UK: Battle of the business schools.

UK: Battle of the business schools. - The rise of the corporate university is forcing traditional business schools to sharpen their acts and form unlikely partnerships.

by Stuart Crainer.
Last Updated: 31 Aug 2010

The rise of the corporate university is forcing traditional business schools to sharpen their acts and form unlikely partnerships.

Business schools have been one of the great success stories of the past 50 years. From their American origins, they have conquered the world, becoming a massive industry. The global market in executive education is estimated to be worth over £7 billion. Each year, British business schools attract more than 37,000 foreign students, bringing in revenues in excess of £500 million, making them among the top 50 UK exporters.

The Association of MBAs estimates that, in the UK, 10,000 people will gain an MBA annually by the year 2000 - nearly 10 times as many as in 1980. More than 100,000 already gain an MBA every year from business schools around the world.

The number of business schools has also mushroomed over the past 20 years.

The Association of Business Schools in the UK now has over 100 members, ranging from newcomers such as Croydon Business School to old stagers like London Business School and Henley Management College. There are also surprising interlopers such as the Royal Agricultural College School of Business. Everyone, it seems, wants to board the business school bandwagon.

The statistics are impressive and gung-ho predictions for further growth are not hard to find. There are estimated to be over four million managers and administrators in the UK, so the untapped market remains substantial. Demand for executive education is high and likely to grow if trends such as lifetime learning continue to develop.

Against this background, it is easy to assume that growth is a fact of life.

Easy, but wrong. Beneath the apparently serene ivy-clad progress of business schools, fundamental questions are being asked. The answers may re-shape the entire business school world. First, there is the MBA qualification, often regarded as the jewel in the crown of business school education.

The lure of the MBA remains strong, but, as the number of business schools and the variety of programmes has grown, the MBA has increasingly resembled a generic qualification; a brand in danger of being stretched too far.

Bells and whistles are the order of the day. The MBA comes in myriad shapes and forms. Accreditation and actually defining what an MBA is - or should be - remains a point of contention. Content, delivery and duration differ wildly, even if the end result is those same three letters.

Take content. The traditional MBA took students on a guided tour of the main business functions, with detours through economics and means of analysis. The aspiring MBA student can now study for an MBA in church management at Lincoln's Bishop Grosseteste College, luxury brand management at Ecole Superieure des Sciences Economiques et Commerciales in Paris, or football industries at Liverpool University.

The football MBA enrolled 19 students in its first year. Thirty eight have already been accepted for the second intake and many more have applied.

'It seems a valid development for the MBA. It fulfils a niche market,' says Sam Johnstone of the Football Research Unit, who teaches on the programme. 'We think there is demand for a business education which explores a fast-growing industry and which allows people to study something they are interested in.' The downside is that fashionable, high-growth industries have a habit of slowing down and drifting out of fashion. In the longer term, schools are forced to come up with new courses, while defending their academic credibility.

The MBA is being pulled in another direction, with the growing popularity of corporate MBAs, involving partnerships between companies and business schools. British Airways, for example, has a long-standing relationship with Lancaster University's Management School. Over 350 executives have now been through British Airways' MBA programme. With their corporate-orientation and more limited perspectives, the value of such MBAs is debatable.

What can be said is that the MBA, the luxury brand of the management development world, will never be the same again.

But it is not only the development of the MBA which raises concerns. The rapid growth of programmes tailored for particular companies means that questions of academic objectivity and independence arise. Traditional notions of academic life are also challenged by corporate funding of professorial chairs and business school buildings - the furore over Wafic Said's endowment of the new business school in Oxford is just one example of the issues now regularly encountered.

If business schools look outside, they will see increasing competition.

Clearly, competition among business schools is intense, but it is also now coming from different sources. First, there are corporate universities. The US has witnessed a phenomenal rise in them - purpose-built educational institutions for corporate staff. There are 1,200 corporate universities worldwide, covering virtually every industry.

On the surface these are not institutions which the denizens of Harvard are likely to lose sleep over. McDonalds' Hamburger University in Oak Brook, Illinois, lacks academic gravitas, but over 35 years has produced more than 50,000 graduates and has 30 resident professors delivering programmes in 22 languages.

Sceptics may shake their heads at the very idea of a Hamburger University or Disney University, but the rate at which these institutions are opening suggests that major corporations take them seriously.

Ford has a Heavy Truck University in Detroit; Intel runs a university in Santa Clara; Sun Microsystems has Sun U; and Apple has its own university in Cupertino, California. Perhaps the best-known corporate university is that run by Motorola. The Motorola University, 'an instrument of renewal' according to the company, supplies 550,000 students a year. Every Motorola employee - and there are 139,000 - is expected to receive at least 40 hours of training per year. The company has also developed its own international MBA programme. Motorola calculates that every dollar invested in training reaps $33, which is just as well. Corporate universities don't come cheap - US research calculates that the average annual operating budget for a corporate university is £7.4 million. At Motorola it costs over £100 million.

Corporate universities are not solely an American phenomenon. In April 1998, British Aerospace unveiled plans to create its own virtual university in partnership with outside academic institutions. The move goes much further than other emerging corporate universities. Called the British Aerospace Virtual University, the initiative involves a massive financial commitment by the company. In the next decade, it plans to invest more than £1.5 billion on building the company's 'knowledge base'. Working with British Aerospace are the Management School at Lancaster and the Open University Business School.

Not all traditional business schools see corporate universities as a threat. Henley Management College is one business school which has moved quickly to become involved, working in partnership with Cable & Wireless on its worldwide Marketing Academy and with two more companies in developing corporate universities. Henley principal Ray Wild is optimistic about the future: 'Corporate universities stem from the desire of sophisticated companies to take control over their education and training activities. They also deliver a message to current and potential staff that the company takes a responsible approach to its people.'

Far from threatening the existence of business schools, he says, corporate universities could be a boon to schools which see their clients including corporate entities and not only individual managers.' Cambridge University, for example, has recently sought to forge closer links with the business world. In response to a similar programme run by MIT, it has created a US-style school of entrepreneurship. It is hoped that this will encourage scientists and engineers to set up their own businesses rather than go into traditional university research.

Others are less bullish and it is not only the fact that new competitors have emerged that concerns them. A more basic problem for business schools is that the competition is effectively reinventing their business through the application of hard-headed management techniques and new technology. Traditional business schools have been late converts to the technological revolution and their hesitation has meant that the up-starts have stolen a march. For example, students across North America can take courses through Executive Education Network, a tele-learning programme created by Westcott Communications of Carrollton, Texas. The company finds top faculty at universities, or executives in industry, and offers interactive sessions by phone, internet and video.

The potential death of some of the traditional business schools is put into sharp focus by former Cambridge University student John Sperling, the man behind the explosive growth of the Apollo Group. Apollo owns the University of Phoenix, the Institute for Professional Development, the College for Financial Planning and Western International University.

Apollo began life in 1973. It now has over 56,000 students enrolled in its programmes, revenues in excess of $283 million and is one of North America's largest private business schools. Apollo has a low cost base (using part-time staff, no expensive bricks and mortar) and is tapping into the mass market for adult continuing education.

Private money and the latest technology are a potent combination, but a profusion of technology is not the automatic answer, warns Jonathan Slack of the Association of Business Schools: 'Just because organisations have the technology does not mean that they offer a good learning experience, or that they have the systems in place to deliver it effectively.'

Wild also points out that although the corporates may have the financial clout, they do not necessarily hold all the cards.

'We have talked to a number of large companies about the possibility of joint ventures to help with distance learning. They have global coverage and marketing capabilities, but they don't have the educational ability or any real understanding of multimedia capabilities.'

A growing opportunity is emerging for partnerships between traditional business schools and the new players. Slack says: 'News Corporation and Disney, for example, are interested in what they call 'edutainment'. But he warns: 'There may be a tendency toward mergers and, inevitably, there will be some casualties.' For traditional business schools, the question is who the casualties will be.

PREMIER LEAGUE: THE BEST OF THE TRADITIONAL SCHOOLS

The divide between the top schools and those lower in the pecking order is widening. The premier league is already here and its players compete globally, for students and faculty. The Americans continue to dominate, with Harvard leading the field. But European schools, such as INSEAD, Switzerland's IMD and London Business School, are coming up fast.

Jonathan Slack of the Association of Business Schools says that despite all the growth in the sector, there is still only a small number of schools with an international faculty.

HARVARD

HARVARD BUSINESS SCHOOL

Dean Kim Clark has dragged Harvard into the age of information technology; its faculty remains formidable and its alumni network frightening.

IMD

Lausanne-based IMD in Switzerland has built its reputation on quality and industry contact - its roots lie in management centres set up by Nestle and Alcan. Strongly international.

IMD INSEAD

Cosmopolitan students and faculty, with expanding facilities at Fontainebleau and strong alumni, including William Hague and Lord Simon.

KELLOGG - NORTHWESTERN UNIVERSITY

Under dean Don Jacobs, Kellogg has become one of the world's top business schools. It is notably strong on marketing and tailored executive programmes.

INSEAD

LONDON BUSINESS SCHOOL

Moved into the premier league under the personable George Bain. Staff and students now wait to see if his successor, John Quelch, can cement its premier league status (see box, page 60).

MICHIGAN BUSINESS SCHOOL

The archetypal big American school - more than 5,000 participants in its executive programmes every year. Increasing international operations, especially in Asia, including China.

KELLOGG - NORTHWESTERN

SLOAN SCHOOL OF MANAGEMENT - MIT

An intellectual hot-bed, across the Charles River from Harvard. When it comes to the nitty-gritty of production and manufacturing, Sloan leads the way.

WHARTON - UNIVERSITY OF PENNSYLVANIA

Strong on finance programmes, with increasing activity in Asia. Wharton has consistently punched its weight without doing anything particularly eye-catching.

MIT

STANFORD SCHOOL OF BUSINESS

Handy for Silicon Valley. Intel's Andy Grove teaches at Stanford. Stellar faculty, lavish facilities (including new Schwab Center) and attractive climate.

CONTENDERS - Ashridge Management College

- University of Chicago

- Columbia Business School

- Cranfield School of Management

- Fuqua School of Business - Duke University

- Manchester Business School

THE NEW DEAN WITH IDEAS FOR THE LONDON BUSINESS SCHOOL

The man charged with guiding London Business School into the new millennium is recently appointed dean, John Quelch. Recruited from Harvard Business School, Quelch is typical of the new breed of peripatetic academic. Born in London and educated at Oxford, his career has taken him to the University of Western Ontario, Wharton and Harvard. In the latter, he established himself as a leading light in international marketing. But will this help Quelch deal with a notoriously fractious faculty, a job once compared to herding cats? 'The challenge of moving overnight from being a business scholar to a general manager is a formidable one,' says Quelch in his office overlooking Regent's Park. As befits a marketing man, he is quick to establish the first principles of the school's raison d'etre.

'We value scholarship and new ideas. That is our principal reason for being and faculty members must be able to contribute to that mission.' Quelch is critical of the limitations of corporate universities and of company-specific MBA programmes. In particular, he casts a jibe at Northwestern University's decision to award in-company MBAs which, he says, has 'debased its currency'. 'There is a need for major corporations to be managed by general managers who can think outside of the box. The power of an MBA from a leading business school is the mix of students from different industries and backgrounds learning and working with each other.' Which schools will prosper in the years ahead? 'The premier league of schools will be distinguished by their ability to generate new, important ideas. Students want to know that they are studying with professors who are developing the most stimulating ideas.' It's convincing, but now he has to deliver the goods.

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