IPBS: An Alliance That Works

Strategic alliances and joint ventures between business organizations often fail to deliver the expected results.  In fact, research suggests that such alliances and joint ventures fail between thirty and seventy percent of the time.

One consistent finding in this research is that strategic alliances and joint ventures are most likely to fail when companies don’t have shared values and operating philosophies, and when their management teams are not committed to the success of the venture as a whole.

I was thinking of this research last week when I was flying back from Germany where I had been meeting with the D’Amore-McKim School’s partners in the International Partnership of Business Schools (IPBS).  The IPBS is an alliance of ten business schools – two in the U.S. and one each in Mexico, Ireland, UK, France, Germany, Spain, and Italy.  Together we offer dual-degree programs for our undergraduate international business majors and a Masters in International Management (MIM) program that involves students earning half of their credits at one institution and the other half at another.

This alliance has been in place since 1974 and the D’Amore-McKim School has been a member since 1994.  By all measures, it has been an extraordinarily effective alliance which has served our university and students well.  As I took off from Stuttgart on Saturday morning after two full days of meetings with our IPBS partners, I thought about why IPBS has so successfully bucked the odds of alliance failure for so long.

The answer is really quite simple: IPBS partners do have shared values and operating philosophies and our leadership teams are extremely committed to IPBS success (and not just our own institutions’ success).   We all believe in the importance of students having the opportunity to live, study, and work in another country as part of their business education – developing the language fluency, cultural awareness, and business skills and networks necessary to develop into tomorrow’s global business leaders.

Importantly, we have translated these shared values into a standard operating philosophy which governs student experiences at each of our partner schools.  For example, all students in the IPBS bachelor degree programs major in international business, intensively study a second language, spend one to three semesters studying at a partner university in that university’s native language, and complete two six-month co-op work placements – one in their home country and another in their host country.

Similarly, we have coordinated our curricula within the IPBS partner schools so that all students who spend two years at a partner university and complete all the requirements there receive a degree from the partner institution as well as from the home institution.  For example, we have many proud dual-degree alumni from the D’Amore-McKim School of Business at Northeastern University and the European School of Business at Reutlingen University.  In our MIM Program, we have integrated curricula so that students can spend the first half of the program at one institution and transfer all of those credits to a partner institution where they will finish and earn their MIM degrees.  For example, there are many MIM graduates of the European School of Business in Reutlingen who spent their first six months of the program in Boston at the D’Amore-McKim School.

Don’t get me wrong.  The details involved in making all of this work are complex and sometimes result in intense disagreements between IPBS partners.  But, in the end, it seems as if all of these issues get worked out.  Our shared values and high-level operating philosophies go a long way in making this happen but the other key ingredient is the commitment that each of the IPBS institution leaders makes to doing the hard work to get the details right.

I forgot to mention earlier that I wasn’t alone on my trip to Germany.  In fact, three senior D’Amore-McKim School faculty and staff leaders accompanied me.  There were approximately 40 leaders in total from the 10 partner schools at this two-day meeting.  We do this twice per year and the IPBS deans meet a third time at one of the global conferences for business school deans.  Each day is filled with hours of meetings going over all aspects of our joint programs to ensure integration and student success.  Each night is filled with celebrations and outings that build the personal ties that bind us together as one IPBS organization.  This is how joint commitment to the IPBS mission is nurtured and reaffirmed each year.

Most business schools have “alliances” with scores of other business schools around the world that they proudly list on their websites. But if you dig a little deeper, you will find that most of these are alliances in name only, and many more involve nothing more than the enrollment of an occasional exchange student.  At the D’Amore-McKim School we have “alliances” like this, too.  They serve an important purpose in creating more opportunities for our students to study abroad and learn about different cultures and business environments.  But none of these relationships delivers the value to our institution and our students that IPBS does.  Such impact requires full partner alignment on values and operating philosophies and commitment to the hard work necessary to maintain and improve the alliance over time.

It is a real privilege to belong to an alliance like IPBS which demonstrates the extraordinary value that a well-functioning global alliance can deliver.  The need for this type of educational offering has never been greater and our experience suggests it is worth all of the hard work necessary to deliver it.

Moving Forward With Reverse Innovation

Vijay “VG” Govindarajan visited Northeastern recently to discuss his latest book Reverse Innovation  as part of our Presidential “Profiles in Innovation” lecture series.  His topic obviously captured the imagination of Northeastern faculty, staff and students as the lecture drew a standing-room-only crowd to the largest auditorium on our campus.

VG’s lecture didn’t disappoint.  He began his talk by describing in great, dramatic detail three case studies in which breakthrough innovations in the health care and devices sectors were enabling better health outcomes in emerging markets at a fraction of the cost that is the norm in richer countries such as the United States.  He noted that, in some cases, the multinational companies who developed these innovations in countries like India and China were now exporting these concepts, products and services to the U.S. and Western Europe.  He predicted that these innovations had the potential to fundamentally reshape industries in the world’s richest economies just as they were in the world’s poorest economies.

This view of the world contrasts with the way most economists and leaders of corporate multinationals used to think about innovation.  The prevailing theory until recently was that multinationals should introduce product and service innovations to demanding consumers in the richest economies and once they had proven the concepts in these mature markets, they were ready to be exported to less-developed, emerging markets.  The problem with this approach is that the new products and services developed through this process were often too expensive or otherwise inaccessible to all but the highest-end consumers in emerging markets.

VG argues that multinationals who really want to reach new customer segments and reshape their global industries must “reverse” this traditional process and introduce breakthrough innovations in emerging markets first, ensuring that the products and services that they develop are accessible to the world’s poor as well as the rich.  His work echoes that of the late CK Prahalad who argued that there are enormous opportunities for global companies to earn profits serving the billions of poor people who live at the “bottom of the economic pyramid” in our world.

VG’s work has been influenced deeply by the time he spent advising GE and its CEO, Jeff Immelt, as well as other CEOs of leading multinationals.  Thus, it isn’t surprising that he frames his arguments in terms of implications for multinationals: the concept is called “reverse innovation,” for example, because multinationals traditionally exported ideas from developed to developing markets and he is urging them to import ideas from developing markets instead.   In my opinion, this emphasis on multinationals is a compelling but perhaps limiting way to frame his work.

As I see it, VG’s  insight has less to do about the flow of innovations across the globe, and more about the potential to unlock enormous value for the world’s companies and people by focusing innovation efforts on the needs of the world’s poorest 6 billion people rather than its 1 billion richest.  Multinationals, of course, will play a crucial role in unlocking this value – at least if VG continues to be successful in advising them to do so.  But entrepreneurial start-ups, family businesses and other local businesses are often well-positioned to create the breakthrough innovations necessary to serve a local customer base that they may understand best.  They will also play an essential role in unlocking the potential of breakthrough innovation to transform economies and lives.

I am convinced that universities like Northeastern will also play a crucial role in driving the breakthrough innovations that VG chronicles and celebrates.  At the D’Amore-McKim School of Business we have thought leaders like Ravi Ramamurti who are shaping the concept and practice of reverse innovation within companies around the world.  At the same time, researchers in our College of Engineering and Bouvé College of Health Sciences are developing the breakthrough innovations that have the power to fundamentally transform today’s cost vs. value trade-offs in health care delivery, product design and prototyping, telecommunications and countless other applications.

At Northeastern, we are playing a leading role in documenting and understanding reserve innovation principles and in applying reverse innovation principles as we develop and commercialize innovations birthed in our labs and field work.  When it comes to reverse innovation, we are theorists and practitioners, thinkers and doers.  That’s what we mean when we say we are driven by “use-inspired research.”

The obvious next step for Northeastern when it comes to reverse innovation is to innovate our own educational model to fundamentally transform the cost/value equation in higher education.   The prospect of unlocking the enormous value for society that such innovation in the education sector would create will motivate and focus our efforts in the coming years.  Many thanks to VG for inspiring us to keep moving forward with reverse innovation.

Practicing What We Preach

Professors are great diagnosticians.  Our job involves observing the world around us and developing conceptual and empirical models that explain what we see.  In my case, I was trained as an economist and business strategist and thus have a toolkit at my disposal to identify the forces at work that are transforming our global economy and the implications these changes are likely to have on business strategies and performance.

My faculty colleagues in the D’Amore-McKim School of Business are equipped with similar toolkits.  So, we understand how advances in information technology have fundamentally reshaped industries as diverse as banking, media, entertainment, telecommunications and retail.  We understand how globalization has driven fundamental changes in industry value chains, shifting manufacturing and technical support functions to hubs in China, Southeast Asia, India, Eastern Europe and elsewhere.  We understand how disruptive innovation forces have transformed the computer, brokerage and steel industries.

Of course, the higher education industry is not immune to these information technology, globalization and disruptive innovation forces that are reshaping industry after industry.  It is clear that information technology advances enable whole new models to access the knowledge that was traditionally transmitted through faculty experts in university classrooms.  It is clear that American business schools no longer dominate the graduate business education market and that faculty and students “shop” globally for the best universities.  It is clear that while online degree programs were once inferior to campus-based alternatives, this generation of online programs meets the needs of larger and larger segments of business students.

At least these trends are clear to me.  As Dean, it is my job to diagnose, anticipate and drive change in business education.  My faculty colleagues, on the other hand, spend their time (as they should) studying other industries and enterprises.  They teach business, after all, not education.

As part of our ongoing strategic planning process, I have asked my faculty colleagues to apply their considerable industry and enterprise analysis skills to better understand how higher education is likely to change and what we should do about it.  In essence, I’m asking us to practice what we preach every day in our classrooms.  I’m asking us to apply disruptive innovation theory to our industry and determine what it means for the business education industry and the D’Amore-McKim School.  I’m asking us to use lessons from technology-enabled change in other knowledge-based industries to predict the future of our industry and the likely winners and losers.  I’m asking us to better diagnose our own strengths and weaknesses.  And I’m asking us to reconsider all aspects of our business model and organizational culture so that we might become a much more nimble organization that is resilient and positioned for success no matter what the uncertain future holds.

This isn’t, by any stretch of the imagination, easy work.   After all, as academics we are natural diagnosticians and preachers (teachers) rather than change agents.  It may be hard to practice the strategic planning and change management concepts that we preach, but it is essential that we do so. The changes we are observing in the higher education industry today are unprecedented and it behooves us to tap into the very best in academic research and thought when defining our own path forward.

The Ultimate Experiential Learning Opportunity

In previous blog posts, I have written about how important I think entrepreneurship education is and have highlighted some of the courses, programs and initiatives that define Northeastern’s approach to such education.  Given Northeastern’s emphasis on experiential learning, it is no coincidence that we are so committed to entrepreneurship education.  In fact, I believe that working to define and begin building a new enterprise from scratch is the ultimate experiential learning opportunity for college students.

Consider the entrepreneurial process.  At one level, it involves deep, conceptual thinking as the nascent entrepreneur identifies new opportunities for potential value creation which don’t yet exist in the market.  At another level, it requires that the entrepreneur develops a sophisticated understanding of the industry and competitive context that her venture will compete in.  And at yet another level, it requires that the entrepreneur thinks about all aspects of the proposed business in a holistic, integrated way so that she can begin developing an organization that is best positioned to capture the identified opportunity and build a sustainable competitive advantage.

When business students are asked to define and actually begin building new businesses, they find that they must apply concepts from all of the core courses that they have studied (e.g., strategy, finance, accounting, operations, marketing, organizational behavior, leadership, entrepreneurship).   And when students in other colleges are asked to do the same, they find that they, too, must translate the higher-level concepts and theories that they have learned in their engineering, science, social science, and humanities classes into well-defined hypotheses about what will actually work best in a particular applied context.  The entrepreneur must be a master at matching a concept to the right context and in the process develops a deeper, more nuanced understanding of the concepts she was first introduced to in our classrooms.  You can’t develop successful entrepreneurs in the classroom alone.  Similarly, not much learning takes place when students are asked to devise business plans without first providing them with conceptual frameworks and tools that guide students through the rigorous thought process that underlies any successful venture launch.

Northeastern’s President, Joseph Aoun, expressed this entrepreneurship education philosophy quite compellingly in a recent opinion piece in the Boston Globe.  As President Aoun argues, universities like Northeastern that offer both conceptual and experiential learning opportunities in entrepreneurship for all of their students will not only birth more successful businesses but, perhaps more importantly, will also birth many more professionals with the entrepreneurial mindsets necessary to drive innovation and progress in all sectors of our society.

Moving from Education to Employment

Former colleagues of mine at McKinsey & Company have recently published a thought-provoking report on the challenges and opportunities many countries face in helping students transition from school to the workforce.  Quoting from the Executive Summary, the report notes:

“Around the world, governments and businesses face a conundrum: high levels of youth unemployment and a shortage of job seekers with critical skills. How can a country successfully move its young people from education to employment? What are the problems? Which interventions work? How can these be scaled up? These are the crucial questions.

In this report, we attempt to answer them. To do so, we developed two unique fact bases. The first is an analysis of more than 100 education-to-employment initiatives from 25 countries, selected on the basis of their innovation and effectiveness. The second is a survey of youth, education providers, and employers in nine countries that are diverse in geography and socioeconomic context: Brazil, Germany, India, Mexico, Morocco, Saudi Arabia, Turkey, the United Kingdom, and the United States.”

The report is fascinating and serves as a wake-up call to higher education leaders like myself.  In many ways, the report is highly critical of the role post-secondary education is playing in preparing students for meaningful careers.  These survey results are particularly troubling:

• Only half of students surveyed believed that their post-secondary studies improved their employment opportunities
• One-third of employers say they never communicate with education providers; of those that do, fewer than half say it proved effective
• Fewer than half of students say that when they chose what to study they had a good understanding of which disciplines lead to professions with job openings and good wage levels.

These figures paint a pretty bleak picture, but the McKinsey report also identified some education-to-employment programs that are helping students and employers make the right employment matches.  Quoting from the report again, “Two features stand out among all the successful programs we reviewed. First, education providers and employers actively step into one another’s worlds. Employers might help to design curricula and offer their employees as faculty, for example, while education providers may have students spend half their time on a job site and secure them hiring guarantees. Second, in the best programs, employers and education providers work with their students early and intensely.”  The report goes on to recommend further development of such post-secondary education programs.

These recommendations make great sense to me because they describe exactly how our undergraduate business program works here at the D’Amore-McKim School of Business.  Our corporate Board of Visitors and industry advisory groups (such as our Accounting  Advisory Board) are involved in curricular redesign efforts and provide ongoing feedback on specific courses and changes in the industry that our students and faculty must understand.  In addition, our classes are full of guest lecturers from our key corporate partners who help our students better understand how the concepts they are learning in class are applied in practice and offer advice on how best to prepare for and succeed in careers in their fields.

The signature of our undergraduate program is co-op, in which students spend six months in paid, full-time jobs in leading business, government and non-profit organizations.  The vast majority of our students, in fact, will participate in two or three co-op jobs before graduating from the D’Amore-McKim School of Business, providing the possibility that they leave us with vital job experience, a more impressive resume, and a much better sense for what they want (and don’t want) in their careers.  Not surprisingly, a majority of our students receive permanent job offers from at least one of their co-op employers – suggesting that both employers and students find that the co-op model works as a successful job-matching model for those moving from education to employment.

At the D’Amore-McKim School, we also ensure that “employers and education providers work with their students early and intensely (Education to Employment. McKinsey&Company, p.20)”  For example, a required freshman course is built around a live case study and consulting project for the global retailer, TJX.  TJX executives work with students throughout the semester and judge their final project presentations.  Section sizes for this course are capped at 19, in effort to ensure that students have a better chance to master the material.  In addition, faculty get to know their students personally and provide the curricular and professional guidance students need to start making their coursework, major, and co-op plans for the next four years.

In our “New World Scholars” program, honors students are also paired with alumni and corporate partner mentors in their freshman year.  These mentors, coming from outside of academia, provide a valuable alternative perspective on career paths that complements the counsel offered by our faculty.

Our co-op and program advisors also begin working with our students during the freshman year so that they may start learning about their interests and educating them on the range of potential co-op opportunities and career paths that they might pursue.  These advising sessions supplement the “co-op prep” courses that all of our students are required to take to ensure that they are well prepared to search for, secure and perform in these jobs.

The McKinsey report helps us better understand the difficult challenges that our youth face in transitioning from post-secondary education to full-time employment and sheds light on one of our world’s most pressing economic issues: the high and chronic levels of youth under- and unemployment.  These young women and men are bright, energetic, well-educated and willing to work, and our world cannot afford to continue wasting this extraordinary human resource.

I like to think that we are doing our part at the D’Amore-McKim School to help our world fully leverage this resource.  I wish more of our business school competitors would develop similar models which focus so extensively on preparing students for the education-to-employment transition.  While I don’t relish the thought of these competitor schools working to erode a distinct advantage that we enjoy in the business education market today,  how much better would our world be if all of our students were leaving college with the skills, passion, and mindsets necessary to embark on careers that they find professionally rewarding and personally fulfilling?

Getting Into Your Competitor’s Head

My last post described the uncertainty that I, and all business school deans, face when developing our long-term strategic plans and near-term budgets.  The business education market is changing rapidly and none of us is prescient enough to define exactly how it will play out next year, let alone five-to-ten years down the line.

While there are many underlying drivers of the uncertainty that we face, perhaps the most fundamental one is that we don’t know which organizations will enter our market in the coming years and what business models they will choose to compete against us.  To understand how important this uncertainty is, imagine that many of the new entrants are media, consumer electronics or technology companies that aggregate online business courses and sell them either à la carte or as accredited degree bundles.

To understand this model better, consider how the music industry has transformed itself over the past 10-15 years.  As the digital revolution transformed the music industry, the standard product became unbundled (from the album to the single track) and the marketing and distribution of music shifted online.  Not surprisingly, this shifted value in the music industry away from the music “bundlers and promoters” (otherwise known as record companies) and traditional brick-and-mortar distributors (otherwise known as record stores like Tower Records) and toward the superstar artists who increasingly could promote and distribute their music without relying on the record companies.  It also shifted value to the new online distributors such as Apple’s iTunes who made it easy for consumers to sample, purchase and store the tracks that they wanted to create their own bundles.

If I have described this analogy well (an analogy that Professor Rita McGrath offered at a recent conference for business school deans), it should be clear to you why business school deans must focus on the intentions and business models of potential new entrants into the business education market.  Traditional residence-based universities are analogous to the record companies and record stores in the music industry.  After all, we “bundle and promote” higher education products and services (we call these “curricula” and “enrollment management” in academia) and distribute them on the ground (we call these “campuses”).  In this continued scenario, educational spending would shift away from universities and toward “star faculty” (analogous to the superstar recording artists) and the online education distributors (analogous to iTunes).

Of course, this analogy is nowhere near perfect.  In particular, university “bundles” (curricula) are largely defined by a set of shared, long-established standards while an album’s bundle of songs may largely be determined by the idiosyncratic preferences of an individual recording artist.  As a result, it is likely harder to “unbundle and rebundle” courses in a way that will serve students well, than it was to unbundle and rebundle songs.

Not surprisingly, they are many alternative viewpoints about the validity of this analogy and others, and thus, the near- and long-term outlook for business education.  But the more general point I’d like to focus on in this post is that it is essential that business school deans spend time trying to better understand the intentions and capabilities of new and potential entrants into the business education market.

My consulting experience and research suggest that this is often easier said than done.  While I was working on competitive strategy projects at McKinsey & Company, approximately 90% of my clients argued that their competitors engaged in “irrational behavior.”  At the same time, only about 10% of my clients admitted to “irrational behavior” on the part of their companies.  While I would like to interpret these percentages in a self-serving way (only the smartest, most rational clients would hire me as a consultant!), the truth is that in most cases what my clients deemed “irrational behavior” by their competitors stemmed from a lack of understanding of the objectives and strategies of their competitors.

This confusion is understandable.  After all, we form a point of view about what is an appropriate strategy in an industry by what we see working for our institutions and closest peers.  But when an industry is full of heterogeneous competitors, each with different objectives and assets, capabilities and resources to draw upon, they will naturally follow different strategies.  It is good, sound strategic thinking that leads to different approaches being pursued by different types of competitors in an industry rather than “irrationality.”

The danger in dismissing competitor behavior as “irrational” is that it provides a convenient excuse for not doing the hard work necessary to better understand your competitors and their likely moves and counter-moves in the market.  Your organization won’t be prepared for their initiatives and will find itself constantly on the defensive – reacting to – rather than shaping the future of the market.

This is why business school deans must attempt to “get into the heads” of these new and potential future entrants to the business education market.  If we can understand these players better, we might preempt or co-opt their strategies, or even align ourselves with them in strategic partnerships.

Getting into your competitor’s head first involves developing a better understanding of their assets, capabilities, resources, partnerships and aspirations since these will define the feasible choice set for their strategies.  You must then turn to better understanding the decision-makers in those companies.  How are decisions made and who makes them?  What are their objectives and what biases might shape their thinking when formulating their strategies?  There are systematic ways to better understand your competitors – you don’t have to rely on guess work alone.  For example, see my article with John Horn and Jayanti Kar on this topic.

You must first think like a strategist for your competitor and realize that they will most likely play to their strengths.  In the business education space, this is why the schools with the strongest brands and star faculty are likely to continue to lead the MOOC revolution – they have the best chance of attracting the hordes that this model relies upon.  Similarly, the education publishers – traditional “bundlers” in our industry – may increasingly seek to bundle and certify online offerings (this must be one motivation for Pearson’s recent acquisition of online education service provider EmbanetCompass).  Schools with resources but lesser brands will likely invest heavily in specialized, new program offerings based on focused clusters of faculty expertise since they won’t be able to compete otherwise.  And schools with limited resources and brand recognition may end up being “acquisition” candidates for other players looking for faculty and facilities to host residencies in their online programs.

Ultimately, these are decisions made by human beings within their organizations’ governance structures, so it pays to understand how decisions are made and who makes them.  For example, the publicly-traded, for-profit players are likely to make decisions more quickly and will focus on market share, profit and shareholder value metrics.  The non-profit universities tend to have consultative faculty-driven decision-making processes, and almost certainly will move more slowly and defensively, albeit with an admirable focus on program quality and student learning.  Significant capital will continue to flow into the market from non-traditional sources, such as private equity, and business school deans will have to understand how the principals of those firms evaluate their investments including their tolerance for risk and desired time horizons for returns.  All of these factors will determine how the business education market redefines itself in the coming years.

Admittedly, this competitor and expected future competitor analysis won’t generate perfect forecasts and unassailable predictions of future winners and losers.  There are too many sources of uncertainty in this rapidly-evolving industry to deliver that type of foresight.  The alternatives to such analysis, however, are hardly compelling.  You could simply assume the status quo or make no attempt to forecast the future, waiting to react to changes in the market as they evolve.  Such simplistic and reactive approaches, however, are inconsistent with future market leadership.

At the D’Amore-McKim School of Business, we aspire to be one of the leaders of this next generation in business education.  In this time of uncertainty and change in our market,  all of us at here must continue the hard work necessary  to get into our competitors’ and likely future competitors’ heads.

Strategy and Budgeting in an Uncertain World

For the last few weeks I have been working on the 2013-14 academic year budget for the D’Amore-McKim School of Business.  You might think that this is a straightforward process, and in many ways it is.  The hard part, of course, is deciding how to allocate resources and forecast performance in the rapidly-changing, highly-uncertain market for business education.

It wasn’t always this way.  My first experience in developing a budget for an educational institution occurred when I was the treasurer of my children’s non-profit preschool.  In retrospect, this was an easy task.  The school was enrolled to capacity and had a long wait list to boot.  Since tuition was predetermined for the year and accounted for the vast majority of school revenues, it was easy to project total revenues.  And since the largest expenses were predictable and fixed (staff salaries and rent for the facility), costs were also easy to forecast.  We had a stable business model and had no interest in expanding into new markets or services, so the strategic planning and budgeting process involved little more than determining how much additional income we needed to continue to attract and retain great teachers, and then setting tuition increases to ensure that we would generate the income necessary to fund those raises.

It wasn’t that long ago that strategic planning and budgeting in many higher education institutions worked pretty much the same way.  Tuition income and even endowment income (assuming conservative asset allocation rules and relatively stable financial markets) were relatively predictable and the largest cost categories were fixed (faculty and staff salaries, debt service, facility costs).  Major changes in programs were rare and were often rolled out over many years, with limited impact on the budget in any one year.  Decisions to make large investments in new facilities usually involved taking on additional debt, and there was always a risk associated with taking on such long-term obligations.  However, as long as the basic higher education business model remained unchanged, these were viewed as low-risk bets.

This is not the strategic planning and budgeting process I am going through now.  The business education market, especially for graduate degrees, certificates and executive education programs, is changing rapidly and how it will evolve in the next 1-5 years is highly uncertain.  If you’ve been paying attention, you know the drivers of this uncertainty: the rise of global competitors; the increasing importance of online competitors of all sorts, including the providers of MOOCs; the rapid shift in graduate student demand from traditional MBA programs toward MS and limited-/no-experience programs; and a general questioning of the value of high-priced business programs in a slow-growth economy.

While my undergraduate tuition may be reasonably foreseeable for at least the next few years, my graduate and executive education revenues are not so predictable.  At times like these, I am particularly thankful that my research, teaching and consulting have always focused on decision-making during uncertainty (for an example of my work in this area, see my book 20/20 Foresight: Crafting Strategy in an Uncertain World).  This work has taught me a valuable lesson: there is no such thing as a “certain” or “uncertain” business decision.  Every significant business decision involves some uncertainty and thus risk.  Decision-makers must confront this uncertainty head on and not fall into the all-too-common trap of either assuming away underlying uncertainty or the opposite extreme of avoiding analysis altogether because the world is just “too uncertain.”  Rather, decision-makers must conduct the best possible analysis they can to identify the uncertainties they face and the range of possible outcomes that may play out over time.

In my ongoing strategic planning and budgeting exercise, this means that I have to consider multiple scenarios and a wide range of potential outcomes for the new initiatives that we are launching and the impact they will have on the bottom line of the D’Amore-McKim School.  It also means that I allocate the necessary reserve resources to insure against downside risks.  And perhaps most importantly, it requires that I monitor results and leading indicators of future performance closely throughout the year and make course corrections as necessary.

I must do this despite the fact that I am unabashedly optimistic about the future of the D’Amore-McKim School of Business and our ability to continue to innovate and offer world-class business education programs that will thrive in the new business education market.  After all, we are well ahead of the trends toward online, experiential, entrepreneurial and global business education models.  In addition, if we are courageous and entrepreneurial enough, we can shape the future of business education.  Sound strategy during uncertainty always involves a mix of bold attempts to shape the unforeseeable future to your advantage while simultaneously preparing to adapt if those shaping attempts fail.

As I finish up the budgeting process this month, I find myself focusing not just on the downside risk that uncertainty creates but also on the extraordinary upside opportunities.  I must budget to protect against this risk while ensuring we are still well positioned to capture the upside opportunities.  While this process may be more difficult than what I experienced as the treasurer of my children’s preschool, it certainly is more rewarding, too.

Like most things in life, uncertainty is neither “bad” nor “good.”  The only certainty about uncertainty is that it is always with us and it is best not to ignore it.