Why business models in education matter

Again, and again teachers rightfully state that there is no reason why they should take into account the business model of their course. However, on an institutional scale a business model describes the way an organization defines itself. It is not only an earning model: describing the earnings versus the costs, determining the net income of the organization.
The business model also contains collaborations, essential activities and processes and core competencies. By defining the organization in this way shows clearly what the organization sees as its raison d’être, its competitive position in regard to other institutions and organizations.

The individual teacher teaching a class in Latin may not be interested in the fact that her investment in offering an interesting program is only attended by small groups of students. At an administration level of the university, however, the imbalance between the costs of providing the class and the income generated through direct student fees and governmental subsidies. This imbalance and the financial long term effect of it can be fed back to the individual teacher, providing an incentive to change the way of teaching. In this case, sharing with other teachers over universities could be an answer to the investment costs (eq. through virtual classes, by video appearances). Yet, another measurement taken could be to when the institution sees this course as essential for its identity and does not want to share it with others. In that case, funds will be made available for teaching regardless financial shortages. An intermediary way could be to support the teacher to develop materials which could reduce the actual f2f time by offering online materials.

All these actions (innovative or conservative) require an understanding of the business model of the institution:
– why would we invest in innovation in our present education: this requires a view on the strategy of the institution and on the values of the stakeholders;
– will we cooperate and who are our partners, con-colleagues or co-creators?

A good business model can help in three ways: (1) analyses the present activities: are we still creating value for the present students and other stakeholders? (2) Given our strategic targets, are our activities still in line with these targets? (3) Given the wish for change, what does that mean for our activities, competences and partnerships?

Especially in education were the situation is complex as the stakeholder who provides the finances is not the same as the one who receives the education. Is education the service provided (towards the individual student) or is it the student with a degree who is delivered towards society? Another complicating factor is the interaction between the different business models for research, teaching, valorization and other activities as employed at HE institutions.

Again, a business model without a clear strategy or vision on the organization is like having a roadmap without a destination. If we know what we want to do for who; the next thing is to determine how and when. Describing the different business models could give an internal consistency on each major activity, but also show interdependencies and conflicts between the different business models.

Inside in the business model of an organization will stimulate innovation in a broader sense than only technology or demand driven. By aligning the demands of the stakeholders with the possibilities of the organization, possible improvements can be identified, raising the value for stakeholders, whether students, teachers, governments or society at large.

This should not mean that governments should control either content or methods of teaching, that administrations should make profits the main driver of education, but it isn’t a carte blanche for teachers to use unlimited resources in their teachings.
The acceptance of reciprocal interests and interdependencies should lead to an innovative mixture of alternative financing of new interesting teaching methods.

Education Changemakers: Business Models Matter http://marscommons.marsdd.com/business-models-matter/

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4 thoughts on “Why business models in education matter

  1. Hey admin,

    Nice post. I think that, business models in education matter because a business model describes the rationale of how an organization creates, delivers, and captures value, in economic, social, cultural or other contexts.

    Regards,
    shuvro chowdhury

  2. Its interesting that now as a piano teacher, I get to think back on the 9 years I spent teaching High School Latin and adjuncting in College. No where in your article, which was very good in describing the attributes of a business model in education, do you directly mention the students in this model as the one essential element — No students, no teachers, no class. Education models ideally are about student/teacher interactions, not about organizational flow charts, collaborating with others (teachers often do this in informal ways and always have), investments, or other such “money” making terms. I guess, I am not interested in making money, except enough for me to live on. If the “company” wants to — fine. But schools do not or rather, should not, exist to make money. We educate students. I would have taught Latin or Piano for no money simply because I like it, believe in it, and believe that the students who take from me, want to learn the subject and have chosen me. If not, they should study something else with someone else. That should be why we exist, not to create more business types, but better students and better people.

    • Dear Liz,

      Thanks for your reaction.
      As I started my blog, individual teachers should not be held responsible for the (financial) sustainability of their course, yet, sometimes courses are so badly organized that they have a negative impact on the reputation of the organization as a whole, damaging their chances for survival.

      I think, however, that an organization should ask itself the question why they exist, who they serve and how this process could be sustainable. In that sense, the student, but also alumni and the government each play a role in the model.
      As you rightly say, the individual teacher is responsible for the educational or didactical model, the student -teacher interaction. And it is in no-ones interest when educational institutions only create business types; I have not set any goals for the outcome of the educational process as such.

      However, being offered the best conditions to realize your teachings is of course in your interests. And that is one of the reasons why the organization should have an idea where to find the funds to create those conditions for the teachers. All employees (teachers, administrators and cleaners alike) are stakeholders in the organization and have an interest in the long term survival of the institute.

      Another interesting point you make is your reference to teaching music, even for no money because you like it. Thinking back to the time that we sought a piano and a guitar teacher for my children, we (and the kids) had some explicit demands. For example, the lessons and exercises should be combined with their regular schoolwork (parental condition), it should not be classical guitar (my daughter), and my son wanted to start with recognizable pieces. The local music school was not prepared do any concessions to our demands. Luckily we found an independent teacher who has a passion for teaching. He made a compromise with the children. Although none of them have lessons anymore, they still enjoy playing sometimes.

      In my words, the business model of the individual teacher did have a better fit with us, than the formal approach of the school. Concluding, I think that a large part of your critique is in the language used and the level of analyzes. Yet let’s agree to disagree to the point that in my opinion education should be funded and cannot be dependent on the goodwill of individuals with means elsewhere, whereas you set a lot of trust on the generosity of unpaid teachers.

  3. I wanted to also reply to Shuvro Chowdhury: I see a disconnect between the business model and what education is all about. I feel that I impart value — my values to students — not via a business, but through my interaction with them. It is a personal model, a student-teacher model. I am not an organization, I am a teacher, and contrary to some thinking I do not believe that corporations are people and therefore cannot act in the highly personal way that only individuals can act. The company is important, but only in so far as the individuals that make up that company are considered first. It is the individual and his actions that create the context for imparting the values that form the essence of what a company is all about, the product it produces. A company produces products or services. A school creates independently thinking individuals. Liz Bird

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