CLAY CHRISTENSEN: GE And Perdue Farms Will Disrupt Harvard Business School

YouTubeHarvard Business School Professor Clay Christensen is the father of the idea of disruptive innovation, and one of a select few business thinkers who can claim that their theories influence the behavior of top companies.

Right now, he thinks that his own employer is ripe for disruption. He's argued previously that higher education as a whole "is on the edge of the crevasse," and will be disrupted by online competitors. In a discussion at Harvard's Nieman Journalism Lab (full video available here) Christensen focused specifically on the disruption of the MBA.

"You guys need to stay tuned because it's happening to the Harvard Business School," Christensen said. "It truly is and nobody at Harvard even thinks about it."

There are two things that make MBA programs like Harvard's ripe for disruption, Christensen argues. The first is the cost.

"To get a Harvard MBA, you gotta to be the best of the best of the best to get yourself admitted, and then we empty your pockets to the tune of $120,000," Christensen said. "Then you have two years of foregone salary. So this is a very intensive investment."

The second is the high salaries expected by top MBAs. For new HBS grads, according to Christensen, the average combined base salary and bonus was around $160,000. That's a price many companies simply can't afford for early-career workers.

"If you look at who recruits our graduates, there are very few operating companies," Christensen said. "So there's no General Motors, no General Electric, no General mills, only one Johnson and Johnson company, no Intel, no Dell, no Motorola."

The only people who can afford graduates are places like McKinsey, Goldman Sachs, hedge funds, and private equity. So in "classic disruption style," top MBA programs have overshot the salaries that the majority of companies can bear. The result? Competition on the low end that will eventually move to the top.

"What's disrupting us is that operating companies are pulling in the training of management inside. They're creating their own corporate universities, like Intel University, GE at Crotonville," Christensen said. "The best corporate university that I've visited is Perdue University: This is not in West Lafayette Indiana, but it's in Salisbury, Maryland. Perdue Farms, the chicken company, has its own university. They teach themselves while they work, and it's growing like crazy."

Corporate universities aren't new. But they're starting to grow. And as they get bigger and better, and start to cater to people who might have gone for an MBA in the past, they'll be a compelling alternative for many executives-to-be.

For now, Harvard's not feeling the pain because these generally aren't people who would get in there in the first place. But bringing training in-house is much cheaper than hiring MBAs; it's more accessible to those who don't want to take on huge debt loads; the education is much more in line with what companies actually need; and people are working, getting experience, and earning a salary the whole time, rather than two years away from their career.

There are only so many consulting and banking jobs out there, and when starting salaries start to dip, paying $120,000 and giving up two years will look less and less appealing.

Find the full discussion with Christensen here