The Business Crisis The Non-Elite Business School Is Facing

Pick an industry or a major company, and imagine this is what it’s facing:

• The costs of doing business are more fixed than variable, no matter what, and how many, products are being sold;
• Its core products, the ones it has depended upon for years for survival, are in decline, and predicted to decline even further;
• The products that are predicted to have increasing demand, generally, bring in less revenue and profit margin, and in some instances may cost more to deliver;
• And competition for these products with increasing demand is greater, with more players from outside the core industry able to credibly compete.

This is, in a nutshell, what graduate management education looks like today at non-elite schools, and it’s about as hairy of a business dilemma as you’re likely to find in any of the case studies the students in these programs toil over.

Much of what is outlined above is not news, but our most recent study of business school deans shows just how dire the circumstance is based on their projections for where things are headed.  Eduvantis has been working closely with business schools for 10+ years, and in nearly every instance when we ask the question “what is the most important contributor to your financial stability/success”, the answer is “hands down, our in-person Part-Time MBA.  It basically funds much of the rest of our portfolio”.   And when we ask “which is your most profitable program”, often times we hear “our Executive MBA”.

In our last survey of 80+ business school deans, when we asked “How would you describe the enrollment outlook for the following business school product categories nationally over the next 5-10 years”, less than 10% projected growth in either category, and the vast majority projected declines.  (The Full-Time MBA, had similar pessimism, but is often serves a different purpose within the portfolio.)

And which product categories are the ones they are most bullish on?  Certificate programs and specialty master’s programs, both much shorter in nature, and less expensive, potentially by considerable amounts.  Certificate programs also have the distinction of being the category with the widest array of players beyond higher education institutions, with tech companies, consulting firms, and others seeking it out as a supplemental revenue stream.

You’ll note that there is also near unanimity that Hybrid Part-Time MBA programs and Online MBA programs have positive outlooks for the next 5-10 years, so what’s the problem?  The revenue that used to come in from the in-person PTMBA and/or EMBA will now just come in through the Hybrid PTMBA and/or Online MBA if you do this right, and that’s how a business adapting to the times survives, right?!

But let’s examine the answers to two other questions from this survey as well to see what it means for the average business school.  First, we asked “The number of regional/national brands offering an Online MBA for significantly less than most Part-Time MBAs at institutions in similar brand tiers (often less than $25k) continues to slowly grow.  Which of the following best describes where you feel this trend is headed over the next 5 years?”  As you can see, over 75% of the deans in this survey thought one of the following: 1) either lower cost Online MBAs will proliferate, so even if they have one, it will likely generate less revenue and margin than their in-person PTMBA used to; or 2) perhaps worse, there will be a few “winners” that gobble up much of the national market share.  Think Walmart versus your local, mom-and-pop retailers a few decades ago.  Sure some will survive, but many won’t.

As if this weren’t all concerning enough, the elephant in the room appears to be ready to stand up and stretch its legs.  When asked “When do you anticipate a Top 5 ranked business school will offer a fully online MBA?”, deans overwhelmingly think the answer is pretty soon.  Imagine the cascading effect that one of the top 5 schools offering an Online MBA, potentially at scale, could have!  Instead of them gobbling up market share in just their own backyard, they will take the top-tier students from across the country, leaving a wake of “next-tier” students for the local/regional/other online players to scrap for.  The institutions that had some semblance of pickiness previously into their MBA programs would likely be pressured enough for revenue to be less picky, leaving those without pickiness also without many applications.

This is not meant to be a doomsday blog post, but rather an observational piece focused on the reality that for most business schools, their graduate revenues and margins are going to be negatively impacted over the next 5 years as these market dynamics continue to play out.  The question then becomes how to proceed: does your business school invest in trying to become one of the, likely few, big winners in the near future, or do you now begin adjusting your cost model and portfolio to reflect the most likely outcome?

We’re working closely with business schools and university leadership across the country to provide the information and recommendations necessary to answer this question, and those adjacent to it, and would welcome hearing from you if you’re facing your own choices and challenges, and would benefit from our expertise and insistence on a data-based foundation for decision making.