How Will Asia Change Business Education

AIM’s Ricardo Lim provides an overview of the complex, heterogeneous market that is Asia today.
How Will Asia Change Business Education
Of the 694 business schools accredited by AACSB International, only 10 percent are located in Asia. If Asian business schools make up only 10 percent of AACSB’s accredited schools, how can we presume to influence business school thinking?

As dean of the Asian Institute of Management in the Philippines and the outgoing director of the Association of Asia-Pacific Business Schools, I find this question especially important. My answer is that the business of business schools in Asia is incredibly complex, but growth here is steady and opportunities abound. That is why I believe Asia will ultimately impact the way business schools think.

WHAT IS 'ASIA'?

When many people think of Asia, they often think first of what I call “typical” Asia: China and India. But there is also “first-world” Asia, which includes Japan, Taiwan, Korea, and Singapore. There is the “southern hemisphere” Asia of Australia and New Zealand, which are becoming more Asia-intertwined culturally and economically. There is “tiger” and emerging Asia, which includes the countries in the Association of Southeast Asian Nations, also known as ASEAN (South Korea, Malaysia, Indonesia, Singapore, the Philippines, Vietnam, Myanmar, Brunei, Cambodia, and Laos), and South Asia (such as Pakistan and Bangladesh). Eventually, what we call Asia might extend all the way north to Kazakhstan and east to Turkey, but the line stops at Pakistan for now.

Together, these countries are the production line of the world, generating one-third of global GDP, according to the ASEAN Secretariat. Companies in the West contract with companies in China, India, Thailand, the Philippines, Malaysia, and Indonesia to manufacture everything from auto parts to electronics. This interdependence between East and West will only strengthen over time.

Despite the fact that it produces many of the world’s goods, Asia adds very little leadership value or participation to the process, save for a few original manufacturers in Korea and Japan. In many cases, our native skills and innovations are underdeveloped. For example, analysts have found that, of each 16-gigabyte Apple iPhone made in Asia, US$8 of the $450 gross margin on the unit goes to assembly labor. The rest goes to support international shipping companies, marketing firms, distribution companies, and, of course, Apple. As another example, the online news agency InterAksyon reports that 460,000 people from the Philippines are now at sea, accounting for a third of the world’s cargo and cruise seafarers. But the vast majority are regular sailors, waiters, singers, or cooks. Very few Filipinos are masters or captains.

This disparity could change when the ASEAN countries integrate in 2015, a development that will create, in theory, an entity much like the European Union. After that happens, it will not be inconceivable for an Indonesian production plant to have a combined Indonesian, Filipino, Malaysian, and Thai workforce and ownership. This environment will make for interesting studies for business schools in cross-investment, cross-cultural management and strategy.

BROAD, VARIED, CONNECTED

If I were to describe Asia in a sentence, it would be “We are many.” Asia is a diversity of cultures, economies, and political structures. That diversity occurs not just from country to country, but within single nations. Take India: All of India is supposed to speak Hindi, but each state claims its own unique language, such as Marathi, Kannada, Bengali, or Tamil. The same is true for other Asian countries, all Towers of Babel.

Asia also represents a wide disparity of income—an October 2013 report from the International Monetary Fund notes that per capita GDPs range from US$61,000 in Singapore to $1,600 in Myanmar. But while the ASEAN Secretariat cites an average annual economic growth of 5 percent to 11 percent for ASEAN countries, wide gaps exist in individual countries between rich and poor. A small percentage of Asian billionaires can indulge in fine wines and exotic cars, but a billion or more souls in Asia still do not have access to education, running water, or electricity. When Typhoon Haiyan hit in November, Leyte Island in the Philippines was devastated, and people were reduced to cooking over wood fires and fetching water from rivers. But in truth, that was the state of many people in the countryside even before the storm. The storm exposed not only tragedy but disparity.

Asian governments range from democracies to dictatorships, with the latter waning as information flows more freely. Indeed, technology could become the great enabler for the poor in Asia, where computing is cheap. Broadband costs as little as $5 a month in Sri Lanka, one-tenth the world average. That reality leads to yet another question for business schools: Will Asians continue to need face-to-face education, or can they learn more effectively online?

And while Asia’s growing population does not yet earn and consume as much as Western consumers do, it could soon. Consider this: Despite its one-child policy, China has 160 million students in primary and secondary education as of 2012, according to KPMG’s Education in China report. That is equivalent to the population of one Russia—or eight Australias—all in short pants. In the years to come, this group will purchase watches and cars and perfumes—and education. Imagine, 15 years from now, when these young Chinese choose grad schools. If only 0.1 percent choose to earn MBAs or EMBAs, China will need 160,000 MBA seats. The number in India is even more staggering: In 2008, there were almost half a billion people— about two Brazils—between the ages of 5 and 24, according to the Economic Times. If just 0.1 percent of this group pursued MBAs, India would need 500,000 seats per year.

The sooner business schools understand the differences and unique phenomena that are driving growth within Asia—and prescribe ways to manage them—the sooner that growth can be mutual and sustaining.

THE BUSINESS OF ASIAN BUSINESS SCHOOLS

Asian business schools face problems similar to business schools around the world—finding funding, coping with rankings, staying true to mission, hiring faculty. But we also must respond to trends unique to this region:

Intense competition. There has been a surge of new competition in Asian countries, including foreign competition. INSEAD is in Singapore, and the University of Chicago Booth School of Business has moved into Singapore and Hong Kong. Nottingham University Business School and Edinburgh Business School in the United Kingdom have opened campuses in Malaysia. Northwestern University’s Kellogg School of Management and the University of North Carolina’s Kenan- Flagler Business School have partnered with local schools in Thailand; the University of Western Ontario’s Richard Ivey School of Business is in Hong Kong. Then there’s the China European International Business School, a nearly 20-year-old institution formed through an agreement between the Ministry of Commerce of the People’s Republic of China and the European Commission. On top of this, a great number of schools offer “hop-to-X-city” global EMBAs throughout the region, at full Western pricing.

In this climate, Asian schools stay competitive by charging lower tuitions—from US$10,000 to $40,000 for a degree compared to $60,000 to $120,000 for a branded Western degree. Without such pricing, the global brand names would clearly dominate.

MBA education. With so many schools, it’s not surprising that programs range widely in quality. For example, India officially has 411 schools that offer post graduate programmes in business, their equivalent to an MBA. The unofficial number of such programs— from both legitimate and ersatz business schools—could be much greater. Yet of that large number, only two Indian schools have been accredited by AACSB to date. Market forces eventually will weed out poor performers, but while there is high demand and money to be made, the market will attract poor-quality providers.

The China factor. China is the gorilla in the room, the belle of the ball. Because its economy is growing at 11 percent—double or triple that of any other nation—corporations and academic institutions must focus on China. This means that schools will drive funds, research, marketing, and collaborations China’s way. As a dean in the Philippines, I am envious, but China deserves it: It simply does things faster and better.

But if we focus too singularly on China, we risk missing nuances in other Asian markets, which could produce many untold stories. We could miss what’s happening in many countries now providing outsourced manufacturing and knowledge services to other parts of the world. Or the fact that Australia and New Zealand are becoming melting pots of Asian culture. Or that Japan has seen a resurgence of “Abenomics,” the economic policies of its Prime Minister Shinz Abe who is calling for significant increases in government spending to stimulate the country’s economy.

New accreditation standards. AACSB’s new standards have introduced another change to our market. Their emphasis on impact, innovation, and engagement paints clear directions for Asian schools. Even so, there is work to do. Some schools fear that their local realities may stunt their prospects for accreditation—especially in the requirements related to academic qualifications, now divided into Scholarly Practitioner, Scholarly Academic, and Practice Academic categories. But strong Asian institutions will create greater impact on their local settings; they will innovate even with limited resources. Fly-by-night schools will wither naturally.

The difficulty of keeping scholars. The faculty shortage that some schools in the West are facing is even more intense for schools in Asia. PhD-granting institutions in Asia are not as productive as those in the West, making it more efficient for Asian schools to send scholars to the U.S. or Europe for training. Alas, many do not return. The better Asian scholars also tend to drift to the West, attracted by higher salaries. Asia needs a more effective way to train and retain scholars—perhaps Asian schools should even create their own consortium of PhD-granting institutions to cultivate their talent.

AIM’s MISSION, THEN AND NOW

How have we in Asia reacted to these drivers? I can present the case of my own school, the Asian Institute of Management. In the 1960s, a group of local businessmen in the Philippines enrolled in a traveling Harvard advanced management program. They believed that a professional institution offering a similar case-based education could produce competent managers for Asia, so they convinced Harvard professors to help start AIM in 1968. Since then, we have produced 40,000 degree and non-degree graduates, most of whom are still located in Asia.

We did it without a publish-orperish culture, government support, or a large endowment. We had to be entrepreneurial. We created a number of cost- and time effective short courses for executives, using cases that we borrowed from Harvard Business School or wrote ourselves by capturing tales from the field. We focused not on specialized training, but on general management. We hired as instructors professionally qualified CEOs and general managers who ran plants, wrote budgets, drove sales forces, and negotiated with suppliers. What they lacked in theory, they made up for in experience.

Then came competition from well-heeled Asian universities, and with them rankings, partnerships with foreign schools, and AACSB accreditation. How unique were we if we were built on Harvard’s Western model of education? We realized that, to be competitive, we needed to participate in media rankings. To be ranked, we needed accreditation. To be accredited, we needed to build a culture driven by academically qualified faculty and innovate new approaches that the market valued.

Our mission to produce competent managers for Asia is even more relevant now than it was in 1968. Our y-variable remains unchanged. But to play the new game, AIM has had to change its x-variables. Who are our target markets—experienced or fresh graduates? How should we package our product—as an all-in traditional MBA or as a specialized degree? How should we deliver our product—full-time or part-time? And in what modes do we deliver— face-to-face, blended, or online?

To keep AIM relevant in today’s market, we’ve made many changes. We have added projects such as the MPO Walkabout, a capstone project in our Managing People in Organizations course. For Walkabout, students complete a project that presents some measure of risk—it must be something they’ve never done before. We focus on the region through activities such as the International Field Review in our master in development management program. IFR sends students on a two-week immersion in an Asian country, where they learn more about development projects funded by multilateral agencies.

funded by multilateral agencies. We also look for academically qualified and professionally qualified faculty who understand industry and publish research, and we bolster their credentials with our seven research centers. Our faculty receive lower salaries than faculty at Western schools, so to keep them content to stay at AIM, we give them ample time to do outside consulting—which also improves their understanding of industry.

Given our limited funding, we also realize that the best way to innovate is to collaborate. We are engaging with non-business schools and teaming up with a university in Manila to create new products that bring together engineering, design, and management. We are partnering with online education providers and seeking out free-market online alternatives. For instance, I teach an introductory statistics course, in which I encourage students to access free videos of the Khan Academy, so I can flip my classroom and spend time helping students delve into the principles they’ve learned about online.

Finally, though we are the “Asian” Institute of Management, we must focus on building knowledge in the ASEAN region. We recently opened the Dr. Stephen Zuellig School of Development Management to explore issues faced by developing countries, such as helping nonprofits build capacity, bridging social divides (such as between Muslims and Christians), promoting sustainable development and public-private partnerships, and tackling public finance and procurement. And, of course, we have many region-specific management topics to study—ASEAN supply chains, cross-cultural management, diasporas and labor migration, outsourcing, family management and ownership, financial markets, social marketing, social entrepreneurship, and disaster planning and management.

STILL MUCH TO LEARN

Asia will continue to attract foreign schools to its huge markets, where there will continue to be variations in quality and cost, as well as a proliferation of new specialized master’s degrees and online EMBA products delivered to a stratified, heterogeneous market. China will continue to dominate the economic scene, but pockets of management thought will emerge in the rest of Asia in topics such as sustainable profits, disaster management, entrepreneurship, and supply chains. I believe that the West can learn from our work in such small, concentrated economies in the region’s less-studied cities such as Leyte, Aceh, and Phuket.

I revisit my original proposition: Can Asia influence business school thinking, given that we have a minority voice in AACSB, EFMD, and AMBA? I believe the answer is “yes,” because our diversity and differences make for such a rich learning environment. Asia’s challenge is to produce new generations of native scholars who will stay in Asia to build a local base of knowledge. But as its economies grow, Asia’s strength is that it will continue to generate novel and compelling stories that advance management. And because local schools are the ones best equipped to listen to these stories, the best way for schools in other parts of the world to participate in Asia is to collaborate with us.

It will be a rich mix, from which new ways of teaching and new management stories are certain to emerge. I hope that is enough to influence business school thinking.

Ricardo A. Lim is dean of the Asian Institute of Management in Makati City in the Philippines.