6217-insead business school-cd-int use-v3 · 2017. 11. 9. · title:...

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INSEAD:

Building the Business School

for the Future

05/2016-6217

This case was written by Indira Pant, under the supervision of Ilian Mihov, Dean of INSEAD. It is intended to be used

as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative

situation.

Additional material about INSEAD case studies (e.g., videos, spreadsheets, links) can be accessed at

cases.insead.edu.

Copyright © 2016 INSEAD

COPIES MAY NOT BE MADE WITHOUT PERMISSION. NO PART OF THIS PUBLICATION MAY BE COPIED, STORED, TRANSMITTED, REPRODUCED OR DISTRIBUTED IN

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This document is authorised for use only in INSEAD Visionaries Conference at INSEAD – 2 June 2016 - by Ilian MIHOV. Copying, printing or posting is a copyright infringement.

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Copyright © INSEAD 1

In January 2016, the Financial Times ranked INSEAD’s MBA programme #1. As the entire INSEAD community celebrated, Dean Ilian Mihov slipped into his office to prepare his presentation for an alumni reunion dinner later that evening. As he reviewed his slides, he was filled with gratitude and pride in his team. He also felt humbled by this extraordinary school he had undertaken to lead. In only 55 years, INSEAD had revolutionized business education on a global level, through the achievements of its students, alumni, faculty, staff and their collective contributions to society.

Two years into his Deanship, Mihov felt certain INSEAD was at an inflection point in its history. The world of business education was changing rapidly and the School faced considerable challenges. INSEAD would struggle if it continued doing more of the same. It had to be bold and innovative in its programmes and how it funded them. The Board had recently approved Mihov’s Strategy 2020, in which he envisaged a fundamental change in INSEAD’s business model, giving it the financial resilience it needed. Strategy 2020 was ambitious, so Mihov and his team were turning to INSEAD’s exceptional alumni to help the School at this crucial time.

As the cheers and laughter outside grew louder, he thought: It was easy to become complacent at the top. Would the alumni he was about to meet endorse the need for change? Would they embrace their crucial role in INSEAD’s future?

A Glorious 55 Years

In March 1957, several European nations signed the Treaty of Rome to build a strong and united Europe. Driven by these goals, George Doriot, the first Frenchman to study and subsequently teach at Harvard Business School, envisioned a pan-European management education institution that would meet the inevitable demand for trained managers. At its Annual General Meeting in July 1957, the Paris Chamber of Commerce resolved to establish Europe’s very first business school. Mihov described how the ideals that surfaced in those turbulent times shaped INSEAD’s unique identity:

For centuries, wars broke out between European nations every 20 or 30 years. Doriot wanted a school that would not only provide management education, but also promote peace and prosperity by bringing people from all over Europe to work and build businesses together. In the spirit of unification, no nationality would be dominant at the school. Consequently, instruction and assessment in the early years was in German, French and English. INSEAD graduates would not just be trained in management – they would also acquire a global perspective. This value remained at the core of INSEAD’s ethos and identity throughout its history.

The first Europe-educated MBAs – 52 students from 14 countries – graduated from INSEAD in 1960. By 2015, the School had over 50,000 alumni representing 157 nationalities. They had been taught by 150 faculty members from 40 countries on three campuses – in Europe, Asia and the Middle East. INSEAD had become “the business school for the world.”


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INSEAD’s success was partly attributable to its mission:

“To create an open-minded learning environment that brings together people, cultures and ideas from around the world, in order to transform individuals and organisations through business education. Through teaching, we develop responsible, thoughtful leaders and entrepreneurs who create value for their organisations and their communities. Through research, we expand the frontiers of knowledge and influence business practice.”

Flowing from this mission were values of diversity, independence, excellence, collaboration and entrepreneurship that fuelled an extraordinary pioneering spirit. Not only did INSEAD bring management education to Europe, but also the School’s one-year MBA programme was the first of its kind anywhere in the world.

Soon after opening its iconic campus in Fontainebleau, outside Paris, INSEAD entered the executive education arena in 1968. Working closely with the business community, INSEAD pioneered customised programmes, which would become a mainstay of executive education all over the globe. INSEAD also blazed a trail in thought leadership with innovations such as the use of business simulations and the introduction of soft skills development in leadership programmes.

No other business school embodied an international perspective the way INSEAD did. Its leadership saw the significance of Asia as far back as 1980 and created the Euro-Asia Centre. This Centre allowed INSEAD to develop executive education programmes for Asian companies as well as for European companies that wanted to explore the opportunities offered by Asian markets. Twenty years later in 2000, INSEAD opened its doors to MBA students in a full-fledged campus in Singapore. This unique multi-campus structure received a significant boost with the launch of a campus in Abu Dhabi in 2007 (see Exhibit 1).

How INSEAD Became #1

INSEAD’s exceptional showing in the Financial Times (FT) rankings was not an accident, nor was it a surprise. It was, perhaps, a delayed recognition of the School’s excellence on multiple fronts.

Unique, Innovative and Successful Programmes

INSEAD competed at the high-end of the MBA market. It had the largest and most diverse programme in the world. In 2015, 1,018 students representing 78 nationalities graduated with an INSEAD MBA (see Exhibit 2). Students valued the programme’s unique one-year format, the global exposure gained by studying on three campuses across the world and the diversity they experienced in the classroom.

Employers valued the programme, too. A higher percentage of INSEAD MBAs found jobs with the world’s most sought-after employers than any other business school.1 Remarkably, 1 In 2015, based on INSEAD analysis of data from Universum and LinkedIn, 8% of INSEAD’s MBAs

worked with the world’s 20 most desired employers – more than the corresponding percentage for any other school.


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INSEAD managed to do this at the lowest cost; in 2015, the INSEAD MBA cost US$70,000, just over half the US$130,000 price tag for most of its competitors’ programmes (see Exhibit 3).

INSEAD’s doctoral programme delivered remarkable results, as well. According to the Financial Times, the School had the highest percentage of new PhD graduates placed as faculty members at the top fifty schools in the world.

Also benefitting from this diverse, multi-campus environment was the executive education segment, in which, again, INSEAD was among the world’s leading providers. In 2015, over 9,500 participants took part in more than 200 customised and 40 open programmes. INSEAD’s first foray into online education, an increasingly important segment, was very promising. These programmes were typically plagued by poor completion rates. INSEAD’s innovative offerings, some with cohort sizes exceeding 1,000, had completion rates in excess of 85% – a testimony to their thoughtful design, engaging delivery and relentless focus on applicability.

Faculty Excellence

Most students spent a relatively brief time at the School, so the faculty had to create maximum impact as efficiently as possible. This accelerated pace meant that INSEAD faculty had to be at the forefront of thought leadership and also be able to distil this knowledge innovatively to advance classroom learning within a very short period of time. To deliver this level of excellence, INSEAD’s 150 faculty members were drawn from the world’s finest academic institutions.

In the late 1980s, while retaining its commitment to excellence in teaching, the School began to invest in deepening its research capabilities. Consequently, in 2015, INSEAD faculty published the most papers in the world’s leading management journals.2 They also authored numerous books and cases that widened the reach and impact of their research. In fact, INSEAD faculty wrote six of the ten best-selling cases distributed by the Case Centre over 40 years from 1973-20133.

Mihov described how this strong research capability, layered on the established excellence in teaching, created an ecosystem that stimulated knowledge creation and dissemination:

An INSEAD classroom is a magical environment. Through their publications, INSEAD faculty push the frontiers of knowledge and bring cutting-edge academic research into the classroom by applying it to topical matters. Our diverse and extremely bright students appreciate that they gain understanding of complex real-world phenomena in a learning environment that is based both on relevant knowledge and rigorous analysis. They respond enthusiastically, elevating the discussion well beyond what’s written in any textbook.

2 In 2015 INSEAD led the worldwide University of Texas, Dallas Top 100 Business School Research

Rankings with 48 publications in 24 leading business journals. http://jindal.utdallas.edu/the-utd-top-100-business-school-research-rankings/ accessed April 26, 2016.

3 In 2014, to celebrate its 40th anniversary, The Case Centre compiled a list of their 40 best-selling cases. http://www.thecasecentre.org/educators/aboutus/40anniversary/top40cases/intro accessed April 26, 2016


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Alumni Success

… A lifetime’s adventure in 11 months. But there was more than that: we were changing. The intensity had forced us to prioritise. The friends and travel gave us new perspectives and opened our minds. The goodbyes were a reminder that life was both enormous and fleeting. The rejections the reminder that nothing would be given to us. We became more aware of our differences, but we were also less judgmental. We were more aware of our weaknesses, but also more sure of ourselves. We were finding the best version of ourselves.

Marlon Bowman, MBA’15J, Valedictorian

If a business school were to be judged on the success achieved by its students, INSEAD would jostle for the top spot in any global ranking. In 2015, 58% of INSEAD alumni occupied C-suite or board level positions. INSEAD ranked second in the world for the number of alumni serving as CEOs at FT500 companies.4 INSEAD alumni also were equally successful in creating companies of their own – more than half had started a venture at some point in their careers.

Culture of Engagement and Commitment

Very early during his tenure, Mihov observed that the INSEAD faculty and staff were exceptionally committed to their work, and he also saw how this unique level of engagement contributed to the School’s success. In fact on October 1, 2013 – Mihov’s very first day as Dean – the re-accreditation team from AACSB5 visited the School and concluded that “the faculty are unusually committed and engaged in the global mission of the school.” Mihov proudly described this culture of involvement and sense of ownership:

We don’t have the headcount of our competitors. So the only way we achieve so much is because our faculty and staff are involved in virtually every domain of the School. At INSEAD, every faculty member willingly plays myriad roles within the community, and they continually stretch far beyond normal responsibilities, often without remuneration.

Complex and Increasing Challenges

Since the 1990s, every industry was fundamentally altered by the interplay of multiple forces. Globalisation continued unabated; digital technology transformed products and services, which, in turn, became widely accessible with the rapid expansion of the Internet; and social, economic, political and environmental changes opened up new markets as old ones lost their shine. Business education, too, saw its share of turbulence.

4 From MBA to CEO by Adam Pailin, Financial Times, January 23, 2015. 5 The Association to Advance Collegiate Schools of Business (AACSB) is a global, non-profit organization

engaged in the advancement of management education. Institutions have to meet demanding quality standards in order to receive AACSB accreditation.


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Increased Competition

The number of business schools established around the world increased exponentially in the early 2000s. In 2013, India alone had over 2,000 business schools.6 With its diverse community and multi-campus structure, INSEAD’s “global” tag was one of its most compelling differentiators in this cluttered market. Not so anymore – every major competitor now had delivery outposts scattered across the globe.

Competition also came in new forms. Corporate universities found favour because of a growing perception that business school education had become too generic to address the specific challenges of a company. In the U.S., their numbers doubled to 2,000 between 1997 and 2007. By 2015, it was estimated that over 4,000 companies had these in-house schools.7 This was worrying because not only did these new institutions draw students away, but they also poached experienced faculty and administrative staff from the School. Adding further to the complexity in the market were consulting firms and publishing houses that ran management courses for their clients.

It was, however, the explosion of online courses that had the greatest potential to throw INSEAD’s operations into disarray. Online education was the fastest growing segment of the market, with new players, new formats and new products surfacing at a bewildering pace. Several schools, big and small, offered courses in the form of massive online open courses (MOOCs), many of which were free. Others offered the entire MBA programme in a distance-learning format. Many of INSEAD’s competitors entered the fray, using state-of-the-art studios to record classes and digital technology to recreate an interactive classroom experience online. Recordings of hard-to-replicate events or especially innovative classes were now available for repeated use. Technology also had the potential to improve the quality of the programme by removing geographic constraints – schools could now source the very best instructors and students from all over the world and place them in the same virtual classroom.

Shrinking Demand

The availability of so many viable alternatives chipped away at the global student pool for business schools. Further aggravating this decline were the deteriorating economics of a business education. For many students, the most compelling attribute when evaluating job offers was total compensation. Despite its hefty price tag, a business degree was highly sought after because it significantly boosted initial and subsequent compensation. In the early 2000s, graduates of the FT Top 10 MBA programmes could hope to see their salaries triple. By 2015, however, they would be fortunate to double their pre-degree compensation. This steep slide hit markets hard. Between 2008 and 2014, the number of GMAT takers with scores over 650 plummeted in INSEAD’s principle markets – down 33% in North America and 20% in Western Europe8. The rapid growth in demand from emerging markets helped INSEAD to offset this decline partially, but the competition for students was escalating rapidly.

6 The MBA is being transformed, for better and for worse, The Economist, Oct 12, 2013 7 Keeping it on the company campus, The Economist, May 16, 2015 8 Graduate Management Admission Council data and INSEAD analysis


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INSEAD Must Adapt

Between 1975 and 2015, INSEAD’s revenues grew at an average rate of 7% per year to €210 million (see Exhibit 4). Revenues primarily came from three sources – degree programmes, executive education and external funding (gifts and endowment yield). Until the early 1980s, all three sources contributed almost equally to total revenues. Degree programmes, particularly the MBA, grew rapidly in the mid-80s. However, by the mid-1990s, as a result of a concerted push in customised programmes, executive education contributed over 55% of revenue. With larger class sizes, higher tuition fees and the introduction of the EMBA, revenue from degree programmes surged, bringing it back on par with executive education by 2009. External funding, however, grew sluggishly and by 2015, it contributed only 6% to total revenue.

Vision and Strategy: Business as a Force for Good

Amidst these challenging circumstances, Mihov realized that INSEAD needed a vision – possibly even a radical change in direction. The vision had to both enhance the School’s influence in the world and also engage the powerful, collective force of its alumni population. He decided to start this process by revisiting INSEAD’s mission.

In 1980 in China, there were 840 million people who lived below the extreme poverty line of $1.25 per day. By 2009, this number had gone down to 150 million. This unprecedented reduction in poverty was the result of one thing – rapid economic growth. And the only engine of long-term growth was business creation and innovation. Business had to become a force for good…and INSEAD had to play its part.

In response to the new challenges and opportunities at hand, Mihov made the bold decision to refocus INSEAD’s mission: “To develop the future responsible, thoughtful leaders who through their actions accelerate growth, lead to improvements in living standards, and promote peace and prosperity globally.” With this new and nuanced framing, Mihov and his team drew up Strategy 2020 – a long-term plan, which would permeate every key domain of INSEAD: its programmes, students, alumni, faculty, staff and infrastructure.

Revitalize the Programme Portfolio

Degree Programmes

George Doriot famously remarked: "Always remember that someone somewhere is making a product that will make your product obsolete." INSEAD’s product portfolio had to become more impactful, relevant and cost-effective. This meant strengthening the MBA programme, boosting the EMBA programme and intensifying efforts to establish pre-experience programmes.

The flagship MBA programme operated in INSEAD’s most competitive and mature market. Students increasingly expected INSEAD to go beyond equipping them with analytical and problem-solving skills. They wanted personal leadership development and customised career


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development support. The curriculum and pedagogy of the programme had to be refreshed and career services had to be strengthened.

INSEAD’s EMBA was relatively small with 217 students graduating in 2015. Competitors’ intakes were two, even three, times that number. The Financial Times had also ranked the joint Tsinghua-INSEAD EMBA at the top of its Executive MBA list. Capitalising on this success, Strategy 2020 envisaged double-digit growth in EMBA revenues every year.

Pre-experience programmes were also becoming popular, particularly in Europe. Following the Bologna Accord, many of INSEAD’s competitors offered one-year or two-year pre-experience Masters programmes.9 Companies that traditionally hired MBAs had begun hiring these pre-experience graduates and the initial feedback on them was positive. INSEAD would examine the feasibility of introducing a pre-experience, one-year, Master in Management (MiM) in 2017. Mihov saw this segment as crucial:

Entering the pre-experience segment can be a source of new risks, but this move is aligned with the School’s mission in a rapidly changing environment. If there is a demand shift from MBA to MiM programmes, then it is our responsibility to develop the MiM students to be global business leaders and entrepreneurs who accelerate growth and lead improvements in social well-being.

Executive Education

A clear leader in customised programmes in Europe, INSEAD would strengthen its presence in the U.S. market targeting aggressive double-digit growth. The portfolio of open programmes would be revamped and customised online programmes would receive a concerted push. Mihov explained how INSEAD would differentiate itself in this increasingly commoditized environment:

Our programmes are increasingly becoming transformative experiences for our participants who want to become both “implementers” and “innovators.” We have to equip them to cope with complexity and uncertainty. To do so, we have to go beyond building analytical skills and focus on personal development. We must enable participants to become aware of their own leadership style, unproductive behaviour and vulnerability. We achieve this crucial level of self-assessment by using a structured approach that incorporates reflection, coaching and experiential learning.

Increase Student Financial Aid

To retain global leadership, INSEAD had to attract the best students. As Mihov explained, “If INSEAD attracts the best students, it has the best alumni and the School flourishes.” INSEAD’s competitors clearly agreed. Many provided scholarships that covered 60% of tuition costs. By comparison, INSEAD scholarships covered a mere 5% of tuition costs. In

9 In Europe, the Bologna Accord was signed in 1999. It split five years of university education leading to the

equivalent of a Master’s degree into a 3-year Bachelor’s degree after which students could go elsewhere for a 1 or 2-year Master’s Program. Students with diverse undergraduate degrees could now go on to do a Masters in Management, making it a very popular program.


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order to remain relevant in the field, INSEAD would need to significantly boost funding for scholarships by 2020.

Invest in Endowed Chairs and Research Centres

Strategy 2020 would enrich the intellectual environment at the School by encouraging impact and creativity in research and teaching. Competitive compensation, promotions, endowed chairs and research centres would enable INSEAD to attract and reward faculty who would, in turn, attract the best students, and prepare the strongest alumni in the field.

Step Up Alumni Engagement

Mihov considered INSEAD’s alumni one of its most compelling resources. Unfortunately, the School was not realising the full potential of this resource. Many alumni were passionate about the School, but felt disconnected from it. INSEAD had to work harder to engage this exceptional community. Strategy 2020 would strengthen ties with alumni through forums, reunions and special events. INSEAD would also build a platform of online courses designed to create a lifelong learning path for alumni. Finally, space would be acquired for alumni clubs around the world to hold a range of activities including executive education, master classes, career fairs, interviews and reunions.

Strengthen Brand Awareness

Despite INSEAD’s success in the rankings, its brand was relatively unknown in key markets such as China and the U.S. The School had to invest in building a brand of excellence and innovation, emphasizing the School’s unique position in being a “force for good”. INSEAD’s website, communication material and press releases would highlight the achievements of its alumni and faculty. It would also host events to increase visibility in key markets.

Strengthen Geographical Presence, Infrastructure and Staff Support

Being global was central to INSEAD’s appeal. Better integrating all three campuses with technology, programme exchanges and faculty presence was therefore a priority. The Europe campus would be modernized to incorporate contemporary spaces that facilitated experiential learning, creativity and entrepreneurship. The Asia campus would plan its next phase of development and the Middle East campus would have greater prominence in the degree and executive education programmes. INSEAD’s global footprint would be further strengthened through local alliances in the U.S., India, China and Latin America.

The School’s information technology infrastructure would also have to keep pace with this global expansion and the ever-increasing digitisation of management education. INSEAD would invest in facilities and expertise to ensure operational efficiency and cyber security. Equally important, this investment would enable INSEAD to harvest vast amounts of data generated across the School to sharpen its strategy and programme effectiveness. To ensure that these ambitious plans were executed efficiently, the School would launch a new talent management system and strengthen its staff support.


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Changing INSEAD’s Business Model

As he shifted his focus to implementation, Mihov realized that the biggest stumbling block for Strategy 2020 was INSEAD itself. The business model that had brought INSEAD to where it was today would not get the School to where it needed to be tomorrow.

As an independent, non-profit organisation, INSEAD relied almost exclusively on its own revenues for funding. Most of its main competitors either received help from governments or were part of larger institutions, which allowed them to share staff and facilities. Mihov was clear that INSEAD would not compromise its independence for such benefits. However, Strategy 2020 was an ambitious plan. It called for financial stability and could not be financed from operating surpluses alone. A larger endowment would protect INSEAD’s independence and the sustainability of its programmes. Unfortunately, INSEAD’s endowment was significantly smaller than that of its competitors. Building it, therefore, became the principal focus of Mihov and his team.

It was not until the late 1980s that INSEAD’s leadership began to build up the School’s endowment. Despite increasing rapidly in the last decade, the size of INSEAD’s endowment was shockingly low – in 2015 it stood at €190 million, just short of total revenue for the year. By comparison, INSEAD’s competitors had endowments that were between four and eight times their revenues partly because the culture of giving was more entrenched in the U.S. than in Europe. Assuming a 5% yield, these schools received 20-40% of revenues from endowment earnings. For INSEAD, this figure was a mere 5% (see Exhibit 5).

The paucity of funds seriously hurt the School. For one, INSEAD distributed only €6 million as scholarships, a paltry sum compared to its competitors, and only half of that was funded. This meant the School had to sometimes turn away outstanding applicants who needed financial support. Limited resources also constrained INSEAD’s ability to attract faculty and fund research, which hampered the School’s intellectual development. Finally, INSEAD was the only school among the world’s top business schools that was not actively upgrading its facilities. Mihov explained why:

More than 90% of the cost all our buildings were met by borrowing to be repaid from operating surpluses. Most schools are not permitted to do this. Building funds have to be raised separately. Having diverted our operating surpluses to loan repayments we cannot invest sufficiently in other critical areas like scholarships, research, technology or brand building. This has to change.

In 2016, the School launched a major fundraising campaign to increase INSEAD’s competitiveness and excellence in the following areas: innovation through technology and learning; academic research and teaching; and global impact via its student and alumni network. The campaign targets were ambitious and the School would need to adopt a fundraising plan that was as sophisticated as the community it served. In recent years, INSEAD had made considerable headway in strengthening its alumni relations and fundraising activities. However, there remained the greater challenge of building a culture of

engagement and giving among the School’s alumni and donor community.


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Implementing Strategy 2020 was a formidable challenge, but Mihov felt INSEAD was well positioned to make it happen:

The task before us may be deeply complex, but I must focus on the great honour it is for us to be part of such a strong collective. I am not alone. Our Board, faculty and staff are with me. And together, we have access to the best brains in the world – the INSEAD alumni. INSEAD is a special and unique institution and we have to make sure it endures for the sake of our students, our alumni, and everyone who is influenced by INSEAD’s force for good in the world.

Mihov shut down his computer and headed to the reunion feeling a greater sense of urgency and purpose than he had ever felt before.


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Exhibit 1

INSEAD’s Timeline

1957 The Paris Chamber of Commerce agrees to establish a European business school

1959 First MBA class starts in the Chateau of Fontainebleau 1960 First MBA cohort graduates: 52 students from 14 countries 1967 Fontainebleau campus opens 1968 First executive education programme 1974 First programme on Asian business 1976 Launch of the Alumni Fund 1980 Euro-Asia Centre opens in Fontainebleau 1989 PhD programme begins 1995 First INSEAD development campaign 2000 First Singapore MBA intake – 53 students from 26 countries 2003 Launch of Executive MBA programme 2004 Second INSEAD development campaign 2007 Abu Dhabi Centre opens 2012 Master of Finance launched 2015 Leadership Development Centre opens in Singapore

Exhibit 2

Comparative Enrolment Statistics

Source: INSEAD documents

0

200

400

600

800

1000

1200

MBAs graduating in 2015


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Exhibit 3

Comparative Cost Statistics

Source: INSEAD documents

Exhibit 4

INSEAD Revenues

0

20000

40000

60000

80000

100000

120000

140000

Cost of MBA programme (US$)

0.0

50.0

100.0

150.0

200.0

250.0

INSEAD Revenues(constant €)


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Exhibit 5

Comparative Business School Endowment Statistics

Source: http://poetsandquants.com/2016/04/04/businessschoolendowments/3/, accessed on April 26, 2015

-

500.00

1 000.00

1 500.00

2 000.00

2 500.00

3 000.00

3 500.00

Endowment fund (in US$ millions)


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