When Harvard Met Stanford

In the world of elite business schools, Harvard and Stanford are

separated by ideology, distance, and a rivalry that has them competing

for students, faculty, and corporate customers. But in an

uncharacteristic twist, the two now appear close to a landmark deal to

merge part of their B-school operations, BusinessWeek has learned.

The proposed plan: to combine the executive education arms of Harvard

and Stanford into a separate entity that will design and deliver

face-to-face and online programs to companies around the globe.

The venture may even be run as a for-profit entity, which would allow it to

operate outside university rules and to offer more incentives for

faculty participation. But even if it remains attached to the

universities, the alliance will mean revenues of $100 million-plus and

the birth of a blockbuster in the management education world. "If

they're successful and combine it with their brands, then it's

unbeatable," says Nancy J. Lewis, IBM's director of management

development worldwide.

"NATURAL ALLIANCE." Beyond the glitz factor, the marriage is a survival strategy for an increasingly competitive market in nondegree executive

training. For one thing, each school has something the other needs.

Harvard is legendary for its studies in general management and

leadership, while Stanford has made its reputation in innovation,

e-commerce, and entrepreneurship. "It's a natural alliance, because the

two schools are in different parts of the intellectual space," says

Richard Schmalensee, dean at Massachusetts Institute of Technology's

Sloan School of Management.

Harvard and Stanford could use the allure and prestige of the combined

brand to launch an executive MBA (EMBA) program, which neither currently

offers but both are exploring. That's important, given mounting

competition, such as the University of Pennsylvania's Wharton School,

which will open a facility in San Francisco this fall for exec education

and for its EMBA. And developing programs jointly will presumably keep

the costs down for both.

The proposed deal will also include Harvard Business School

Interactive -- the B-school's online course-development arm -- as well as the

participation of Stanford University's engineering school. "We were

really motivated by a sense of the possibilities that might open up for

us if we were able to join forces," says Kim B. Clark, dean of Harvard

Business School.

FIRST OF MANY? The B-school world had already taken to partnerships -- but until now, the alliances have mostly been between U.S. and non-U.S. schools, like the deals between Columbia Business School and London Business School or Wharton and France's INSEAD. Combining the intellect -- and wallets -- of powerhouse rivals Harvard and Stanford is likely to be only the first in

a series of domestic alliances, says Laura D'Andrea Tyson, dean of the

University of California at Berkeley's Haas School of Business and a

BusinessWeek columnist. "This will only intensify this trend and force

our hands," she says.

Still, it's not exactly a merger of equals. In BusinessWeek's executive

education rankings, Harvard tops the list, while Stanford comes in at

No.5. And Harvard will bring to the table three times the course

material and research as well as faculty more committed to executive

education than Stanford's. But "Stanford has some significant

advantages" to offer Harvard, including a West Coast presence and New

Economy panache, says David Yoffie, chairman of the advanced management

program at Harvard.

The details -- where the new entity will be located and each school's

intellectual contribution and share of revenues -- will take several months

to work out. But "it's a worthwhile challenge," says Joel M. Podolny,

Stanford's senior associate dean for academic affairs. The first

assignment: figuring out what name goes on the shingle. By Jennifer Merritt, with Mica Schneider in New York

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