Moocs may create a global trail of failed business schools

The Mooc (massive open online course) phenomenon is having a significant impact on higher education – especially business education.

In less than two years, close to 100 leading universities and business schools have launched 450 costly Moocs and enrolled almost 5m students. Involving Wall Street and Silicon Valley as partners in these ventures, these business schools are changing the rules of competition. But they are doing so at the cost of eliminating their peers.

Those elite schools that are launching Moocs are creating a new standard for business education, in the same way they did with the case study teaching method decades ago.

Wide dissemination of knowledge to students is not new – as exemplified by books and textbooks. What is new, however, is the provision of individual learning paths to a massive number of students for free – which is disrupting the majority of business schools in the process.

Most business schools are typically standalone teaching institutions that depend on public funding and tuition revenues to survive. Since Moocs result in the mass-standardisation of course content and commoditisation of knowledge, they reduce most schools’ ability to generate revenues from teaching and charging a premium since their course content has been standardised.

Moocs are a classic case of commoditisation of services, which generally leads to competition on prices and outsourcing. As is typically the case when a new phenomenon emerges, different business models emerge.

While Mooc business models remain unclear, they are a valid substitute to pricey business education offerings. Customers’ expectations and bargaining power are increasing, while that of business schools is decreasing. New entrants (for-profit educational and technology-driven providers, powered by Wall Street and Silicon Valley) are also affecting the economics of business education.

Betting on Moocs implies that research emphasis will decrease since teaching will become a priority. Research is one of the main drivers of the prestige that the elite business schools have accumulated over time. If research is replaced by teaching (the quality of which is very hard to measure) the elite business schools will be even more dependent on other prestige drivers, such as the results of their main campus sports teams in national championships. Academic rigour and discipline will yield even more power to practice schedules and games.

Moocs appear to be highly disruptive to lower-ranked business schools. Of the approximately 13,000 business schools worldwide, the elite number less than 1,000. The risk is high that the remaining 12,000 business schools will to a certain extent become commoditised.

Non-elite business schools may be forced to merge with other entities if they do not wish to wither on the vine and die a slow and painful death in the world of commoditised business knowledge, free courses and $49 Ivy League certificates. Alternatively, they could focus much more on differentiation and move away from standardisation. Since online education will never provide the magic of class debates, an increased student and teaching faculty face-to-face interaction (small classes) and stronger connections with employers might also help the majority of business schools to survive the growing Mooc phenomenon.

Moocs raise more questions than they answer. They may well leave behind a global trail of failed business schools and along with them, legions of unemployed part-time and full-time teaching faculty and administrators. A 15 per cent consolidation rate among non-elite business schools would lead to 1,800 school closures.

The rules of the game are changing and business schools and business education need to adapt. While they once invested in conformity and strategic alignment, business schools may now have to differentiate and adopt different roles. We certainly cannot assume that the status quo controlled by most teaching faculty will continue and should bear in mind the words of Danish physicist Niels Bohr: “Prediction is very difficult, especially when it’s about the future”.

Bertrand Guillotin is director of the International Programs Office at Duke University’s Fuqua School of Business.

Vincent Mangematin is associate dean of research and senior professor of management and technology, Grenoble Ecole de Management, France.