1.02 Higher Education's Business Model

Most non-profit higher education institutions in North America operate according to essentially the same business model.  While elite and non-elite colleges and universities may see themselves as distinct, their differences are primarily a matter of emphasis. Some institutions, for example, may place more emphasis on research productivity, most consider this of great importance and hire faculty on this basis. They also rely on similar sources of revenue: tuition, public grants, research and other external grants, renting of facilities, and merchandise (clothing, food).

It’s worth noting, too, that most institutions, regardless of ranking, share a common notion of what constitutes a great institution - the “Harvard DNA”, as Clayton Christensen termed it. They seek to mimic the characteristics of the most prestigious institutions, which in turn, creates greater homogeneity in the sector.

We can use the  Business Model Canvas, highlighted in the last post, to explore the components that make up higher education’s business model. 


Who does the institution serve? Many universities focus on 18-24-year-olds, who have recently graduated from high school. Some universities widen their focus with programs targeting adults, who are returning to complete undergraduate degrees.


What are the reasons students and others turn to your institutions? E.g., Widely recognised credentials that have value in the labour market; ranking as a top research university.


Which activities are fundamental to your organisation? E.g. Research, teaching, evaluating student performance, developing programs in subjects of value to society, and granting degrees.


What are the sources of funds that make your institution sustainable and how do you capture these monies? E.g., Government capital grants, tuition, philanthropists and research grants.


How does your institution interact with stakeholders? E.g. Through on-campus teaching, conference participation, scholarly journals and media.


What are the other organisations your institution partners with on a regular basis? E.g., Research granting organisations, private companies seeking research partners, and regulatory/accreditation bodies.


What are your primary costs, and how do you go about paying for these costs? E.g., Faculty and instructor salaries, administrative staff, building maintenance and marketing.


What are the critical resources that every college and university must possess? E.g., Faculty, buildings and accreditation.


How does your organisation build and maintain relationships with its key stakeholders? E.g. alumni organisations, university email systems, university social networking (Facebook), learning management systems, and media relations officers.

Instalment 2.01: What is a Business Model, Anyway?

Instalment 2.02 Higher Education's Business Model