BW Online | July 23, 2002 | A New B-School Star of India?

JULY 23, 2002

B-SCHOOL NEWS

A New B-School Star of India?
Hyderabad's Indian School of Business has major-league backers and world-class faculty. Now it wants to become an Asian jewel

STORY TOOLS

Here's a recipe for building a major league business school from scratch: Start with Rajat Gupta, the managing director of the world's most prestigious consulting firm, McKinsey & Co. Add support from a few of his colleagues -- and from the deans of the No. 1 and No. 2 schools on BusinessWeek's B-school rankings. Work with eager local politicians to reduce red tape and drum up media attention. Find local businessmen to put up lots of money for capital expansion -- plus large numbers of highly-respected visiting faculty.

Those are the ingredients that went into the Indian School of Business -- the product of an unprecedented effort by McKinsey, the Wharton School at the University of Pennsylvania, and Northwestern University's Kellogg School. In June, ISB -- which occupies 250 acres at Hyderabad, the capital of the state of Andhra Pradesh in south-central India -- graduated its first crop of 126 MBA students to much fanfare, including a commencement address by A.P.J. Abdul Kalam, who was elected India's president on Thursday. So far, ISB has prompted political proclamations, a swirl of local media coverage, and a big buzz among the world's top business academics.

Just over a year after opening its doors, ISB has created an apparently viable Western-style management-education center in India, where B-schools have become something of a passion. It may still be a developing country, but B-schools abound there, mostly training students with little work experience for jobs with domestic businesses.

FRENCH PRECEDENT? In fact, the Indian Institute of Management at Ahmedabad (IIM) received 48,342 applications for about 350 spots last year. With such incredible demand for management education, it's almost certain that India's market can sustain another B-school. What remains to be seen, though, is whether ISB can deliver on its plan to become Asia's premier B-school with a global focus -- a magnet school for management education in the region.

Those close to the school think it can. They invoke the name of INSEAD in Fontainebleu, France, which was founded in 1959 with significant help from the Harvard Business School. In its first years of existence, INSEAD, like ISB, relied heavily on the largesse of its patron saints -- HBS, the French government, and the Ford Foundation -- plus the contributions of visiting faculty.

Today, INSEAD thrives, ranking first among all non-U.S. MBA programs in BusinessWeek's biennial survey. With a touch of envy, ISB's patrons point out that INSEAD routinely attracts top students from around the world and maintains a standing roster of research faculty and visiting professors -- two attributes ISB hopes to develop as well.

RED-TAPE CUTTER. If it does, it'll be in large part because of the efforts of its patrons, who, in addition to McKinsey and the two U.S. schools, include Indian political, business, and academic leaders. Andhra Pradesh's Chief Minister, Chandrababu Naidu, aggressively lobbied the school's founders to scrap plans to locate it in a larger metropolis, such as Bombay or Calcutta, in favor of Hyderabad -- a city locked in competition with neighboring Bangalore for the title of India's Silicon Valley.

Naidu's influence helped speed the building of the campus, which took only 21 months, according to chief architect John Portman & Associates. "Usually the red tape is significant in India, but the project was expedited by the top guy [Naidu]," says Walt Miller, who directed the over-$50 million project for Portman.

Now, Miller says, Portman is waiting for the go-ahead to begin Phase II, which will add two more student-housing complexes at a cost of $15 million. Add to that tab the price of visiting professors and a fledgling PhD. program, and -- even with 168 students now paying about $20,000 a year in tuition -- it's clear that ISB needs continued financial support.

ALL-STAR TEAM. It's no coincidence that McKinsey director Anil Kumar, who played a central role with Gupta in planning ISB, now sits on the school's governing board. He says almost nonchalantly that he'll have no problem rounding up as much as another $40 million from ISB board members alone. That list includes such notables as Citigroup Senior Vice-Chairman Victor Menezes and Kleiner Perkins Caufield & Byers general partner Vinod Khosla, as well as the chairmen of India-based companies Chaterjee Group and Hindustan Lever, and the CEO of Indian bank ICICI.

All that money won't mean much, though, if the school fails to attract first-rate faculty. It took INSEAD nearly a decade just to land 12 permanent professors -- and luring researchers to Fontainebleau, a picturesque former hunting retreat for the French monarchy, must have been an easier sell than Hyderabad. Still, ISB's founders hope some of the large contingent of Indian academics at top U.S. B-schools will respond -- at least temporarily. "There are roughly 200 faculty members of Indian origin at the top 20 business schools," Kumar says. "And 90% of them have said they would come back to teach a term."

Indeed, the visiting faculty roster reads like an all-star team. Already, Kellogg Dean Dipak Jain and London Business School human-resources guru Lynda Gratton have taught an executive-education course at Hyderabad. And the current term's MBA students will be taught by one Kellogg professor, one Minnesota professor, and four from Wharton. "You could not find that [caliber of] faculty, even in the U.S.," says Jain.

STUDENT AVERAGES. Still, Kumar admits to worrying about hiring and retaining permanent faculty. He hopes Hyderabad's tech ambitions will entice faculty eager to research emerging economies. The new Dean, Vijay Mahajan -- "on loan" from the University of Texas at Austin for a three-year tour at ISB -- says he'll recruit slowly and selectively, targeting one or two faculty additions per year. Already, ISB has lured two professors from the Indian Institute of Management at Bangalore, and one away from the IIM at Ahmedabad -- two of the most popular business schools in India.

Mahajan brags that new faculty will find students "as bright as any you'll find in a top-20 school in the U.S." If statistical measures are any indicator, he's right: For ISB's inaugural class, the average 690 score on the Graduate Management Admissions Test (GMAT), 4.5 years of work experience, and age of 26, all match up well with top U.S. B-schools. By comparison, New York University's Stern School -- No. 13 in BusinessWeek's rankings -- reported corresponding averages of 689, 4.67, and 27 for the class than entered in 2001.

The acceptance rate of about 15% (this year, ISB received 1,217 applications for about 170 spots) also compares favorably with that at many top U.S. schools. McKinsey's Kumar says it's a good start, but adds he's hoping to improve the caliber of the class. "We did take about 10% to 15% that were pretty spotty," he says. Also, only one student in ISB's first class was non-Indian (that is, neither of Indian citizenship nor Indian descent), and only two students in the current class are non-Indian. That's progress -- but not nearly quick enough for a school with grand designs and international ambitions.

BETWEEN WORLDS? As it tries to build an international student base. the key for ISB will be to consistently provide grads with a shot at good international jobs. Of its 126 initial graduates, only six have yet to get. But ISB says that of 180 offers made to its graduates, only 36 were for overseas positions. That doesn't count students who landed with Indian branches of multinational corporations such as GE Capital, GlaxoSmithKline, and McKinsey, which took three ISB graduates for its Indian office.

The next few years of recruitment will be crucial for ISB. If the job market picks up, so too will the expectations of prospective students. Should ISB prove unable to place graduates abroad consistently, it faces the risk of miring itself in a B-school no-man's-land: too Western for Indian students, who are accustomed to the cheaper, public school model of the IIM, but too Indian for Western students, who will expect ISB to deliver on its promise to develop global reach.

Still, if its first year is any indication, ISB -- with all its well-placed guardian angels -- may just make India the center of Asia's B-school universe.

By Brian Hindo in New York

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