How to Save the Business School

The rise of business schools around the world has been a success story for the industry. Through a business education, many students have improved their chances in life, and certainly raised their salaries. Business schools have always, however, attracted criticism.  

Influential reports by The Ford Foundation and The Carnegie Foundation in the 1950s were condemnatory of business schools, criticizing the poor quality of their students, lax academic standards, untrained faculty, unintellectual curricula, and unclear missions. They had, in all, little to say in favor of business schools. Later, the New York Times, Forbes, and The Economist joined the chorus of critique. 

Business Schools: Critical Voices and Global Challenges 

Despite this, business schools flourished. Yet after a long period of growth, they are now experiencing tougher times. Fundamental shifts in values and major demographic developments have put schools on the defensive. Students and employers are raising concerns about outdated curricula and the lack of alignment between study and real-world career demands. Some question the societal legitimacy of business schools in general, arguing that they are nowadays detached from broader societal concerns and that they have contributed to corporate dominance, environmental degradation, widening wage disparities and ethical scandals. Even influential pro-business CEOs such as Elon Musk and Mark Cuban have expressed skepticism about the efficacy of business degrees. 

An Urgent Need for Reform? Business Schools in Transition 

Against this backdrop, it is clear that business schools need to fundamentally realign themselves in order to dispel existing doubts about their raison d'être in the public eye. However, this urgently needed change is often slower than necessary. Technocracy and the fear of upsetting donors put the brakes on reforms. In addition, changes are often only driven forward in very small steps, which means that the change achieved is more symbolic than substantial. 

Mission Statements: New Strategies to Strengthen Legitimacy 

A careful analysis of fundamental strategy can help business schools enhance their legitimacy and adopt a clear set of values. Most business schools draft a mission statement to describe their purpose. While this statement often offers an indication of a school’s purpose, these statements have to be treated with a pinch of salt, as far too often they are detached from reality, trying to portray a business school as something more than it is. 

Going forward, business schools must ensure their mission statements are not only clear and inspiring but also grounded in reality. This requires the involvement of diverse stakeholders – students, faculty, employers, and alumni – in the drafting of these statements.  

Sustainability and Flexibility as Key Issues 

Socially important areas such as sustainability, lifelong learning, societal impact, and responsible management are no longer peripheral issues, and must be at the heart of a business school’s purpose if it is to remain relevant. Students increasingly demand flexible learning that fits their personal and professional lives. The number of options is staggering, and students prefer to learn when, how, and where it suits them best. 

Resource Strength as a Factor for Success: How Business Schools Stand Their Ground in the Market 

A major factor driving the competitive ability of business schools is available resources. Organizations should develop unique core-competences that can permit them to outperform their competitors by doing things differently. 

The most valuable and rare resources of a business school tend to be its academic faculty, including a strategically minded and visionary leadership team. But it is not just human capital that matters. A school’s physical assets, financial resources, institutional reputation, and organizational culture all play crucial roles in shaping its competitiveness. Business schools that can cultivate a unique combination of these resources and capabilities are better positioned to outperform their competitors and establish a clear market differentiation. Business schools should decide what resources and capabilities they have (both tangible and intangible) and decide what their potential impact is on their competitiveness.  

Global or Regional? A Strategic Market Focus is Required 

Another critical area for strategic renewal is the market focus of business schools. Should a business school aim to attract top global talent, or position itself as a regional player? In large markets such as China or the United States, this is particularly pertinent, as schools must decide whether they aim for a domestic audience or a more global student body. 

Deciding where to compete involves weighing a variety of factors, including the size and profitability of potential student segments, as well as the alignment between the school’s purpose and the needs of its target markets. This strategic decision can have significant operational and financial implications, particularly as schools increasingly leverage remote learning technologies that reduce the constraints of geography. 

Research, Teaching or Social Relevance? The Necessary Focus. 

Once a business school has clarified key strategic building blocks – namely the purpose (vision and mission), the market (where to compete), the competition (how to compete), the resources (with what to compete) and the systems (how to monitor its strategy) – the school can draft a more informed and coherent strategy. 

A business school can follow three principal options: it can prioritize research, teaching, or social relevance. While, at first glance, this may appear obvious, most business schools fail to clearly prioritize one of these three domains. Instead, they spread their efforts too thin and end up with mediocre performance in all three domains. They are a “jack of all trades but a master of none,” which leads to lackluster and undifferentiated positioning. 

Targeted Specialization: How Business Schools Make the Most of Their Strengths 

To overcome this trap and achieve a clearer profile, schools should make explicit trade-offs between the three domains.  

Nevertheless, in order to meet professional standards, a certain minimum performance must of course be achieved in all three areas, but only very few internationally leading elite business schools actually have the necessary resources to excel in research, teaching and social commitment. Due to limited resources, many business schools will have to focus on one area, such as the quality of teaching, in order to stand out from the competition in this area. Whether a business school focuses on the quality of teaching, excellent research or social relevance depends on the individual composition of resources and capacities. 

Mediocrity Versus Excellence: A Comparison of Business Schools 

Some schools are “stuck in the middle” and do not reach minimum credibility thresholds in any of three key competitive domains. These schools find it difficult to compete and are bound to struggle, unless they are externally funded by government or wealthy individuals who would like to have a business school named after them. As a result, there are many institutions that have business schools “written on the box but not in the box.” Such schools typically hire mediocre faculty who offer mediocre education to mediocre students. 

On the other hand, elite business schools that manage to excel in all three domains – research, teaching, and social relevance – benefit from a self-sustaining business model. Their reputation attracts top faculty and students, which in turn enhances their brand recognition and financial stability. This virtuous cycle enables them to maintain their competitive advantage and reinforces their legitimacy in the global marketplace. 

Strategic Clarity: The Key to Success for Business Schools 

Developing a clear strategy offers strategic clarity to business schools and prevents unproductive and expensive wavering between alternative trajectories. This reinforces the legitimacy of the business school in the areas in which it chooses to compete and avoids frustrations from competing in domains where the school cannot win. 

Business Schools under Pressure: 3 Tips for Lasting Relevance 

At a time when the legitimacy of business schools as a whole is being called into question, business schools need to critically review their strategies. There needs to be a fundamental shift in the ways in which schools build their futures. The challenge is not just about responding to critics who question the relevance of academic research or the real-world efficacy of what is taught in their classrooms. To remain viable business schools must align themselves more closely with stakeholder expectations while delivering value that goes beyond the classroom. 

To achieve this, three key areas of action are of particular importance: a purpose-driven strategy, clear market positioning and competitive differentiation. These three pillars are crucial to keeping business schools relevant and successful in an increasingly complex and competitive environment. 

1. Purpose-Driven Strategy 

At the core of the renewal lies the need for a clear, purpose-driven strategy. It is not enough to craft lofty statements. Schools must scrutinize their purpose and ensure alignment with stakeholders. The legitimacy of any institution rests on its ability to inspire and serve the communities it engages. 

2. Precise Market Positioning 

Furthermore, a sharp focus on market positioning is key. As remote learning proliferates and the very notion of “local” becomes blurred, geographic targeting must be reconsidered. A school needs to decide where to compete. With shifting demographics and evolving student preferences, business schools must make deliberate choices about where and whom they target. 

3. Differentiation in Competition 

Schools need to determine how they will differentiate themselves in a highly competitive sector. Whether it is through research excellence, teaching quality, or societal impact, each institution must choose a path that aligns with its strengths and resources. The decision on how a school can differentiate itself from competitors should be informed by its aspirations, resources, opportunities, stakeholder desires, the competition, and any trade-offs that may occur. 

Critically, business schools must take stock of their resources and capabilities. This starts with a self-critical and candid assessment of leadership, faculty quality, teaching and research infrastructure, institutional reputation, and financial health in determining which competitive strategies are feasible.  

Progress in the Spotlight: Metrics as a Management Tool 

The success of any strategy hinges on robust systems for tracking and adjusting progress. Effective metrics not only help keep institutions accountable but also ensure that their actions are aligned with their overarching mission. 

Conclusion: Focus as a Path to Legitimacy and Competitiveness 

Building on the critical review of their key strategic decisions, most business schools will need to decide whether they prioritize research, teaching or social relevance. While all business schools should aim to reach minimum thresholds in these three areas, resource constraints will compel most schools to focus on one domain to excel and differentiate themselves from competitors. A clear focus on one competitive domain prevents wasting resources will enhance the overall legitimacy of the business school, leading it to stand out in a world awash with undifferentiated business schools that smack of illegitimacy to wider society.  

A focused and realistic approach rooted in a school’s particular strengths and circumstances will aid business schools in avoiding the fate of institutions “stuck in the middle” and continuing to face legitimacy challenges. This means hard choices, but the other option, of continued flailing, societal disapproval, and accelerated failing, is a far worse fate. 

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