Notions of what constitutes a university – its functions, processes, and objectives – are so thoroughly ingrained that it is difficult to imagine fundamentally different scenarios. But there’s clearly a growing sense that the current model is fraying at the edges.
More professionals in higher education are now entertaining the notion that the traditional institutional model will require more than a small adjustment. We face a litany of challenges: rising costs, declining public funds, the rise of the student- consumer, the emergence of international competition, the rapid rise of for-profit schools, increased demand for spaces (and poorly scalable organizations), a greater percentage of ill-prepared students (see “increased demand”, above), and, of course, the Internet and its various, wonderful, unfolding and unpredictable implications. There’s a sense that something new is on the horizon. We’re just not sure what it looks like (or if it will include us).
Higher education shares this concern with many other institutions: newspapers, automakers, the television industry – each is asking what the future will look like.
None of this turmoil is inherently bad. It’s only a problem if we don’t come up new and better ways of doing things.
But imagining radically different models is not something that comes particularly easily – especially in industries as thoroughly embedded as higher ed. (Let’s set aside the fact that, in certain respects, the sector is actually rewarded for maintaining its traditions.)
Because imagining a new approach to higher education is so difficult, I’ve found the concept of business models particularly useful. Like the study of history, the concept of business models helps me see the big picture more clearly. It helps me to understand our current approach to higher education in concrete terms, while stimulating my thinking about new models.
The concept of business models has garnered more attention in the corporate world over the last decade. I suspect that the attention reflects a growing consciousness (fear?) that for many enterprises “business as usual” may prove to be insufficient; that a fundamental rethinking of products, services, processes and markets will be necessary to survive the shake-up brought on by global competition and quickly emerging (often technology-born) rivals. In some quarters, attention to quality (e.g. total quality management), and later, strategy, has been supplanted by more fundamental questions that the study of business models encourages.
If you’re interested in the subject of business models, I recommend Mark W. Johnson’s “Seizing the White Space: Business Model Innovation For Growth and Renewal” (Harvard Business Press, 2010). Although not an entry-level book, it provides the tools to analyze existing business models and to develop new ones.
At the core of the book is a construct that breaks the business model into four elements.
1. Customer Value Proposition (CVP): “An offering that helps customers [students] more effectively, reliably, conveniently, or affordably solve an important problem . . . at a given price.”
2. Profit Formula: “The economic blueprint that defines how the company will create value for itself . . . It specifies the assets and fixed cost structure, as well as the margins and velocity to cover them.”
3. Key Resources: “The unique people, technology, products, facilities, equipment, funding, and brand required to deliver the value proposition to the customer.”
4. Key Processes: “The means by which a company delivers on the customer value proposition in a sustainable, repeatable, scalable, and manageable way.”
Posted in: Business Models