A month ago, I had the chance to present a report on how value in business education is being redefined. I have decided to “open-source” it: I will deliver it down to your inbox in three different chapters, as a Summer read for you.
This is the first delivery. Enjoy!
Quick Read: Executive Summary in 2’
In the light of radical changes in the business context (digital revolution, platformization of the economy, “second machine age”, “fourth industrial revolution”, etc.…) the structure of value creation and the basis of competition in business education is shifting.
The equation by which business schools delivered and captured consistent value to students and companies, a bundle of knowledge, learning experiences and “signaling” through a lasting credential, is turning obsolete.
Knowledge has been digitized, made abundant and demonetized. Learning has been redefined by the use of data and platforms. Traditional degrees have lost their monopoly.
Value is shifting into new areas of value creation, where new players are capturing portions of this value and are putting incumbents at stake. In general, new players in business education are super-credible, super-focused and super-flexible new entities, with no faculty “tenure” and no “rankings” incentives.
These new players are dominating the growing “fast skills” industry (the learning of skills that match specific jobs or career tracks), and from this position, they are following upward trajectories that might threaten “core” business activities of incumbent business schools.
If new players dominate the “fast skills”, incumbents might have a window of opportunity with “slow skills” (those “thinking” mechanisms that make humans unique with respect to machines). In some way, if “fast skills” are “apps” in our smartphone, “thinking skills” are the operating system. However, some new players, leveraged by flexible cost structures, might have already “appropriated” some value areas in the more sophisticated, premium business education where students and executives learn how to master this “thinking” mechanisms.
Business schools will have to reframe their role. Individuals and organizations will turn out to be lifelong learning “species” where the future will no longer be an extrapolation of the past. Their life will be a learning pathway defined as a continuum. Multiple players will appear in this continuum and business schools will have to be orchestrators of this ecosystem: they will have to transition from designing products (programs) to platforms.
During this journey, sometimes stormy, waves of irruption of new players will coexist with waves of concentration. The business education industry has already started a process of bifurcation where leading incumbents heavily invested in their brands and with large financial resources, are decoupling from the rest through a double vector: globalization and technology.
Redefinition of value in business education
Traditionally, business education institutions have been able to produce and capture value by offering a “bundle”:
- Delivering relevant knowledge, taking advantage of a certain information asymmetry between “sender” (professor, business school) and “recipient” (student, participant)
- Delivering a meaningful, synchronous learning experience altogether, including a certain sense of community based on the interaction between students and professors, in the context of a lively campus.
- Issuing an “official”, lasting credential (traditional degree) that signals certain qualities and reduces market asymmetries (for instance, when it comes to employment). Traditional degrees have the characteristic of being highly regulated.
We describe this model through an equation of value , where “k” is knowledge (access to knowledge), “x” is the delivery of a learning experience and “c” is a traditional degree or credential. This equation entails an intrinsic complexity based on dealing with different business models in the same bundle: (k+x) is based on a value-added business model, where “inputs” are improved through the process of learning; while “c” is the enabler of a “matchmaking” business model, where “outputs” are matched to the needs of recruiting companies.
However, the entire equation is at stake these days.
For one, digitization has made information and knowledge “abundant”, which has mostly demonetized access to it. Among many other implications beyond monetization, the professor is not the “sage on the stage” anymore, but someone more like a “coach”, “mentor”, “facilitator” or “curator”. Also, digital content, as in other informational industries, can be unbundled and rebundled in a number of ways (course tracks, certificates, etc..) as you would do, let’s say, with music playlists.
The learning experience is also in the process of digitization and progressive demonetization, thanks to the combination of new learning management platforms, the transition of MOOCs into SPOCs (small private online courses) and the promising new applications of VR and AR (virtual and augmented reality) in the realm of education. As Anant Agarwal, CEO of EdX, puts it, “digital learning is still in the beginning of a Moore’s Law-like curve”.
Finally, when it comes to the “matchmaking” model of business education, significant changes in the configuration of work, enabled by the rise of platforms (“uberization” of the economy), diminish progressively the role of signaling of traditional degrees. Recent research by Google’s head of HR Laszlo Bock, and also other similar studies at the Rotman School (University of Toronto) and Yale found that traditional degrees, even at elite business schools, are losing their “signaling” capacity when it comes to predicting a graduate student performance in an organization, with an exception: the two first years of a job in consulting and banking industries.
Matchmaking tends to be more algorithmic, where companies and projects match “on-time”/”on-demand” talent with skills and ideas, which in turn might prompt the rise of micro credentials/nanodegrees for those skills.
Old value drivers are seeing its influence diminished, but new drivers emerge: for instance, personalization of education across the entire life of an individual or an organization. In short, there is a shift in the basis of competition, which is attracting a number of new players and adjacent players into the game, who may threaten the ability of incumbents to capture value down the road.
Within this framework, the following are some of the most significant macro trends and trends in the realm of business education: