Business schools under attack, must fight back

Business schools need to stop being too homogenous and engage in developing truly ‘different’ offerings if they are going to survive. Making changes and doing things differently will require some tough choices – but when you look at the competitive landscape, making those choices seems inevitable.

For the last nine years, I have been a strategy academic at a United Kingdom business school and a participant as well as an observer of the changes under way in higher education. While competition amongst business schools has been fierce for quite a while, the signs are increasing that business schools are under attack.

Digitalisation-fuelled competition

Competition amongst business schools is increasingly global. United Kingdom business schools have a long track record of internationalising. Many UK universities – including Lancaster, Liverpool and Nottingham, to name just a few – already have highly international portfolios with partnerships and campuses in multiple countries.

But more recently, Chinese universities have started to internationalise as well. For instance, Peking University HSBC Business School is one of the first Chinese universities with a campus in the UK.

Similarly, elite business schools in the United States are expanding internationally and offering degrees in London. Stanford’s Ignite programme is an example; a part-time offering focused on innovation and entrepreneurship, with parts of the programme delivered online.

Business schools also face competition from in-house universities run by large companies. ECLF, the Executive Corporate Learning Forum – a network of corporate universities and chief learning officers – has more than 60 members.

While the programmes delivered are often staffed by academics from leading business schools, corporate universities also directly compete with business schools, particularly in the executive education market.

For instance, management consultancy McKinsey offers management education as part of its McKinsey Academy, in order to support client organisations’ strategic transformation. Again, provision is both online and face-to-face.

The online provision of business education is eroding the traditional barriers of entry as investments in a campus are no longer necessary.

Haven’t I seen that before?

Competition is further fuelled by a lack of differentiation amongst business schools. Degree titles and syllabi of degrees such as the MSc in Management around the globe are almost identical, or at least very similar.

This is hardly surprising. Institutional theory tells us that organisations in an industry become ever more similar over time. But why?

With pressure mounting in such a competitive industry, business schools have to show certain characteristics to be considered ‘legitimate’ or they risk being punished by accreditation bodies and student applications.

Business schools that aim to compete on an international stage need to adhere to the criteria of major rankings, such as the Financial Times Full-Time MBA ranking, which features the top 100 MBA programmes worldwide.

Rankings like this emphasise students’ career progression measured by salary increase in addition to other criteria such as international mobility and student diversity, but also a school’s research ranking. The latter measure takes into account 50 academic journals recognised by the Financial Times. Thus, business schools very often create financial rewards for staff to publish in FT-listed journals.

Brexit puts EU student numbers under pressure

A third competitive pressure results from the uncertain outcome of Brexit negotiations. Research conducted by the Higher Education Policy Institute highlights the risk of a potential decrease in the number of European students by up to 60% following Brexit. This potential decline in student numbers has implications for the viability of undergraduate, and particularly postgraduate, offerings.

In a recent article, the UK Guardian reports that the London School of Economics is currently evaluating the implications of a sharp drop in European students for its portfolio of programmes.

What next?

There is a picture emerging. More and more players seem to compete for a potentially shrinking market. What do business schools need to do?

It would be a false conclusion to stop participating in global rankings. Rankings have been and are likely to remain a key signalling device for the quality of education. This is important as it is very hard for potential students and other stakeholders of business schools to judge quality from outside.

The competitive challenge for UK business schools is somewhat counter intuitive. They need to be similar enough in order to be recognised as leading business schools while, at the same time, establishing highly focused and distinctive offerings.

This tension is not unique to business schools. Recent strategy research reveals that the same issue occurs in high technology contexts where both distinctiveness and perceived membership of a recognised group of firms are vitally important.

An important way forward for UK business schools is careful profile building in one or a few areas. We already see signs of such profile building. While some business schools increasingly invest in blended offerings, others aim to establish a stronger focus on engagement with business as well as catering for a wider spectrum of society, for instance University Academy 92.

Business schools that fail to build a distinctive profile are likely to be confronted with a substantial erosion of student numbers, making a consolidation of the number of business schools in the UK a potential outcome.

A lot is going to happen in the near future. UK business schools might be under attack, yet it seems they must fight back.

Dr Martin Friesl is a senior lecturer in strategic management at Lancaster University Management School and associate editor of the International Journal of Management Reviews.