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Transformation in the Business Education Marketplace: The Impetus to Change

The EvoLLLution | Transformation in the Business Education Marketplace: The Impetus to Change
As the expectations, needs and demographics of today’s students and today’s employers continue to shift, business schools must adapt and evolve to survive.

The business education marketplace is transforming rapidly. The expectations—and demographics—of students are shifting rapidly, as are the needs of the employers looking to hire them. More and more business schools are exploring what it will take for them to remain more than just relevant—but competitive and successful—in the future. Over the course of this two-part interview, Philip Powell shares his thoughts on the biggest obstacles to success for business schools and reflects on how they might overcome these challenges.

The EvoLLLution (Evo): What are a few of the most significant challenges facing American higher education today?

Philip Powell (PP): First of all, at least in the United States, we’ve had massive tuition inflation at the undergraduate level. The real cost of a college education in the last 20 years has gone up hundreds of percentage points while the real value has only gone up maybe 10 percent. It’s a market failure. We teach in economics that if you are high cost and low value, you get run out of the market. To be honest, we’re in danger of that in higher education, both at an existential level and at a real level too. Thunderbird Business School declared bankruptcy about two years ago and they were bought out by Arizona State University. Wake Forest University had to close down its full-time MBA program.

We in the higher education industry have to be redefined. Typically innovation leads to higher quality but at a higher cost. We need disruptive innovations that lead to higher quality at a lower cost.

Evo: Why is it important for today’s business schools to pay attention to the non-traditional student population?

PP: Business schools need to focus on the non-traditional market in response to a tectonic change in the labor market, and we can see a perfect example of that tectonic shift in Silicon Valley. In Silicon Valley, the average professional changes jobs every 18 months. That’s the average.

There’s a fundamental change going on in the way we look at work. Skills are becoming obsolete faster and the value of new skills accelerates faster, so we have an obsolescence cycle in the labor market where the value of skills is rising and falling faster. We’re getting to a point where we’re shifting from the traditional labor market—where we work for an organization for a long time—to what I call the “free-agent global labor market.” We’re becoming free agents, where knowledge  and skills are capital. New skills translate to knowledge and to value. For business schools, we have to deliver both if we’re going to place our students.

With this shift, the concept of the traditional student becomes obsolete, where someone goes to college in their early 20s, earns a bachelor’s degree, gets a good job and stays with the organization for a while, with two or maybe three organization changes over the course of their career. In this model, the student effectively stops learning in a formal setting after they earn their bachelor’s degree. The free-agent labor market is going to force us all to be non-traditional students because we’re going to have to constantly retool. Education will no longer be a discrete, one-time event in our life—it will be a continuous stream of new knowledge and new skill development. Some of that will come through the universities, some of that will come through disruptive channels like edX, and some of it will come through corporate training.

In order for business schools to stay relevant, they have to shift to deliver knowledge and skills in this type of dynamic environment. If we don’t, somebody else will. We’re already seeing that with MOOC providers and their nanodegrees, where they bundle areas of knowledge that students can access at low cost. That designation is recognized by a set of companies. There’s a similar movement happening in healthcare as well.

The non-traditional student has become the new traditional student. It’s all driven by the labor market and shorter employment cycles. To me, whatever is non-traditional has to become our flagship focus. Business schools have to focus on non-traditional students if we’re truly delivering the type of innovative education models that the market deserves.

Evo: How does the business of business education need to change so that business schools are able to adapt to that fundamental shift in the market?

PP: Competitiveness for business schools starts with the portfolio of offerings. For elite, top-ranked business schools, the classic degree will remain relevant for at least for the next 100 years. For the rest of the market, the way business schools have to adapt is twofold: There have to be internal changes within the shell of the degree programs, and there must be a significant shift to online.

To be honest, I am embarrassed by this industry—we have not embraced online education nearly as quickly as we should. The Kelley School did, we started adopting and offering online programming in 1999, which reflects the innovative culture that I like so much about this school. Unfortunately, in 2016, a lot of business schools still view online education as innovative. It’s not innovative anymore. While higher education leaders were sitting on their hands in the late 90’s and 2000’s asking whether online learning was of a high enough quality, Fortune 500 companies were forging their own path forward. They were building virtual organizations, they were making billions and billions of dollars of profit using online and virtual communication to hold their organizations together. Higher education thinks online education is innovative, but if you go into any company, most companies view virtual business as the default.

Online needs to become the new flagship delivery mechanism. Here’s an important facet to this, though: Institutions shouldn’t use online education to try to recreate the traditional brick-and-mortar classroom. It’s like looking at a personal computer and saying, “This is going to be a great typewriter.”  We have to shift our reference point to what is normal for our clients, who are now businesses. In large businesses, the default is virtual teams and virtual organizations—they’ve liberated themselves from location. A lot of graduates from our residential MBA program don’t get an office anymore. They get a laptop, they work from home sometimes, they work from corporate headquarters sometimes, they work from client sites in different regions, but they don’t have an assigned, place-based office anymore. Their “office” is their laptop. The whole concept of mobility as a liberation from location is the norm. That makes the traditional brick-and-mortar higher education model outdated.

So what do business schools have to do? They have to cross the online chasm, and some are doing it better than others. I give high praise to the Kelley School because we were one of the first to the online market and now we compete for the number-one spot in every business school ranking. We have over 1000 working professionals enrolled. All the students in our Kelley Direct online master’s degree program are non-traditional. We spun off from Kelly Direct and created a whole suite of fully online executive education programs as well. We serve over 2000 online, non-traditional graduate students. Our undergraduate program is strong, but at the margin all of our growth is in serving the non-traditional students.

This interview has been edited for length. It is the first installment in a two-part Q&A series with Philip Powell. Please come back in two weeks for the conclusion.

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