Do We Have a Working Knowledge of Our Business Model?*

While judging the resiliency of an institution’s governance structure to deal with economic and political dislocation is a prerequisite in today’s higher education climate, comprehending the properties of its business model and how it may need to evolve in the face of changing market conditions is essential to not only leading an institution, but also managing successful institutional transformation when that is required.

Eric Denna’s review article, “The Business Model of Higher Education,” in EDUCAUSE (March 24, 2014), offers a methodology to undertake such an analysis by proposing a series of questions that governing boards and presidents need to be asking themselves, in consultation with other administrative leadership, related to understanding “where the institution is today, but more importantly where it is headed.”¹ The questions Denna poses very much align with the Baldridge Excellence Framework for educational institutions–that is, a focus on an organizational assessment of leadership, strategy, customers, measurements, analysis and knowledge management, workforce, operations, and results.² In both cases the answers to the questions (provided by board members, the CEO, and cabinet members) seek to empower the institution with the ability to achieve its long-term goals, improve its operating results, and become more market competitive through a reimagining of the institutional business model.

Analysis—Where the Institution Is Today and Where It Is Headed

1. Who do we serve and what are they trying to do versus Who should we serve and what are they trying to do? (Who are our students?)

2. How do we help those we intend to serve do what they are trying to do versus How should we help those we intend to serve do what they are trying to do? (What is our value proposition?)

3. How do we deliver our services to those we are trying to serve versus How should we deliver our services to those we are trying to serve? (What channels do we use to access students?)

4. What is the nature of the relationship we have with those we serve versus What should be the nature of the relationship with those we serve? (What is our relationship with our students?)

5. How do these prior components translate into revenues for our institution versus How should these prior components translate into revenues for our institution? (Where do revenues come from?)

6. What are the key activities that create the services we provide versus What should be the key activities that create the services we provide? (What are our key program offerings?)

7. What are the key resources we need to create the services we provide versus What should be the key resources we need to create the services we provide? (What are our key resources?)

8. Who are the key partners that help us create the services we provide to those we serve versus Who should be the key partners that help us create the services we provide to those we serve? (Who do we partner with?)

9. How do the key partners, resources, and activities translate into our institution’s cost model versus How should the key partners, resources, and activities translate into our institution’s cost model? (What is our cost structure?)

Eric Denna, VIEWPOINTS: “The Business Model of Higher Education,” EDUCAUSE (March/April 2014).

For Denna these conversations are important not only to define how an institution’s business model may be evolving in response to changing market dynamics, but also, to help facilitate finding a viable path forward when staying the course may no longer be a realistic option. Understanding who their students are, where they are from, what their educational goals and objectives are, how they learn, and how the answers to these questions affect an institution’s value proposition and revenue base, are all essential to protecting an institution’s long-term sustainability.

By engaging the broader institution in seeking to answer these questions, leadership in a very transparent way can begin to accurately define if and how the underpinnings of the institution’s business model are changing—that is, leading the institution in a new direction. Leadership can assess whether the changes taking place align with the institution’s core mission and purpose or represent a significant divergence. It is also possible, with this information, for leadership to succinctly explain how any new programs, proposed lines of business, or alternative business strategies supporting the long-term sustainability of the institution’s business model are compatible with its stated mission and purpose.³

Yet the most important benefit for leadership may be the ability to instill stakeholder confidence through transparency and by demonstrating that the institution has the capacity and tools required to implement the changes deemed necessary to meet the immediate set of challenges. Trust can be won by engaging in an inclusive process. Without this level of understanding and confidence, uncertainty exists, and the required trust to draft a plan to effect change becomes that much harder to earn.

*This blog post is adapted from Association of Governing Boards of Universities and Colleges, Baker Tilly, the Council of Independent Colleges, and the National Association of College and University Business Officers, Collaborative Leadership for Higher Education Business Model Vitality: Strategic Conversations for Small College and University Governing Boards and Administrative Leaders, Washington, D.C.: AGB, 2023, 14-16, with special thanks to Stephen T. Golding, AGB subject matter specialist.

Notes