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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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

 

Torrents and Moocs: the paradox of sharing

Time was too short to write a blog last week. To the why I will return later in this blog.

Sometimes things take some time before you make certain combinations. A few weeks ago I saw a documentary over the process against the people of the Pirate Bay in Sweden: the Pirate Bay away from key board.

 

The last week I was working on a paper, with a colleague of mine, concerning the effects of Moocs on Higher Education: are they disruptive or not?  And suddenly, I am thinking about this paradox between Torrents and Moocs.

People invest in making things, physical or virtual objects. Growth theory tells us that property rights are very important for innovations. Given that

  • most inventions never will become more than a nice idea in the laboratory and
  •  that between the state of creativity and a commercially interesting innovation the organizations has to spend a lot of money,

it is clear that organizations have to earn a lot of money to pay back for all those investments.

So -according to the theory- this earn back period depends on the time  an organization can protect its product or service from becoming replaced by cheaper copy cats. Hence the importance of property rights.

This paradigm is adjusted in recent years, both in practice as in theory. Open innovation still builds on solid property rights but sees a lot of wasting resources because of the closed approach to research and innovation. In practice there are firms who decide against the long period of patenting their inventions, stating that the patenting process in itself increases the possibilities of competing copies and results in losing valuable marketing time (move fast before they catch up).

Yet, the entertainment sector still bases itself on the old growth paradigm. They point to the investments of artist and producers to develop books, music and movies; things that can be digitalized and copies. An interesting exception are paintings. There is a whole industry offering Van Gogh’s Sunflowers and nobody is treating to shut down my printer if I make a color print of a picture of the Rijkswacht of Rembrandt.

However, exchange of digital copies of other artistic products will result in a world where no movies are made, no books will be written and no original music will be composed.

There is something strange with respect to this attitude. When I buy a book or a cd, all rights are mine; I can resell them, give them away or donate them for a good cause. There are even organizations who buy books and leave them in trains and other public places. I can make copies for “home-use” and share those with friends. Sharing in this sense is seen as something good and socially desirable behavior. However, when I buy an electronic book, I can only resell it if I read it online at Amozone.com who put it in a vault. When I resell it, it is not the book I sell, but the combination of this vault. I have the feeling that when I buy something digitalized, I never become the owner but will always rent it in some way. Let alone that people should share on a larger scale, using P2P networks (Pirate Bay) or hosting sites (as Megaupload). The movie about the process against the Pirate Bay shows that the vision of the South Park creators is more than fiction.

So sharing with a small group of people is good, but sharing with a lot of people is bad!! At least that is the message as I read it in the behavior of society with respect to internet organizations who facilitate mega-sharing.

Yet, in the past year, I read nothing but good words about teachers, institutions and foundations who facilitate the free mass sharing of knowledge and education. Of course there are discussions on the motives and the pedagogical models, c- versus x-, definitions of free, gratis versus available and so on. Yet there is a consensus to the fact that free education perhaps not will change higher education, but at least will raise the quality with decreasing costs. The newest hype being Moocs because massive is good adn efficient. So in education Sharing is good, Big Sharing is better!

Why does society feels that big sharing in some ways is bad, whereas it is desirable in other situations? Could it be that developing (good) education does not require investments; perhaps the fact that Moocs build on existing courses and that the ‘putting online’ does require such small sums that these small sums disappear in the larger budgets of universities? Yet 55 % of the Mooc-teaching professors indicate that these activities significantly competes with other activities.

Another explanation can be that the suppliers of the Moocs are different from the owners of education; as I described elsewhere the motives of individuals to participate in OER can be different from those of the institutions involved. So a professor can offer a Mooc because he thinks that his materials are not worth anything elsewhere, or for reputational reasons; organizations often participate because of the additional subsidies, marketing reasons or as part of their corporate governance.

Partly this is recognizable, offering a successful Mooc is good for your professional reputation. Yet, most Moocs contain specially for the Mooc developed materials, no rerun of old presentations and recorded colleges. The participating institutions put a lot of effort in the presentation of the Moocs, not only because of marketing reasons. There are a lot of ideas of potential future business models including providing additional services, selling programs for in company trainings and selling the information about the Mooc-participants. So, the Mooc institutions resemble modern day pop groups who offer (part of) their songs for free at the internet because they decided that their earning potentials are in other areas as life performances or fan goods.

http://www.economist.com/node/21552574In the same sense, publications in the form of double blind peer reviewed articles, published in closed journals are seen as of a greater academic value than blogs, columns or contributions to free journals. Also, in this sense free is a disqualification, synonym to bad quality. Perhaps scientific publications have to undergo a disruptive shock, just like education.

Moocs, social contracts and flipping classrooms: E-Learning in 2012

In 2012 the youngest branch from the online distance learning family (ODL) generated much attention. Moocs distinguish themselves from open educational resources in several ways. Moocs are full courses aimed at learners, whereas resources are often reusable parts, aimed at teachers. Openness ranges from free to participate to free to use. It is their business model, that makes them interesting. Most (M)oocs are regular courses, for which development is paid for by normal university funds.

They are recorded in some way and delivered free through some kind of collaborative platform. Some platforms discuss generating  additional incomes by licensing other institutions to offer degrees based on the courses or integrating the courses in in-company training programs. Of course there are also critiques on Moocs, ranging from McDonalisation to instructor led. Willem van Valkenburg just recently wrote: “As you can see is that most of the platforms are created by a US for-profit company. So I encourage initiative from outside the US, especially the ones that are really open”. In October 2012, U

Another of the latest trends is flipping the classroom: transferring your courses in distance learning, using the class room time for interaction instead of lecturing. Wilfred Rubens has written a number of blogs on this subject, listing among others the warning that wrong choices with respect to the distance learning can result in less educational results. During the Dutch Education Days he organized a session where he did not give a presentation. The participants had to prepare themselves beforehand, using the information sources and tasks that Rubens had published on his website. The session was completely dedicated to interaction. Next step, following the Guardian, is the flipped academy.nX has started in Spain and the British Open University announced to start their own Mooc platform some days ago. However, why van Valkenburg asks for new initiatives and if the new platforms will be different from the American platforms is not clear.

Quote 1: “Alex Bruton, associate professor in innovation and entrepreneurship at Mount Royal University in Canada, thinks so. The ‘flipped academic’, as he sees it, is an academic who informs first and publishes later, seeking usefulness as well as truth in their research and striving to publish only after having had an impact on students and society”.

Quote 2: “An academic’s success should not be measured by the number of research papers they produce, but in how they communicate their work to a wider audience, suggests Sarah Hewitt, assistant professor in the department of biology at Mount Royal University”.

This concept combines the Open Access approach with the critique on managerialism in university (Christine Teelken, see my last blog). However, working at the Open University of the Netherlands, we already flipped the classes over the last 15 year. Comparing two situations, I find that a lot of the success depends on the attitude of the students.

For a strategy course, we organize meetings with our regular students and with people only taking the strategy course as a special subject. The regular students are used to distance learning, come prepared to the meeting and most of them are interested in discussing their companies strategic decisions using the distance materials.

Although the “commercial” groups differ, a lot of the time the learners just want to pass the exam, wanting a summary of the materials. In such cases, it is hard to motivate the students and the tutor to get into a group discussion.

Lastly, following several authors, the social contract is broken because of the financial crisis. At least what they mean is that implicit relationship that more education increases your chance of more interesting work or a higher income does not exist anymore. However, the social contact as described by Rousseau, Locke, Grotius and others can be best be illustrated by the story of the stag hunt. Hunters have the choice to cooperate and hunt a stag, feeding the tribe, or individually hunt a hare, feeding their selves and their family.

In terms of the political economy, hare hunting represents capitalism, stating that my hare is bigger than yours; without ever hunting a stag. State communism is stag hunting, with the leader taking home the stag, leaving the tribe hungry. Question is if there is a third way?

In economics, the third way is represented by the Keynesian approach. Simply said, Keynes’ theory states that in good times a government has to save, so it can run a deficit in bad times. Tinbergen added to this that the best way to spend your money is to use one instrument to achieve one goal (first best solution). Theil amended this view in the way that the government often has less instruments than goals, so choices have to be made and not every solution is optimal (second best solution). In political sciences, it is accepted that, as Churchill said: “Democracy is the worst form of government, except for all those other forms that have been tried from time to time.” (from a House of Commons speech on Nov. 11, 1947)

The social contract as an alternative for cold capitalism or dictatorial state communism, can be described as Social Democracy; combining Theil-Keynesian economic policy with the imperfect participation of one-man-one-vote (not excluding women of course). Especially for a good functioning of social democracy, it is important that people understand the choices made. Not every target can be fully realized, there has to be a tradeoff between objectives; both in economic and in social politics. This understanding demands a good educational system; participation and social cohesion depend on understanding.

In this sense, I think education is a stag. Society is responsible for the functioning of the educational system as a whole. Business models and management theories have an important function within the sector: efficiency is important especially in a time where money is scarce.

Especially in ODL, Moocs or OER, competition will lead to reproduction of similar courses. Perhaps some courses will be better; nicer or cheaper, so in time these courses will drive out the other courses. But in the meantime resources will be wasted which will damage both the reputation and the level of education whereas cooperation and coordination could increase the efficiency and by that the level of education, the availability of good materials and give teachers over the world instruments to improve their courses sharing the resources.

I am curious which of the developments will prevail; will the introduction of Moocs lead to (international) competition or to a more open educational environment? Will we be able to flip academia? Or will the new rules of Open Access lead to more inequality between those who can pay and those who can not?

Lastly, will the economic crisis lead to a political crisis; breaking up the social contract or will people and governments work together to reinvent the third way of social democracy, accepting the imperfect workings and Theil’s second best solutions.

Till next year

Opening up: Open Innovation in a closed market?

When Paul Prinsloo asked me if Chesbrough’s funnel could be open on both sides, the economist in me cried NoNoNo!

This initial reaction is caused by schooling in traditional economic thinking. The concise version of this reasoning is as follows. Firms have to invest funds in research and development. Only 20% of the projects started will survive towards the stage of commercialization, where another part will be lost in the implementation stage. This means that, once the final product or service is on the market, the profits have to be large enough to compensate the firm for all initial investments, including failures and restarts. To generate profits of this size, the firm has to have some kind of monopoly power for a given period. This can be guaranteed through some specific competences, materials but mostly through property rights and patents.

The theory tells us that in a world without protection, the firm which makes the initial costs will not earn enough before its competitors enter the market with imitations or even improvement on the initial innovation. Innovative firms will go bankrupt, so there will be too little or even no innovation in this world.

Open innovation still depends on property rights, but it changes the situation in the sense that inventions, patents and innovations are bought and sold. Firms search externally for usable patents and supply their inventions and patents to the market if they deviate to much of the existing business model. Chesbrough assumes that through this mechanism costs will decrease and efficiency will increase as more research is used in innovations and failures will only influence the innovating firm (how these costs are influence the collective wealth is unclear in his model).

So open innovation is about increasing cooperation, but within a market setting. However, cooperation will lead to shared experiences and this can result in shared values, creating more business opportunities.

Collaboration is also necessary because on the output side of the model things are changing. Firstly, there is the influence of ict. For a lot of business, their main function was to select and stock products, produced by others. For example publishers (both of music and books), who selected the writers and bands of good quality, took care of the distribution of their work and made a living by selling these products. In essence, this is the same for super markets, which decide which goods to offer to the consumers, choosing from a large range of alternatives.

 

However, as Chris Anderson described in The Long Tail, in a web based society producers can place their products on websites, whether self published books, music or specialized goods which were normally not chosen by large risk adverse companies. Although some authors, composers, bands and small producers will act purely on their own, others search for collaboration to share sales channels; using each other traffic on the website to generate trade for themselves, see for example the Strange New Products website or Weird Music.Web.

Secondly, the tendency towards co-creation. Accepting the fact that value is created in the use of products, not in the sales transaction, the buyer plays a major role in realizing the full value of a product or a service. To give a consumer the freedom, to adapt the product or service to his or her own wishes, collaboration with other firms is almost unavoidable.

Taking those two tendencies together, the market side of firms is opening up, requiring the input side to open up. Open innovation makes co-creation and specialization possible, but market developments in their turn push collaboration (and by that open innovation): opening up one side of the process will cause the other side to open up too.

Berkeleyan, Hulda Nelson imageOpenness means different things in different fields. Open in the sense of open source means free. Open access in the sense of the British government means that the producer (author) pays for the deliverance of his product, open in open education can mean without start qualifications or gratis. Open innovation means that the research outputs are shared over the borders of the firm, caused by or stimulating co-creation on the output side of the firm; increasing access to knowledge and innovation without fundamentally changing property rights.

Another difference is that –despite the fact that all behaviour is free- the openness in innovation and co-creation is enforced by the market forces, whereas openness in software and education mostly is voluntary. Perhaps a nice subject for another blog?

Is strategy back?

You may not be interested in strategy, but strategy is interested in you.

Attributed to Leon Trotsky

Strategy in real life has never been far away, however in academics it seemed to be a period in time that strategic thinking was out of fashion. Or as a former dean of our faculty said: Strategy is about everything, so it has to say something about everything. Strategy became an adjective, in the sense of strategic human resources, strategic management or strategic operational decision-making. Since the introduction of the business model, the business canvas and open innovation, strategy has again become a serious topic. Comparing the different approaches in strategy, you can see a common point. All modern approaches put the customer central, moving to a more service oriented theory of the customer (the so-called Service Dominant Logic). On the input side of the business model, there is a certain distinction between approaches. For example, the Osterwalder canvas lists cooperation as one of the fields of importance in determining your business model; the Prahalad approach and Open Innovation of Chesbrough and van Haverbeke are even more explicit in setting cooperation as one of the essential competences to develop unique competitive advantages. As Prahalad put it in “The Age of Innovation”, it is not ownership of resources, but access to resources even if they are owned by other firms.

In another context I have shown that this is the reason why open innovation is counted as part of the so-called Open Movement. The Open Movement consists of Open Source, the development and implementation of free software by a massive group of volunteers; Open Access, the movement against expensive publishers and for opening up all kind of resources; Open Education, a mix of different kind of educational resources for teachers and learners, total free courses and programs provided by volunteers but also by top universities and Open Innovation, the realization that collaboration of firms is necessary if innovation has to be successful in the present complex world. These initiatives range from a completely free towards a copyright protected exchange of ideas. As Open Business Models are a part of the Open Movement, the success of open activities requires new business models. For example, it is now possible to use your computer with a free Linux Operating System, using FreeOffice, (replacing Microsoft Office) and other kinds of free software, including web development software as Moodle. This calls for new business models on the part of commercial software: what are the features people are prepared to pay money for, as there is a free alternative? Open Access caused a major discussion between the UK government, academics and the publishers. .The UK government has taken the decision that work, paid for by the British taxpayer will be free available online for universities, companies and individuals, to use for any purpose, wherever they are in the world (The Guardian, 15 July 2012 ). To make this possible, the government changes the business model of scientific publishers from being paid by the subscribers of their journals to making the authors pay an ‘Article Processing Charge’ (APC) around £2,000 per article. This APC is financed by the research funds of universities and research institutions (the so-called Golden approach, commission Finch; contrasting the Green approach). Open Access will change the business models in publishing, but possible also in other artistic business as movies, music ect. Open Education is about individuals and organizations offering different kinds of education and educational resources. Sometimes for free, sometimes for a small fee. New technological developments allow a larger access, a broader participation in education. Partly this will make good education available in places where it was not available before, Secondly; it sets the standard for other teachers as students can compare the free course with the courses at their university. However, it can also influence the business model of traditional and distance teaching universities. What do these institutions offer to make up for the fees as compared to the free courses? Of course, Open Innovation is less about getting things for free but more about the must to cooperate, opening up a traditional very closed activity. Surely, research and development departments were heavily guarded places, whereas now, openness and interaction are propagated in by the open innovation and open business model approaches, Yet, there are still approaches which stress the importance of the closed enterprise. For example the blue ocean – red ocean approach of Kim and Mauborgne assumes that the firm has to move towards a position of relative loneliness, to survive. In these approaches strategic decisions have to do with the distinction between the firm and its competitors. If the resources you use are available for everyone, there is no distinguishing competitive advantage!

The more co-creation and non-price factors determine the competitive position of an organization, the more important collaboration with other firms. The more price competition determines the success and survival of the organization, the more important specific individual competences become. Strategy is about recognizing your own position in relation with the outside world, the industrial relationships, the customers, competitors and others. Copying the behavior of others will not lead to an unique position, collaboration can result in a competitive advantage when combined with special internal competences. The same applies for the motto attributed to Leon Trotsky at the beginning of this blog. Searching the internet, this quote can be found at hundreds of websites. However, at the more serious websites pointing towards publications in which the quotes can be found, this quote is not found; the only quote looking like it is: “You may not be interested in the dialectic, but the dialectic is interested in you”.

Copying the “free content” provided at many websites might not always be the best policy to get the best results 😎