The unbundled MBA: How you'll earn the degree in 25 years

In a quarter of a century, most business students will never enter a classroom. The faculty lectures, the MBA student discussions and the homework assignments will occur instead over the Internet, where each part of the educational experience can be played as many times as it takes to fully absorb or satisfy, as if it were a Seinfeld rerun.

The world's most famous professors will more likely be compelling teachers—rather than journal-published researchers—and many of them will be free agents, unattached to a single university. Technology will allow for free-agent faculty, able to teach directly to students, with the university being what it will increasingly be viewed as: just another middleman taking a profit. Professors won't need an affiliation with a university, because technology will allow them to create their own brands.

The costs of academic learning will plummet. And much of education will be modular in nature. Students will pick and choose from the best professors and the best colleges and universities worldwide to construct a degree of choice. There will be little need to go to one school for several years and sit in classrooms with other students. The greatest asset universities now hold—the ability to grant a degree—will have so greatly diminished in value that it will become little more than a quant notion for the learned.

A doomsday scenario for business education? Not really. The nominal purpose of a business school is for academic learning. But as learning becomes increasingly available online, it's likely that the other functions of a traditional on-campus experience—student selection, extracurricular leadership and social development, career management and alumni networking—also will become unbundled. Most business schools inevitably would lose their allure.

We're already witnessing the very beginning of what will be revolutionary change to the most popular credential in all of business: the MBA degree. As far back as 1975, the MBA blew past both law and medical degrees in the U.S. But it was only three years ago, in 2010–2011, that business edged out education as the most popular advanced degree, accounting for 25.6 percent of all master's degrees. The numbers for business are largely made up of MBAs but also include specialized business master's programs, including master's of finance or accounting. 

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Yet trouble is brewing. Enrollment in part-time MBA programs—the largest single part of the MBA market—has significantly declined in recent years. The number of people taking the GMAT and expressing an interest in full-time two-year programs also has dropped.  

Richard Lyons, dean of the University of California, Berkeley's Haas School of Business, has boldly predicted that half of the business schools in the U.S. could be out of business in as little as five years or as many as 10. His dire forecast came on the heels of yet another Draconian prediction: Harvard Business School innovation guru Clay Christensen said that half of U.S. universities could go bankrupt in 15 years due to the impact of online learning on their business models.

If a collapse is imminent, it's not because demand for those with business degrees will diminish. As Paul Danos, dean of Dartmouth College's Tuck School of Business, puts it, "Businesses have grown enormously in complexity and scope, and more than ever they need ethical, skilled, well-educated, creative leaders who are global in outlook."

But the ability to more effectively deliver that knowledge over the Internet will cause widespread disruption to the business of education. First off, the cost of education will dramatically fall because technology allows those costs to be distributed over vast numbers of students. A full-time two-year MBA program costs about $120,000. One recent study found that it costs a business school about $1,500 in instructional costs to provide a single course to one student. Online courses, however, dramatically lower those costs to just a few dollars per student.

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The fixed costs of a research-based business school are extraordinarily high, making some of these schools look as if they are sitting ducks for massive disruption. Consider this fact alone: It costs a business school $400,000 for its faculty to publish a single article in an 'A' level academic journal. That estimate, by two professors, is believed by some to be too conservative.

Roger Martin, the former dean of the University of Toronto's Rotman School of Management, believes the estimate is closer to half a million dollars. Much of the research, moreover, is going on to fund such esoteric issues that it has little to no application in the real world. Martin, for instance, believes that the cost of an article that could be used in some way by businesspeople is about $1.7 million.

Secondly, most of higher education has always been protected, particularly in business, where many students don't want to quit their jobs or move to get a graduate degree. From the very start of education, geographic boundaries protected the local university from competition from national or global rivals with greater resources. That is no longer true. 

Technology allows the big brands to leap over those boundaries and compete directly with second- and third-tier institutions. The proliferation of online business-degree programs and free business MOOCs (Massive Open Online Courses) is already hurting the cash cows of every business school: part-time MBA programs, executive MBA programs and open-enrollment executive education courses.

Berkeley's Lyons believes that over the next five years, five of the top 25 business schools in the U.S. will join Carnegie Mellon, the University of North Carolina and Indiana University in offering online MBA programs. If his forecast comes true, that development alone will hasten the likelihood that many second- and third-tier business schools will lose out to the bigger brands.

Ironically, the most disruption in higher education won't be caused by new, entrepreneurial outfits. It is coming and will continue to come largely from the educational incumbents who have learned from other industries that they need to move first. That is why schools such as the University of Pennsylvania's Wharton School has led the way in offering an array of free MOOC courses to students, including what the school calls its "foundation series" of four core offerings in financial accounting, marketing, corporate finance and operations management. Those free core courses have cost the school $250,000 but already have reached 2 million online students.

Indeed, it's already possible for anyone, anywhere in the world, to cobble together the core and elective curriculum of an entire MBA program for free from many of the best professors at the best business schools. Today any student could mix and match the courses online over a few years, catalog all of them on a résumé, and claim to have the equivalent of a world-class business education obtained for free. An elite business degree is essentially already modular with greatly diminished costs.

Sure, today you wouldn't get an orderly sequence of classes that build on each other. You wouldn't get the benefit of forging important friendships that would last a lifetime. You would lose out on the on-campus recruiting from the world's best organizations. And you would not have the alumni network to support and encourage you over your professional life. But you would have the basic education for free. And in 25 years, you're likely to have all of it.

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So what does all this mean for business students? Like the influx of foreign competition in nearly every business from televisions to autos, it's great news. It means lower prices, more choice and greater flexibility. It means that you can increasingly get an executive education program from a Harvard, Stanford or other leading educational brand with much more résumé-boosting power rather than settle for a local or regional brand. If you want an MBA, it means that you can get the degree online from a nationally ranked business school, no matter where you are. You don't have to slog through evening classes after work for years to get the degree from the local college no one has ever heard of. 

And If you don't want to pay the prices set by Harvard, Stanford, Wharton and others for either a program or a degree, it also means there will be plenty of other excellent business schools willing to fill the gap with lower-priced product. Auburn University, a school with an exceptional reputation in the South, has an online MBA that costs around $45,000. It won't be long before some well-known schools begin to accept some graded MOOC courses taken elsewhere for free so you can shorten your time to get a degree.

For most of the business schools in the world, on the other hand, it means new and brutal competition. Schools that already have strong brands supported by world-class faculty aren't going to go out of business. But it's worth noting that the 100 or so top business schools in the world represent not much more than 1 percent of all the institutions handing out graduate degrees in business. So there's plenty of fallout to occur outside that top 1 percent of the field.

The disruption that will occur over the next 25 years won't be pretty. But in the end, students will benefit greatly from the turmoil and change—and education will never be the same.

John A. Byrne is the editor-in-chief of C-Change Media, a digital media company focused on higher education. C-Change's most popular website is PoetsandQuants.com, which covers graduate business education.