Can Half The Business Schools Really Go Out Of Business?

Interestingly enough, Lyons is no great fan of giving away product for free via MOOCs. That is why Haas has not jumped on the MOOC bandwagon. “They have their role, particularly for democratizing access to strong material,” he says. “But a course at a top business school distinguishes itself via elements like live interaction with top faculty, well-designed interactions among students, and learning by doing. Put differently, our courses are about knowing, doing and being, the latter includes cultural values that Berkeley-Haas takes seriously. MOOCs are (only) about knowing.

“Yes, MOOCs are mostly about a new channel. Their potential in themselves to change the product that we offer is minimal. There is more potential in the carving up of MOOC content for use in ‘flipping’ the classroom. But in that case the operable unit of content is not the course, but select course parts. Today’s MOOC platforms don’t own the parts, so when the parts start to get valuable, MOOC economics will shift to the owners of those parts.”

What of his prognosis that half the business schools in the U.S. could very well close their doors within five to ten years? Lyons explains that research by the accreditation agency, The Association to Advance Collegiate Schools of Business (AACSB), shows that there are 13,000 business schools in the world.

When he made his prediction, many immediately assumed he was referring to the very top schools when in fact the vast majority of the 13,000 are relatively unknown and unranked, lacking even a national reputation in the countries in which they exist. Those are the schools that are most vulnerable in an initial wave of disruption, he says.  “Everybody knows these disruption stories don’t start with the strongest players.”

Lyons also believes the impact technology ultimately has on the business school universe will be more severe because it will directly impact what he says are the “sustaining economics” of the business schools. Programs for undergraduates, full-time MBAs and Phds often are loss leaders for schools. Revenue from part-time MBA, Executive MBA and open enrollment exec ed programs are where schools generate the revenue to support themselves and the other programs. Yet it is those revenue-producing programs that will be most affected by technology, he says.

TECHNOLOGY CAN BE USED BY NATIONAL AND GLOBAL BRANDS TO PLAY IN LOCAL MARKETS

“The part-time MBA market has a local pattern of competition, but digital technology globalizes that competition,” explains Lyons. “Most schools still think in terms of an addressable market.” But that notion, he adds, will soon have far less meaning than it has in the past. Global education brands, such as a Harvard, Stanford, Wharton or Berkeley, for that matter, can now use technology to cross into local and regional markets to offer attractive programs that compete directly with the offerings from local players.  “If other competitors can suck the part-time revenue out of these schools, they won’t have a viable financial model.”

In fact, Lyons thinks that one reason many schools are experiencing declines in their part-time enrollment is due to the attention being given to free or low-cost MOOC courses by business schools. “It’s getting potential students saying, ‘If I can get big chunks of that for free, I’ll try it out.’ That is having a transitory effect on part-time programs because people now want to wait-and-see how it works. At the edges, programs that are offering more flexible formats are starting to pull people away.”

AN INTERNAL REVIEW DUE IN SEPTEMBER WILL HELP TO SHAPE THE SCHOOL’S DIGITAL STRATEGY

Haas has not yet decided whether to offer an online MBA degree, but Lyons is waiting on an internal review due in September to help shape the school’s strategy moving forward. The review came out of the school’s advisory board and was begun at the urging of Ralph Bahna, a board member and then chairman of Priceline.com. “At a board meeting, Ralph said this is moving more quickly than we realize and we need to bring together the best thinkers to gain a better understanding of what impact it can have over the next ten years,” recalls Lyons.

Before his death in late February, Bahna agreed to fund the effort. The Bahna Initiative has led to the creation of  an unusual group, which includes former executives of the Bill Gates Foundation and Twitter, to forecast the impact technology could have on education in the next decade. The group’s report is expected in September, says Lyons.

One thing remains certain, believes the Haas dean: New technology is accelerating the pace of change in higher education and will ultimately claim many business schools as victims.

DON’T MISS: THE MOOC REVOLUTION: HOW TO EARN AN ELITE MBA FOR FREE or THE ONLINE MBA COMES OF AGE