INTRODUCTION
As the global economy has developed over the last 20 years, the US and worldwide economies are shifting from an industrial and services model to knowledge and innovation as the driving force for economic growth. As a result, the demand for a highly skilled workforce is continually growing. Yet at the same time, there is widespread recognition that not enough skilled labor exists in the workforce of today or tomorrow. Higher education is now a rapidly changing marketplace as it is strongly impacted by major demographic, economic, technology and competitive forces. Like any good business, higher education organizations must develop winning business designs and market strategies in order to fulfill their mission to develop a skilled workforce.
The higher education market is segmented and described as follows:
| Market Segment |
US Size(1) |
Business Model |
Key Segment Trends |
| Traditional (18-24 years old) |
10.8m full time annual enrollment growing 4% by 2016 |
Most are publicly funded. 2 year to graduate. High capital expenditures for dorms, classrooms.
High fixed cost structure (full time faculty), constrained by physical space. Endowments to support cost structure. |
56% with online programs. |
| Adult Working (24+ years old) |
6.8 m enrolled growing 30% by 2016 |
For-profit and not-for-profit. Degree completion to graduate.
High curriculum, systems development cost, but highly leveragable with student growth. High variable teaching cost. |
44% adult participation rate in 2005 |
| Career Colleges |
61m with High School but no college. |
Certificate to 2 year degree. Low to moderate capital expenditure. 50% lower relative tuition. High variable teaching cost.
Training for in-demand professions, trades. |
39% adult participation rate (up from 31% in 1995). |
| High School (9-12) |
16.4 m enrolled |
Mostly public funding. Charter (1.2m), home schools (1.5 m), and private schools (1.3m). |
9% drop-out rate. Growing use of online
for accelerated pace of learning, home school. |
(1) Source: National Center for Education Statistics
There are 5 key principles, applicable to each market segment that will produce a winning business strategy in higher education. Specific strategies by an organization will differ based on history, current core capabilities, etc. But the following principles apply to achieve sustainable strategic health.
ACADEMIC QUALITY
Jack Welch said "An organization's ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage."
Quality in any business is simply a must in today's economy. It is the "jacks or better play." Whether it is a consumer good or an education, there are significantly more choices for people to consider when buying. More importantly, academic quality is primarily what the student really expects. Too little quality means there is little real lasting value to education and the student enters the workforce potentially at a disadvantage. Based on the author's personal survey of "what do employers want in employees?" the following characteristics suggest a starting point for developing high education quality:
For employees to be creative, imaginative and (yes) think outside the box
Humility and confidence
Excellent communication and presentation skills
Knowledgeable of a specific academic discipline, plus the employer's product or service
High energy, an upbeat attitude and the willingness to take the initiative when needed
Problem solvers capable of seeing the big picture and identifying alternatives
A team player who can share the credit with the rest of the team
Ability to grow and develop personal skills
Have the ability to positively affect an employer and its change
Understands the world we live in, plus technology
Businesses want people with the ability to learn and think. Certainly this result is occurring in higher education today. Business leaders are saying, however, that an even higher level of academic quality is needed in order for them to compete. A university's perspective can be much broader than the 10 above characteristics. How does any organization go about improving quality (of a product or service)?
Measure, measure, measure
Learn
Continually improve
Set high standards
Allocate people's time to include research and development of learning
Higher education is unique. A quality product is highly dependent on human variables and variation - e.g., how a person is feeling that day to multiple styles of learning to significantly complex information to communicate.
Question: Can information technology be used to create mass customization with high quality (similar to businesses like Dell)?
MARKET STRATEGY
"Customers don't always know what they want. Most of the coffee people bought was stale and they weren't enjoying it. Once they tasted ours and experienced a gathering place between home and work where they were treated with respect, they found we were filling a need they didn't know they had." Howard Schultz (Starbucks).
Successful businesses are continually developing their marketing strategies for profitable revenue growth, which for higher education, provides a critical source of cash for reinvestment into the institution. Effectiveness of marketing strategies gradually deteriorates over time as student populations' change (see Innovation), competitors improve their methods, and new techniques to reach a target audience are developed. Starbucks communicated its message partly by adding locations. In higher education, it is necessary to deliver the message directly to the target audience. New methods utilized in business and increasingly in higher education include:
Database Marketing: more targeted segmentation and messaging by developing customer and prospect marketing databases through Customer Relationship Management (CRM) systems and email campaigns.
Virtual Events: webinars are increasingly a more standard part of marketing. Most organizations, however, have not really committed to virtual events that integrate a variety of rich media formats. It is naturally difficult for all prospective students to visit a campus. Therefore, more use of rich media can provide low-cost visibility to "visit a campus" and learn about its programs.
Social Media for B2C Marketing: The use of social media has become a more prevalent part of B2C marketing strategies. Social media syndicates content, it makes an organization more searchable, able to learn more about prospective students, and helps prospects learn more about the organization.
Content Marketing to Differentiate: 21st century marketing is more and more about content publishing. Create content that prospective students identify as valuable (e.g., "how to adjust and fit in at college"). Syndicate that content to support thought leadership, brand awareness, and inquiry generation; updated to keep SEO high.
 Brand building is essential for higher education to communicate and deliver on its core promises. How can an organization build its brand? Identify, communicate and deliver on its core values that...
Define the essence of the company
Are the simple, believable, unassailable truths about the organization
Are adhered to in the face of adversity
Are principles people are passionate about
The best example of branding is the United States - life, liberty and the pursuit of happiness.
Historically, the price for higher education (tuition) has increased faster than inflation and wages, creating greater affordability challenges for prospective students.
Question: How likely is this price strategy to continue working over the long term, or will a new price strategy be needed to attract the target audience at the same or higher levels?
FISCAL VIABILITY
A healthy business is focused on developing and maintaining a strong financial vision as a whole, including positive cash flow generation as a source of capital. Warren Buffett makes three key points to accomplish a sound financial vision:
"Every day, in countless ways, the competitive position of each of our businesses grows either weaker or stronger. If we are delighting customers, eliminating unnecessary costs and improving our products and services, we gain strength." In other words, a sound financial vision begins with knowing customers, and then designing and implementing a strong business strategy.
Buffett manages the balance sheet as much if not more than the income statement. How? By weighing every decision for its impact on the balance sheet. Adding assets and liabilities by nature increases business risk. Why? To target an effective use of assets. A key question is - can the business (or an institution) repay debt if cash flows decrease below average?
There are fundamental questions used to evaluate any business which, as a result, form the basis for financial planning and goals. They are:
Is the business in an industry with good economics (not competing on price)?
Does the business have a brand name that commands loyalty?
Are revenues (and cash flows) increasing with healthy, consistent margins?
Is the debt-to-net assets ratio low or high?
Does the business have a high and consistent Return on Capital?
Does the business have a track record of retaining its Change in Net Assets (or profit) for investment in good opportunities?
Does the business have high maintenance cost of operations? High capital expenditure?
Is the organization able to adjust prices for inflation?
Profit is more than a return to stockholders. Profit forces an organization to be disciplined and effective in its use of money.
Question: Does a for-profit school have an advantage over a not-for-profit school because its incentive includes the need for cost effectiveness? Does a not-for-profit have an advantage because a targeted budget surplus is likely to be less than a for-profit's profit goal?
INNOVATION
"Innovation distinguishes between a leader and a follower. Innovation has nothing to do with how many R&D dollars you have... It's about the people you have, how they're led, and how much you get it." Steve Jobs (Apple)
Increasingly, innovation is a requirement for a business to compete successfully in its market. Without innovation, institutions of higher education will not be able to fully meet the needs of students or compete against for-profit institutions that have the ability to generate higher levels of cash flow and capital. Like in business, some organizations are very innovative, unfortunately most are not.
What stimulates innovation? How we think. Peter Drucker says to analyze 7 potential sources of innovation:
Unexpected outcome - simply discover what you can learn from failure
Incongruities - examine the differences between your assumptions and reality
Process needs - look to apply an existing process solution in another area to a different type of problem
Industry and market changes - industries shift in how they conduct business, be on the look-out for new, emerging trends.
Demographic changes - a highly reliable predictor, but one that is often overlooked. Study long term trends.
Changes in perception - is the glass half full or half empty? Discover new understanding by looking at things from multiple perspectives.
New knowledge - the typical view for sources of innovation, but usually take a very long time to develop.
 "Online learning is transforming teaching, providing new instructional delivery models, and expanding access to education. Effective online instructional practices are increasingly supported by a growing evidence base that shows how various programs, courses, and instructional models can improve learning, increase student engagement, and catalyze innovation in education." Journal of Online Education, Volume 4 Issue 3, February/March 2008.
Increasingly there are new tools being developed to enhance the learning process. The goal for each higher education institution is to incorporate the technology based on its own learning and experience. The challenge, however, is to create the culture and expectation for faculty to create courses with new technologies through trial, research, failure and relearning. Below is a summary of tools (Journal for Online Education).
Innovation requires a real commitment, but not necessarily of significant dollars. It is a mind-set, an attitude, a culture.
Question: What style or characteristics are needed from leadership to create an innovative culture?
CULTURE AND PEOPLE
What is culture and why is it important?
The dictionary defines culture as the "predominate attitudes and behavior that characterize the functioning of a group or organization. It is the intellectual and behavioral activity, and the works produced by it, created from the collective experience, training or education of people belonging to the group." The culture of an organization is a major determinant of the success or failure of an organization. Culture can be a deliberate design, or it can evolve over time based on the random or politically-driven results as people come and go in organizations. It is a function of the attitudes, beliefs and ability of the leadership. It requires a lot of time and effort on the part of the leaders.
If an organization has a reputation for excellent customer service and high quality products, it is the result of how effective the leadership has been at designing a positive organizational environment, at attracting talented people dedicated to accomplishing the mission, and doing so in a coordinated process. A positive culture can be destroyed by arrogance, selfishness, closed mindedness, or top-down management.
Listen to what Lou Gerstner, who turned around IBM from the brink of bankruptcy in the 1990's, has to say about organizational culture:
"I have spent more than twenty-five years as a senior executive of three different corporations. Until I came to IBM, I probably would have told you that culture was just one among several important elements in any organization - along with vision, strategy, marketing, financials and the like...I came to see, in my time at IBM, that culture isn't just one aspect of the game - it is the game. In the end, an organization is nothing more than the collective capacity of its people to create value.
Most companies say their cultures are about the same things - customer service, excellence, teamwork, shareholder value and integrity. But, of course, these kinds of values don't necessarily translate into the same kind of behavior in all companies - how people actually go about their work, how they interact with one another, what motivates them. That's because most of the really important rules aren't written down anywhere." (Excerpt taken from Gerstner's book titled "Who Says Elephants Can't Dance?")
Google's Culture
Google's cultural design is an example to learn and consider in developing a leadership style. After all, it is apparently working. First, who are the leaders and what do they do? Google says...
Co-founders Larry Page, President of Products, and Sergey Brin, President of Technology, brought Google to life in September 1998. Larry Page grew the company to more than 200 employees and profitability. Sergey Brin received a degree in mathematics and computer science. It was at Stanford where he met Larry and worked on the project that became Google. Page and Brin recruited Eric Schmidt who has focused on building the infrastructure needed to maintain Google's rapid growth.
To build a successful culture requires that organizations decide what relationship they will have with customers and employees, and the work environment they will provide. Google says (my underline for emphasis)...
"Google is not a conventional company, and we don't intend to become one. True, we share attributes with the world's most successful organizations - a focus on innovation and smart business practices comes to mind - but even as we continue to grow, we're committed to retaining a small-company feel. At Google, we know that every employee has something important to say, and that every employee is integral to our success.
Google has offices around the globe, but regardless of where we are, we nurture an invigorating, positive environment by hiring talented, local people who share our commitment to creating search perfection and want to have a great time doing it. Googlers thrive in small , focused teams and high-energy environments, believe in the ability of technology to change the world, and are as passionate about their lives as they are about their work."
Leadership Styles and Organizational Culture
To create a positive, change oriented, innovative culture, try the following.
The innovation process is confusing, difficult and inefficient. Motivate people by making it safe to fail. The goal is to experiment, fail early, and learn throughout the process.
Thanks and appreciation will continue to engage and motivate people. Ask questions about their work and provide sincere recognition. Provide people instant access to take the person and their work seriously.
Innovation occurs when people come together to solve a problem. Obtain ideas from many people throughout internal and external organizations. Do not suppress people's identity in the process. Don't have favorite people in the organization (all are valuable).
Remove barriers, bureaucracy and obstacles. Set aggressive targets and do good work.
When there are issues or things that need to be worked out, straightforward dialogue is most important out of respect for people and their abilities. They have a right to know and often have the solutions to the issues (technical and business).
Develop employees' expertise - technical, business and intellectual knowledge. Allocate time and resources to let people develop skills (then they will know that what they do matters).
Communicate customers' needs/wants to everyone, as well as the market and business conditions. Expand the reach of employees as much as possible to participate with customers. Ask the toughest customers about your company's products and how to make them better.
Express clear messages regarding situations and people, but do so kindly. Be transparent, nothing to hide, boil things down to the critical point.
Hire people that can replace their boss (including one's self). If someone is not performing, then it is necessary to first give them understanding and a chance to succeed. If it still does not work out, then provide them a graceful means to exit an organization.
Have a bias for action and healthy relationships.
Question: Can people - leaders - change their beliefs and behaviors to meet the needs of changing markets and organizations?
About the Author
Mr. Alan K Rudi is a results-oriented, technology-savvy global business executive with a history of driving double-digit growth and turning around underperforming information services and higher education organizations. His broad leadership experience includes roles as a Chief Marketing Officer, a Chief Financial Officer, and a Chief Operating Officer. He thrives on the challenge of building successful businesses where he can bring to bear operational leadership abilities and strategic business development expertise.
In senior line management positions over the last fifteen years, Alan has brought his industry expertise, strategic skills and talent for defining and executing growth plans to organizations that provide sophisticated database, online, analytical, and knowledge-based services.
Alan graduated with a Bachelor of Science degree in Finance and Accounting from Northern Arizona University; an MBA in Strategy and Marketing from Oregon State University; and a Masters of Science in Technology Management from Pepperdine University.
Contact Information:
Alan K Rudi
208 S Leandro
Anaheim, CA 92807, USA
Mobile: +1 714-743-8344
Email: alanrudi@sbcglobal.net
Note: You are welcome to copy and distribute this special report as often as you wish; I only request that you please include the author's information page when doing so. Thank you.
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