A Business Model for a research and education

Recently, I was asked to suggest a business model for a research and education center. Some organizations aimed to work together in the field of innovation and regional knowledge sharing. Aim is to make the center sustainable in the sense of Yunus et al. (2010). They describe Social Businesses as an organization which aims to earn enough to renew the invested capital combined with social profit maximization: At the same time as trying to achieve their social objective, social businesses need to recover their full costs so they can be self-sustainable.

Already several earning models of the kind Rappa describes at his website were discussed, however, a business model involves more than only an earning potential. So starting out with the assumption that in research each question is unique, this defines n=1. The methods of academic research may be more or less modeled in a stage model, each query will need different data bases, different academic specialties and competences.

The same applies for education. Taking aside learning styles and other contextual  factors, the group of intended learners will have specific work and practice related needs.

This suggest that at the input side r=g, a network organization is needed to meet the demand of the customers. The business model has to take the r=1-n=g philosophy of Prahalad (and others) into account. Central questions are

  1. how the network organization can attracted the necessary resources to organize the activities  needed to fulfill the unique demands of the customers?
  2. How to organize the earning model to make the center self-sustainable as a social business.

Education and research as a network organization

Note that in a network organization there are two sets of key resources and key activities as mentioned in the Osterwalder-Pigneur business canvas: firstly the resources and activities aimed at fulfilling the needs of the customer, the realization of the value offering. These factors have to be found in the relationships which make up the network of the organization. The key resources and activities within the organization have to do with setting the conditions necessary to activate the former external resources and activities. The internal resources and activities as relationship management, ‘the black books’ and communication and organizational skills are the core competences of the network organization. Money is often an important persuading factor, but reputation, knowledge sharing and strategic issues can also convince organizations to work together in a network setting.

A business model for an education and research network organization

The assumption is that the main customers of such a model are other organizations, having specific research questions, wanting to school their employees. The aim of the network organization is to match demand by organizing its partners into a relevant supply.

The actual business model is inspired by a model some colleagues of mine had developed some years ago for a HEI. It consists of different layers, each aimed at a specific audience, but building on each other.

The major difference between the layers is its amount of openness and the facilities offered. The first layer consists of free information, free courses, OER and research rapports. This layer offers free products and services for interested parties. The only restriction is that one has to register with an real email-address. There are several potential sources of income in such a case:

  1. Selling marketing space to third parties
  2. Internal subsidies because of the marketing of other products and services
  3. External subsidies because of the dissemination of knowledge
  4. Analyzes and sales of data on potential customers; email addresses ect.

In terms of Rappa’s earning models this is a combination of the advertising and the infomediary model. In Rappa’s taxonomy, the Freemium model of Anderson (giving away something for free; earning an income by offering additional services or products) is part of the advertising model.

In the second layer (registered) visitors find a supply of standardized service and products, for example courses based on existing courses of the participants, workshops and alike. Interested parties can either participate or buy products on a pay-as-you-go base, or –in the case of changing offerings- take a subscription. The utility model assumes the first case, whereas the subscription model differs from the description here as they assume the subscriber also to be a member of the network.

Here, I would label the participants of the last two layers as members. Members of the third layer become part of the community in the sense that they can freely use courses and existing research. Furthermore, they can participate in discussions and influence the direction of new research and the educational course of the center. This level can be compared with a regular student at a HEI, who has pays a yearly fee and is during that year free to use all the facilities and courses at the institute.

Of course, for specific studies or custom made courses and other on-demand the subscribing member has to pay an additional fee. The fourth layer consists of the full participants, the suppliers of services and products supplied in the three other layers. New full participants should pay a fee reimbursing the others for the initial investment costs, getting the right to promote and sell their own products and services within the center.

Open Education                                   – free (registered) entry–                   Open Access
Courses                                                     – pay as you go –                                 Studies
Programs and custom made courses          – community I –                   Original research
(New) Producers                                           – community II –                   Founding fathers

Overall, such a center will act as a broker between the participating organizations and individuals or organizations seeking the products and services on offer. In the brokerage model, income is earned by charging a commission or a fee either based on actual transactions or as part of a general agreement. Yet, at each level data is generated which could be used to create value for (potential) customers and partners, again creating income. Another additional source of income could be regional and national subsidies as governments often stimulate geographical collaboration.

Changes are that an actual implementation of such a model will require some adjustments, for example the privacy regulations with respect to adjustments to the gathering and usage of data are strict; in a world of ever falling government budgets, subsidies may be small or non-existent.

Still, a business model which generates income through its communities can afford to sustain Open Education and Open Access (research), which in itself will not be sustainable.

It would, therefore, be interesting to see if an institute or center build on these principles would be self-sustainable in the sense of Yunus et al (2010), combining a social goal (Open Education, Open Access), while at the same time covering the full costs.

http://www.opencoffeeoss.nl/open-coffee/

Source: http://www.opencoffeeoss.nl/open-coffee/

Literatuur

Yunus, M., Moingeon, B., & Lehman‐Ortega, L. (2010). Building social business models: lessons from the Grameen experience, Long Range Planning, 43, 308‐325

It has to be Open: The Lau last performance at PinkPop

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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

 

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)

The business model of not-for-profit organizations

Solving the big issues of our generation requires bold new business models  
Osterwalder and Pigneur (2010, 265)

In a short time span I encountered two views on the usage of business economics in not-for-profit situations. Firstly, the quote above this blog, in which Osterwalder and Pigneur(2010) claim that a business model approach could help solve present day global problems. Against this, Thompkins(2005) argues that inefficiency is an important characteristic of the public sector as it is the effect of the necessary democratic process and the required transparency of processes in this sector, or as the title of his article says: The distinctive context of public management; implying that there are different kinds of management.

In our view this seemingly contradiction is based on a misunderstanding of the concept of the business model. Although it is developed for analyzing and developing models in the for-profit sector, it is about the creation and deliverance of value. So if transparency is an attribute of the public sector, it should be represented in a business model describing a specific public organization.

This is the challenge Judith Sanderse and myself have taken on. We agree with Osterwalder and Pigneur(2010)  that the business model, and more specific the Business Canvas, can be used to increase the efficiency and effectively of all kinds of organizations, including not-for-profit ones. Hence, the main objective of Judith’s research was the development of a specialized business model canvas for NGOs. The central research question of this study is ‘how is a NGO business model canvas structured?’

 However, by using the Business Canvas for analyzing not-for-profit organizations, we have to take two tings in account:

1. the definitions of terms in the general business model will not be recognized by the managers and employees of these organizations and sometimes even lead to resistance to use the Canvas;

2. given the specific functions of these organizations, the Business Canvas will have to reflect the different attributes of these organizations to increase both the usability as the acceptance of the models.

Judith Sanderse did analyze the potential usage of the Business Canvas in the case of non-governmental organizations. To do so, she used three steps; firstly using the literature (especially that on social enterprises) to adjust the ‘Beyond-Profit-Business Canvas (see Osterwalder and Pigneur, 2010, 264-265), proposing an adjusted model for not-for-profit organizations.

Secondly, she interviewed several experts, to see if the model was usable in terms of form and variables. From these interviews she concluded that the Business Canvas should be adjusted. Different business models have to be used for foundations and ngo’s (see the figure below).

bc_Sanderse

Furthermore, the definitions have to be adjusted and clarified. In the table below the definitions as used are given.

Key definitions
Business model A business model describes the rationale of how an organization creates, delivers, and captures value.
Vision Outlines what the organization wants to be. It can be emotive and is a source of inspiration. For example, a charity working with the poor might have a vision statement which reads “A World without Poverty.”
Key Partners The network of cooperative agreements with other people or organizations (including governments) necessary to efficiently offer and distribute the organisation’s mission and programmes.
Key Activities The main actions which an organisation needs to perform to create its value proposition.
Key Resources The physical, financial, intellectual or human assets required to make the business model work.
Value Proposition The organisation’s mission, its main programmes and brand.
Mission Defines the fundamental purpose of an organization, succinctly describing why it exists and what it does to achieve its vision. For example, the charity working with the poor can have a mission statement as “providing jobs for the homeless and unemployed”.
Relationships The type of relationship the organisation has established or wants to establish with each key beneficiary or donor segment.
Programme delivery methods The method which the organisation uses to achieve its mission or programme activities to the beneficiaries.
Ultimate Beneficiaries The target group who the organisation principally aims to reach and serve to achieve its vision/mission.
Channels The methods of communication, distribution and sales used by the organization to interface with its customer/donor segments.
Customer/Donor Segments The different group of customer and/or donor segments which the organisation targets for its fundraising activities. In this component customers tend to be more related to the merchandising section of the organisation and donors tend to be related to the fundraising section of the organisation.
Revenue The income streams, this could be donations, merchandises/sales, investments or other income streams available for the organisation to work on its value proposition.
Costs The total expenses which the organisation incurred (or will incur) to implement the agreed activities.

Lastly, the adjusted model was used to analyze five NGO-s through interviews with key-managers of these organizations. The split business model was recognizable and usable according to these managers. Functioned mentioned where:

    • Understand the dependencies of the separate elements
    • Change process
    • Visualization of the organisation
    • Staff induction
    • Communication, both internally and externally
    • Alignment

Yet further research should follow the usage of the model in describing and analyzing the workings of the organizations, to see if it is possible to improve or even change the way they try to realize their goals.

Yet, despite the ultimate goal of the organization, be it the public good, education or income for the stockholders, it will require money to make our world go round.

 

 

 

 

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/

Are Moocs disruptive, interesting or just marketing?

Van der Bosch poses an interesting question as he states that Moocs are an interesting development, but as he says that Moocs are the wrong revolution.  Bonnie Stewart writes about the supposedly disruptive character of (x) MOOCS, pointing to the many publications using this term. She sees a trend in the power relations to shift, however preserving and consolidating the power relations of the traditional universities. xMOOCs are, in her view, just an opening of new markets based on the reputation and brand of the elite universities. Rolin Moe in Reviewing Christensen’s Disruptive Technologies (Harvard Business Review, 1995) in MOOC Terms gives an historical interpretation of Christensen’s original definition of disruptive innovation, using it to analyse xMoocs.

Thrift in de Chronicle is even more cynical, listing four main reasons why MOOCS are called a disruptive innovation and became a hype over the past months: 1. Moocs do appeal to economic elites, which see opportunities for profit in an economic environment where pretty well everyone is chasing limited opportunities for high returns. 2. because it taps into a vein of middle-class anger over tuition costs (a subject also mentioned by van der Bosch). 3. Moocs could reduce costs of higher education for governments, providing an attractive excuse to reduce spending. 4. because all that said, as higher-education systems continue to grow in scale, it makes sense to look at ways of teaching more people more efficiently, and MOOCs may well be a part of the answer.

Concluding that, no elite universities will be caught up in a more general industrialization of higher education

Meanwhile, edX announced the new members in February. In this announcement, they described their selves as “the not for profit online learning enterprise [..] building an open source educational platform and a network of the world’s top universities to improve education both online and on campus while conducting research on how students learn”.

Promising: “Courses offered by institutions on the edX platform provide the same rigor as on-campus classes but are designed to take advantage of the unique features and benefits of online learning environments, including game-like experiences, instant feedback and cutting-edge virtual laboratories”.

However, the Chronicle poses the question How can a non-profit organization that gives away courses bring in enough revenue to at least cover its costs?  Agarwal (president of edX) states that edX is non-profit, but self sustained. EdX expects income from several sources. Firstly, there is an agreement that “self-service” courses will be offered through edX without any further help, it pays a fixed amount of the income generated by the course to edX ($50.000 for a new course, $10.000 for recurring ones). Next, institutions can use edX as a consultant and design partner, paying for each course developed within this model. Furthermore, edX has a deal with a network of testing centres and has plans to license the courses to other universities, both potential sources of income.

Another interesting aspect is that Koller is quoted stressing that Cousera offers to share a larger part of the profits with the university that provides the course. It seems that competition between the MOOC-platforms has started?

napkin sketch by Clayton Christensen for Wired Opinion

So there are several positions taken with respect to the way we should look towards Moocs. Of course it is interesting to know the opinion of the person who labelled Disruptive Innovations. Christensen and Horn asked the question: Beyond the Buzz, Where Are MOOCs Really Going?

Their answer is simple: Yes.

For this answer, they have three reasons. Firstly, Moocs are serving non-consumers. Although Moocs are limited in the services they provide compared to traditional colleges, they offer free and accessible education to a broader audience, who can not afford the traditional offering. However, this is a characteristic of ODL in its broadest sense as can be read in the rapports of the UNESCO. China, Russia, Brazil and Turkey all offer some kind of Open Educational Resources with the intention of making education available in places where are no institutes for higher education and for people who are not able to participate in the traditional HEI’s. Secondly, as they state: disruptive innovations improve over time to march upmarket. This is also given as a reason why Moocs have become popular in recent months, using the augmented possibilities to increase quality. An observation which will not be shared by everyone commenting on Moocs. Lastly, Moocs redefine quality in the industry. As Christensen and Horn state: in the future, courses might be offered based on employer demand, not faculty research interests. MOOCs are already evolving in some ways away from traditional educational constraints: Udacity’s courses, for example, have shifted from a time-controlled to a more competency-based learning model that takes advantage of the online medium.

License Some rights reserved by Toban B.

Will Moocs be disruptive in the sense that they will change traditional education?

Their specific form, to which I will return in a later blog, makes it possible for a new segment of “customers” to participate in education. It becomes more easy to sell “education” as a product to firms, incorporating it in their corporate universities. Just as the introduction of the film, the movies, made the stage performance available for whole new audiences, winning in efficiency as one performance could be seen by millions but (perhaps) losing in other features as effectiveness  (the impact of the players on the spectators) or artistic aspects. Moocs facilitate the mass-consumption of education, but not the mass customization as predicted by Christensen and Horn. For that they are to inflexible. Furthermore, ODL and Moocs can facilitate other “revolutions” in education as flipping the classroom; transferring simple readings and task making to the e-domain, whereas the class room will be used for discussion and group work.

Predicting the future is not something I like to do, but my experiences with scenario techniques make me very doubtful if these kind of uses of Moocs will be applied soon. Drawing a line representing the use of Moocs as a change agent in traditional HEI’s versus a line of the supply of relevant Moocs by other HEI’s provides an optimistic quadrant in which Moocs will be offered and used to change the traditional educational systems against a realistic quadrant in which Moocs are offered by good willing individuals, used by individuals who have no other choice!