Executive Interviews: Interview with Prof. John T Delaney on Business Model Innovation
April 2009 - By Dr. Nagendra V Chowdary

Prof. John T Delaney
Dean, College of Business Administration and Joseph M. Katz Graduate School of Business.

• Firstly, congratulations for being the 6th Dean of the University of Pittsburgh’s Graduate School of Business. As a Dean, what is your assessment of business schools’ enrollments during these unprecedented crisis times?
  Thank you. At this stage of the current recession, MBA enrollments will likely remain stable, though differences will emerge across schools and programs. For example, applications for full time (FT) MBA programs will likely increase, though the top-ranked schools will see a greater share of the increase than the lower-ranked schools. In addition, enrollment in joint-degree programs (e.g., MBA/JD) will likely increase as students seek a broader set of skills and hence more job opportunities. I expect some top-ranked schools to increase MBA class size to increase tuition revenue in order to offset reductions in endowment income. Applications to part time (PT) MBA programs may also increase as students seek to improve their skills while keeping their current jobs. In contrast, applications to Executive MBA programs will likely decrease because of lower employer tuitionsupport for students. Depending on a school’s enrollment mix across these programs, different business schools may see good or poor enrollment results

  It is useful to note that my analysis does not account for some potential complications. First, MBA tuition levels will likely lead students to become much more value conscious in selecting a program. This may lead to enrollment gaps for expensive MBA programs that aren’t in the top ranks. It could also lead to improved enrollments at some public university business schools, which tend to have lower tuition (at least for local residents). These trends will be very important as they could cause perceptions to change regarding which schools are the very best business schools. Second, the current crisis could lead firms to reassess the value of MBA-trained professionals. If such an assessment concluded that students with undergraduate business degrees could substitute for MBAs or that other graduate degrees were preferable to MBAs, the overall number of applicants to MBA programs will decline due to a falloff in employer recruitment. This issue will not be apparent immediately, as recruiting is going to be lower because of the economic recession and it will not be possible to disentangle these explanations in the next year or so. Third, changes in MBA enrollment patterns have implications for business faculty and universities. Many universities started MBA programs to generate revenue from a growing market. If the market shrinks, some programs will likely go out of business. In recent years, BSchool faculty have enjoyed a golden age in terms of compensation and employment. A decline in business enrollments will cause adjustments to occur, albeit over the course of several years. Regardless, of the outcomes, itwill be a difficult time for business school deans and MBA program administrators.

• What do you expect the Business Schools to focus on? Should they continue the same way as they were teaching? Or should the students be sensitized to the current economic and financial crisis?
  There is much debate about the point raised by this question and it is likely that a wide variance of opinions will emerge across deans, professors, and others. I believe that the crisis has created an opportunity for every business school to look at its operating model, the value proposition it provides, and its strategy for providing strong business education in the future. Different schools will respond with different plans. Some of the plans may offer little change and some will likely reconstruct the curriculum and MBA experience in a broad and telling way. Ultimately, students will vote on the amount of change needed, as they will enroll in programs that align with their perceptions of necessary MBA education.

  I believe it is essential for every business school to adjust courses to take into account the lessons of the current economic recession. Employment markets and patterns are going to change as a result of the financial industry meltdown. This will affect salary packages. It will create more competition for jobs and thus require schools to provide students with additional tangible skills—ones that recruiters will recognize. If a business school does not make adjustments, it risks its future student base. At the same time, business school governance is designed to ensure careful (deliberate) decisions and to resist hasty change. I see conflicts at many schools as faculty confronts difficult choices and short timelines for making them. I am also confident that, in the end, BSchool faculty will make the necessary decisions.

• What according to you is the best way for companies to stay focused during these unprecedented times? What should they concentrate on?

  Company leaders should start by asking the question: “What is our business?” You need to understand what you do that creates value for people. Then you must focus on maintaining and improving that value proposition. Look for opportunities in the economic crisis to expand your business. This is important because some segments of the business may contract substantially or fail during the recession.