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Angel Cabrera
Academic President

Rethinking a business model

Q: How would you assess the leadership of college presidents in embracing new technology and innovative teaching techniques aimed at reducing costs, improving quality and reengineering higher education? What leadership steps would you recommend for them?

The Internet has shaken up the status quo in virtually every industry, including education. New educational paradigms and business models enabled by the Internet have torn down old monopolies and have helped democratize access to knowledge and education. The "great recession" has only accelerated the process. Universities that for years have delivered traditional programs in traditional academic settings secured and funded by large endowments, government funding and rapidly growing tuition price-tags are going to have to rethink the way they do business. Those who do not, risk becoming irrelevant.

Trying to preserve the status quo is not a viable option for any institution in the coming decade, as technology, demand, and increased competition from private, public and for-profit providers continues to transform the higher education industry. The current system is under enormous pressure, and if old actors don't change, new ones are likely to take their place.

Leaders of traditional institutions need to confront the new realities of the market place and ask themselves and their constituencies what unique value proposition their institutions can and should provide. In the era of MIT's Open Courseware and Apple's iTunes University, content differentiation cannot be the answer. Institutions will compete through their specific approaches to education, their values, their brands, their networks, their capacity to accommodate the preferences and needs of specific populations.

As much as universities are hotbeds of research and innovation, they tend to be surprisingly conservative when it comes to altering their own ways of doing business. This time around however, hanging on to old ways with the hope that this storm too shall pass may prove a fatal mistake.

By Angel Cabrera

 |  May 25, 2010; 4:46 PM ET
Category:  Education leadership Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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To HERMAN50:
You can't go by number of applicants. Students nowadays routinely apply to 10 schools. That was unheard-of 20 years ago. But they still can only attend one.

This report by the Pew Research Center (http://pewsocialtrends.org/pubs/747/college-enrollment-hits-all-time-high-fueled-by-community-college-surge) shows why 4-year colleges are worried. Many of them are in dire financial straits, despite overall enrollment increases. College attendance among 18- to 24-year-olds increased from 24% in 1973 to 40% in 2008, even as the U.S. population rose. Over the same period, though, costs have soared, so that all of the financial gains from the vastly increased enrollment have been eaten up (and then some). Worse yet, the phenomenal enrollment growth since 1970 has been almost entirely from white females, and this demographic is probably maxed out. There is much room for enrollment growth among blacks and hispanics, but -- and this is the key point -- that demographic is increasingly choosing 2-year colleges and distance-learning colleges (e.g. University of Phoenix). They may (or may not) transfer to a traditional 4-year college eventually, but that means the 4-year college has them for less time, and that means fewer dollars in their bank accounts. Translation: Ouch!

Posted by: dmm1 | May 26, 2010 8:14 AM
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Follow a business model? Why would I want my kids to attend an institution that follows a pure business model, particularly if it is a "corporate-style" business model that seeks only a narrow measure of success? Assembly line education? I'll pass and tend to agree with Herman50. The real question of focus should be, what is the purpose of an education? Is an education solely a means of obtaining employment or is it a way of fashioning a world-view and, ultimately, a way of shaping a life?

Our oldest child is attending a private, liberal arts college. My spouse and I are continually ASTOUNDED by the quality permeating every aspect of this particular institution; the experience has been more than we could have ever imagined for our child. Everything, and I mean everything, has been well-thought out and meaningful.

We're not wealthy, yet are more than happy to pay every single penny that it is costing us to send our child there (child is taking out student loans as well.) Both spouse and I attended college through our state system and there is no comparison as to the experiences we had there and the experience our child is currently having at the private, liberal arts college. The observation of, and immersion in, quality and high standards matters. It matters in its provision of a model for young adults who are on the threshold of determining who/what they are capable of as human beings on this fragile, interconnected earth. Higher education matters as a model of relationship, connection, a sense of humanity toward others, and the mindset/attitudes fostered.

Posted by: PatC1 | May 26, 2010 12:36 AM
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We all would like the best opportunities for education for our children and ourselves. Previously the number of spaces in the freshman classes of the prestigious universities was physically limited, and went to the brightest and/or best connected/wealthiest people. Now, with electronic communication, that limitation no longer needs to apply. Everyone, anyone, can go to Harvard---if that is indeed the epitome, as it claims to be. Or did it only seem that way, bcs they got the best pupils? We can find out, once EVERYONE can get in!

Posted by: timsiepel | May 25, 2010 9:41 PM
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As someone who has just completed my MBA at Thunderbird in their Global MBA On Demand program I think its appropriate that universities are forced to re-think their business model. I chose the executive education style MBA program at Thunderbird because i could get a Thunderbird education from anywhere my life or job took me, over having to move to Arizona to live on campus. Our program is based on a 75% online delivery and 25% in a classroom setting (On Campus, and in classes around the world in week long intensive courses) My classmates were spread out all over the world and over the 19 months of the program we figured out time zones and communications solutions for all of team projects, almost all of our courses required collaboration formally, and the ones that did not we naturally worked as a team to get through it all. The design of the program has put me in a better position to be a more globally competitive person in both the workplace and how I approach my philanthropic endeavors. While there will always be a place for traditional brick and mortar university courses, the institutions that are able to integrate the virtual learning delivery options into their program offerings will be able meet the needs of an increasingly diverse customer base.

Posted by: chris_mendonca | May 25, 2010 7:00 PM
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There's a fascinating (and disturbing) disconnect between pronouncements, such as this column, announcing that universities must change or die, and ever-increasing numbers of applicants to these supposedly antediluvian, irrelevant institutions. Clearly, many, many students and their parents find value in the traditional university, and they are willing to pay a great deal of money for it. Unsurprisingly, Angel Cabrera does not mention the fact that traditional universities offer a product that enjoys incredible popularity.

Posted by: herman50 | May 25, 2010 5:25 PM
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