Saturday, May 30, 2015

Higher Ed Innovation in India

A few days ago, I was completely bleak about the possibility of introducing Higher Education innovation in India. (See earlier post here) However, my key points were perhaps already cliched, and with the benefit of little more perspective, it is worthwhile to review this topic with a different start point - what shape can Higher Ed innovation in India take?

First, there is an enormous amount of corruption in Indian Higher Education sector, and it is growing with commercialisation. The students are justifiably sceptical about anything new or disruptive, and would rather put their faith on tried and tested, despite knowing that these public institutions are quaint and could not care less for them. 

Second, while the students know that the choices they have are all poor, the default reaction to this realisation is not to try something new or innovative, but to ensure that one does not do anything foolish. So, while Indian education seems ripe for new and disruptive propositions, education innovation remains difficult because of lack of venturesome consumption. (See here)

Third, the lack of venturesome consumption is perhaps also generally true for the Indian society (see my earlier post about innovation in India in general) and particularly, the view of Kishore Mahbubani that India is an Open Society with a Closed Mind. In a number of ways, this general approach defines India's ambivalence towards foreign universities, where the country behaves like a retired Prima Donna waiting to be wooed but can not find any suitors on her terms. Despite the generally poor standards of its Higher Education provision, India has not allowed any foreign university on its soil, primarily because it would upset the dynamic of Indian Higher Education.

Fourth, the dynamic of Higher Education in India, growing from colonial roots, is defined to be by and of the privileged class, for entry into privileged class. The government guards this structure as zealously as it can. In some way, the failure to democratise education was the biggest failure of the founders of Modern India, and there is no evidence they even thought about it. The policy thinking in India is always about how to keep the access to Higher Education straight and narrow, along with a quality control regime that is punitive rather than development centric. And, under the new Government, the policy regime is growing even more intrusive, not the other way around.

Fifth, when one-time Prime Ministerial Advisor, CNR Rao, a distinguished Chemist, observed that India has an examination system but no education system, he nailed it right. A system designed to maintain privileges, rather than develop the potential of its people, are usually examination-centric, and India is an extreme example. The most successful education businesses in India today, which are worth hundreds of millions of dollars and listed in Stock Markets, are all exam-prep businesses. So, businesses make money from education in India, but not through disruption. They do it by sustaining the system.

A system which is reaching its breaking point, that is. One of the problems of economic development is that while its gains may be extremely unequal, the aspirations are more difficult to limit. While India has a growing middle class (though its size, for all the exalted talk, remains puny, about 150 million, compared to China's 800 million), its zone of exclusion is much more severe and its culture more individualistic (than China's). Besides, Indias development model, which for the last 25 years, depended too much on Government action (liberalisation, infrastructure build-up etc), now needs to be balanced by wider global successes of private businesses. The few Back-office champions India had spawned earlier seems to be reaching the limits of their growth, primarily as they can not find enough people. If Infosys had to interview 1.2 million applicants to recruit their 10,000 new hires, that may get them mention in a business book, but it still remains a huge waste of time and effort. On an average, Indian companies report that only 15% of who they interview (which is a shortlist based on some fairly demanding criteria they set in the first place) can be recruited, and still they let go about 60% of the people they recruit within the first year.

So, this is how Indias education equation looks. About 15% of those who should go to college do so, about 50% of those finish college (7.5% of the relevant population), about 25% of these, in various technical disciplines, qualify for the interviews with these various large companies (2%), of which 15% gets selected (0.3%) and then 40% of them are retained (0.12%). At every step, indeed, I erred on the optimistic side, and yet, I am staring at 0.12% of the youth finding meaningful employment, jobs that come with a future, that is. Indeed, this figure should be supplemented by those who go to work for the government, but, leaving out the dead-end jobs, these will not vastly improve the percentages here. In summary, one can say that there is a very large number of people who are non-consumers, they have no access to meaningful Higher Education, and therefore, an opportunity for disruptive innovation, notwithstanding all the roadblocks listed above.

While this equation gets worse and worse every year, it has remained difficult to spawn meaningful innovation in Indian Higher Ed. There may two reasons for this.

First, many of these disruptive attempts come from outside India. While these attempts bring to the country a number of good ideas - and disruptive ones - they are inherently limited, because of cost structures and business design, to the limited number of privileged people who are already being well-served. At best, they could aspire to serve the 0.3%, the number of those who could get a job in the global companies [because they can afford first world cost structures and go to a premium private institutions and speak at least one international language] and work to improve upon the 40% retention rate. The big opportunity, however, lies upstream, particularly in expanding access to technical disciplines, college completion rates and indeed, access to Higher Ed. It remains unattractive for most education businesses coming from outside India to work on these problems. However, as one astute Indian investor observed, without working on these deeper issues, any business remains limited to the existing social context of Indian Higher Education, and is, therefore, more vulnerable to inherent conservatism of the traditional customers. It is only by working on these deeper problems, bringing access to those who do not have it and creating a meaningful Higher Ed experience, one could break the social model of Higher Education, and therefore, disrupt the sector. This remains beyond the business model of the global companies looking into India. [Also, the perils of being global is that all too soon, one starts assessing the market attractiveness, and leaves India because it is all too difficult].

Second, the Indian companies have very little incentive to disrupt the market. They are a victim of the demand curse, that India has so many other opportunities - why not work on one more test prep business - which are more attractive to investors. Besides, as one Senior Executive of Pearson Affordable Learning Fund observed, there is very little good quality entrepreneurship in education in India. Often, you will meet entrepreneurs who are trying to start two or three businesses at a time, simply because they do not know which one may win investor approval, leading to, predictably, failures in all of them. And, besides, it is still a Market for Lemons, where the unscrupulous thrive and drive out the scrupulous operators. 

So, there are demand-side reasons complementing supply-side reasons for lack of innovation in Higher Ed in India. It is difficult to see how privately backed businesses can break this deadlock, even if the global Higher Ed is at the cusp of a massive disruption. There is indeed a market opportunity, but it will require an unique local-global format (or glocal format, as Rahul Choudaha calls it) to really change anything in Indian Higher Ed.

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