Friday, August 22, 2014

Rethinking Education's Value Chain

Managing and optimising the value chain is the big thing in business strategy. Numerous innovations have taken place since businesses have started thinking about it, and such innovations revolutised the businesses. The biggest change with regard to this is perhaps how manufacturing companies moved away from production activities, and instead focused on the activities directly related to the customer experience. So, however nostalgic we may be about a team of Engineers hacking together a working personal computer out of someone's garage, Apple is the company it is by producing machines in Foxconn factories in China and by being in control of the customer experience through its design, development and retailing and channel operations. In short, the current paradigm is that the value resides with the customers.

As Higher Ed comes under financial pressure and told to be more business-like, the Education leaders have also started innovating with the education's value chain. They have drawn lessons from manufacturing companies, perhaps, and decided to outsource activities which were previously sacrosanct - the teaching itself. As if following the manufacturing playbook, large educational organisations started focusing more on brand, marketing and administration, and filled their classrooms with armies of adjunct tutors. This is indeed particularly true for private institutions and lower ranked public colleges, and popular among investors in education, which see the tutor salaries as the biggest cost for any education operation, and therefore seek to minimise it. Following this mantra, colleges today have become indistinguishable from the other offices, employing vast arrays of management staff but few tutors. When Quality Assurance Agency (QAA) started overseeing UK private colleges in 2012, their reports showed that they were somewhat surprised by how few tutors actually featured in the permanent payroll of these colleges. The adjunct model is indeed working very well.

Except that this takes the education business away in the opposite direction from where manufacturing companies wanted to go: Away from the customers (students). The value chain thinking in education is perhaps applied too literally, and dare I say this, with little thinking. If the value resides with the students, it is the interface with the students, the classroom, where the institutions should be focused on. But they are not. 

Indeed, one could argue that this is for a good reason. This is because often the money is coming from the governments, donors or loan providers, creating a vast bureaucratic overload. Besides, the education institutions are spending a huge amount of money, and employing a lot of staff, in one critical touchpoint with the students - in marketing. Seen from the priority assigned to various activities, it would seem that most education institutions today are vast marketing machines. 

This is perhaps a mistake. Unlike the product companies, where the customer and the payer is often the same, in education, it may be different. That someone is paying for it does not make value automatically migrate to that particular interface, if the benefits of that expenditure have to realised to the satisfaction of another person. God save the spa where I send my wife for a loving break and which decides to treat me as a customer because I am paying for it! On a more serious note, the government is funding the student for a reason, and so is the Student Loan Company: Treat the students less than par and the loans will remain unpaid. So, this conception of value creation that underlie the current operations, and organisational structure, of educational institutions seem to be out of sync with the concept of the value chain.

I shall claim that the this new managerial university model is one of the key reasons why education is becoming dysfunctional. Indeed, the education investors want more, not less of, a managerial university model: They are investing in companies which project scalable education models by 'adjunctifying' (if such a word could be invented) teaching. This is the only way they could find to liberate education from its 'cottage industry' thinking. But by doing that, they shift the organisations away from the customer experience (or redefine the meaning of customer experience, making students happy with better swimming pools or marketing package rather than good education) and more into a bureaucratic jungle. However, we can perhaps see that the smaller private colleges work better than big college chains (collapse of Corinthian Colleges in the US may just be the tip of the iceberg as far as the problems of big chains are concerned) and the relationships that underlie the operations of proprietary tuition homes in India somewhat work better in creating more student success than big industrialised private universities. While these are anecdotal observations - and indeed some serious discussions on the models of the managerial universities, both public and private, need to happen, rethinking the value chain of education and locating the activities that are critical to value creation may be a good start for an education entrepreneur.  

 

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