Not-for–profit organizations and customers: trying to solve the puzzle

Lately, I gave a lecture on shareholders, using Mitchell et al. (1997) Toward a theory of stakeholder identification and salience: defining the principle of who and what really counts. In this paper, they try to describe an instrument which can be used by managers to identify the stakeholders and their relative importance.

This is important, because given any organization, the whole world (and perhaps the whole universe) can be seen as some kind of an stakeholder. So it is important to order your stakeholders one a scale between very urgent towards ignore. However, the order in the stakeholders is not given, but dynamic. If time changes, positions and influence can change.

The dimensions Mitchell et al. (1997) use are:

  • Power: ..a party to a relationship has power, to the extent it has or can gain access to coercive, utilitarian, or normative means, to impose its will in the relationship… (p. 865)
  • Legitimacy: …”a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions”.. (quoting                Suchman, 1995, p.866)
  • Urgency: .. time sensitivity is necessary, it is not sufficient to identify a stakeholder’s claim or “manager relationship” as urgent. In addition, the stakeholder must view its claim on the firm or its relationship with the firm as critical or highly important. …. (p.867)

 

 

So shareholders are the ultimate dominant stakeholders (having power to change the policy of the firm and having a legitimate claim to do so). However, when there is an idea that present management is making large mistakes, they will want to change management fast and they become definitive stakeholders.

The same will happen when an environmental pressure group, who have legitimate claims and a sense of urgency (dependent stakeholders) acquire political support; becoming powerful and so definitive stakeholders.

Customers have a legitimate claim on the firm. Next, they have a discreet power, if they get a sense of urgency, a customer’s strike will force the firm to act in a desirable way.

By determining the strategy of a not-for –profit organization (whether an NGO or an educational organization) it is often not possible to determine a customer, an individual or group who pays for the service or product offered. Stakeholder analyzes can help to answer the question: For who are we doing what we do? What is our value-offering to whom?

For example, education has several goals, depending on the individual or group you ask. If we take the four kinds of “aspirations” of Christensen et al (2011, 1) and combine them with the stakeholders who have an interest in these goals, we get the following combination:

Goal Stakeholder(s)
1. Maximize human potential StudentEmployers
2. Facilitate a vibrant participative democracy in which we have an informed electorate that is capable of not being “spun” by self-interested leaders GovernmentSociety 
3. Hone the skills, capabilities and attitudes that will help our economy remain prosperous and economically competitive GovernmentEmployersStudents
4. Nurture the understanding that people can see things differently-and that these differences merit respect rather than persecution GovernmentSociety

 

Christensen et al. (2011) furthermore point out that education is used as a sort of magic cure, for several societal problems (ranging from poverty towards anti-terrorism). Budgets, regrettably, do not  rise in the same amount as requests do.

Society at large is too big and not specific enough to be anything else than a discretionary or demanding stakeholder. Employers can be divided into two categories; as part of the society, defining certain legitimate demands on the competencies of students, but without power. Another group is a real customer, paying institutions to organize refresher courses and alike. In that case, they have both the power and the legitimate to influence (this kind of) education: becoming dominant stakeholders.

Governments and other financiers are also dominant stakeholders which goals should be taken seriously into account. As described above, goals are added to the original goals as society changes, but budgets overall remain the same adding budget control as an additional goal.

Students want to learn, to further their career, to increase their social skills. They want to learn the right things in the right way. This makes them legitimate stakeholders with some sense of urgency. However, question is how much power they have? In most educational systems, students pay fees, but not enough to reimburse costs. So who determines which are the right things to learn? Governments finance the major part of educational programs, but often based on the number of students, certificates and awarded degrees. Yet, academic teaching is supposed to be founded in academic research, which is financed by governments and corporations. So indirect these determine the content of the programs.

The goals of Christensen et al. (2011) concentrates on the external stakeholders. Of course employers (teachers but also administrative personnel) are important stakeholders. Employment means not only income, but also (hopefully) a meaningful work environment.

It is interesting to see what happens when the stakeholders’ aims differ.

For example, students campaign for free education: Free education is not just about the money. It’s about the working conditions of those who make our education possible, and about democratising and liberating our institutions and the curriculum; funding vocational and further education, living grants and childcare that allows women to freely access learning.

In the Netherlands, students and teachers occupy part of the University of Amsterdam protesting against a perceived reduction in quality of teaching and too little democracy.

It is the Board of the HEI’s who have to unite or compromise the different conflicting goals of the diverse stakeholders. Power and urgency fight for influence.

 

I don’t think that this blog solves the puzzle of the role of “customers” or stakeholders in education. Most teachers I know will say that they teach because of the students. However, as seen above, it is important to realize that funding partners will influence our institutional targets. As far as these coincide with the personal goals of the teachers and students, this will be reinforcing; however when they conflict, it becomes interesting.


 

 

 

Professor R. Edward Freeman speaks about the role of business in society: Purpose of business is not maximizing profit for shareholders, but is about changing the world!


 

 

Literature:

Christensen, C., M. Horn and C. Johnson (2011) Disrupting Class, McGraw Hill, New York

Mitchell R., B. Agle, D. Wood (1997) Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts, The Academy of Management Review, Vol. 22, No. 4 (Oct., 1997), pp. 853-886

Osterwalder, A., Y. Pigneur (2010), Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers, John Wiley and Sons Ltd, Augustus 2010

Articles on budget cuts:

http://www.msnbc.com/msnbc/gop-governors-want-higher-education-cuts-recoup-budget-shortfalls

http://www.cbpp.org/cms/?fa=view&id=4011

http://eacea.ec.europa.eu/education/eurydice/documents/facts_and_figures/National_Budgets.pdf

 

Internet, sharing and openness; lessons from e-commerce

At the beginning of the century, the influence of the Internet on business really took off. This induced managers and scientists to reflect on the role of the Internet on the way we do business. One of the major changes was the openness and sharing. Another influence is the increasing competition. Because information flows “openly”, the possibility to compare prices, quality and other characteristics increases beyond the geographical proximity.

Education is only beginning to feel the influence of both trends. The High Level Group on the Modernisation of Higher Education has published a new rapport on the New Modes of Learning and Teaching in Higher Education. In this report, the importance of technological progress for the widening of access of HE is stressed. As they state “Online technologies provide opportunities to learn anywhere, any time and from anyone”. Non-traditional learners have access to new forms of learning which will increase lifelong learning and ongoing professionalization.

In a world were global politics become more complex and worldwide manual labour has become a commodity, both European democracy and Europe’s competitive position require an ever increasing education of its population. Creativity and smart solutions have to take the place of mass production; not only the designers and developers have to be high educated, the average labour force also has to scale up. Another interesting observation is that “The goal should be to ensure that all publicly funded education resources are openly available”. This is not only a support of the Open Educational Resources-movement, but can be interpreted broader: education should be free as mostly all public educational institutes are mainly funded by the government.

Tony Bates (2014) concludes his review of Moocs with the observation, that “[A]t some point, institutions will need to develop a clearer, more consistent strategy for open learning, in terms of how it can best be provided, how it calibrates with formal learning, and how open learning can be accommodated within the fiscal constraints of the institution, and then where MOOCs might fit with the strategy”.

When we look into different sectors, where openness plays a role, we can distinguish:

– Open as in free to use, re-use and distribute: the open source movement in the sector of Information Technology. In general there are two different approaches. Communities develop free software, whereas companies are allowed to use the free software to sell specialized adaptations (only making the customers pay for the added value). In the other case, firms give away software or products to earn money with additions to these products and services (freemium, ranging from WinZip to razors).

– open as in open access in the publishing sector, where costs are shifted from users (readers) towards producers (researchers, writers); the intermediate firms keep the same or more income. Often open access is motivated by the fact that most research is funded by public funds, so it should be freely available for the public. Publishers are then compensated for their costs by authors’ fees.

– open as in free to participate, as the Internet opens the possibility for the public to participate in journalism or quality control. Furthermore firms use customers to improve their products and develop new products and services; labeled co-creation.

– open as in open innovation, the process whereby firms ‘spin-in’  ideas and inventions of others and ‘spin-out’ ideas and inventions which do not fit into the business models of the firm, especially in the industrial sectors. IP-rights are essential as they make it possible to trade inventions which can or will not be used internally. By selling and buying inventions, the efficiency and size of innovations in society will increase. Technology increases the possibilities for innovation on a small scale. Sharing of knowledge and resources is a major force behind the MakersMovement, in which small inventors design, prototype and -eventually- distribute their innovative products or services (see Anderson, 2012).

Wiley (2014) – in his discussion on Moocs – defines openness in education as the transition of ‘open entry’ (in the sense of no entry demands from the Open Universities) towards ‘open licenses’, as in Open Educational Resources (OER), towards a possible  ‘open educational infrastructure’.

The Open Educational Resources movement strives to generate educational resources, which are shared for free (although often developed using subsidies of national governments and private institutions).  Moocs are a part of this development, but where the majority of OER is aimed at teachers, Moocs are developed for usage by learners, opening up participation.

Moocs are also, more then OER, examples of the ‘give-part sell-part’ approach to openness. In the regulations of several Mooc-platforms, we see explicit remarks about the earning potential of alternative usage of the Moocs: licensing, assessment and certification but also use a HRM-instrument and corporate universities.

This definition of openness is consistent with the 5-components model for open education (5COE) of Mulder and Janssen [2013]. This model analyses the different activities of (open) education and it is possible to un-bundle these into three components on the supply side and two on the demand side.

On the supply side they distinguish:

  1. Open educational resources (OER)
  2. Open learning services (OLS): online and virtual activities which are available either free or for payment, including assessments, exams and communities.
  3. Open teaching efforts (OTE): all supporting activities as teaching, ict-support and other roles in (distance) teaching; these activities will generally not be free.

On the demand side they describe the following two components:

  1. Open to learners’ needs (OLN): open education should be free in the sense of time, space and tempo; however, it should also be affordable for everyone.
  2. Open to employability & capabilities development (OEC): education should be open towards new and changing demands from society and the labour market, but also promote critical thinking, creativity and personal growth.

Christensen et al. (2014) uses a similar approach to forecast a more disruptive development with respect to the (American) educational sector. Distance education, the competence based approach, the existence of high quality, accredited open educational materials offers commercial firms the opportunity to enter the educational sector, aiming at low cost segments and non-consumers (of existing education). According to them, it is only a matter of time before the last bastion of the traditional mixture of academic research and education, the accreditation organizations, will fall. So unbundling education at an organizational level could result in unbundling at a sectorial or national level and a new division between open en exclusive forms of education.

Most educational programs are not financed by their students, but subsidized by governments, churches or private enterprises. Depending on the fee, the financial barriers of participation in education are substantial to non-exsting. Contrary to the (average) openness in finances, most institutions have entry barriers in terms of quality requirements. Only the Open Universities (yet not all, and not for all programs) accept all students without a formal qualification. So, although open access in a financial way exists in some European countries, where the majority of the costs is shifted from the individual towards the collective. Yet open participation is even rarer due to qualitative restrictions for non-degree learners. This is an explanation why Moocs have attracted so much attention: it is the change for many not formally qualified learners to follow relevant academic courses.

Open innovation is based on collaboration, based on trust or contracts and on bought knowledge. HEI’s have a long tradition on working together on research projects. Yet, it seems that in the field of education, both developing and exploiting courses and programs, collaboration is less common. Still, there are large opportunities to exploit the Long Tail of Education. In Anderson’s long tail, the Internet combines two factors. The distribution and marketing costs of digital materials is approaching zero, so it’s only production costs which determine the price; furthermore is it possible to reach out to more people than locally interested. In the music business this means that a Celtic classical ensemble can distribute its music towards a global public covering costs, whereas in the traditional music industry this was only possible for hits. In education, this means that it should be possible for small audience courses to survive, provided that the teachers work together and share resources.

The success of Open Innovation depends on the right attitude. It requires a realization that the organization has to absorb external knowledge and has the competence to do so. It also requires an awareness of the strengths of the organization, as the external knowledge has to be complementary with the existing knowledge and competencies. External knowledge can destruct the existing business model and help to build a new one, but only when the competencies are available to transform the knowledge in an actual business model.

This means that opening up the supply side of the educational business model, we should ask ourselves questions like:

  1. What are our strengths and weaknesses, in the services we provide towards our students, our financiers and society?
  2. Which external knowledge can lessen our weaknesses and how do we acquire this knowledge? Are collaborations possible?
  3. How do we exploit and enlarge our strengths? Can the be of use in the collaborations to lessen the weaknesses?

For example, specific knowledge could be used to develop online courses which are taught to both our own students as students of other institutes for a fee. Even the expertise to develop online courses itself could be used to make excellent external knowledge available for our own students, by seeking combinations of our excellence in online teaching, combined with the knowledge of research institutes.

So opening up on the supply side may be a case of showing the possibilities of win-win situations by combining the strengths (or weaknesses) of the different institutions involved. Opening up on the demand side, from teacher/institution to student is perhaps both simpler and more difficult. As shown above, an Open Access-model requires a shift of costs from the users towards the producers. The simple solution is the removal of all fees for students and a full government funding of the HEI’s. This can be resisted on ideological grounds. For example, the British government finances students through loans, so they will choose the HEI’js best fitted for them, challenging HEI’js to improve their education in such a way that most students chose for them. If this is a good model to improve educational quality and the knowledge level in the economy can be discussed, however, it is one of the used models.

The second barrier to openness depicted above is the use of qualitative entry demands. Of course, there are formal restrictions on entry, but institutions are often more strict than legally required. For example, in the Netherlands, the entry demands for students with a vocational degree when entering a university are very high. That is not only because they lack research competencies, or the knowledge of specific academic subjects, but also because educational institutions in the Netherlands strive for the best students. The flexible part of their budgets depends on the success ratios of students and the amount of degrees awarded. By discouraging the lesser students, success ratios will be enhanced and for every student the “degree bonus” will be received.

Openness will increase experimentation, which will lead to a certain amount of failure. Not every (open) invention becomes a sustainable innovation and not every individual starting an academic program will become a successful student. Yet, without experimentation no successes too!

Remaining question of course is who is going to pick up the bill of the students’  “free lunch”?

Live BC – Before College / AD – After Degree according to 9GAG http://9gag.com/gag/aRPPPxM?ref=fbp

Literature:

Anderson , C., (2014) Makers: The New Industrial Revolution, Crown Business

Bates, T. (2014), A review of MOOCs and their assessment tools,  http://www.tonybates.ca/2014/11/08/a-review-of-moocs-and-their-assessment-tools/  , accessed November 2014

European Commission (2014), Report to the European Commission on New modes of learning and teaching in higher education, October 2014, ISBN 978-92-79-39789-9, doi:10.2766/81897,  http://ec.europa.eu/education/library/reports/modernisation_en.pdf , accessed November 2014

Mulder, F.,  B. Janssen (2013, in Dutch) Open (het) onderwijs, Surf Trendrapport, http://www.surf.nl/en/knowledge-and-innovation/knowledge-base/2013/trend-report-open-educational-resources-2013.html (accessed October 2014);
English version: https://www.surf.nl/en/knowledge-and-innovation/knowledge-base/2013/trend-report-open-educational-resources-2013.html

Wiley, D. (2014) The MOOC Misstep and the Open Education Infrastructure, September 18, retrieved September 30,  2014, http://opencontent.org/blog/archives/3557

Wiley, D.,  (2014), The Open Education Infrastructure, and Why We Must Build It, July 15, 2014, http://opencontent.org/blog/archives/3410 , accessed December 18, 2014

 

 

 

 

 

 

 

What is Openness in Open Education??

In general, there seems to be a tendency towards openness in society.

Ilustation from Magelia WebStore, https://www.magelia.org

In the sector of Information Technology, we see the Open Software movement, a movement in which people share knowledge, resources and products for free.

The Open Educational Resources movement strives to generate educational resources, which are shared for free (although often developed using subsidies of national governments and private institutions).

In the publishing sector, we see a discussion on Open Access; free access to scientific (subsidized) publication.

In industrial sectors, we see a discussion on Open Innovation (Chesbrough, 2006, de Wit and Meyer, 2014); the idea that most knowledge will be developed outside the firm. New knowledge, necessary for innovations, has to be bought, sold or shared. (Information) Technology increases the possibilities for innovation on a small scale. Sharing of knowledge and resources is a major force behind the MakersMovement, in which small inventors design, prototype and -eventually- distribute their innovative products or services (also see Anderson, 2012).

Wiley (2014) – in his discussion on Moocs – defines openness in education as the transition of ‘open entry’ (in the sense of no entry demands from the Open Universities) towards ‘open licenses’, as in Open Educational Resources (OER), towards a possible  ‘open educational infrastructure’.

Open Universities over the world (generally) accept all kinds of students, independent of the level of former education. Yet, education in this case is not free; students have to pay fees, which can become a barrier despite the formal openness. So did a member of the Open University of the UK argue that it could be seen as a social obligation to set entry tests. Given that students have to pay certain fees, it would be unfair to let them make debts for a couple of years, after which the university concludes that they are not capable of finishing their study.Since the nineties of the last century, several organizations worked on the development and distribution of free educational objects. These objects were termed Open Educational Resources in 2001 by the Unesco (1st Global OER Forum in 2002). This openness is defined over five dimensions (the 5R activities, as defined by the Unesco (2012):

  • Retain – the right to make, own, and control copies of the work (e.g., download, duplicate, store, and manage)
  • Reuse – the right to use the work in a wide range of ways (e.g., in a class, in a study group, on a web site, in a video)
  • Revise – the right to adapt, adjust, modify, or alter the work itself (e.g., translate it into another language)
  • Remix – the right to combine the original or revised work with other open works to create something new (e.g., incorporate the work into a mash up)
  • Redistribute – the right to share copies of the original work, your revisions, or your remixes with others (e.g., give a copy of the work to someone else)

© Chad Anderson | Dreamstime.com

Another general model of openness is the 5-components model for open education (5COE) of Mulder and Janssen [2013, figure 2]. This model unbundles the different activities into three components on the supply side and two on the demand side.

On the supply side they distinguish:

  1. Open educational resources (OER) 2. Open learning services (OLS): online and virtual activities which are available either free or for payment, including assessments, exams and communities; 3. Open teaching efforts (OTE): all supporting activities as teaching, ict-support and other roles in (distance) teaching; these activities will generally not be free.

On the demand side they describe the following two components:

  1. Open to learners’ needs (OLN): open education should be free in the sense of time, space and tempo; however, it should also be affordable for everyone. 5. Open to employability & capabilities development (OEC): education should be open towards new and changing demands from society and the labour market, but also promote critical thinking, creativity and personal growth .

The unbundling of Janssen and Mulder (2013) had the aim to develop a potential earning model for HEI’s, combining paid activities with the supply of free resources. This was necessary because there was a feeling that the isolated development of open educational resources, as done by MIT (subsidized by the William and Flora Hewlett Foundation), or Saylor.org (offering whole courses, subsidized by Michael Saylor ( MicroStrategy Inc.)) were too much dependent on the goodwill of a person or foundation.

Others are building on Andersons 2009) Freemium model ). For example, the Free Software Academy, which offers free courses and paid tutoring within accredited programs. The Moocs developed in recent years often use a similar business model.

With respect to the openness of this model two remarks have to be made:

  1. there is a major division between several providers of resources, whether objects or full courses. All are open in the sense that using them to learn or teach is free (costless and no entry barriers), Yet, some do apply all the Unesco R’ s, some only part (both participating under different Creative Commons Copyrights), some are not reusable or adjustable at all. Especially Moocs are static in the sense that they cannot be changed or adjusted to new usage, sometimes new usage is actively discouraged. Furthermore, Most Moocs are only open for a certain period (often the period the same course is given in the original university).
  2. as shown by economic theory, obtaining money for products or services requires the possibility to exclude others from using the service or product. Unbundling to design a business model for open education means to draw a line between activities and products which are open (exchanged for free, but not necessarily costless) and activities which are closed (exclusively available for paying participants). Janssen and Mulder (2013) did use their model to show the possibilities of traditional and open universities to participate in the OER movement. Yet, it can also be used to explain the initial enthusiasm of xxx-investors to participate in the American Mooc-platforms. The expectation was that by offering additional activities, the platforms would generate profits. To guarantee the required exclusivity, participating HEI’s had to sign contracts which restricted their freedom in usage of the material placed with the platform. Data, but also third party contracting (in-company trainings ect.) became the prerogative of the platform.

Christensen et al. (2014) uses a similar approach to forecast a more disruptive development with respect to the (American) educational sector. Distance education, the competence based approach, the existence of high quality, accredited open educational materials offers commercial firms the opportunity to enter the educational sector, aiming at low cost segments and non-consumers (of existing education). According to them, it is only a matter of time before the last bastion of the traditional mixture of academic research and education, the accreditation organizations, will fall.

So unbundling education at an organizational level could result in unbundling at a sectorial or national level and a new division between open en exclusive forms of education.

Wiley (2014) moves openness even one level higher. He sees open education as  an open education infrastructure. With this he means a “set of interconnected structural elements that provide the framework supporting education”.

He concentrates in this on competence-based education. Developing competence profiles and the accompanying programs, techniques and need is costly and complex. By offering open competence programs, more institutions can develop new experiments based on these programs, improve and change the programs, which will feed back in the education of the original developers. Such a process should improve quality and efficiency of CBE-programs and the educational infrastructure. The same applies to assessments. In a CBE-world, knowing the exams will not increase a student’s chances (a reason for secrecy in a the more traditional educational world) as the test are competence based, and will judge performance rather than reproduction. Again, opening up your assessments will improve them by increasing usage, localization and experimentation. Wiley (2014) adds open certification to his open educational structure as a logical step following the definition of competence oriented learning objectives, teaching and learning using open educational resources; being tested through open assessments and using open certificates to show for the acquired competences. Openness of this kind will increase the quality and efficiency of the national educational system.

There are two important distinctions between these approaches. First of all, we can make a distinction between free activities and free products. As Michael Saylor is quoted at the Saylor.org website: Education should be free. Yet, at the website, a lot of courses can be found, however if we define education as the combination of materials, teaching, assessments and feedback, it represents only part of the educational activities.

The same seems to apply to the open education of Wiley (2014). He writes about the exchange of CBE-profiles, open exchange of assessments and alike. However what will be done with these products is not discussed.

The second distinction touches this point. Mulder and Janssen (2013) distinguish between the supply and the demand side. The supply side of the educational system are the teachers and HEI’s offering education to students; competent employees to employers and engaged civilians to society; forming the demand side of the system.

Openness on the supply side seems to concentrate on educational resources, whether teaching materials, assignments or CBE-profiles. The aim of the resources is to support and improve teaching by making materials available, but also stimulating quality through discussion and improvement of existing materials.

Openness on the demand side is about the freedom to participate in education. This is about the removal of entrée barriers. These barriers can be formal (admission restrictions), financial (high fees, large additional costs) or otherwise. The OECD (2014) rapports on tuition fees . These range from non (eg. Austria, Greece, Finland) to € 1950 in the Netherlands. Outside of Europa, the average fees are higher: Canada (approx. 4,000 USD), UK and the USA (approx. 5,000 USD) .

Other barriers, however, may be even more important especially in later-in-life education, as the combination between education and work.

Open education is different from free education; yet in my opinion, openness should be about removing barriers for learners, not only on providing resources for teachers.

Literature

Anderson , C., (2009) Free: The Future of a Radical Price, Hyperion

Anderson , C., (2014) Makers: The New Industrial Revolution, Crown Business

Chesbrough, H. (2006) Open Business Models, Harvard

Christensen, C. M., M. B. Horn, L.Caldera, & L. Soares, (2011) Disrupting College: How Disruptive Innovation Can Deliver Quality and Affordability to Postsecondary Education http://www.americanprogress.org/issues/labor/report/2011/02/08/9034/disrupting-college  (accessed April 4 2013)

Mulder, F.,  B. Janssen (2013, in Dutch) Open (het) onderwijs, Surf Trendrapport, http://www.surf.nl/en/knowledge-and-innovation/knowledge-base/2013/trend-report-open-educational-resources-2013.html (accessed October 2014)

OECD (2014) Education at a Glance, http://www.keepeek.com/Digital-Asset-Management/oecd/education/education-at-a-glance-2014_eag-2014-en#page1 accessed December 2014.

Unesco (2012), Declaration of  Paris, http://www.unesco.org/new/fileadmin/MULTIMEDIA/HQ/CI/WPFD2009/English_Declaration.html, retrieved September 30, 2014

Wiley, D.,  (2014), The Open Education Infrastructure, and Why We Must Build It, July 15, 2014, http://opencontent.org/blog/archives/3410, accessed December 18, 2014

Wiley, D., (2014), The MOOC Misstep and the Open Education Infrastructure,  July 15, 2014, http://opencontent.org/blog/archives/3557 , accessed December 18, 2014

Wit, de B., R. Meyer (2014), an international perspective, 5th edition, Cengage Learning

 

Disruptive versus destructive innovation: an answer to Paul Prinsloo

I think that the discussion on business models, innovation and disruptiveness will improve as we make a distinction between value and profit, and between disruptive and destructive.

In my opinion, each organization tries to deliver value to the outside world. Whether you supply a product or a service. Whether you aim to earn a profit or are a task oriented organization, someone has to belief your activities.

Whereas profit is the outcome of a monetary transaction, value is created by the usage of the offering: by using a product or using the products which result form a service. It is therefor that in modern marketing the influence of the user or receiver is so important: production determines the characteristics of a product or service, usage determines its value.

A monetary profit is neither a sufficient nor a necessary condition for the realization of value. Learning can add value by increasing a persons competences, by making an organization smarter or a society more egalitarian. Yet it can be very difficult to express these increases in monetary terms, necessary to determine the amount of profit.

Classical oriented economists and politicians will argue that learning will increase a person’s potential future income and that it would be justified that people would pay for their own education. This ignores the positive external effects of this education on the productivity and lives of other members of society, but it also ignores the risks of general economic factors which are as important for the realization of the potential income.

Value does not imply profits, hopefully profits do represent value.

Within the field of innovation, we often speak of Schumpeterian destructive innovation. With that economists indicate that often the creation of new things will result in the replacement of old products and services. Creativity is a source of more productive processes, of more attractive products and better services. A problem is the translation of a creative invention into a sustainable innovation. Frequently, the proof of the superiority of an innovation is backward looking. Economists can give a long list of inventions which were technically superior to other inventions, but did not survive the competition.

Disruption is something else; Christensen defines it as an invention, aimed at non-consumers and the bottom of an existing market. It becomes a successful innovation when it convinces non-consumers to use the product and slowly nibbles at the bottom of the existing market. These kind of innovations are characterized by a negative development: by removing features which are aimed at the upper part of the market, the product or service becomes less complicated and cheaper to produces. This results in a lower price. Both the decline in price as the concentration on the core features of the value offering, non-consumers will be convinced to try the new product.

Christensen predicts that the newcomer will, in time, move upwards in the market; the same propensity explains why the incumbent firms cannot counter the entry of the new firms at the bottom of the market. Given an initial position, existing customers expect the firm to add new features increasing quality and usability for the existing customers. However, this increase in quality will cause the costs of production to rise. It therefore not to be expected that incumbent firms are able to counter the entry of the new firms or even initiate a disruptive innovation in their own market.

Disruption adds additional products to total supply and can turn into a destructive force when the firm moves upwards. Creative destruction will be replacing existing products with superior competitors from the start.

Applying these concepts towards the educational sector, we have to distinguish new alternatives aimed at non-learners and alternatives replacing existing educational supply.

For example, studying physics through Youtube-movies can be inferior to an f2f education in modern laboratories. Yet, for some students it is the only way to study a subject, given their restrictions in terms of location, money or time.

Educational alternatives as Moocs can be disruptive in the sense that they offer non-learners a chance to (re)start an education by removing some of the barriers of traditional education. However, they will not be destructive in the sense that they will replace traditional education as long as they miss some of the essential features as certification and degree awarding. When they move up, for example when a firm uses Moocs as internal trainings programs, they replace part of the traditional education. Yet, they have a long way to go before free educational programs will take the place of traditional education.

(Open) Distance education is potentially more destructive than Moocs. In a world of fragmentation, where people want to find a personal mix of work, learning, personal time, there is a demand for just in time and just in case (formal and informal) learning. The supply determined approach of traditional education does not fit this modern way of life. So an open and creative approach to education could result in forms of education which will replace (destroy) the traditional 16 – 24 years oriented programs.

This depends, as Christensen et al. points out, on the way accreditation institution react. Incumberants will try to influence the quality “eisen”, to protect their own programs. So standaards can act as a barrier to entry, the same as in other sectors.

Soucrce: Christensen et al on disruption of education

So when Paul Prinslo remarks that: “In the context of Unisa, there is also ample evidence that some initiative is launched under the banner of “disruption” and “innovation” without considering the implications and impacts of these ideas on our students, staff and institutional well-being. Some of these also disrupt the core business of the institution to such an extent that the center does not hold, and that several systems cannot cope with the impact. I am OK with the idea of piloting a novel and disruptive idea alongside the main business  and then go big. But there seems to be a believe that starting small is not disruptive enough

I can sympathize with his feelings. Management at the Open university of the Netherlands also has the tendency to start developments that are criticized by the staff and students. I think that the educational sector globally is in a state of flux, ranging from financial problems of institutes to financial problems of students, from having to redefine their mission to dealing with the effects of the economic crises.

Yet, disruptive innovation has become a fashionable management term; sometimes disturbing your organization can be a good thing, often it is not. Organizations benefit from incremental changes. It shows good management: [most of the time] sudden changes indicate that management was not prepared for outside changes; incremental changes towards the new outside conditions give the opportunity to build on the existing competences and change them slowly. When the organization (management and non-management) are incapable to react to new conditions, they leave room for others to come up with creative new modes of education which better fit the new economic and social conditions. These trends could become destructive and replace educations as we know it.

Disruptive innovations are occurring in situations that traditional education ignores the potential group of non-learners increasing research efforts and raising demands on students to meet rising qualifications. The ignored group could become the target of organizations which supply a less complex and cheaper form of education.

Organizations should make a well balanced choice between stakeholders, potential students and competitors before drastically changing their existing business model.

Yet, I belief that especially the open universities of this world offer value to individual students but also to society as a whole by offering a formal education to those who otherwise would not be capable to increase their knowledge, be it a single course to increase their knowledge on a single subject, by taking several courses as lifelong learning or taking a full program as a second chance to education!!

And because a new version of something old can be beautiful:

(the original: https://www.youtube.com/watch?v=FaVDXyXqI9Q)

Disruptive innovation discredited? A personal assessment of the discussion.

The question posed by John Naughton in the Guardian is:

Clayton M Christensen’s theory of ‘disruption’ has been debunked. Can we all move on now, please?

He refers to a contribution of Jill Lepore in The New Yorker, titled The Disruption Machine. In both articles, the theory of disruption is attacked at three levels:

  • a historical level: starting with the initial meaning of the word innovation, a discussion whether “creative destruction”  equals “destructive innovation”, and some relationship between ‘the age of terror’ and the popularity of destructive innovation;
  • a critique of the case study method used by Christensen and others to support their theory; accordng to Naughton and Lepore the used definitions of success and innovation are crucial in the support of the theory by the cases. Another critique is the fact that if the chosen time horizon is longer, successful examples fail, whereas failling firms become succesfull in time.
  • not only in retrospective does the theory fail, accourding to the authors, the theory also fails to provide reliable predictions. Some investment fund of Christensen did not live up to expectations, several cases are described, in which the theory did not provide the right predictions.

Of course both Christensen (interview in Bloomberg Businessweek, June 20, 2014) as his co-author (The Innovator’s Solution) Raynor (Of waves and ripples: Disruption theory’s newest critic tries to make a splash, Deloitte University Press) did react to these critical remarks.Christensen is quoted by Drake Bennet to have said:

And then in a stunning reversal, she starts instead to try to discredit Clay Christensen, in a really mean way. And mean is fine, but in order to discredit me, Jill had to break all of the rules of scholarship that she accused me of breaking—in just egregious ways, truly egregious ways. In fact, every one—every one—of those points that she attempted to make [about The Innovator’s Dilemma] has been addressed in a subsequent book or article. Every one! And if she was truly a scholar as she pretends, she would have read [those]. I hope you can understand why I am mad that a woman of her stature could perform such a criminal act of dishonesty—at Harvard, of all places.

Raynor uses a 13-pages paper to react. If we leave the historical and semantic discussions aside, the major defense is on the case study method used. Both Raynor and Christensen point out that positions shift over time, so the different cases selected by Lepore and Naughton have to be understood in their specific market position at that point in time; providing new case studies. Also, the predictive value of the theory is a question of timing and good interpretation.

For example Christensen says:

Just so you understand, disruption doesn’t happen overnight. There are now six or eight traditional department stores in existence in North America. Let’s just call it less than 10. And Walmart is quite a large company. Target is quite a big company. So has disruption been at work in the retailing industry? It’s a question. Macy’s still exists. So—Jill, tell me, what’s the truth? If you could just be Jill’s answer for me.

Raynor also takes the Kmart example, stating:

To claim that Kmart was not a successful disruptor because it is no longer a disruptor is like claiming Carl Lewis was not a champion sprinter because he is not now a champion sprinter.

From: http://search.dilbert.com/comic/Disruptive%20Innovation

With respect to the falsifiability of the theory, Raynor points out that several cases indeed follow the theory:

Case studies are extraordinarily useful when developing theory and limning a theory’s limits. Case studies establish a theory’s descriptive validity (there is such a thing as a disruptive path to success) and its explanatory power (here is why it works). Case studies cannot test a theory’s predictive power when a theory makes probabilistic predictions. That requires a statistically valid test of a theory’s accuracy on a population. Complaining that Christensen has not proved the predictive power of disruption based on case studies is to miss this critical distinction between two completely different methods, each attuned to a very different need.

Therefore, I would like to rephrase the question with which we started this blog:

Is there a general theory of business economics?

Much of the discussion above centers on the validity of the case study method and the generalization of the theory of destructive innovation. If I may take two (handpicked, quoting Lepore) examples:

  1. Retailers, quality and price fighters.

In line with the examples given by Christensen and Raynor, several stages can be distinguished in the development of shops: Until 1948 small specialized shops dominated the market. More general oriented shops took over the market for retailers, but from the 1960’s on the large chains of supermarkets controlled the market. In the 1990’s two price fighters entered the supermarket segment. Lowering services and prices they captured a stable part of the market. The existing supermarkets tried to introduce so-called ‘own brands’ and C-brand products, but were hindered by the large overheads and fixed costs to really compete in the lower parts of the market.

Now, twenty years later, the former price fighters move upmarket offering A-branch products and specialized products. Other price fighters are competing at the low price part of the retail market.

Some conclusions, which are consistent with the theory of disruptive innovation:

–          Established firms have difficulty with combining different business models within one organization (cq shop);

–          Established price fighters move upwards in the market, imitating the old firms;

–          New disruptive firms will emerge and the old disruptive firms will have the same difficulties to compete as the firms they pushed upwards in the market.

 2. Airlines: KLM, Transavia and Ryanair.

Last week KLM had to warn the shareholders that the expected profits of KLM and Transavia have to be adjusted downwards. Transavia, is a Dutch based low-cost airline operating as an independent part of the Air France-KLM group, bought in 1991 as answer to the treat of the disruptive treat of pricefighters as Ryanair and Easyjet.

At the same time rumors indicated that Airbus, after Ryanair’s proposal to have passengers on short flights standing up, was developing new chairs doubling the capacity of the airplanes.

 

 

With this example, we illustrate two mechanisms from the theory of disruptive innovation:

–          It is not easy to find a way for established firms to copy and counter the business strategy of the disrupting entrant.

–          That disrupting firms can evolve and keep disrupting the market, contraire to the theory of Christensen and Raynor.

The two examples can be criticized of being “handpicked” and being too shallow to describe the full complexity of the cases; both true!

Yet the point we want to make is exactly that: in different situations, different components of the theory are supported. Instead of quarreling over the historical interpretation of the word innovation, what is the truth or if IBM still makes a profit or not, other questions should be asked, for example:

1. Which kind of innovations are there and what are their relative importance in survival of firms?

2. Why do we see different trends and reactions in different case studies: what are critical success factors for entrants and established firms?

3. What is the effect on social welfare of a successful disruptive innovation? Should we try to increase the speed of these kind of innovation, or try to stop it?

 

Lastly, a critique on the way which Lepore tries to protect education and health care from Christensen disruptive innovation. Disruptive innovation cannot play a part in these sectors, according to Lepore, because:

Doctors have obligations to their patients, teachers to their students, pastors to their congregations, curators to the public, and journalists to their readers—obligations that lie outside the realm of earnings, and are fundamentally different from the obligations that a business executive has to employees, partners, and investors. Historically, institutions like museums, hospitals, schools, and universities have been supported by patronage, donations made by individuals or funding from church or state. The press has generally supported itself by charging subscribers and selling advertising. (Underwriting by corporations and foundations is a funding source of more recent vintage.) Charging for admission, membership, subscriptions and, for some, earning profits are similarities these institutions have with businesses. Still, that doesn’t make them industries, which turn things into commodities and sell them for gain.

She totally misses the point of the application of business economics to these sectors. Readers leave the traditional media, turning to the free information available on the internet, students turn to Moocs, discussion groups and peer pages to find the information they need to learn, patients lookup success-ratios of doctors, choosing the best. Governments have financial difficulties, making choses about what to finance, people and institutions which donate are becoming more critical. Right or wrong, the customization of society is increased by the possibilities of the internet and social media.

Doctors, teachers, journalists and perhaps even priests have to take the preferences of their public into account. Of course, people are still restricted by their budgets, by their social class, by their networks, like before; but loyalty has declined and partly replaced by economic trade-offs.

This makes strategic analyses of the offering of an institution versus the wishes of the purchaser even more important.

Education, let’s blow it to bits or put it back? 2

A short update on Education, let’s blow it to bits or put it back? 

In February I discussed a tendency I predicted, based on the theoretical unbundling of education in educational resources (open or not), Moocs as resources and educational services which could be offered. I wrote:

Mulder goes one step further, in dividing the educational process in different stages and services. He concentrates on the division between content, which should be offered as open educational resources, and services as tutoring and grading, which should form the base of organizational income.

The economic theory of this is already older. The idea that the internet will reduce firms to their core-competences and products and services will be produced by networks of specialist, each working at the lowest prices and offering the highest quality has been presented in the 1999-book Blown to Bits of Philip Evans and Thomas S. Wurster. (not 2008 book Blown to Bits: Your Life, Liberty, and Happiness After the Digital Explosion by Harry Lewis, Ken Ledeen and Hal Abelson).

Between firms and the customers will be place for intermediaries, firms giving information on the availability, the price/quality of the products and other information. Between firms, there is room for intermediaries, which only role is to bring components together, matching the demand in the market.

I ignored the last players in my blog, wrongly I must admit.

In a nice blog, Micheal Horn, did write about Unbundling and Re-bundling in Higher Education (Forbes, 7/10/2014).

He argues that online learning is a disruptive innovation and sees unbundling as a ‘likely’ tendency: “we are seeing the beginning of unbundling in courses, content, credentialing, campus life and personal growth, and more”.

However, he points out that because of the unbundling, there will also be a new trend for bundling: “there will exist a need for subcomponents that bundle things together like coaching, mentoring, communities, personal learning plans, and employer connections, as these areas are critical for student success”.

In the same line that Evans and Wurster used Dell as example for the firms responsible for putting the final product together, Horn takes Dell as the example of integrating different parts of education together.

This will result in the creation of intermediate firms offering support by selecting the best courses, the best communities or a consistency within the different parts of education someone has had.

However, in recent years we observe that the movement of firms towards their specialized core-competences is countered by the idea that firms have outsourced too much. Human resource management or account and control may initially not be seen as core competences, but when the distance between the core activities and the outsourced  HRM-department or accounting-department become too large, they lose their use as strategic instruments.

Unbundling of education can result in the loss of consistency between components of a chosen program; of frictional costs (for example a accumulation of registration fees), overlap of content and problems with the acceptance of degrees by employers.

As in the strategic paradoxes, bundling and unbundling will be a trade-off between efficiency and effectiveness; a paradox not easily solved!

The Crowd and Open Education: resilience and sustainability

Updated July 21 2014

 Update:

A relevant quotation I found in my notes:

Paul Stacey

Crowd learning

Crowd learning describes the process of learning from the expertise and opinions of others, shared through online social spaces, websites, and activities. Such learning is often informal and spontaneous, and may not be recognised by the participants as a learning activity. In this model virtually anybody can be a teacher or source of knowledge, learning occurs flexibly and sporadically, can be driven by chance or specific goals, and always has direct contextual relevance to the learner. It places responsibility on individual learners to find a path through sources of knowledge and to manage the objectives of their learning. Crowd learning encourages people to be active in setting personal objectives, seeking resources, and recording achievements. It can also develop the skills needed for lifelong learning, such as self-motivation and reflection on performance. The challenge is to provide learners with ways to manage their learning and offer valuable contributions to others.

 

Deloitte University Press published an infographic on crowdsourcing. Crowdsourcing is defined as “an approach to harnessing the power of individuals to work to solve problems in a decentralized way”.

They distinguish five different kinds of crowd sourcing, using the crowd’s creativity and knowledge (competition, collaboration and voting), its funds (funding) or its labour power (labor). According to the writers, Rob Hamill, Emily Malina and Elizabeth Pal, each form of crowd sourcing is applicable in certain situations and will be contra-productive in other situations.

The table below gives an overview of the different ways of crowd sourcing, the video has some funny examples, starting with 1714 as start of one of the first crowd sourcing projects.

 

Form Pro Contra
Crowd CompetitionCrowd competition refers to the hosting of contests in which participants work individually or in groups to come up with a solution to a given problem. The outputs may include many viable ideas or solutions.
  • creating actional solutions
  • developing prototypes
  • Generating outside ideas
  • predetermined desired outcomes
  • lack of resources to review submissions
  • building community
Crowd Collaboration
Crowd collaboration requests the input of decentralized individuals to develop, aggregate, and share knowledge and information across a pool of contributors, generally through a loosely controlled web-based platform. The typical outputs of a crowd collaboration effort are collective concepts with shared buy-in.
  • building and sharing knowledge
  • responding to emergencies
  • shared policies
  • User anonymity
  • Small and inactive crowds
  • Promoting individuality
Crowd Voting
Crowd voting is the process of turning to the crowd to reach a decision. This practice typically involves inviting participants to help make a decision based on pre-defined options.
  • Decision making
  • Rating and ranking
  • Quality assurance
  • Strategic decision making
  • Political sensitive issues
Crowd FundingCrowd funding is the process of funding projects through small contributions from a large group of participants. Crowdfunding activities are typically hosted through web-based platforms.
  • Fundraising
  • Disaster relief
  • Start-ups
  • High transparency

 

  • Ongoing operations
  • Loosely structured initiatives
  • High short term expectations on returns
Crowd Labor
Crowd labor refers to the engagement of a distributed labor pool to accelerate the completion of large-scale projects by splitting up a task into components that require little creativity or coordination but that cannot be automated.
  • Creating actionable solutions
  • Data entry and validation
  • Translation (eg language)
  • Digital archiving
  • Unstructured tasks
  • Subjective tasks
  • High-level thinking

As I argued before, the sustainability (or resilience to use a new buzz word) of business models for Open Education will depend on the inclination of people and institutions to cooperate either on the input/production side as on the user/learner/consumer side of the business model. As crowd sourcing is a form of this kind of collaboration, it could generate knowledge on the the potential success factors by reversing this table and apply the pro’s and contra’s to different systems of Open Education.

Crow Labor is one of the most used forms of Crowd Sourcing in the development of Open Educational Resources. Organisations as the Saylor.org, Merlot.org rely heavily on materials of others. However, this kind of free labour has also some aspects of Crowd Collaboration because it is not necessarily about projects which “require little creativity or coordination”.

Crowd Competition is seen in situations in which organisations as the EU, Hewlett foundation or the American government ask for proposals which will be subsidized. On an individual level, these calls will be passed on towards teachers and other educational developers to come up with the creative solutions to win the funds.

It can also be used as an instrument to start-up a new data-base or website on educational resources and programs. By setting a suitable reward, the system can generate a certain minimal critical mass, above which it will be interesting for other partners to participate.

Crowd Voting is often used to give an indication of the quality of the resources or programs. For a ranking to be functioning, there have to be enough votes and the voting public has to be something of an “in-crowd” of experts.

The remaining form of Crowd Sourcing is the financial form, Crowd Funding. According to the authors, this instrument is unsuitable for ongoing operations and loosely structured initiatives. Yet, I have the impression that several non-commercial projects depend on one large fixed subsidizer and a fringe of minor short-term donors.

Concluding, the examples of Open Educational Resources and Open Education show that the forms of Crowd Sourcing as described by Hamill, Malina and Pal is not complete; there are other situations which can only partially described by this taxonomy. Especially the voluntary participation in high-knowledge projects does not fit either the Crowd Collaboration nor the Crowd Labor definitions.

Still, the research in Crowd Sourcing should generate a further understanding of these kinds of collaboration: the free contribution and exchange of educational materials between individuals and organisations. A better understanding of these phenomena will enhance the changes of success of the Open Education movement.