The Unbundling of Business Education

As Jim Barksdale, the co-founder of Netscape, once put it during a call to the company’s investors: “There are only two ways to make money: bundling and unbundling.” In education, just as in business, the reality is that some people add and others subtract.

As business schools, we face a particular challenge. Bundling education, primarily in the form of degree programs, is the world with which we are most familiar, so it is natural to feel some unease when the sand starts shifting under our feet. We are seeing the unbundling of business education slowly crop up in the form of microcredentials or nanodegrees.

Just as we have seen in other industries, unbundling in education signals that customer preferences are changing in fundamental ways, which could eventually lead to a restructuring of business education. We must think carefully about how we are going to play both our short game and our long game as this trend unfolds.

Comfort of the Past, Promise of the Future

In our programs, we typically map discipline-based bundles into degrees, the basic unit in formal education. In some cases, we have specific professions in mind, bundling content that we consider necessary to prepare students to be proficient in those professions.

There are other types of bundling. For instance, once students select their degree programs, they often complete the same curriculum at the same pace. This form of bundling reflects the industrial “factory” model that our educational system has adopted. We design much narrower bundles for our executive education programs, where we pair topic-specific courses with knowledge that provides intellectual scaffolding for our teaching.

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As industries are transformed by rapid innovation and advancement, no job is safe from obsolescence or radical restructuring. The need for lifelong learning looms large, indicating that work-based education might have run its course.

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It’s true that business schools have added more elective courses in recent years to give students some choice in how their bundles are structured. The core curriculum, however, has remained largely fixed.

As more microcredential options continue to unbundle education on the supply side, students will likely want more flexibility than a choice of electives provides. We then will see even greater unbundling on the demand side; as people embrace lifelong learning, they increasingly will want to pursue customized educational paths. We haven’t seen this trend fully take hold yet, but it is one that holds promise, especially when we anticipate how digitalization could reshape education.

Background Dynamics in the Market

Various market dynamics now playing out before our eyes could usher in a new model in education. We should be carefully tracking four trends, in particular:

Digital transformation. Education will not escape the effects of digital transformation. In fact, it is unavoidable that education—especially on the learning side—will become a data science. In other words, education providers will use data to unbundle content, disaggregate learner cohorts, and guide learners to the content and delivery formats most appropriate for their needs. For the skeptics among you, just talk to biotech scientists. Just over a year ago, few if any of them believed that mRNA would turn biotech into a data science. But the pandemic made it so, and in quite a dramatic fashion. If you are the lucky recipient of the Moderna or the Pfizer-BioNTech vaccine, you already have benefited from that transformation.

Shorter attention spans. Society is experiencing a general trend toward what I call “tweetadization.” As we are increasingly influenced by social media, our attention spans for consuming content have been reduced considerably. Across all industries, short and simple messages are in. We should not be surprised that the impact of students’ shortening attention spans is seeping into education.

A move away from work-based education. Many workforce experts are starting to raise questions about the efficacy of work-based education, in which students choose courses of study that slot them into narrow career paths. There is a concern that these students could find themselves in need of reskilling when their chosen professions disappear. As industries are transformed by rapid innovation and advancement, no job is safe from obsolescence or radical restructuring. The need for lifelong learning looms large, indicating that work-based education might have run its course.

A move toward shorter forms of training. A recent report in the Financial Times on executive education suggests that corporate learning officers now are looking for short, sharp, engaging, and impactful training programs with a measurable return on their investment. Digital technology will increasingly enable companies to assess their educational ROI more stringently and continuously. Now that the pandemic has forced us to move more of our courses online, that door has been pushed open even farther.

The Consequences of Unbundling

Unbundling has its upside in that it will open up new revenue streams for higher education institutions. But there also are downsides. First, unbundling shifts power from the supplier to the customer, which will embolden learners to ask for more and different educational experiences from providers. In fact, one of the reasons why unbundling has not yet become the norm in education might be that established suppliers and new providers are still looking for new ways to aggregate content and retain the upper hand in the market.

Second, unbundling puts the spotlight on the components of bundled education that no longer provide value to students. For example, with so many options available online, more students might seek out courses taught by “celebrity” faculty. While schools can easily hide newly recruited faculty within larger degree programs, such novice faculty will be a hard sell in unbundled products where they must carry their own weight.

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We need to understand what the unbundling game is and how it is likely to evolve, and then play the game strategically. Unbundling isn’t a trend we just want be part of—it is a dynamic game we want to win.

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Third, when unbundling unfolds in an industry, new players typically find a way into the game. These players inevitably become forces that not only trigger but also magnify the trend’s momentum.

Fourth, when a new trend emerges, organizations tend to let flock mentality drive their behavior. They jump into trends too quickly, due to FOMO (fear of missing out). But even when quick action is advisable, we should think before we jump. Some business schools might still hold scarce assets that they can continue to leverage in bundled offerings. Other schools that might lack assets to create more comprehensive offerings could potentially build reputations in specialized areas of unbundled offerings. Choosing the right path requires careful consideration.

Finally, as I point out in my book, Rough Diamonds, much of the bundling we see in business education today was driven by our need to turn to other disciplines to provide the intellectual scaffolding for what we teach. For example, when we teach marketing, we often delve into psychology and sociology. Unbundling might require us to strip away some of that scaffolding, reducing the depth of learning that our students achieve.

Playing the Short Game

With these caveats in mind, how should we play the short game unfolding around us? There are two things we should not do: We should not slice, dice, and stir-fry what we are already doing, and we should not fall prey to flock behavior. We need to understand what the unbundling game is and how it is likely to evolve, and then play the game strategically. Unbundling isn’t a trend we just want be part of—it is a dynamic game we want to win.

As we plan our short-term strategy, we first must take a closer look at our current value chains and cut out anything that does not contribute. We must become more agile and focus on things that matter. It is time to clear the deck.

We also need to keep a finger on the pulse of the market. How is the demand side developing? What are our customers’ requirements? What advice do they need? For example, some customers might need help with stacking unbundled offerings. In this case, institutions that decide to be aggregators of content might provide that help as part of their strategy.

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The unbundling trend has exposed just how inefficient our bundled degree-based model is at developing human potential. The emergence of microcredentials reflects learners’ search for a more efficient educational model.

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If we do decide to unbundle our content, we must take a twofold approach. On the one hand, we must adopt strategies that enable us to learn more about the changing market; on the other, we also must address current market demand. We can play the short game aggressively, if need be, by employing the practice of cross-subsidization. Schools adopting this strategy set aggressive prices for microcredentials in areas where they possess unique strengths—such as, for example, the draw of a star professor. They can use these premium microcredentialing programs to showcase their faculty talent, reach broader audiences, and build demand for larger bundled offerings.

In the end, the unbundling trend has exposed just how inefficient our bundled degree-based model is at developing human potential. In fact, this shortcoming likely triggered the unbundling trend in the first place. The emergence of microcredentials reflects learners’ search for a more efficient educational model.

Playing the Long Game

Our long game, then, will focus on shaping that model. As we contemplate how to respond to changes as they evolve in our industry, we must remember the case studies that we teach in our schools. Those cases highlight what happened to organizations in other industries transformed by digitalization, from movie rentals (Blockbuster) to mobile phones (Nokia). The companies that stuck to their past strategies, while ignoring signs that their markets were changing, lost in the long run. There is no reason to believe that education will be any different.

I offer two pieces of advice to academic leaders who want to play the long game effectively. First, embrace digital transformation and use data intelligently to match adaptive educational experiences to the specific needs of individual lifelong learners at different stages of their lives and careers. Second, study digital ecosystems in other industries and familiarize yourself with which organizations play what role and why.

These two approaches won’t just help you understand how digitalization might restructure the value chain in education. They also will help you nurture the mindset needed to design and sustain a long-term response to the changing market.

Preparing for a New Paradigm

What new paradigm will emerge in higher education is not yet clear. But I am certain that its parameters will be defined by learners, not providers. And if that is the case, business schools will need to create digital learning ecosystems that lock students and alumni in as lifelong learners.

If students’ learning journeys become data-driven, and they likely will, schools can bundle offerings intelligently within their learning ecosystems based on exactly the content each student needs. Such a learner-focused paradigm would be a far more efficient way to develop human potential than either the standardized bundling we emphasize today or the microcredential programs that we now see pointing to a far different future.

The fact remains that unbundling is merely a symptom of larger changes to come. But with the market for microcredentials already growing, we have little time to contemplate our next moves. The game is on.

Vanhonacker was the founding director of INSEAD’s doctoral program in Fontainebleau, France. He helped establish the China European International Business School in Shanghai and Moscow School of Management SKOLKOVO, as well as build the research output of the marketing department at the Hong Kong University of Science and Technology Business School.