Business Schools : New market entrants create competition

Just when business school deans thought it was safe to step back into the executive education market, they are discovering demand for these short, non-degree programmes is not as straightforward as they had believed.

Strategy consultancies such as Bain and Boston Consulting Group have long been executive education providers, but now publishing companies, technology start-ups and recruitment consultancies are circling in an attempt to land chunks of a global market worth in excess of $70bn a year.

In some cases, the new entrants have arrived through acquisitions — LinkedIn, the professional networking site, for example, recently bought Lynda.com, the training company. Others have arisen through alliances, such as the Financial Times’ partnership with Spain’s IE Business School to deliver corporate programmes.

For the educational technology companies, it is a case of building on their existing businesses. “We are beginning to see the emergence of edtech-driven, venture capital-funded start-ups that believe edtech [the use of technology in teaching] is the driver of executive education,” says Mike Malefakis, associate dean for executive education at Columbia Business School in New York.

The recruitment agencies too, faced with the erosion of their customer base by sites such as LinkedIn, are building assessment tools and skills training into their services to corporate clients.

But the competition does not stop there, says MIT Sloan dean David Schmittlein. The number of business schools entering the executive education space is increasing, especially young, up-and-coming ones. “How much of it is because of a more stable economic environment and how much because of spare human capital as MBA numbers are down [is unclear].”

There is even competition from closer to home — from universities’ continuing education divisions, law schools, medical schools and engineering schools, says Prof Schmittlein. As subjects such as leadership creep on to the agenda of engineering schools, for example, “these will [begin to] look even more like management education institutions”.

What is more, companies that traditionally have been the customers of business schools are setting up corporate universities, often with the help of schools and cherry-picked professors.

“More and more we are being asked to help companies build their internal capabilities,” says David Altman, executive vice-president for Europe, the Middle East and Africa at the US-headquartered Center for Creative Leadership, a not-for-profit research organisation and education provider. “Big companies are calling them academies, while others are saying they want to build their own internal capabilities.”

Trends that began before the financial crisis are continuing, such as corporate demand for shorter courses. The trend for companies to eschew open-enrolment courses in favour of ones designed for a single company has accelerated, as has the need for programmes that award a certificate or diploma, which can often be credited towards a degree.

Demand for certification is very important in Asia, says Guy Saunders, associate dean for executive education at Melbourne Business School in Australia. He believes all schools could eventually allow short courses to be credited towards a degree. “My sense is that the wall is cracking in the big schools too.”

The demand to prove return on investment — a thorny concept in the context of education — is also back on the agenda. Josep Valor, academic director of customised programmes at Iese Business School in Spain, which topped the FT’s customised executive education rankings this year, says there are ways to measure this through executive promotion.

He cites the example of Oracle, the software group, where Iese runs a programme for senior managers with Michigan Ross business school. Oracle judges the success of the programme by the number of people who go on to become vice-presidents in the company.

“Companies are looking for value for money and can see [we offer that] because we can prove we have successful programmes that address their challenges,” says Prof Valor. “We do not know how to solve their problems — they know how to solve their problems. We help them think about how to solve their problems better.”

Asia, Africa and the Middle East are proving to be the growth markets for executive education in 2015. Demand is biggest in Asia for cross-cultural leadership and for training managers to run subsidiaries outside the region.

Demand from China in particular for executive programmes has rebounded, says Kai Peters, chief executive of the UK’s Ashridge Business School, which along with other schools has trained Chinese government officials. In the Middle East and Africa, the demand is for developing younger leaders.

In the US and Europe, demand is increasingly sophisticated, says Mike Canning, chief executive of Duke Corporate Education, part of Duke University in the US. “It is no longer about filling knowledge gaps. It is about rewiring, [which] is not about knowing something, but making sense of things for which we have no model.”

The use of online technology is also on the rise. This year, half of Columbia’s executive education participants will be distance learners. Although demand for campus-based programmes shows modest growth, “online has mushroomed into the growth engine of enrolment”, says Malefakis. Columbia’s two online programmes that replicate traditional programmes have not cannibalised their campus equivalents, he adds. 

“One of the real keys as to why online is growing is not just the price point but the opportunity cost for both learners and faculty.” Online students can study at their own convenience, in the evenings and at weekends, he points out. “Learning has become 24/7.”

That said, the main challenge may not come from the rise of technology or increased competition from consulting and publishers, says Dominique Turpin, president of IMD business school in Switzerland. The dearth of academics who can teach executives is the biggest threat, he says.

“The only way we can survive is to be innovative and relevant. You have to be close to the client,” he says. “If you ask the board members of IMD what worries them, it is where to get the faculty.”