To Western business schools it offers vast new opportunities but also serious competitive challenges. In designing their Asia strategies, business school deans need to undertake the analysis for each product line separately. They should also never forget the central maxim of business strategy: If you don't have a competitive advantage, don't compete.

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