MBA Business Models. While Top Programs Will Obviously Survive, Lesser Programs Have Their Hands Full. Unless.

MBA button on computer keyboard

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MBA enrollments are falling. In fact, they’ve been falling for years. Even the top programs experienced declining enrollments in 2022. There are all sorts of reasons for declining MBA enrollments including cost, perceived value, time-to-completion, shifts in the economy, relevance and micro-credentialing, among other challenges. But the real problems are embedded in MBA business models – especially with how they differentiate among market segments. While the top programs will survive, lesser programs have their hands full. If they want to stay revenue positive, they must separate themselves from the pack — or stay in a race to the bottom.

Business Models

Business models are extracted from business strategies, and business processes are derived from business models – which are often described in the Business Model Canvas, which consists of 9 elements:

Key partners Key activities Key resources Value propositions Customer relationships Customer segments Channels Cost structure Revenue streams

Let’s add another one: competition. Companies often examine these elements to develop their go-to-market tactics.

MBA Business Models

Business model diagram.

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It’s no different for MBA business models. Universities have partners, activities, resources, value propositions, customer (student) relationships, customer segments, channels, cost structures, revenue streams and competition. How higher education responds to these elements defines the MBA business model.

The first element that should be defined is customer segments. Here’s where target market separation occurs. Rankings help where top programs are separated from all of the other programs that dot the landscape. Value propositions extend from audience analysis. Top programs sell education-and-credentials, while lesser programs sell credentials-and-education — an important distinction. Obviously, top programs are more desirable than lesser ones, and even in a time of declining enrollments they’re much harder to enter.

MBA business models immediately separate into top/lesser segments, and from these segments everything else extends. For example, value propositions, channels, competitive analysis and key activities are different depending on MBA target audiences and the ranking of the programs. Lesser programs try to make it “easier” to earn the credential by offering flexible learning options, synchronous and asynchronous online education, mix and match curricula, increased scholarship dollars (AKA tuition discounting), fewer required credits, shorter completion times, lower admission requirements and pre-credit for “other” educational experiences (such as Certificate Program completions) to reduce the number of steps necessary to earn the credential. Easier, indeed.

Improved, better, different …

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Top MBA Program Differentiation

The top programs are in competitive bubbles where they use very different value propositions to compete. Their identities as “top” programs make it de facto easier to compete since the bubble is so small and alumni loyalty is so strong. They differentiate themselves with new courses, faculty showcasing, industry relationships, funding, certificates and some delivery flexibility. They tout their strong industry “brands” often reflected just in the names of the b-schools: “Wharton,” “Sloan,” “Kellogg,” “Booth,” etc. They must become optically more relevant, attract and retain high-profile faculty, increase their industry influence and offer curricula that’s appealing, exciting and timely – which they do every year. Poets & Quants, for example, lists the new courses from the top business schools including Stanford, Chicago, Harvard, Penn, Columbia and MIT – among other top schools – courses that sound a whole lot different from courses offered in lesser MBA programs. Here’s a representative few:

Entrepreneurship in the Life Sciences How Not to Bankrupt Your Family Reforming Mass Incarceration & the Role of Business Climate & Financial Markets The Business & Governance of Water

In fact, there were “174 new MBA courses at 26 leading US business schools” in 2022 with many more on the way. All in all, while enrollments are falling, the top MBA programs will be just fine.

Lesser MBA Program Differentiation

The challenge for lesser programs is to differentiate from what everyone else is already doing. For this reason alone, part-time and full-time lesser programs are in trouble. (We teach our business students that it’s impossible to win races to the bottom.) The general trends are to go online, increase flexibility, reduce admission requirements, reduce the time-to-credential, increase tuition discounts and reduce the number of required credits, among other steps everyone else is already taking. (I just saw an MBA program advertised as “9/9”: $9K in nine months.) There’s also an ongoing price war with prices ranging from $9K to $100K for lesser accredited programs.

It’s hard to see how this ends well.

Lesser programs should aspire to what top programs offer. This is not to suggest they abandon their credential priority, but seek a better balance between educating and credentialing, and offer some unique features where real differentiation among competitors can occur. As always, they should market themselves as “different,” while making sure that credential-seekers are not threatened by requirements or expectations that might be perceived as too rigorous for their purposes. Translation? Lesser programs should not scare students away who only want a credential.

So what are some differentiating steps lesser programs can take to increase enrollment? Lesser programs are forced to compete with other lesser programs – and there are lots of them. Those in business know that when the competition is wide, deep and hungry, outcomes can get ugly (sometimes described as circular firing squads). In their attempt to increase access to their programs through online education, lesser programs have actually dramatically increased the number of competitors, since MBA students can now live anywhere and pursue their degrees anytime with fully asynchronous programs — so much for local and regional advantages! (I wonder if that outcome was anticipated when so many programs went completely online: competition now literally comes from everywhere.)

Let’s assume that the top programs will remain top programs for at least the foreseeable future. They also have resources that permit them to adapt to changing market conditions. (Noah Barsky, for example, reports on how Northwestern’s Kellogg School of Business is creatively adapting to shifting market conditions.) While the top MBA programs compete among themselves, let’s assume there are 25 programs that need less help than the hundreds of MBA programs that dot the US higher education market. What should they do?

The conservative approach is to just survive the race to the bottom, hoping that somehow MBA enrollments will turnaround, while absorbing declines in revenue. Since hope is not a strategy, perhaps the MBA business model of lesser universities should include some elements that can be marketed to existing and ideally wider audiences. (We also teach the value of adjacent markets. In fact, we teach the whole business model development process embedded in an overall strategy complete with go-to-market processes.)

All of that said, what are some differentiating steps lesser programs can take to increase enrollment?

Here are 9 recommendations that can help differentiate lesser programs (beyond cost, credits, flexibility, time to completion, asynchronous delivery, tuition discounting and no GMATs/GREs admission requirements — which together dilute MBA content and quality — and keep lesser programs running a race they cannot win):

1. Curriculum Redesign

Let’s start with curriculum. Lesser programs should make their curriculum much more timely and way more relevant to real and current business problem-solving. Students complain all the time about the gap between theory and practice. (In fact, complaints about MBA relevance date back to the mid-20th century. Henry Mintzberg famously argued the case in 2004.) If MBA program managers need a rational for this kind of change, they absolutely must read every word of “How Business Schools Lost Their Way” by Warren Bennis and James O’Toole. Business curriculum is, they argue, still too abstract, theoretical and “scientific,” and on the other end of the spectrum, now way too tools-oriented. (Lesser programs should immediately stop teaching MBA students how to use tools of any kind. Udemy is where you go for tools training).

One response to the relevance criticism is to develop a dual-track curriculum where discipline fundamentals in finance, marketing, accounting and technology are supplemented with “in-the-trenches” courses that describe what it means to actually “do” finance, marketing, accounting and technology, and what it’s like to actually “be” a finance, marketing, accounting and technology professional – all in the context of actual business problem-solving – with all of its warts. A dual-track curriculum could differentiate lesser MBA programs from other lesser programs, so long as professors with significant industry experience can be found to teach the “in”/“do”/“warts” courses. (Theory/concepts/cases are well-covered by traditional faculty.) Curriculum can also differentiate MBA programs with “unusual” courses (like what the top programs do).

MBA programs must become much more relevant — and then market themselves as such:

“By whatever means they choose — running businesses, offering internships, encouraging action research, consulting, and so forth — business school faculties simply must rediscover the practice of business. We cannot imagine a professor of surgery who has never seen a patient, or a piano teacher who doesn’t play the instrument, and yet today’s business schools are packed with intelligent, highly skilled faculty with little or no managerial experience. As a result, they can’t identify the most important problems facing executives and don’t know how to analyze the indirect and long-term implications of complex business decisions … today it is possible to find tenured professors of management who have never set foot inside a real business, except as customers.”

The good news about dual-track differentiation is that very few business schools have claimed this high ground. In fact, it’s a green field for lesser programs.

2. Showcasing

All programs have star power. Sometimes it’s a campus or a building. Sometimes it’s an event that defines a university’s brand, like a national championship in football or basketball. Sometimes it’s faculty who excel at one or more business activities or disciplines. Lesser programs should search for differentiation based on star power that can be showcased. As my colleague Noah Barsky has suggested for years, one way to showcase faculty is to create a “graduate faculty” marketed as simply the best dual-track faculty MBA programs have to offer, faculty who are aggressively marketed across the theory/practice continuum. Another is to link cases and immersive/experiential courses directly to “stars,” like this, for example: “our program interacts directly with our football/basketball programs with opportunities to solve some of the most pressing business problems in intercollegiate competition.”

Faculty showcasing should involve videos, podcasts and Q&A sessions where prospective students can interact with their professors before, during and after their MBA programs, all of which can be “staged” by MBA program managers. While most credential-only-seekers might have little or no interest in this kind of interaction, the possibility of pre-/during-/post-program contact can be sold as a differentiator.

3. Life-Long Relationships

Lesser programs should invest in customer acquisition and customer retention. (Yes, we also teach these best practices.) MBA programs can create life-long relationships by offering students credits to courses or certificates at some future date, or discounted certificate programs that can be converted into other degrees at their university. Lesser universities could also offer access to “star” faculty to visit their companies for briefings and other meetings. How about one — or two — free MBA course(s) a year — for life? “Alumni management” should become a core competency, not through invitations to events where alumni are expected to donate. MBA graduates could be invited to international immersion programs or be invited to one program free-of-charge. This kind of relationship management would differentiate programs – and offered as compelling differentiation “proof.”

4. Certificate Programs

One of the easiest, quickest, cheapest and best ways for lesser MBA programs to differentiate themselves is through Certificate Programs linked directly to MBA credentials. Look at the above list of new MBA courses from the top MBA programs and think about all of the possibilities around Certificate Programs. Certificate Programs — and mini-Certificate Programs — can be created quickly and offered almost immediately to students with whom you’ve built life-long relationships. They can also be used to bait prospective MBA students (and the general public). Certificate Program discounts can be offered to matriculating students and MBA alumni. For example, a Certificate Program in Generative AI or Sustainability could be developed and marketed within 60-90 days, earn MBA credits and converted to a new MBA course — all while generating revenue for the business school. Quick market testing could identify hot topics; market interest could be tested in the field. Certificates could be created and killed with great speed and minimal cost, especially with creative faculty compensation models — which is key to managing costs and time-to-market.

5. Specialized MBAs

The future is specialized. As more and more professions specialize, universities must respond – ideally lead – the specialization craze. This is not a suggestion to create more and more “specializations” within existing MBA programs, which get buried by core MBA courses and ignored by credential-only seekers, but to create whole new MBA programs in, for example, healthcare, AI, sustainability and those areas green lit by marketing. As with Certificate Programs, speed is what differentiates specialized MBAs. If a university takes 9-12 months – or longer – to develop and offer specialized MBAs, it will follow the competition into potentially very lucrative areas where the lion’s share of profits have already been skimmed by early movers (especially in an increasingly asynchronous online MBA market).

6. Free Delivery

Lesser MBA programs – all programs for that matter – must go where the opportunities might be. Lesser in-person and hybrid programs should travel. MBA programs should be marketed as “deliverable” to near and far sites: “all companies need do is ask.” Traveling MBA programs are tailor made for hybrid delivery where MBA programs could be kicked off in-person with faculty stars followed by a mixture of online and in-person courses. “Star” marketing can be effective selling in-person programs, especially programs that focus on executive audiences where relevance is highly-valued. How many in-person programs — currently under stress — might survive if they were delivered on corporate campuses? Local and regional delivery could also be examined. Lots of possibilities here.

7. MBA+ Clients

There’s no reason why relationships with individual companies cannot be organized around education and problem-solving that occurs within and outside of classes with star faculty experienced with corporate problem-solving. Business schools could offer expertise within and outside the classroom where faculty descend upon a company with MBA courses, certificates, micro-credentials, consulting and other activities that together create a wide, deep and lasting relationship between a company and a business school. This is an extension of the delivery model described above and represents a different kind of relationship universities can have with specific companies or other organizations.

8. All Modes of Delivery

Lesser MBA programs should deliver their credentials in multiple ways. Lesser programs cannot get out of the race, but they can enhance delivery features, such as real-time hybrid programming, course flipping and immersive/experiential experiences – all in an effort to make their programs more accessible and flexible than they already are. While this is not a proprietary journey, speed here can work as new delivery options are created.

9. Marketing

None of these ideas make any sense without aggressive, creative marketing. Differentiation without messaging is a waste of time. Big-bang marketing campaigns can be effective only if they’re followed with constant, consistent messages that stress differentiation. Professional marketing teams who have all the right skills and competencies should be hired to get the word out. Marketing bake-offs should be organized. “Incumbent” marketing firms – who were there when the race to the bottom began – should be replaced. Digital marketing firms should compete for MBA marketing contracts annually. Digital is now “word-of-mouth.” It must managed by those who really understand digital analytics.

Some messaging ideas?

“We come with all of the incentives every program offers – flexible learning options, synchronous and asynchronous online education, mix and match curricula, scholarships, lower admission requirements and pre-credit for ‘other’ educational experiences you bring … but our theory/practice dual-track curriculum is unique and different from any of the programs you may be considering.”

“Our faculty is really world class – not because they publish theories (which they do) – but because they’ve been in the trenches where they’ve achieved significant business success. They’re credible. They will be your problem-solving and career guides. They can provide all sorts of services to your organization.”

“Our MBA program hugs you for life with degrees, certificates and free courses forever.”

“Our Certificates are timely, helpful, flexible and actually earn credit toward our graduate and certificate programs – which are specialized to problem-solving and market trends.”

“We deliver! If you prefer an in-person or hybrid MBA, we’ll come to you!”

“Still fun, fast and flexible — but different – and we can prove it.”

Afterthoughts

Business models must respond to market trends. There are tons of examples of models that remained static and died. MBA business models must also adapt to market trends – and competitors that are everywhere. If struggling MBA programs see themselves as risk takers – even a little – the ideas here can help. But if they continue to race to the bottom, they will struggle unless, hopefully, the market saves them. If you’re in charge of the MBA business model at your university, do you want to hope or differentiate? Hope will buy you some time; differentiation may turn things around and brand you a pioneer — something else you can use to differentiate yourself.

If you’re selling a top MBA program, you don’t need much luck. But if you’re selling a lesser one, you will need much more than luck (and hope). You need a plan to separate yourself from the pack.

If you’re buying an MBA program for yourself, your team or your company, you need an education-with-a-credential or a credential-with-an-education. Both should be features-rich. Study the business models and select appropriately.