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 second delivery. Enjoy!
Macro trend #1: Bifurcation among incumbent players
The framework above describes in some way the commoditization of the old equation of value, which is driving business schools to a certain process of concentration within a traditionally fragmented industry.
- Strong global brands like Harvard or Stanford are bifurcating and creating a sort of “global competitive group” (between 5 and 10 institutions) decoupled from the rest: the 0.1% of top MBA programs in the world account for 1/3 of the overall enrollment.
- Some strong incumbent players are leading new global alliances:
- Yale School of Management set up the Global Network for Advanced Management, a teaching and research Alliance, with already 20+ top member schools, like Insead, HEC, IE, LSE, Haas Berkeley, among others.
- IE and Financial Times set up the Corporate Learning Alliance for customized executive education. Others, like the executive branch of Sciences Po have already joined.
- M&A is not a rarity in this industry anymore:
- A few French schools have consolidated in the last few years in order to catch-up with globalization. The most remarkable example is probably Skema, the merger of the business schools at Lille and Sophia-Antipolis. Through this merger, Skema has been able to implement an ambitious global strategy opening campuses in China, Brazil (through an Alliance with the leading school Fundaçao Dom Cabral) and in the Research Triangle in North Carolina (US).
- Hult Business School recently took over Ashridge, one of the most iconic Executive Education centers in the UK. Hult has followed a trajectory typical of most disruptive innovators. Started by identifying a certain “overshot” in the MBA market and offered a one-year program with focus on experiential learning and global learning (through a global rotational program). Then progressively expanded the portfolio and finally upgraded to ExecEd programs by taking over a long established player like Ashridge.
- Leading incumbents are also decoupling by heavily investing in technology and digitization.
- For instance, Harvard (University) and MIT invested in 2012 a combined $60M to launch the EdX platform in 2012. Harvard Business School created HBX, its “EdX” for the business school alone. Through HBX, Harvard Business School delivers from “keynote” courses with Clayton Christensen to “fundamentals”, like HBX Core (Credential of Readiness in business).
- The Wharton School (University of Pennsylvania) exemplifies how leading business school incumbents decouple through technology. In the last academic year alone, 35,000 people have paid $100-$150 for certificated Wharton courses in the Coursera platform, which makes a gross revenue of about $3.5M to $5M. As its Dean Geoff Garrett states, Wharton’s push for “online” is about efficiency (less hours of top faculty devoted to “commodity” content), quality (more hours devoted to meaningful learning), current revenue (out of certificates), and reputation (reputation is future revenue: increased awareness plus certificate completion are an entry pathway to residential or blended higher-margin courses in the future).
- IMD, the iconic executive education school in Lausanne, has moved most of its open executive programs to an online platform: “Global Leadership in the Cloud”, which makes personalization exponentially better.
- This is how leading incumbents convert potentially disruptive technologies into sustaining ones, improving their productivity and widening the gap with the rest of incumbent schools.
Macro trend #2: Value is shifting, which translates into the irruption of a number of new players
New sources of value creation have become relevant for students, participants and companies. The ability of business schools to capture value is also shifting. Emulating Daniel Kahneman’s “Thinking Fast, Thinking Slow” bestseller, we have split this trend into new sources of value that have to do with “Learning Fast”, as a result of the accelerated metabolism of the economy, and those that have to do with “Learning Slow”. If learning were T-shaped, “learning fast” would be the horizontal axis, while “learning slow” would be the vertical axis. We have found that although the “vertical” is more permanent, the shift of value occurs everywhere, and new players threatening business schools’ ability to capture value grow along both axes.
2.1. Irruption of a “Fast Skills” Industry
- The “on-demand” economy and its accelerated metabolism has given birth to a new educational industry formed by providers of “fast skills”. John Seely Brown has found that the life of a skill these days is 5 years compared to 20+ years a few years ago.
- One of the largest gaps GMAC has found when it comes to the motivations of GenY (Millennials) vs Gen X for studying business is that the former want to acquire “quick managerial skills” that help them “accelerate their career”.
- “Fast Skills” are easily attachable to specific jobs or job opportunities, which makes them monetizable as independent capsules. This reinforces their value proposition based on a tangible value for money.
- New players like General Assembly (San Francisco), Udacity (the MOOC platform), Foxize (Barcelona), or a number of “coding” academies are tapping into this new market, which EdTech predicts to have a global value of $30b in the upcoming few years. However, in a typical disruptive innovation trajectory, some of these new players in the “fast skills” industry, which started addressing “non-consumers” of business schools, are progressively scaling up their offerings.
- General Assembly, whose motto is “Skill Up”, started as a coding academy, and now offers courses in business, digital marketing, start-ups, career development and data science in 15 physical locations around the world. Last year, it started offering customized education for large corporations.
- Udacity, the MOOC platform, has the motto “Be in Demand” or “Master In-Demand Skills” to “fast-track your career”. It also started as an online platform for coding skills and it hasn’t certainly moved that much from computer science, but has entered the realms of business analytics and start-up growth and finance. However, it has scaled up and sophisticated its offering: for instance, partnering with Georgia Tech for a master’s degree, or designing the most comprehensive portfolio of nanodegrees in the higher education industry. Udacity launched the Nanodegree Plus, a variation of its nanodegrees that guarantees you a job in 6 months, otherwise, Udacity refunds you the fees. Recently, Udacity launched Udacity Connect, a network of physical campuses in New York, San Francisco and LA.
2.2. Experimentation and entrepreneurialism as an attitude
- Also in line with the rapid metabolism of the economy, the lean start-up culture and the rise of exponential growth organizations, entrepreneurialism and experimentation are becoming a new normal in business school.
- GMAC recently found that in the last five years, the percentage of GMAT test-takers worldwide who say they want to become entrepreneurs, has risen to 28% (up 9 points). However, this same percentage is between 40% and 50% among African, South Asian and Latin American test-takers.
- This shift of value has put “adjacent players” like Y Combinator in Silicon Valley, probably the world’s most iconic start-up incubator, as truly competitors of business school. Consider: Y Combinator offers some of the value drivers that were exclusive of business education. It is more selective than Stanford, “students” are taught by prominent “faculty” like Reid Hoffman (Linkedin) or Mark Zuckerberg (Facebook) and finally they benefit from the “Y Combinator” seal when it comes to marketing their start-up project at the end of the 2-year training program. The same signaling effect of business school exists at Y Combinator, with a slight difference: those coming on campus are not recruiters but venture capitalists willing to invest in “the next big thing”.
- Others, like Silicon Valley legendary entrepreneur Peter Thiel put it in a more radical way: he has created the “Uncollege” program to prevent brilliant students from going to college: they alternatively enroll in a 3-phase program that includes some travel, coaching by prominent entrepreneurs and even an internship at a high-growth company, possibly one of the so-called “unicorns”.
- If “entrepreneurialism” were to dominate the value creation discourse in business education, Y Combinator and others (like Google) might stand up as the purest players.
2.3. Algorithmic Personalization & Matchmaking
- One of the main implications of digitizing contents and processes in any industry is that data and the use of algorithms become a new source of value. Mobility has been reinvented by the algorithm that supports Uber; accommodation has been reinvented by the algorithm behind airbnb, etc. Chunks of higher education and business education will be reinvented by data, learning analytics and algorithms. Business schools have invested a lot of resources in measuring everything for the sake of business school rankings, except the learning process. But digital learning platforms enable schools to collect millions of points of data about each student or participant and her learning process. The ultimate aspiration of any MOOC platform is not to monetize each of their open courses but to monetize their massive data vault, probably by personalizing your lifelong learning trajectory and matching your exact “data points” with the interests of employers.
- Udacity, the MOOC platform mentioned above, showcases the type of threat for business schools these players represent. Its matching algorithm between users (students) who obtain nanodegrees for specific skills and industry leaders like Google or Amazon has turned Udacity into a prominent headhunter, turning traditional degrees into an “imperfect signaling”.
2.4. Understanding of exponential technologies
- If there is a “new player” institution that “personifies” the new body of thinking around the impact of technology in society and organizations, this is Singularity University (SU), a joint venture of Google and NASA. Since its inception, SU has sophisticated its portfolio and has progressively approached the field of business education. In a new twist, Salim Ismail, its global ambassador and best-selling author of “Exponential Organizations”, has recently set up a new consultancy, Miami-based ExO Works, that plays exactly in the intersection of exponential technologies and organizations.
- With the advent of the 4th industrial revolution, literacy on the confluence of exponential technologies (info, cogno, nano and bio) and their impact on organizations is becoming a new normal that impacts business school curricula across the different fields of knowledge.
2.5. The value of “proven tools”
- Adjacent leading players in the realm of strategic management like McKinsey (McKinsey Academy) or new “disintermediated” players, like institutes/consultancies led by bestselling professors are tapping into the opportunity of offering “proven tools” in a context of uncertainty and complexity.
- The above-mentioned ExO Works has developed the Exponential Organization Canvas and offers Sprint programs for corporate clients that aim the transformation of their organization. However, one of the best examples these days is Alex Osterwalder’s Business Model Canvas and his consultancy “Strategyzer”. Alex Osterwalder himself is following a disruptive trajectory in business education. He started by publishing his books, followed by his keynotes on business modelling. Then he created a web application to forge a community around it. Then he started doing masterclasses, next was the creation of the Strategyzer Academy with courses for individuals and finally for companies worldwide.
2.5. The renewed significance of the “Slow Skills” industry.
- The rise of the “fast-skills” industry has reinforced the opposite territory of value creation: something like the “slow skills” or those “thinking mechanisms” that run our “operating system” as managers, decision-makers or leaders. Jeff Bezos, Amazon’s CEO, has remarked that he guides himself through relevant strategic decisions by thinking on “what is not going to change down the road: what customers will still be asking for in 10 years from now”. In business education, lifelong learning is the new normal, not only for individuals but also for organizations altogether: learning turns out to be a “continuum” for individuals, while organizations also become “learning organizations” because they can’t define the future as an extrapolation of the past any longer. This implies that we must reframe and redesign constantly our “operating system”, and this requires “slow”, “in-depth”, “meaningful”
- The MIT Center for Digital Business (Brynjfolsson & McAfee, authors of “The Second Machine Age”, and Tom Davenport) has championed the idea of “augmentation” to overcome the possibility of machines replacing humans. The threat of substitution lies in routine jobs; it doesn’t matter if they are cognitive or not. For decades, business schools have trained layers of middle-management for whom the prospects of future jobs are grim. Augmentation relies on the ability of humans to leverage on technology, robots & AI to “augment” their capacities. An example of “augmentation” would be to develop better judgment as a way to “step up” once we have found patterns among massive amounts of data. “Judgment” would be one of those purely human “slow skills” whose impact can be augmented with the use of technology.
- Within this framework, what becomes “central” is not which “apps” (fast skills) we upload but the design of our operating system and how we reinstall and reframe it. BCG’s senior partner Martin Reeves says that we will be able to see machines that do strategy for us. In this context, he stresses that one of the “king” skills for humans will be “reframing”. This might sound like good news for incumbent players, some of them rooted in the liberal arts tradition of critical thinking. However, new players, without any “legacy system” in their backpacks (costs, culture, etc.) are offering “fresh” perspectives on this field and are able to offer a personalized and curated experience that incumbents, with cost structures associated mostly to administration and “tenure”, can’t offer.
2.6. Highly curated personalization.
- Thnk School of Creative Leadership (Amsterdam), Kaospilot (Denmark) and Hyperisland (Sweden) offer highly curated “high-touch” transformational learning experiences, from “college-level” to executive level. What they have in common is that the focus is not on the “functional” content anymore but on a personalized approach to the transformational project that each participant puts in the game. For this purpose, instead of the “tenure” culture, they have facilitators, curators, mentors and coaches. Although these kind of new players do not have a truly scalable nature yet, they are already making a dent in the “leadership” segment of executive education.
- In the same vein, Minerva Project (San Francisco) teaches “habits of mind” instead of functional specific contents to college-level students. The main difference between Minerva and the three players mentioned above is that Minerva is strongly rooted on its online learning platform. Minerva was started up by a former Harvard U. Dean, Stephen Kosslyn. As Wired Magazine recently put it: “Minerva teaches you no skills but a new way to think”. Just a few weeks ago, a MIT Dean (Christine Ortiz), announced the creation of a similar initiative, a college education redefined from scratch, the “Minerva of Boston”.
Characteristics of new players
Most of these new players are a threat to incumbents, not only for their ability to create and capture new value, but also because of their cost structures, which make them fit for the new basis of competition.
· They are “super-credible” and have a “massive transformative purpose”: Harvard and MIT behind EdX makes it “supercredible”, McKinsey and Stanford d.school related to Thnk School of Creative Leadership makes it “supercredible”. Same thing with Google and NASA behind Singularity U.
· They have a “super-focus” instead of unfocused, broad portfolios.
· They have “super-flexible” cost structures, with relatively small overheads, even some times relying on “staff-on-demand” for core activities. No faculty “tenure” culture.
· They understand their environment as an ecosystem where they can tap into new opportunities of collaboration.
· They measure what’s relevant for students and participants. No business school rankings culture.