Keith Hampson’s Higher Education Management Group‘s blog has an interesting post by Keith about the need for new business models in higher education, includes the recommendation of an excellent book on building successful business models, and a description of the four core components of a business model:
Johnson, M. (2009) Seizing the whitespace Cambridge MA: Harvard Business Press
I think Keith is absolutely right about the need for new business models in universities (and colleges). At this moment, I’m working with a post-secondary institution that is trying to develop an e-learning strategy, and for this to work successfully for this organization, it has to fit several different business models that run within the same institution. Furthermore, although for-profit institutions have been forced to develop alternative business models, I think that this is also needed – perhaps even more – in publicly funded institutions, especially those facing severe cuts in government funding (or as in the USA, a rapid escalation in tuition fees), so long as they are consistent with maintaining quality and access.
One model that has been tried only at the periphery (i.e. in continuing education or business schools) is the full cost recovery program model. In this model, instead of funds all going into a central pot then being re-allocated, funds (including tuition fees and government FTE grants where appropriate) go directly to the program, which then buys back any central services required from the university (or goes outside the institution if it can get them at a higher quality or better price).
One advantage of this is that it leads to great pressure to bring down general overhead costs, which in a large research university can easily eat up half the operating budget, and in the centrally funded model, overheads tend to be a monster that must be fed before the other animals, such as academic departments.
Related to this would be a move away from departmental budgeting to activity based costing. This would allow for instance for different ways of delivering education to be better costed and analyzed. In particular, it would also enable the true cost of research to be identified and would indicate the extent to which it subsidizes – or is subsidized by – teaching activities.
Both of these business models are discussed further in our forthcoming book: Bates A and Sangra A (in press) The strategic management of technology in universities and colleges, Jossey-Bass, available by Spring, 2011