Why Clay Christensen and Michael Porter Could Both be Wrong About the Future of Higher-Ed

The Real Higher-Ed Challenge
The Real Higher-Ed ChallengeThe Stand-Off:

The Stand Off:

There has been a lot of buzz around Harvard Business School starting their own version of MOOC, HBX, and the debates and arguments between two of the best minds in strategy in the world today – Clay Christensen & Michael Porter.

By creating HBX, Harvard finally decided to bet on Porter’s strategy, that the core business strategy of a firm should remain unchanged and every part of the business need to reinforce this core strategy.

There has been a lot of debate about who among the titans has got this right.

Both could be wrong

In my opinion, both of them could prove to have missed a beat here.

I believe so because, all the debate around the higher education challenge has been thought from the point-of-view of the university or the service provider and what is right for them.

In my opinion, we also should look at the entire challenge from the point-of-view of the customer (Student) and the end-consumer (businesses where these students will seek employment).

Student’s Point-of-View

If you look at the entire higher education challenge from the point-of-view of the students, you shall find that they core challenges are as below:

  • Higher education as structured today is skewed towards scarcity model.
  • This pushes the cost at some of these universities high, high enough to create a student debt of more than a trillion dollars worldwide. 
  • Despite all of this, higher education doesn’t guarantee a good job to every student.

Employers Point-of-View

Now, look at this same challenge from the perspective of the employers:

  • In order to get the best employees, they need to go to the best universities (which again is operational under the scarcity mindset). If they want students from the best schools join them, they need to compete with a lot of other employers and hence end up paying a high salary to a fresher.
  • Despite paying this high salary, they find that these students still need to be trained in order to get productive.
  • With the ever-changing business environment, they need to continuously train their employees.

University’s perspective:

Now, if you look at this from a University’s perspective, they bring in a lot of benefits to the students and employers apart from the course material:

  • Network of Alumni who can help current students get placed in businesses
  • Ability for students to connect with each other and create their own network
  • Good research opportunities
  • A good pool of resources, which can be invested for the future.

My solution to the Higher Education Challenge:

In my opinion, if i were a university and would want to remain relevant to the students and the employers, I would consider the following:

  • Adopt the Gym membership model for higher education.
  • Instead of a very high upfront fee, opt for a smaller monthly fee model (10, 15, 20 year contracts with fee increasing every month by x%)
  • After 1 year in school covering basics, allow them to go out and intern full time at businesses
  • Offer a life-long membership for them to come back and do one course every year. This will allow their students to continue to pursue their passions of the moment and stay relevant. You could use MOOC’s to offer these courses, wherever it makes sense.
  • Allow organizations to include the monthly membership fee to the university in the pay package of their employees or offer this as a benefit.

This model can address all the flaws that currently plague the higher education industry and in the mid to long term, will be financially much better returns for the university, as you are creating a stream of income that will grow exponentially every year.

Now the question is will the existing universities like Harvard be open to such an idea or will it take a lesser know University that faces extinction or bankruptcy try this out. My bet would be the university that faces bankruptcy would be more open to such a business model innovation.

I had written about this earlier in a blog post as well. You can find the older post here.

What’s Your Opinion

What do you think? If you or your son or daughter had an option to join a university like the one I am proposing, would you consider the offer? What else would need to be in place for you to be excited about the new kind of university?

Do share your thoughts and lets continue the discussion. This is a matter of significance for each and one of us as this will affect all of us when we or our children get to this situation.

I am looking forward to ideas, criticisms and thoughts on the idea proposed here.

Future of The NewsPaper Industry

Jeff Bezos has stirred up a lot of interest in the News Paper Industry by acquiringThe Washington Post” in his individual capacity. There are a lot of expectations now from him and Washington Post to define the future of this industry. If he succeeds to turn-around the loss making paper, that could pave the way for the other players in the industry to follow suit. If he fails to turn this around, people think that it could very well signal the end of an era.

As part of an experiment, I thought what would make me love my newspaper again and I came up with the following description of the newspaper of the future.

  • The newspaper is not more than 10 pages long.
  • It is personalized based on my preferences (which I can set-up online or through the app). I only receive the news that I want to know about (except for may be the first and last page).
  • It is in color, has a lot of pictures, infographics and is a treat to watch and read.
  • It also provides me an option to go online (could use QR Codes which I could scan using the app to dive deep).
  • It also provide me an opportunity to interact with the colomnists and other readers with similar taste as mine (could be through apps or physical in-person meet-ups)
  • Gives me an option to go ad-free (at an additional cost) or only opt for specific kind of ads based on my current interests.
  • I get an option of the frequency of the paper (once or twice a day)

Now, to achieve this, there are many assumptions that need to be questioned and re-looked at:

  1. Newspapers can’t be personalized as they need to be printed at centralized print facility and distributed
  2. The control of what gets printed rests with the editor
  3. We can only have daily, weekly or fortnightly editions
  4. The layout of the newspaper changes depending upon the news stories, almost every day and which requires a team of people who could do that.
  5. The medium is only 2-dimensional (Text and Pictures)

Assuming this vision is brought to reality, both the newspapers and the advertisors whom they serve will benefit hugely.

This is of course if profitability is the main goal of running a newspaper. There could be other reasons to run a newspaper, Shaping public opinion, being one of them. In which case, we need to re-look at the content strategy of the paper.

Currently, there are some interesting developments in the industry that would be worth following:

  • Jacek Otko has been quietly leading the revolution of changing the design of the newspapers, to make them more interesting and pleasing to read.
  • Times of India has an app (Alive) which we can use to watch videos and link to websites that we might want to explore if we want to dive deeper.
  • There are others who are becoming more local and cover their local communities and depend on them for survival.
  • Some like NYTimes charge the readers for online access.
  • Almost all the newspapers have a digital version.

Another interesting dimension to this entire discussion is the future of advertising itself. The advertising industry itself is going through a fundamental shift and since advertisements constitute almost 70 – 80% of revenues for the newspapers, the shape that the advertising industry takes will have a big impact on the newspaper industry as well.

These are my thoughts. What do you think? Do you think that the vision that I have painted for the newspaper of the future is feasible, desirable? Please share your thoughts by commenting on the blog or by tweeting to me at @rmukeshgupta.

PS: Another thing that can really disrupt the entire industry and take it to a totally different direction is the availability of a smart material that could replace paper as the medium to be used for print.

TED Talk of Jacek Utko – Can Design Save News Papers

 

 

Lessons from a Failed (Billion Dollar) Business Model Innovation Attempt

In May this year, Better Place, an auto tech company filed for bankruptcy, burning close to a billion dollars. They had a brilliant solution to a complex problem.

Their idea was to replace fossil fuels with batteries – literally. What this meant was that as you re-fuel your cars with gasoline, you could get your batteries changed at a fuel station. This was in stark contrast to all the other start-ups in this space, who have been working on increasing the range of their batteries to go longer distances or increase the speed at which one could charge the batteries on-the-go. 

There has been enough written about their strategy and why it did not work. Some of the reasons that have been proposed for the failure of the business model are: 

  • The most important cause was the fact that the very need to create a network of fuel stations where battery could be switched was very expensive and was a pre-requisite to start acquiring customers.
  • They got too ambitious by expanding to other markets even before they won in their home market (Israel).
  • They were not able to offer choice of different car models to their customers, which was a mistake.

However, no one has written about what would have given them a fighting chance at success.

I would like to stick my neck out and outline what I would have done if I were running the company.

I think that the business model that they were pursuing was and is still a great model. This ensures that the behavior of the end customer does not change and with the improving quality of batteries, my cost over time would reduce while my revenue would continue to increase, which is a perfect situation to be in.

One of the most important lessons that we can learn from this exercise is that the choice of your initial market is the most important decision you have to make. The choice of markets (Australia, California, Canada, Denmark, Hawaii and Israel) in this case was a mistake.

If I were in their position, I would have chosen a city based approach rather than pick a country as a market. I would have also chosen a city in densely populated area where, the populations do not generally drive very far (thus reducing the number of switching stations necessary to serve the market.

I would have franchised these switching stations (just like Shell or other Oil players do, mostly to the same franchisees) and signed a revenue sharing agreement with them, thereby eliminating a lot of cost in creating a network of switching station. Also, this would have been much faster and would have provided the momentum to the start-up.

Instead of trying to get Auto manufacturers on-board as a partner, I would have signed-up with them as a customer. I would have co-designed a few models along with the auto manufacturers and placed an order for these cars, thereby eliminating the risk for them, thereby creating choice for the customers.

Once the auto companies have made the models, adding or improving them is not much cost or effort and would lead to them developing more models by themselves (if the initial model was successful in the market).

I would then lease or if possible rent these models (co-branded with the auto manufacturers) on a rental based on either the kilometers driven or for every battery being replaced. This makes it more attractive for a customer to rent a car than to buy it (capex to opex).

This would have allowed me to win one city at a time and then expand to an ever larger network. Once the concept is validated in a few cities, I would then scale like hell and create a network (again franchised) across a nation. If the revenue sharing is fair for the franchisees, it would be easy to create a nationwide network.

This would have allowed me to iterate and learn about the operational challenge and find answers to these challenges with the least risk exposure and perfect the model to enable fast scale.

This would have also reduced my total cash burn and given the start-up a longer play in the market.

I believe 6 years is too long a time to prove your concept, which led to Nissan moving out and others not too keen. The key in this case was the inability to win a single market that led to the fall-out of the business model.

Also, I think that one of the key aspects of business model innovation is the velocity with which you are able to execute and validate your business model in the market, failing which you will find ever increasing resistance from the ecosystem and inertia will kill the project.

What would you have done differently if you were the CEO of Better Place? Do you think that someone should still pursue the business model that they were pursuing?

Let me know your thoughts by commenting below or tweeting to me at @rmukeshgupta. 

PS: Interesting news about speed charging your electric vehicle. 

Idea for a disruptive biz-model innovation for banks

There is a lot of discussions and activities around the revival of the good old ATM.

  • Some are trying to make these machines more Customer-centric like Wells Fargo.
  • Some are trying to improve the overall user experience of the ATM like Diebold.

However, the true question should be the following:

Do we even need an ATM? Is there a better, easier, faster way to manage cash than via an ATM?

The first bank to figure out the answer to this question has the potential to truly disrupt the banking industry from a cash management perspective.

One way that I think could be used is the small businesses that accept payments from a credit or debit card?

Can they not be used to function as a teller for the bank? The bank instead of charging a fee for the use of the card machine, can instead pay the business a nominal amount and convert them into cash dispenser.

All the technology that is needed to make this happen is already available. The only change is in the execution of the idea.

This is just one idea to enable this. There could be many more viable ideas.. The question is are we looking for them?

Do let me know your thoughts by posting your comments below or tweeting them to me at @rmukeshgupta.

 

People – to – People banking services by CivilisedMoney

The Crowdsourcing business model has been around for sometime now and has proven to be a good business model for independent artists to fund their projects.

Now, CivilisedMoney is trying to use the same concept to help peer-to-peer financial services in the UK.

CivilisedMoney’s was founded by Neil Crofts and Jason Scottgoal. Civilisedmoney will use people-to-people networks to create an ethical, transparent alternative to the existing financial services industry.

As they say – “It’s banking with people, not banks.”

The concept is very similar to the age old concept of a co-operative bank or a chit fund operated in India. The key difference from these models that I can think of is that this model is much more transparent and easier to operate due to their use of technology to enable these financial transactions. This will also make it easy for people to invest, donate, lend, borrow and transact money with each other directly.

This organization itself was crowd-funded to the tune of GBP 100,000 within 9 days in the on the crowncube platform.

I think the challenges for them could be the following:

  • Achieving scale: Will they be to scale up. If they find out ways to continue to attract people to use their platform, this idea really has a great future and can have a big impact on the financial services sector.
  • Remain a banking service provider: They need to be very careful about how they position themselves. There is a real possibility that they end-up being another platform for crowd-sourcing (like www.kickstarter.com or www.crowdcube.com or many other such platforms. They need to ensure that they continue to function like a bank, offer services like a bank and think like bankers, all within their definition of the business.

This sector is actually in need of an overhaul as we have only seen incremental changes with no major disruption. A disruption in the sector seems to be inevitable. The question is “Can civilisedmoney lead this disruption?”

I wish them continued success in this venture.

Disclosure: I have not invested in this organization and neither do I know the founders. I liked their business idea and want to spread the word.