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.