Can higher ed change its business model?

In many of his recent writings on business model innovation, Clayton Christensen has helped us see how incumbent institutions have no concept of their own business model, value proposition or the jobs that their customers are getting done. He also suggests that successful products and services do not migrate toward commodization, loss of differentiation and erosion of gross margins from aspiring to be the low-cost provider. Rather, he sees a migration from solution shop to value-added processes to precision mechanisms for delivering reliable results. This evolutionary pattern also resembles the democratization of power into the hands of end users and localization of formerly centralized service providers.

As I reflected on this cultural blind-spot in large institutions that cannot see their own business models, I made connections to several other familiar patterns:
  1. Top down authority structures expect conformity to the chain of command. There is no need to think for oneself about whatever concerns the upper executive level of management.
  2. Hierarchies hold members accountable for policy compliance while neglecting incompetence demonstrated in job performance, customer service or internal cooperation metrics.
  3. Bureaucracies are designed as machines that perform efficiently, consistently and perpetually at great expense of innovation, learning and changing with the times
  4. Inevitable turf battles (over budgeting, staff reassignment and use of shared resources) between department necessitate defensive maneuvers like "empire building", "fortress mentalities" and "silo formation".
  5. Group norms dominate the interpersonal dynamics within vertical silos which spawns the scapegoating of those who rock the boat, toot their own horn or deviate from the stifling consensus known as groupthink.
  6. Top executives rise to their level of incompetence where no further promotions are forthcoming, which makes it advantageous to surround themselves with sycophants who tell them what they want to hear, dismiss news of external changes and downplay those with more competence, perspective and foresight.
  7. The human side of organizations, that have grown huge to realize economies of scale, do great injustice their their employees by maintaining imbalances like overpaid/under worked, over qualified/under utilized, overworked/underpaid, and over utilized/under recognized differences between colleagues.
With these patterns functioning robustly in most institutions of higher ed, it's no wonder they have no concept of their own business model, value proposition or the jobs that their customers are getting done. They are operating with tunnel vision outlooks, under the gun of top-down pressures and a full plate of obligatory duties. There's is no attempt to become more valuable to the institution or each other. The system rewards acting selfishly to advance up the ladder while the institution acts on instincts of self preservation.

Recently, I've been listening to over twenty podcasts created by Paul Miller on cloud computing, the semantic web and the disruption of higher ed. Two interviews, in particular, have given me hope about ways institutions of higher ed can change their business model. Chris Geith at Michigan State University and Steve Carson at M.I.T. are both fluent in business models. They sound like the marketing partner in a SAAS startup pitching their business logic to potential customers. They speak of their value propositions as if its perfectly natural and expected.

Both Geith and Carson span many academic silos in their jobs. They function in consulting roles that aid individuals into the horizontal space between silos and between institutions. Their institutions both serve a global community of scholars and industry consortiums. They are also providing added value within their institutions. Fellow employees are their customers who need to be listened to and worked with in order to serve those vertical departmental jobs getting done. In short, these two "silo spanners" defy all seven patterns I enumerated above. They operate in a different culture within academia that spawns pilot programs and business model innovations -- one faculty member or department chair at a time. If these pioneering efforts become separate entities outside the ivy covered walls, business models for higher ed could get transformed. The existing model would eventually get cannibalized by the success of the outside entity that redefined the value proposition of higher ed.

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