higher education business models

After all this discussion of journalism, it’s only fair to turn the focus on to my current industry – higher education. Despite the fact that most academics spend a fair bit of their time trying to come up with new ideas, it is not often regarded as an overly innovative field. This is probably due to the fact that many of the teaching methods used in universities are centuries old. However, a big part of university education consists of transferring knowledge – and since it is the reduction of the cost of reproducing information that is driving the current business model problems in the newspaper and entertainment industries – so it seems reasonable to think that higher education may well be the next big industry that is disrupted, doesn’t it?

We’ve started to see some discussion of this already, but it hasn’t really blossomed into a dialog yet – at least not within the blogosphere. The first big shot there was fired by Don Tapscott – who wonders if universities can stay relevant. He concludes with these questions:

The digital world, which has trained young minds to inquire and collaborate, is challenging not only the lecture-driven teaching traditions of the university, but also the very notion of a walled-in institution that excludes large numbers of people. Why not allow a brilliant grade 9 student to take first-year math, without abandoning the social life of his high school? Why not deploy the interactive power of the internet to transform the university into a place of life-long learning?

Since his piece was originally written for Edge, it is deliberately provocative. And I think that a lot of his points must be considered. Teaching does need to change to accommodate the learning styles and skills of the people currently entering universities. I disagree with one of his fundamental premises, however, which is that universities currently teach in a broadcast method – which knowledge flowing from lecturers down into the waiting, receptive brains of the passive students. There are classrooms where this happens (or at least where this is the model being used), but I would argue that this approach has never been an effective approach. Successful higher education is nearly always a dialog.

David Parry gives an interesting lecture here that takes a similar angle on things, and I think that his arguments are actually more successful. One of his key points is his contention that newspapers have made a mistake by trying to protect their business model rather than their social function, and that he believes that universities are making the same mistake. He follows by saying that it is a fundamental error to think of knowledge as a product, and that if universities are designed to primarily produce and sell knowledge, then changes in technology will destroy that business model as a going concern.

I agree with him on nearly of his main points. However, he is mainly talking about university teaching. And one of the things that I’m not sure we can do is to separate out teaching from all the other functions of universities. They end up serving a number of various (often conflicting) functions, including:

  1. Teaching – which may be a transfer of knowledge, or it may be training in the craft of thinking
  2. The generation of new knowledge & ideas through research
  3. Propagating this new knowledge both through publication and through teaching
  4. Accreditation – assuring society (or employers) that graduates are adequately prepared to contribute
  5. Providing sheltered independence for people that are often away from their homes and their families for the first time in their lives

me lecturing!

The current university business model is an incredibly complex mixture of all of these elements – with complicated cross-subsidisation across them. If we take my two methods for making money in digital markets, aggregation and filtering, you can see that universities are performing three very important filtering functions. First, they filter available knowledge in order to certify that which is most worth knowing for students. This is the function that is probably most directly under threat right now. There are many new entrants such as StraighterLine that are offering to do this much less expensively than universities do.

Second, they filter new knowledge as it is produced via peer review and all of the other mechanisms of the scientific process that are supported by universities. We’re starting to see new digitally-enabled approaches to this function, such as the Public Library of Science. However, while these initiatives take entirely new approaches to the distribution of new knowledge, importantly, the production and filtering of this knowledge is still university-based.

Finally, universities help filter graduates for employers. While some view this signaling function fairly cynically, it is undeniably still important.

So I guess my feelings on this are mixed. While physically being in a classroom when things are working well is one of the more exciting experiences one can have, there are certainly less expensive ways to teach people. They might be a bit less effective than face-to-face, but it is foolish to believe that they won’t become important – and soon. Nevertheless, I remain optimistic that universities can still have a place in the world, and an important one. I’m giving a lot of thought to issues like how I can personally integrate digital technologies in my teaching and research, and what my role will be in the future. I’m certain that in a few years it will be quite different from what it is now. There is enormous opportunity for innovation both in the delivery of education, and in the business models surrounding it. Personally, I find that both incredibly exciting, but also a bit scary…

Student and teacher of innovation - University of Queensland Business School - links to academic papers, twitter, and so on can be found here.

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