Traditional management education is at a tipping point. In the product lifecycle, mainstay programs such as the full-time MBA are in the stage of decline. “Product extensions” such as specialized master’s programs are struggling in many markets. Customer values, expectations, and preferences are changing radically. Technology-based learning is exploding, and the number of substantial new out-of-category executive education competitors is growing exponentially. The needs of employers—the ultimate market-makers—are heading in directions that don’t favor traditional business schools.
And, yet, business schools at every type of institution are still building portfolios based on limited or no objective data on their potential markets—including size, price sensitivity, product requirements, differentiated positioning, marketing costs, and other critical dimensions of competition. This is happening even though many of these schools offer sophisticated courses in digital analytics, data-driven marketing, and customer-centric product design.
No business school is immune to these “blind spots,” which can lead to unprecedented financial pressure and, in some cases, challenges to business model viability. To achieve sustainable financial success in today’s dynamic era, the “business of a business school” demands increasingly rigorous and data-based strategic planning, product development, and marketing management.
How to Compete Online?
One of the most pressing competitive questions facing business schools involves how they can most effectively build online and hybrid delivery into their portfolios. The online market is growing fast—just consider that the U.S. News & World Report now ranks nearly 300 online MBA programs, and Forbes reports that 32,000 students are studying in the top 25 online MBA programs alone.
With the market so crowded, institutions are confronted with a complex array of choices for serving students online, each with its own merit or downside. Some institutions choose to “go it alone,” building their own online infrastructure, delivery, and marketing systems to compete in the space. Others choose to engage an online program manager (OPM). There are now dozens of OPMs such as 2U, Academic Partnerships, Wiley Education Services, and Coursera that offer everything a school requires—from program development to customer service to marketing—to take academic programs online.
However, because they act based on unproven assumptions about their ability to compete in the online space, some schools make choices that are wrong for their markets. Others are disappointed with either the results or the unanticipated consequences of adding online programs to their portfolios, such as the cannibalization of markets for their offline programs. Often, schools spend significant resources “building their brands,” rather than using data to determine how to differentiate their product positioning, identify previously unconsidered market niche opportunities, or even make the case to reconsider plans for a new program.
One example of a school that has used data to its advantage is Babson College, a private business school in Wellesley, Massachusetts. Babson, which emphasizes its strength in teaching entrepreneurship, recently examined relevant data to determine the best way to build greater flexibility into its online offerings.
By using data, business schools don’t base their decisions “on who yells the loudest. They [make decisions] based on facts,” says Keith Rollag, dean of Babson’s F.W. Olin Graduate School of Business. Objective data about competition and the size of the market, he adds, can help schools become better predictors of whether a new program, model, or approach will be viable. Its use “removes instincts, politics, emotions, and other intangibles from the decision.”
By analyzing its competitors and market, Babson documented that its students wanted to have many online education options and that this could be used as an effective competitive differentiation strategy. “We learned definitively they wanted to be able to take fully online or blended courses, or attend traditional face-to-face classes virtually,” says Rollag.
Babson not only designed a program that incorporated this level of flexibility, but also unbundled its MBA so that students can complete elements of the degree piecemeal through stackable credentials. “What we were really trying to reflect when we worked through this was our own entrepreneurial spirit.”
Reaching the Right Customers
Digital marketing is another area in which a new level of data-based rigor is essential. Business schools are marketing their programs to the most digitally savvy consumers in history. These consumers expect a “brand experience,” similar to the experiences they have in their interactions with companies such as Amazon, Google, Zappos, Dollar Shave Club, and Rocket Mortgage. Today’s business school prospects are shopping for everything, even business school programs, on their smartphones and Apple Watches.
Objectively, many business schools spend either too little or too much money on digital marketing to generate quality leads. For example, schools often believe the sign of a successful digital strategy is getting a lot of “clicks,” only to later learn that those clicks don’t translate into results further down the enrollment funnel. Data tells the truth about what is actually happening and allows meaningful levels of marketing program attribution.
Once business schools capture quality leads, it’s crucial that they emphasize funnel management, in which they systematically move prospects from inquiry to application, and ultimately to enrollment. This requires schools to commit to a sophisticated, integrated digital marketing and selling strategy, in which they don’t just identify quality prospects and capture leads, but continue to act on data-driven insights from multiple channels to effectively manage each prospect’s journey.
A commitment to digital marketing is now part of the strategy at the Mendoza College of Business at the University of Notre Dame in Indiana. But this has not always been the case, says Paul Slaggert, director at Notre Dame’s Stayer Center for Executive Education. “We’ve always relied on the power of our brand to drive enrollments,” says Slaggert. For example, in the past, the school had focused far less on generating leads through advertising or moving prospects through the sales funnel; it was not giving prospective students compelling reasons for choosing Mendoza’s program at every stage of the recruitment process. This was particularly true when it came to certain segments of the market.
“We learned through data that while Notre Dame is a wonderful brand in the undergraduate market,” says Slaggert, “that doesn't necessarily translate to enrollments in the highly competitive EMBA space.”
Based on data about the past behaviors of its best-fit prospects, Notre Dame shifted its strategy and resources from growing brand awareness to identifying, attracting, and nurturing high-quality prospects. The school began emphasizing frequent, personalized contact with this targeted group. “The insights gained from our market research and real-time data gave us clarity and confidence to shift our strategy and resources toward leveraging our EMBA customer journey,” says Slaggert. “As we paid more attention to the admissions funnel, we saw an immediate, positive year-over-year impact.” The number of applications submitted to Mendoza’s EMBA program increased by 17 percent. The school’s “capture rate”—defined as the number of submitted applications divided by the total number of inquiries—increased year over year by nearly 4 percent.
Disruption or Adaptation?
As business schools take stock of their markets, one question remains. Are traditional models truly facing disruption, as defined by Harvard’s Clayton Christensen? That is, are they being overtaken by more innovative new competitors, much like video stores were replaced by online streaming? Or are business schools falling victim to their own insufficient adaptation to normal competitive conditions, much like traditional film suppliers allowed themselves to be one-upped by digital photography?
While there’s no doubt that technology-based educational delivery is changing the game for all academic institutions, one can argue that technology has not yet been a truly disruptive force. It is currently more a case of disintermediation. That is, students now have more options to skip the middle man and access educational content directly from a variety of sources. As competitive environments grow more complex, it is an unwillingness to adapt—to use objective data analysis to challenge “institutional myths” with facts—that is the main culprit behind institutional challenges.
Those myths can be difficult, but not impossible, to overcome. For example, the Peter T. Paul College of Business and Economics at the University of New Hampshire in Durham wrestled with declining enrollments in its part-time MBA program—the financial driver of the institution’s portfolio. At first, administrators believed a variety of myths about their program. These ranged from, “There are not enough qualified prospective students in New Hampshire, so we must market to a broader region” to “We need a major curriculum change” to “We can’t compete effectively against well-funded online providers in the market.”
But as it turned out, all of these beliefs were false.
The Paul College came to this conclusion after conducting an objective analysis of market size and population distribution. It gathered data involving current students, as well as prospects that inquired about the program but did not enroll. It delved into its competitors’ market share trends, delivery location preferences, pricing, and product model preferences. With this data, the institution was able to establish a new, fact-based strategic narrative. This, among other strategic shifts, led the school to invest more heavily in program delivery in the nearby city of Manchester, rather than recruit primarily for programs delivered on its main campus. As a result, from 2016 to 2018, applications for fall programs in Manchester rose 25 percent; enrollments in the same period jumped 35 percent.
Confident in the objective data they had collected, faculty and administrators made changes in the way they targeted prospective students, positioned and marketed their program, and managed their sales funnel. The new approach unlocked a market full of previously undiscovered opportunities in Manchester and grew the college’s market share in the state of New Hampshire.
“Enrollments and market share in our part-time MBA program continue to grow, despite the overall declines we see in the category across the nation,” says Deborah Merrill-Sands, the college’s dean.
Preparing for New Competitors
A growing number of “out-of-category” enterprises represents perhaps the largest source of substantial new competition to traditional, university-based business education. Gaining ground in the sale and delivery of management education are not only consulting firms such as McKinsey Academy, Deloitte Academy, KPMG, Accenture Academy, and Eurasia Group/EGX, but also well-funded educational tech companies such as General Assembly, Degreed, NovoED, Fitch Learning, ExtensionEngine, and a long list of others.
These providers are capitalizing on the fact that corporate education needs are changing. They own valuable knowledge capital, have global corporate and government engagements, and possess unique and extensive market information. They have access to large data sets, as well as to sophisticated technology platforms that allow them to deliver education at scale to all levels within an enterprise. If that weren’t enough, they also are nimble and flexible enough to change on a dime.
Based on surveys Eduvantis has conducted, there is evidence that this category of competitor is already shrinking the market share of traditional university-based executive education providers. That comes as no surprise—in 2018, face-to-face delivery provided 88 percent of the revenue for university-based executive education providers in the U.S., according to UNICON, a global consortium of these providers. Among European providers, the number is slightly lower, at 79 percent. The shift to more delivery among traditional university-based programs is accelerating, but it remains to be seen if that shift will occur rapidly enough to help business schools compete against this new breed of provider.
We are moving toward the so-called Fourth Industrial Revolution, which economist and World Economic Forum founder Klaus Schwab defines as the emergence of new technologies, ranging from genome editing to mobile supercomputing to machine intelligence. These technologies, Schwab says, are “fusing the physical, digital, and biological worlds and impacting all disciplines, economies, and industries.” As part of this revolution, out-of-category providers of business education will continue to aggressively put a sharper edge on competition; they will accelerate disintermediation, based on precise, data-based product development and marketing. And they are seeking to take market share from traditional business schools, in all educational product categories.
Each business school must develop its own understanding of the needs and expectations of its unique stakeholders and prospects; each school must deliver differentiated value to these audiences, based on its unique assets, value, and competencies. To do this, it must also commit to new levels of objective decision-making, based on the disciplined use of comprehensive data, to establish their brand positioning, products, delivery models, marketing, selling processes—in short, to more strategically and effectively direct everything they do.
|Tim Westerbeck is president of Eduvantis, a strategy consulting and marketing services firm for higher education institutions.