‘DISRUPTION DOESN’T START WITH THE STRONGEST PLAYERS’
“Everybody knows these disruption stories don’t start with the strongest players,” says Rich Lyons, dean of UC-Berkeley’s Haas School of Business. Lyons believes that that half the business schools in the world could be out of business over the next 10 years. “What has always struck me is that the research at the AACSB (the primary accreditation agency for business schools), shows that there are 13,000 business programs in the world. Many of us play in the upper 1% of the market where there are only a little more than 100 MBA programs.If you sucked the part-time revenues out of the schools, they won’t have a viable financial model. At the edges, programs that are offering more flexible formats are starting to pull people away (from full-time programs).”
While overall MBA applications have fallen at U.S. schools overall in the past three years, with more programs being run as loss leaders, there’s been little to no disruption at the upper end of the MBA market. Of the Top 25 MBA programs in the U.S., for example, only five have experienced a decline in applications to their two-year, full-time programs (see table below). In two of the four, the dropoffs are inconsequential, less than 3% at Dartmouth College’s Tuck School (2.6%) and Emory University’s Goizueta School of Business (1.9%). The biggest fall—29.8%—at Cornell University’s Johnson Graduate School can largely be attributed to upheaval in the recruitment and admissions office.
Application increases at many of the Top 25 programs suggest a flight to the highest quality and reaffirm the perceived value of the degree. At Yale University’s School of Management, applications have climbed by 45.0% in the past three years to new records. At the University of Michigan’s Ross School, apps are up 31.7% since 2013. At UNC’s Kenan-Flagler Business School, they are up a healthy 44.0%. Applications to Harvard Business School are at near record levels, up 11.1% in the past three years.
EVEN AMONG THE VERY BEST SCHOOLS, SOME MEAGER INCREASES IN APPS IN THE PAST THREE YEARS
Yet even among the most elite and highly selective MBA brands, there are some disturbing trends. Schools that have long been known as primary feeders to the world of finance, including Wharton and Columbia Business School, have seen their applications grow far more timidly in the past three years. Wharton is up a mere 3.0%, Booth 5.5%, Columbia and NYU Stern, both up 7.3%.
Schools that are funnels to the more dynamic part of the economy, the big tech firms and the startups, have done considerably better. In the past three years, for example, the University of Washington’s Foster School in Seattle—home to Amazon, Microsoft and a thriving ecosystem of tech startups—has flourished. Foster applications are up a whopping 74.2%. Applications to the University of Texas’ McCombs School of Business in Austin, another entrepreneurial hotbed of tech players, have jumped 47.9%. At Carnegie Mellon’s Tepper School of Business, full-time apps have risen by 29.9%, at MIT Sloan by 28.0%, at UC-Berkeley Haas by 20.7%, and at Stanford Graduate School of Business by 15.0%.
Those increases, moreover, have occurred at already highly competitive MBA programs with far more applicants per seat than is necessary. A likely outcome is that there will be less expensive, more flexible MBA options and fewer full-time, residential two-year programs. “A Porsche is a better car than a Kia but there is a reason why more Kias are sold,” reasons Darden’s Lenox. “A pure online degree is inferior to a residential degree but for many people it may not make a difference. They will go for the cheaper, less valuable experience. So there will be cheap and affordable MBA programs and there will be elite, branded MBAs”
At Iowa’s Tippie College, meantime, the final class of full-time MBA students will graduate in May of 2019. By that time, don’t be surprised to find quite a few more schools scrapping their MBA programs.