The Sin of Higher Ed Business Models
Recently, I read Amit Mrig’s (President of Academic Impressions) white paper titled “The Other Higher-Ed Bubble” in which he describes a “denial bubble” in academic leadership. Specifically, he outlines and describes four assumptions that are “rooted in past practices and experiences, that no longer hold true and that often hold leaders back from taking a new and different approach” to meet current challenges facing the industry. He makes the point that these are “false-assumptions” now, in today’s environment, in addition to a popular understanding of a financial bubble for the middle tier of educational institutions. This is really a good white paper as a call to action for higher ed leadership but it doesn’t go far enough in opening up eyes to the industry’s most harmful embedded assumption relating to why the market (i.e. the consumer) is interested in paying money to attend higher ed institutions in the first place.
Also, I read an article at Forbes by John Tamny in which he writes that there is not a higher ed financial bubble because parents and students have always and will always pay up for the experience (e.g. career networking) that college provides. In fact, he writes that employers don’t really care about the knowledge learned by the student, at say Yale or Stanford, but rather use attendance at prestigious schools as a signal that the student “is smart, probably hard working for having been accepted, and in possession of [attributes], that the individual can likely learn the skills necessary to achieve on the job”. After reading this article the reader is left thinking about the motivations, quality of education, and price sensitivity of higher ed market participants affiliated with non-prestigious schools.
Is it not obvious that a student’s greatest pain point relates to placing his/her ability at best-fit and at best-price of process? Is it not obvious that education, career guidance, and life-design are merely key activities in support of placement at best-fit? And reducing friction* is critical to best-price of placement process?
As a Global Career Development Facilitator and startup entrepreneur in this space what is particularly interesting to me is that both authors can relate to the challenges facing higher ed today but each misses the deeper critical problem in the industry. Amit sheds light on baked-in assumptions that he feels need to be questioned and John sheds light on bottom-line motivation from the market’s perspective, albeit at the top-end of the market. However, each author seems to miss the critical baked-in assumption and bottom-line motivation that applies to the mass market, the long-tail of the market.
Any business model that is interested in viability and sustainability needs to get as close to the solution provider (or be the solution provider) who is reducing or eliminating the market’s greatest pain point more efficiently and effectively than competing alternatives. The sin of higher education business models is a failure to design for or very closely around placement of ability at best-fit and at best-price of process. I can not identify one business model in higher education that even attempts, none-the-less succeeds, to design for such.
As a result, the disruption we are witnessing today in higher ed is just the beginning. The disruption will destroy every higher ed business model including online education models that do not focus on placement at best-fit at best-price for the mass market. The reason the prestigious school’s business model will eventually be destroyed as well is because the solution provider successfully serving the mass market will eventually have access to cheaper capital to create solutions to satisfy the top-end of the market at a lower cost. I think that ALL (save for niche ability development) higher ed business models that do not reconstruct their value proposition to deliver placement at best-fit are going to fail because that is the greatest pain point in the mass market.
Frustratingly, most leaders don’t care enough to reconstruct the higher ed business model today. I believe it is because they are towards the end of their careers and they know how slow change occurs in higher ed. So, the vast majority of leaders are less inclined to support risks associated with reconstructing the value proposition. However, the disruption being leveled from the “outside” will continue in the interim and the harm to younger higher ed stakeholders will be greater as a result of the lack of current leadership to reconstruct today.
Personally, I think that the higher ed industry will be viewed twenty years from now as the greatest mechanism ever to aggregate ability but failed at designing a viable and sustainable business model because it thought its core sustainable deliverable was academic credential rather than placement at best-fit.
For further reading on how leadership in higher ed may be screwing up a great business opportunity similar to how the music industry leadership screwed up in the face of innovation read Clay Shirky’s prior blog post titled, “Napster, Udacity, and the Academy“.
What do you think?
* Friction is everything that slows down making better placement decisions quicker. Examples of “hard” friction include voice mail, phone tag, text tag and travel. And then there’s email which is the worst collaboration tool ever used on a wide scale! Examples of “soft” friction include the lack of transparency, relevant content, knowledge, and intelligence. All friction inhibits getting through a placement process efficiently (speed/cost) and effectively (accuracy).
