The Trojan Horse Threat To B-Schools

Karl Ulrich, vice dean of innovation at Wharton

Karl Ulrich, vice dean of innovation at Wharton

A new analysis of technology’s impact on elite business schools today (July 16) asserts that MOOC courses are a “Trojan Horse” that can cause a massive disruption in an institution’s underlying business model.

The report, the most comprehensive study of the impact of technology on graduate business education, was written by two University of Pennsylvania Wharton School professors, Christian Terwiesch and Karl Ulrich, who have taught a combined quarter of a million students online.

The two professors predict that the technology used to deliver Massively Open Online Courses (MOOCs) has the potential to reduce the size of a school’s faculty by a third or more and to force an explicit accounting of the value of faculty research. Among other things, they estimate that it costs a business school $400,000 for its faculty to publish a single article in an ‘A’ level academic journal (see The Shockingly High Cost Of An Academic Article: $400K).


The report, “Will Video Kill the Classroom Star?,” focuses largely on the impact on some 30 of the world’s elite business schools which currently serve about 10,000 MBA students. While the pair decline to predict how many business schools might be forced to closed their doors as a result of online programming, they make no doubt about the potential for widespread upheaval.

““We are going to be humble about our ability to predict the future,” says Ulrich, vice dean of innovation at Wharton.” But we think the threat is very real. The question is what is our response to the threat.”

They note that a top full-time two-year MBA program costs about $120,000. “Blessed with those revenues, elite business schools have not focused much on efficiency,” write Ulrich and Terwiesch, a professor of operations and information technology. “Our research shows that it currently costs a business school about $1,500 in instructional costs to provide one course to one student. Moreover, business schools encourage faculty research, which itself does not generate revenues, but costs approximately $400,000 per scholarly article published.”


MOOC courses, however, dramatically lower instructional costs, possibly without the financial burden of faculty research. Based on their experience at Wharton, the pair show that it costs just pennies to register a new student in a MOOC and a few dollars for every student that actually completes the course. That cost advantage suggests there is potential for gaining major efficiencies in higher education. “The MOOC itself is not the disruption,” believes Ulrich. “It is the technology embedded in the MOOC, the asynchronous chunk video provided by an expert.”

The authors break down the MBA experience into five parts, only one of which is the teaching and learning of academic subjects—and the part they believe is most vulnerable to disruption. Four of the five core functions of an elite business school remain unthreatened, though changed, by new technology.

On the front end, says Ulrich, is the selective admissions screen. “The mere fact of being admitted to an elite MBA program is a core function of a business school because of its selection and credential value,” he says. “And on the tail end of the process, it’s the alumni network and alumni engagement that happens after a student graduates.


“In the middle, we see teaching and learning but also co-curricular activities and career management. The extracurricular activities are very significant because they provide challenging leadership opportunities to students. Career management provides valuable access to employers. All five functions are critically important. Imagine a business school that does everything but teaching and learning and another that does only teaching and learning. Most students would prefer the former and that is pretty sobering to faculty. But in this case, we argue that the four core functions insulates the elite schools against the threat because it only impacts the teaching and learning.”

The authors lay out three scenarios or “pathways” for schools. “We think the business schools themselves determine their destiny,” adds Ulrich in an interview with Poets&Quants. “You have a technology that lets you do one piece of the service delivery more efficiently. We will either serve more students or give them a better experience holding the list price constant or pursue a path in which there will be fewer faculty.

“The bad news for faculty is that we can now serve the same 10,000 students at elite schools  with a third of the faculty we have now. The elite business schools are the only part of higher education that have grown its tenure track faculty. Most other parts of the university have shrunk per student credit unit delivered.

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