Turning Higher Education into a High Tech Business
In Sean Silverthorne’s July 17, 2006 HBS Working Knowledge article (http://hbswk.hbs.edu/item/5445.html), David Yoffie suggests four distinct features of High Tech companies:
Why tech businesses are different
In fact, says Yoffie, technology company managers must deal with a number of factors that many other industry executives don’t, including:
- The tech company’s most valuable assets in the form of human capital walk out the door every day.
- Tech companies largely rely on components from other vendors, meaning that complementary assets must be managed adroitly. Case in point, the relationship between Microsoft and Intel.
- Tech companies contend with high, upfront fixed costs and low marginal costs.
- They deal with the effect of standards in locking in customers and raising switching costs.
Knowledge Workers
The first factor in High Tech is quite similar in Higher Education. Without the human capital, aka knowledge workers, all economic and value-generating activity would cease. Teaching and Research being the prime products and services delivered, all rely heavily on an educated and trained (and productive) workforce.
Switching Costs
The fourth factor (switching costs) also holds to some degree. It is difficult (and costly) to transfer between universities. Not only is the process Byzantine and time-consuming, but there is a distinct threat of “losing credits” which equates into both lost time and money. In sum, enormous switching costs are built into the system. However, they are being hammered on by irate customers. At UH Manoa, the issue of “articulation” is a constant complaint of the students, and the implementation of the multi-campus course management system made articulation decisions come to the forefront.
To keep it real in this post, it is common knowledge that decreasing switching costs was a part of the strategy of a former UH President in order to “raise” the visibility of community colleges by “naming” them campuses in the University of Hawaii System (which turns out to be a no-no according to the accreditation folks). I believe this is still a predominant belief down at Bachman Hall, home of the “System.” In any case, articulation in the system is becoming more viable, though across systems it continues to be, um, freakin’ ridiculous.
Vendor Relationships
While Higher Education does rely on other vendors, behavior at the level of the organization is more commonly like that of a vertically integrated industry. This is one of the most confusing and distressing issues at my current university. Everything “must” be done in-house, at enormous expense, and at a detrimental cost of quality, flexibility, even functionality. Cases in point (though many of these are operational, not necessarily strategic):
- Instead of outsourcing the printing of the Ka Leo student newspaper (at around 1/2 or less the $340,000/yr it costs to print it inhouse, and with higher quality and full color), printing is kept inhouse until the inevitable press failure in the next year or so.
- Instead of outsourcing the email system for *free* to Microsoft or Google, as many other universities are doing, inhouse upgrades to the hard drive space moved storage capacity from 20mb to 200mb (while Google offers well over 2,000mb, yet another order of magnitude).
- Instead of outsourcing the building maintenance and management of the Campus Center and Hemenway Student Union buildings, these are managed inhouse, and not by the rest of the University facilities staff, but by a separate group, all unionized career employees.
- Instead of outsourcing the payroll system, the university relies upon the archaic state payroll system. The main rationale is that the state payroll system is “free”, but everyone knows that the costs are enormous in terms of complexity, additional inhouse administrative costs, lack of flexibility, pay delay, and massive employee frustration.
- Instead of outsourcing the bookstore to B&N or Borders, or the construction of an internal market system which would allow bookstores to bid on book orders, an internal unit of the Administration runs the system, inside of a building bought and paid for by student fees. Hmm.
- Instead of outsourcing the various departmental, college, and research unit websites, the (largely absent) content management systems and (heaven forfend) a possible Intranet, much less server hosting and network storage, enormous opportunity is lost and cost incurred because of a dearth of Internet-based self-service information and interaction.
Up Front vs. Marginal Costs
This I believe is the crux of the matter. If this element were at all transformed, then everything else would fall into place. At the University, most of the cost of operations is in terms of faculty salaries, nearly all of which have zero flexibility (at least downward). At the same time, there is no incentive for faculty to become more productive or more importantly, more effective. Pay is essentially the same regardless of performance. But beyond bribing the faculty, there are few opportunities to take greater responsibility, to innovate in the classroom and in the research labs… Wait, what am I writing??? There are enormous opportunities… Hmm, guess I should go and do something… ;D
Related posts:
- Panel’s Report Urges Higher Education Shake-Up: NYTimes
- Distance Education and Virtual Worlds — Some Issues
- Intro to Statistics course costs vs. open source / creative commons / remix education
- Online education growth and opportunity
- Math Education Reform
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One Response to “Turning Higher Education into a High Tech Business”
Ah, I love these priceless nuggets left for myself from the past. Ok, well buddy, you are doing something now. That is doing some SEO, Internet marketing and Ecommerce in Chiang Mai, Thailand. Wasn’t yet imaginable back in January, 2007, was it?
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