Does Thunderbird-Laureate partnership indicate the future of higher education?

In March 2013, Thunderbird School of Global Management announced “strategic alliance” with Laureate Education Inc. The school had been under fiscal strains, as the number of applications to Thunderbird’s two-year, full-time M.B.A. have declined by nearly 75% in the past 15 years and the school ended 2012 with $4 million loss, according to the Wall Street Journal. It adds “Thunderbird’s woes reflect the existential crises that many business schools now face as demand softens for full-time, two-year M.B.A.s.”

Despite the “existential crisis”, the announcement of strategic alliance did not go well with the school’s alumni. They interpreted it to be a sellout of the brand to the for-profit world with concerns of potential brand dilution. However, the perspectives seemed to be more emotional than rational.

Compelled by the barrage of questions from media and alumni, the Thunderbird leadership came forward to explain the nature of the partnership in a more transparent manner. Here is a video of alumni webcast explaining nature of the joint venture, financial and non-financial benefits and campus sale-leaseback.

At the core of the strategic alliance is a model of “joint service provider” which provides Laureate with access to the Thunderbird’s brand in exchange for offering pipeline of international student enrollment to Thunderbird. Over ten years, jointly owned service provider will generate over $100 million in operating surplus for Thunderbird.

With Thunderbird as a “center of excellence”, Laureate can launch new management programs and improve the quality of its existing programs. This will help in further enhancing the ability to attract students. At the same time, Laureate will offer pathways to their 4,800 students who have top credentials to join Thunderbird’s program.

Thunderbird is an independent b-school (not a part of a university structure) and hence missed on some of the economies of scales that come with centralized, larger service structures. To fill gap, Thunderbird reached out to the network of Laureate.

In a contrasting move, UCLA’s Anderson School of Management liberated itself from the dependency on state funding for its full-time MBA program. Dean Judy Olian of Anderson, proposed the plan with the rationale that the cutting off the program’s state funding will offer more flexibility and ability to generate resources through tuition and gifts, reports BusinessWeek.

Overall, business schools are already feeling a pressure to justify the value of investing over $100,000  in two-year MBA degrees. While some see autonomy as a strategy (UCLA) to get more resources while other see synergies through partnerships (Thunderbird). The key is that pressure of cost and competition is becoming stronger and stronger, which is compelling b-schools to innovate and adapt. Don’t be surprised if this trend cascades to rest of the higher education in search of operational efficiencies. As TIME magazine already sums up in an article “Cash-Strapped Universities Turn to Corporate-Style Consolidation.”