Reimaging the Future of Education: How Business Strategy Can Save Higher Education
Is a shift in strategy the key to higher education's survival amidst an increasingly competitive market?
What’s Happening in the Market
The National Science Foundation just invested $90M in Rice University’s OpenStax. The investment will help the university build an R&D hub and facilitate long term research into predictors for student success. OpenStax is also one of the leaders in OERs.
The BBC is investing £6M into BBC Bitesize, their education platform. The hope, I think, is that they get younger parents—a demographic that the BBC has been losing—engaging, as well as building brand connections to younger students.
What We’re Talking About
The enrollment cliff in K-12 (especially acute in middle school and high school), along with the expiration of COVID ESSER funding, are leading to educator layoffs across the country (EdSurge). Which is a shame, because the pipeline for teachers is already shriveling up, and layoffs like these will lead to even more protracted labor shortages in the future.
Mississippi just passed their new funding formula and rescinded MAEP. We’ve written about this in the past, but the new funding formula now provides additional dollars and weighting to schools with socio-economically disadvantaged students and students with special needs. This is a huge step forward towards more progressive funding formulas.
One Big Idea: Guest Post
We’re so excited to host our third guest post, by Kaitlin Dumont.
Kaitlin’s expertise lies at the intersection of higher education and workforce learning. "The Mrs. Maisel of EdTech" to those in the know, she takes an observational humor approach as she partners with an ecosystem of stakeholders ranging from senior university leaders to corporate learning executives and state government officials. With a background working in and with some of the world's leading business schools, she has a special interest in applying classic business strategy to higher education as an industry.
Dumont has been featured in several publications, including Inside Higher Ed and Education Technology Insights. She recently took center stage as a speaker and member of the host committee at StartEd’s 2023 EdTech Week in New York City, further solidifying her influential presence in the education technology landscape.
Can Business Strategy Save Higher Education? by Kaitlin Dumont
Every day, it seems, we read another “doom and gloom” article about the future of higher education. Students are questioning the value of a college degree. Employers are unsure whether students are learning the relevant skills aligned to their talent needs. And of course we are about to drive “Thelma and Louise” style, full-speed off the enrollment cliff.
Haven’t we heard this song before? A dozen years ago, the famed Harvard Business School professor Clay Christensen predicted as many as half of American universities would close or go bankrupt in the next 10-15 years. Despite some rocky years for higher ed, that hasn’t happened. Are all these dire predictions nothing more than the ivory tower version of “the boy who cried wolf”?
The answer, inevitably, is, “it’s complicated.” However, one approach for a sustainable future of higher ed is to apply business strategy to current circumstances.
Michael Porter’s classic framework, “The Five Forces”, was first published in Harvard Business Review in 1979. Rather than a lengthy analysis of all five forces on the current higher ed landscape - let’s look at just one of the most provocative: the threat of substitutes.
Almost two years ago, Opportunity@Work decreed their mission to "Tear the Paper Ceiling" - to focus on hiring STARs (skilled through alternative routes) and asking employers to commit to exploring skills-first hiring strategies. However, the result was not the demise of college, rather an opportunity for a strategic response. After all, what exactly is the substitute for getting a college education? Not getting a conventional college education is the simple answer, yet that doesn’t mean not learning.
Internships, externships, apprenticeships, learning through work, and the recognition of transferable skills from life experience have all emerged as crucial ways to connect learning and work. As a result, some colleges are offering credit for previous non-"traditional" academic experiences in order to shorten the time to degree.
So how do firms “win” when all competitors in a given industry are facing the same external pressures? After careful analysis, they make strategic decisions - tradeoffs - in response to the current market. Based on my analysis of the higher ed industry, here are a few ideas:
Mergers. Yes, this is sometimes considered a dirty word in higher ed circles. But thoughtful and well-executed mergers of institutions (especially institutions attempting to build online capabilities) can be transformative. Done right - for example the PennWest merger - they create a smaller selection of attractive products and foster stronger brand loyalty, actually increasing revenues by concentrating the industry through a limited choice of high-quality programs.
Price Reduction. The biggest point in favor of substitutes is the price-to-value advantage in comparison to traditional higher ed. That’s even more true as student (customer) willingness to pay continues to decline. There are already some great examples of schools taking note of this, and creating high-value, low-price programs like the online MBA at the Questrom School of Business at Boston University, which runs $24,000 for an entire two-year MBA program.
Network Effects. Accelerating the transformation of higher education from a one-time transaction (earn your degree and move on) to lifelong learning will create multiple, far-reaching network effects. When delivered effectively, it reduces the pressure of external competitive forces by fostering brand loyalty and repeat buyers. The end result? Increased economies of scale within any single college or university. With a larger audience of learners - both repeat alumni and new students - it reduces fixed costs and increases the amount of revenue driving the bottom line.
Despite the latest cycle of hand-wringing about the fate of higher education, this celebrated U.S. service industry isn’t going extinct. But as it adapts and evolves, Porter’s “Five Forces” can shed considerable light on the best path forward. Colleges and universities that create a clear and compelling strategy in response to external competitive pressure - and no, a strategic plan is not a strategy - will emerge with considerable resilience that should serve future students well.
What do you believe is the most crucial step forward—to uphold tradition or to forge a new path? Your thoughts could shape the future of learning. What's your take?