Making Sense of Business Models

December 15, 2014 by

Eric Denna

I’m on a steep, steep, steep learning curve as I dig into the innovations in higher education to become competency-based. Although I’m well-versed in the concept of competency education in K-12, the triple steepness is due to: a) higher education having different governance and policy context, b) much greater segmentation of customers, and c) a variety of funding sources. So everything I read takes me three times longer to understand in terms of context, segmentation, and funding.

Thus I’m always on the lookout for papers and articles that are sense-making – the ones that make me feel more informed rather than more confused at the end.

I’ve been snooping around to try to better understand the different business models that are going to lower costs or improve cost-effectiveness, one of the goals of competency education in higher education. Eric Denna’s The Business Model of Higher Education, published on EDUCAUSE Review, is just one of those articles where I felt a whole lot smarter by the end of it.

He cuts to the chase by providing nine components based on Business Model Generation:

  1. Customer Segments
  2. Value Propositions
  3. Customer Channels
  4. Customer Relationships
  5. Revenue Streams
  6. Key Activities
  7. Key Resources
  8. Key Partners
  9. Cost Structure

He then translates this into nine questions that can be phrased in the present tense. (Or, to position you for strategic planning, use a modal verb to restructure the questions with “should.” For example, who should we serve?  How should we help those we intend to serve?”)

  1. Who do we serve, and what are they trying to do?
  2. How do we help those we intend to serve do what they are trying to do?
  3. How do we deliver our services to those we are trying to serve?
  4. What is the nature of the relationship we have with those we serve?
  5. How do these prior components translate into revenue for our institution?
  6. What are the key activities that create the services we provide?
  7. What are the key resources we need to create the services we provide?
  8. Who are the key partners that help us create the services we provide to those we serve?
  9. How do the key partners, resources, and activities translate into our institution’s cost model?

He wraps up the article by giving us four hints about where institutions of higher education might think about generating new business models driven by information technology. He writes, “The digital revolution can be felt across a number of industries, from publishing to media to retail, with the following trends surfacing across the spectrum:

  1. Massive scale of adoption: YouTube, for example, claims a viewership of over one billion unique viewers and over six billion hours of video watched every month.
  2. Increased potential and demand for disaggregating or unbundling products: Newspapers have become disaggregated into individual articles available piecemeal online. These are often curated and aggregated by other online sites such as The Huffington Post or Drudge Report. Apple unbundled albums into 99-cent songs, and users re-aggregate individual songs into their own playlists.
  3. Blurring of boundaries: Traditional boundaries in various media and platforms are becoming less distinct, creating new opportunities and greater potential for collaboration. The availability of online video through YouTube, iTunes, Hulu, and other sources, for example, has blurred the boundaries between traditional television programming, cable, computers, and mobile phones. Telecommuting has the same effect on the division between offices and homes. Online retail has blurred the boundaries between brick-and-mortar stores such as Walmart, electronic commerce sites such as Amazon, and auction sites such as eBay.
  4. Affordability and access: The public conversation about the affordability of higher education and the impact of cost on access for all of those desiring to go to college is growing. There is also a growing conversation about the value of education that does not immediately result in jobs.”2

I feel quite grateful to Eric Denna, as his article has opened up a much deeper dialogue in all that I’m reading about competency education in higher education and in K-12. Blurring the boundaries? I immediately started thinking about my days when I worked in non-profits. Every Friday afternoon I dedicated two hours to learning about trends and innovations. Much of that time was spent on researching — what if I could have paid for a mini-course, a module that could have kept me on the cutting edge? Are we blurring the boundaries of higher education and on-going professional development in the workplace?

The one thing that is  very evident –higher education is going to have to be disciplined in both opening up doors to new ideas and challenging assumptions  to find business models that lower costs or improve cost-effectiveness.

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