Solving The MBA’s ‘Amazon Cart’ Problem

As president and CEO of the Graduate Management Admission Council, Sangeet Chowfla believes that the malaise in the U.S. MBA market could be thought of as the Amazon shopping cart challenge.

He estimates that as many as 1.2 million candidates are stuck between “active engagement” and “active application.” In other words, they are researching programs and schools, attending info sessions and MBA fairs, maybe even prepping for the GMAT exam, but they are not applying to business school. If the 1.2 million estimate is right, it would be more than four times the roughly 250,000 people in the world believed to be currently enrolled in MBA programs.

“It’s not all that different from the person who likes something, puts it in their Amazon cart, but doesn’t buy it,” he says in an interview with Poets&Quants. “We believe there is a large population globally that is in the cart, more than one million people, with a large number in the U.S. In fact, the number in the U.S. is larger than the total number of applicants to U.S. schools last year. How do we get people who are sitting on the fence to decide to go to business school?”

‘WE NEED TO WORK TOGETHER WITH SCHOOLS TO GET PEOPLE OFF THE FENCE’

Probably, the same way that Amazon does it, muses Chowfla, by smartly segmenting the fence sitters and then contacting them with more relevant messaging. If a prospective student is stuck in the cart because he or she just received a promotion at work, for example, it may mean sending the person information on flexible MBA programs that can be earned without quitting one’s job, he suggests. If a person just had a baby, it could mean holding off on connecting again with the candidate for six months.

“There are a lot of different reasons: a new job, a promotion, personal obligations, the application process could be seen as too daunting. We need to work together with schools to reduce the decision-making friction and get people off the fence,” he says. “We need to stay engaged with these candidates to make sure they come back.”

Chowfla is in Boston this week for GMAC’s annual conference, an event that has drawn more than 700 business school deans and administrators from all over the world (next year the conference returns to Denver, Colorado). He says two themes have dominated this year’s conversations: Concern about the pipeline for MBA students in the U.S. and concern that too many new products are coming out of graduate management education and that employers don’t understand all of them.

‘THE MBA IS NOT DEAD & REPORTS OF ITS DEMISE ARE PREMATURE’

In the nearly five years that he has been CEO, he has not yet entered a testing center to take  the GMAT exam. When he took the test in the mid-1970s, before getting his MBA from the University of Delhi in India, Chowfla scored in the 95th percentile, about 720 to 730. Long out of test taking practice, he does not believe he could score that well today (though he has taken GMAC’s relatively new Executive Assessment test now being used by 31 schools for their Executive MBA programs and made the 90th percentile).

One thing seems certain. While the global market for graduate management education remains strong, the flagship program—the MBA degree—seems in decline, especially in the U.S. “”The MBA is not dead, and reports of its demise are premature,” he says. “But there is a malise out there.”

He rattles off a number of schools and countries that are either starting new MBA programs, growing enrollment in them or investing in new buildings to vastly expand their graduate management offerings, in Europe, India, Japan, Germany and China.

‘YOU CAN’T TAKE OHIO STATE AND MOVE IT TO PHOENIX’

Chowfla, a former tech industry executive who became head of GMAC in January of 2014, agrees that there is a combination of factors that explain why there are fewer MBA applicants in the pipeline.

He points to a strong economy, the dampening impact on international applications to U.S. schools by Trump and the difficulty in obtaining visas, the dramatic increase in other viable options, such as online MBAs and specialty master’s degrees in business, and the rising cost of the degree (see Four Reasons Why There Are Fewer MBA Applicants In The Pipeline).

But he also strongly believes that demographic trends are playing out to lessen demand for the degree, particularly the increase in the Hispanic population in the U.S. “Most Americans believe that going away to college is a part of coming of age,” he says. “Hispanica are more deeply rooted and invested in their families. They don’t want to leave home, and there is a concentration of them in the south when many business schools are concentrated in the Northeast and Midwest. You can’t take Ohio State and move it to Phoenix.”

WILL MORE STUDENTS IN THE WORLD STAY HOME?

A recent analysis by GMAC found that if the U.S. population mix had stayed the same as it was in the year 2000, GMAT test taking volume—now roughly185,000 people taking 250,000 tests per year—would be five percent higher than current levels. “Due to more Hispanics in the U.S. population in the years ahead, that will only exacerbate. The fundamental case for business education in the U.S. is compromised at this point.”

Besides U.S. trends, of course, there are other factors elsewhere in the world that are putting downward pressure on the U.S. market. “About 20 years ago, the emerging seven nations had a GDP that was half that of the G7 countries. Now, it is equal to the G7. By the year 2035, the E7 countries will have double the GDP of the G7.”

The increase in the middle class in these countries, reasons Chowfla, will create new opportunities for business. Many of the players in those economies are likely to stay at home for their educational needs because they will want to work in those growing home economies.

USING THE AUTOMOBILE BUSINESS AS A METAPHOR FOR MANAGEMENT EDUCATION

These trends foretell a shifting mix of products in graduate management education not unlike what occurred during the evolution of the automobile business, he says. “At first, you had the Model-T and then you had cars for every purpose from station wagons to convertibles and sports cars, to minivans, SUVs and trucks. That focus does not mean that the automobile category is in trouble. The auto companies just made sure there was differentiation among the products.”

He sees the same thing playing out in the market for graduate management education, with alternatives to the full-time MBA programs in the form of blended online MBA options, pure online MBAs, week night and weekend programs, along with the proliferation of specialty master’s in business in more than 20 fields.

Some regions of the world may be better suited for such programs than others. Pre-experience master’s in management programs, are highly popular in Europe and Asia largely because of the “structure of education” in those regions, he says. There is a greater expectation in both Europe and Asia that young people go to school, get their education and then go to work. “The U.S. is used to the idea that you go back to school after work,” he says. “In Europe, it’s an aberration.

“Only 10% of Chinese students who apply to study abroad want to go to work abroad. Ninety percent want to go back to Beijing or Shanghai to work. But about 60% of Indians want to build global careers. They are willing to work four or five years in Indian and then go to school. So Europeans and Asians like master’s in management. Indians and Americans don’t. The satisfaction and net promoter scores for full-time MBA programs are very strong.”

DON’T MISS: FOUR REASONS WHY THERE ARE FEWER MBA APPLICANTS IN THE PIPELINE