Are business schools fit for the future?

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The growth of business education over the past 60 years has been phenomenal, with more than 16,000 business schools operating worldwide, according to an AACSB estimate. Yet a growing range of challenges will mean that in 25 years’ time, many of our business schools will not exist, and none will exist in their current form.

Business schools have grown to meet a universal need for thought leadership, education and training for businesses and management professionals. In the UK, some 130 business schools teach more university graduates than any other subject area and are responsible for attracting one in three of all international students studying in a British university. They contribute £3.25bn to the UK economy and are major sources of university income, supporting other departments in many UK institutions.

Changing markets and new competitors, combined with the multiple pressures of faculty shortages and the need to achieve research excellence, high-quality teaching and stakeholder engagement, now mean the standard business model of business schools is becoming obsolete.

At the same time a more fundamental challenge is emerging: the credibility, even legitimacy, of business schools as the dominant source of ideas, expertise and training for business and management professionals.

Changing markets and new competitors
Successful business schools have expanded their portfolio of programmes, revenues and staff numbers by riding several waves of market demand. Some began with a focus on the MBA as their distinctive product and revenue earner, others have only recently evolved from undergraduate to postgraduate provision. The introduction of student fees created a new source of income – but pushed up the need for support services, tutors and careers advice.

International students have been the main source of growth across the UK business school sector for the last 15 years, driving the proliferation of specialist courses and increasing revenues. But the position taken by the UK Home Office on international students, alongside Brexit and combined with a growth in competitor schools outside the UK, has led to a decline in international students coming to the UK in recent years (by 8.6 percent in 2014/15, for example).

International competitors have been on the rise for several decades, threatening the dominance of the Anglo-American business school model, but only recently, with a surge of new contenders in Asia and mainland Europe, has this begun to seriously affect the UK sector. Many UK institutions have responded with internationalisation strategies, through partnerships, dual-degree programmes, online delivery and overseas campuses, leveraging respected UK degrees and brands abroad.

Alongside this, private sector providers, enabled by changes in Government legislation, can now gain degree-awarding powers in the UK and are targeting lucrative management and business degrees. Pearson Business School at Pearson College London, for example, is expanding its reach partly through partnerships with established players, such as King’s College London and Manchester Metropolitan University. Internationally, McKinsey Academy, Korn Ferry and PwC, LinkedIn’s, as well as an alliance between the Financial Times and the Spanish business school IE, are examples of a growing number of new entrants.

Despite this increasingly competitive environment, there is evidence that institutions are adapting to these challenges, as evidenced in Pathways to Success’ – the Chartered ABS study of strategic groups across the UK business school sector. Rather than gravitating towards a standard business model, they are pursuing different strategies – leveraging scale, focusing on specific programmes or markets, or adopting distinctive themes and partnerships that encompass both research and teaching.

Top business schools, in the UK and worldwide, manage a ‘premium positioning’ strategy, investing in high-quality facilities and support staff to attract students (and leading professors) at a high price point. A high ranking and strong brand is always underpinned through investment in research. This provides a clue to what underlies the overall growth of the sector: the credibility of business school professors as a source of knowledge and expertise that adds value to individual managers, companies and policy makers. This is where the biggest challenge of all is emerging.

The future. Can business schools maintain their legitimacy?
The dominant position of business schools as thought leaders is under threat, for two key reasons. First, a large and perhaps growing proportion of academic papers, the main output of business academics, are irrelevant – literally useless – in any real business context. Academics receive strong incentives to publish and the competitive drive for technical sophistication in the world of the peer-review journal has overtaken the drive to focus on solving real-world problems.

Second, a wide range of non-academic experts, practitioners, consultants and journalists – some credible and some not so – are challenging this hegemony. They are riding the wave of social media and benefiting from a general disillusionment with established experts. Demand for informed input to shape business and management practice grows relentlessly and the new challengers are filling a vacuum left by business school academics, many of whom prefer to stay in their ivory towers.

At a fundamental level legitimacy underpins an organisation’s reason for being. It stems from appropriateness, worthiness and trustworthiness, allowing it to have influence and impact and secure resources. The future of business schools is tied up with their future legitimacy. Without it they will have a declining influence on the next generation of business leaders and will fail to shape the behaviour of businesses or tackle the grand challenges facing the economies and societies that host them.

One solution to this relevance challenge lies, ironically, in business schools stepping back from being overly market-led. While new competitors are emerging to serve the current needs of students and managers, the long-term perspective of business school researchers may give them an important advantage.

Much of the knowledge and many of the skills appropriate for today’s workplace will not be applicable in the future. The very nature of work is undergoing rapid and significant change, partly because of automation but also because the global economy is evolving to value different kinds of expertise.

Business school academics have considerable experience in teaching students how to learn, to derive meaning from information and to question, collate evidence, frame and debate complex issues. This serves them well when information is not only readily available but increasingly transient. Education that enables students to adapt beyond the current context and immediate occupational demands, provides enduring skills that will differentiate career paths.

Similarly, research that looks beyond the immediate fads and fashions to understand the long-term shifts and the forces that are driving them, has considerable value in a world increasingly dominated by short-term thinking and sound-bites. The world needs more robust insights from the social sciences, to match those from scientists and engineers.

This has always set academics apart from consultants, policy advisers and amateur commentators and may well be the key to the survival of business schools.

Clearly, business schools need to improve their efforts on both of these fronts – to provide more ‘future-proof’ education and relevant research – to keep ahead of the competition. This will entail more explicitly and forcefully demonstrating their value and legitimacy in a challenging world.

By Professor Simon Collinson, Director of City-REDI and Chair of the Chartered Association of Business Schools

This article is from ‘Rethinking Business Education’, a collection of thought pieces produced to celebrate 25 years of the Chartered Association of Business Schools

The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI or the University of Birmingham.

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