Saturday, August 01, 2015

The Architecture of Disruption - University As User Network

Uber crossing $50 billion in private valuations, taking two years less than Facebook to get there, should focus minds on a new business model - that of User Networks! If it was unthinkable that an algorithm-led business can dramatically change things even in the most regulated industries and in most unlikely places (India is its second biggest market after US), this is fast becoming all the proof one ever needed. Whether this valuation will sustain (part of it may be due to the asset price inflation due to loose money), it is already a formidable business globally - and indeed, more than a fad! 

Entrepreneurs everywhere are already studying Uber and how it got there. This article, which I was introduced to recently at a meeting, makes some interesting points about billion-dollar companies. There are many salient points worth noting here, but for me, the most important aspect is perhaps the delayed monitization, and made up through strong product/market fit or creation of network effects. It is the latter which is of great interest to me, as I explore the business model of a new kind of university, which I call the University-as-User-Network.

I have been writing about this for a while (see these posts in 2009, 2010 and more recently) inspired mostly by Clayton Christensen's work. The traditional universities, so deeply wedded to a Value Chain model and under no great pressure to disrupt their business model themselves because of the regulatory protections, disregard such conversations altogether, usually painting this as a conspiracy of sorts to undermine their privileges. It is, however, important to note that the very source of legitimacy that the universities draw upon - graduate premiums - could become the source of their discomfiture, because of two reasons. One, if the universities are the source of value-add that makes graduate premium possible, one would ask why such publicly funded opportunity may not be available to wider population, indeed everyone. Two, and if such broadening of opportunity results in some people failing to earn the premium even after going to the university, and we start talking about inherent abilities, then there would be two follow-up questions. First, does the university add any value? Second, if the university value-add depends on prepared minds, and schools are really equipped to prepare these minds, should not more public money be directed at schools at the expense of the university?

There is significant private investment is still directed at creating universities, the traditional value-chain ones. However, these questions should inform the investors about their limits - and that, creation of employment, which is the source of graduate premium, is really a connecting activity. If I learned anything since transitioning into a Higher Education career from training and recruitment sectors, it is that the connection, greater understanding of the world of work, is far more important than the learning content in making a candidate employable (see my post on Unlocking the World of Work). And, for those who think this will trivialize the grand objectives of education, my claim is that doing so is most democratic, because the current system of education and then choicest internships, the way it is done now, is one of the sources of social inequity (see this post here, drawing on a Brookings Institute report). 

What brings all of this together then is a new kind of institution, which is based on the sole value proposition of connecting students to work by unlocking the world of work to them. The point is to build this model as an User Network, which allows the employers to participate with minimum of hassles and costs to disrupt their existing recruitment models - and indeed, for students, to create an alternate job search. This is where the modern education technology is useful, not as a tool to deliver content but to connect people and enable learning based on real experience. And, one can enable the Network Effect - one needs to enable the Network Effect - to create meaningful value proposition out of this model, even if by delaying monetization of the customers, just as Uber and other billion-dollar businesses have done.

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