Dean's Corner: Business Schools Must Practice What We Teach

We teach our students that in today's competitive environment, companies must be able to adapt. Even large companies need the capabilities of nimble entrepreneurs, prepared to quickly respond to changes in the business environment or actions by rivals. But, how nimble are business schools? Is it possible for a business school to stand out from the others?

We teach our students that in today's competitive environment, companies must be able to adapt. Even large companies need the capabilities of nimble entrepreneurs, prepared to quickly respond to changes in the business environment or actions by rivals. But, how nimble are business schools? Is it possible for a business school to stand out from the others?

The Challenges

Business schools face a number of challenges that make adaptation and a differentiated strategy even more important for them than for other types of companies. Let me focus on what I see as the top challenges that require us to be more entrepreneurial and to call into question the viability of our traditional strategies:

1. Changes in demand. MBA demand is decreasing, while specialized master's degrees are gaining in popularity. GMAT-test takers are more international and younger. At the undergraduate level, business has just displaced liberal arts as the number-one major for students graduating high school.

Our traditional "products" (i.e. degrees) must be constantly reevaluated. We must be closer to our key stakeholders now more than ever to effectively innovate. Yet many traditional universities can be slow to respond to changes in demand due to inertia, faculty governance processes, higher-authority approval cycles for degrees, and faculty adaptability. Even if curriculum innovation occurs, other schools will be quick to copy. So, while changes in demand necessitate curricular innovation, this innovation alone cannot be a source of sustained competitive advantage.

2. Tight revenue and increased competition. Cuts in traditional sources of funding (i.e. state legislative funding or endowments) have made responsiveness to market demand even more important. Tuition increases or limiting enrollment cannot be long-term solutions. They are barriers to entry for qualified students, and qualified students face many options to achieve a business degree.

More global citizens consider moving far from home to receive a degree, ending traditional university dominance over a localized or regionalized population. Technology is also making it possible for students to pursue a business degree from a distant university without leaving home. At the same time we're facing revenue challenges, new business schools (including for-profit universities) are also aggressively competing for our students. This suggests that new revenue streams and standing out in an increasingly crowded field may be critical to our survival.

3. Shortage of academically qualified faculty. We face a shortage of PhDs in business, particularly those with strong research credentials, as demand for faculty hiring, particularly established scholars, increases. Many business schools seek the prestige of hiring established, highly productive faculty, and some are "paying for performance" with bonuses for placements in top publications, etc. This is driving up faculty salaries, but also facilitating a more transactional labor market than we've seen in the past.

Faculty are lured by increasingly high salaries and support systems to move more than in past decades, and again, technology makes it easy to judge "market value," putting pressure on revenue-challenged traditional universities to retain their best faculty. When training doctoral students is costly to a university and when so many faculty members refuse to consider "hiring their own," we will continue to under-supply the market and/or discount potential hires that may be more loyal.

The Solutions

So how do we become more entrepreneurial? How do business schools deal with the challenges above, consistent with what we teach as best practices?

The W. P. Carey School of Business, for example, is large, with approximately 8,600 undergraduates and 1,500 graduate students, as a part of the largest U.S. university (Arizona State University). Just like a large company, we must be able to change rapidly and constantly question our current ways of doing business. But, organizational size can be a limit to change and innovation, just as age can for many older universities. Despite our size, we know entrepreneurship is critical for our continued survival and success. Here's how we have begun to deal with the challenges above:

1. Innovative degrees. As demand for the MBA decreases and the number of schools offering it globally increases, we continue to innovate. We launched an M.S. in Management for non-business undergraduates last fall and will launch an M.S. in Business Analytics in August. Employers were telling us they needed deeper functional skills, and in these tight economic times, they were willing to invest in those skills for their employees. The explosion of "big data" means we have to train students to make good decisions based on rigorous analytics.

Involving key recruiters and other corporate partners in the design, development and details of these curriculum changes can help ensure a school is meeting specific demand and help foster long-term relationships with these corporate partners. As an example, our new M.S. in Business Analytics was designed and vetted among a variety of advisory-board member companies, recruiters, alumni working in related fields, etc.

2. Embracing technology and geographic diversification. The W. P. Carey School of Business has been in the online MBA space for more than a decade, a leader in the field. We also have a compelling M.S. in Information Systems fully online, with our new master's programs all geared toward hybrid or online learning. Our online MBA was recently ranked No. 2 in the nation by U.S. News & World Report.

We also made partnerships to offer an executive MBA successfully in China for the last 10 years (now also an M.S. in Management and a Doctorate of Business Administration there) without the investment of a physical campus. Just like in the case of online, there is also a learning curve in China, so continued investment over time is important to achieving a world-class product. Had we not had the right partners (again the power of relationships), our China venture might not have fared as well. It's now ranked the No. 21 EMBA in the world by the Financial Times. These, too, are lessons learned from innovation.

3. A unique strategy aligned with our culture. Arizona State University has a compelling and unique vision. We define ourselves not by who we exclude, but by who we include and how they succeed. This means no cap on enrollment when more college students are choosing business as their major, as well as limited tuition increases and significant financial aid and investments in student support. We are constantly focused on the ROI of our degrees for parents, students and employers.

For many, quality is difficult to reconcile with being large and/or more inclusive. This false tradeoff reminds me of the old debate between Porter's differentiation and cost-leadership generic strategies that companies could not do both or get "stuck in the middle." We know now that while difficult to attain, quality and size/scale can go hand-in-hand.

Within the W. P. Carey School of Business, we aspire for each of our departments to achieve top-10 status in scholarly research productivity in elite journals while teaching a total of more than 10,000 business majors. It isn't easy, but it is possible. We try to deal with the tight faculty labor market and increased choice for students through our culture. We don't have the benefit of age that sometimes accompanies very prestigious universities. However, our relative youth has made us entrepreneurial. Our faculty understands the importance of being nimble, so we try new things, learn, and refine.

We have students who know they need to earn everything they achieve whether at school or on the job, so recruiters love to hire them. In fact, Arizona State University recently ranked No. 5 in the country in a Wall Street Journal survey of recruiter preference.

Despite our size, our relative youth compared to other universities is a force against inertia, and maybe being in the "Wild West" helps us embrace risk. We try to have a lot of fun along the way and believe "business is personal." It's our commitment to our students that a big place like ASU feels very small. We take the success of companies who recruit here or train their workforce with us personally. We believe our unique strategy, along with our culture, helps us recruit and retain world-class faculty, which in turn drives student choice, reputation and corporate partnerships.

In summary, the old adage, "Those who can't, teach," has always rubbed me the wrong way as a teacher. And, the complaints about business schools being irrelevant because we have lost our connection to practice are a straw-man argument. Whether not-for-profit or for-profit, business schools need to practice what they teach. As in organizations, we may not always get it right, but adaptability, innovation and a unique strategy are possible.

Amy HillmanAmy Hillman
W. P. Carey School of Business
Arizona State University