Universities Teach Management Strategy. What If They Actually Do It?
July 7, 2022
How universities can map the value chain of their programs to lead to growth and sustained innovation
Never has there been a more crucial inflection point for American higher education. Impending demographic shifts. The lingering effects of a global pandemic. Students questioning the very value of the service colleges are providing. As higher ed leaders grapple with how to navigate through this world of change, it’s time to take a page from management strategy theorists who have led the way for other industries in similarly precarious times. These big-picture thinkers have created compelling frameworks that can help us make sense of today’s sorely challenged higher education sector.
A particularly effective approach right now would be value chain analysis: an in-depth analysis of the full range of activities an organization conducts to deliver its final product, from start to finish. Using this analytical framework, organizations look for ways to reduce costs, increase effectiveness and identify competitive differentiation. Ever since Michael Porter introduced the idea in his 1985 best-seller, "Competitive Advantage: Creating and Sustaining Superior Performance," there have been numerous articles, exercises, consulting engagements, and reports on how an organization can map the various activities that deliver value to its end-user – in this case, the student. Ironically, though, the very institutions of higher learning where these thinkers reside are sometimes reluctant to put their own theories into practice.
Ron Adner, in his recent book "Winning the Right Game: How to Disrupt, Defend, and Deliver in a Changing World" builds on this idea to describe the value architecture of a firm, or “the arrangement of your value elements.” He then illustrates this process using the case of Kodak. Kodak’s demise came not because it was unwilling or unable to change, but because the company didn’t map the value architecture of what it provided to the end-user and wasn’t able to predict the seismic shifts in its industry. It wasn’t that the way in which customers captured photos had transitioned from film to digital. Kodak recognized this particular shift and had started selling digital cameras and set up photo kiosks in almost every pharmacy for customers to easily print from their digital cameras. However, the way consumers produced, viewed, and shared the images had transitioned to a fully screen-based method, eliminating the need for photo printing entirely. Kodak hadn’t taken a hard-headed look at what it did well, and where it could use help, to give customers what they wanted.
In order for colleges to survive and thrive in our current global economy, this will be a necessary piece of strategy formulation and execution, as it is for every firm.
Is higher education having its Kodak moment?
During my time at the Tuck Executive Education at Dartmouth we attempted to do this work of mapping our value chain and the architecture of our value elements. We broke down our programs piece-by-piece to determine where value is created and captured for our learners. Everything was up for discussion - from the initial touch-points with learners through marketing and recruitment channels, to the design and development of new programming, to how that programming is consistently delivered and optimized. We then used our findings to not only inform our strategy, but to decide how that strategy would be executed. Most fundamentally, we had to determine which pieces of the value chain were our core capabilities and should be developed and invested in internally, and which pieces were less within our central capabilities and therefore prime areas where we should seek outside expertise through strategic partnerships. For example, Tuck Executive Education at Dartmouth is a very lean, 10-15 person team. We didn’t have the sales/marketing engine to go to market with a new program. So we partnered with companies that could help us reach an entirely new market base with our academic content, while still retaining our core capability of expert thought leadership. It’s not easy for a university to admit that there are pieces of its value chain that are better suited for partnership. For years, there has been a bias towards retaining all pieces of the value chain in-house. However, in order for colleges to survive and thrive in our current global economy, this will be a necessary piece of strategy formulation and execution, as it is for every firm.
When moving from strategy to execution, there are three ways universities might assess their value elements:
Invest in the necessary capabilities to retain all value elements internally. While this has been the bias of many schools, few are uniquely positioned to execute upon this strategy. One example that comes to mind is Harvard Business School Online. In 2014, HBS launched HBX to “deepen the School’s impact and broaden its reach.” What it doesn't include in the promotional materials on its website is that following this launch it took years just getting to revenue neutral and building those strategic resources took considerable investment. However, almost a decade later, HBX is reaping the reward of not only leveraging a truly innovative platform, but retaining all of the profits in its financial bottom-line. It’s a great model - if you can afford the investment and have patience while the considerable resources required do their work.
Outsource all value elements and operating activities. This is the traditional Online Program Manager (OPM) story. The partner steps in and takes over all operating activities for the school, and retains a significant amount of the revenue, as well. It’s a great model for schools who do not have the investment resources of an HBS to build all of the necessary capabilities themselves. However, it’s hard to ignore some recent tensions around the use of OPMs escalated by a few bad actors, so these arrangements need to be investigated with care.
Strategically partner on the value elements that will result in the greatest benefit to the university and its students. For those schools that don’t have the level of investment of an HBS, but also don’t necessarily want or need to partner on every operating activity, there is a third way. For example, perhaps a college has amazing faculty thought leaders who have only taught in the classroom. Now it wants to launch a new, fully-online, mostly asynchronous degree. The school could staff up a team of instructional designers, invest in media capabilities to produce the video assets and digital content, and spend a large amount of money on marketing and promotion. Or, it might be smart to combine two approaches. It might decide that it’s willing to invest the marketing dollars and perhaps even build-out its own media production group. But at the same time it could also opt to partner with expert outside instructional designers who can work with the faculty to create a compelling curriculum in an academically rigorous online approach.
The educational partner landscape is ever-expanding - from newer ed tech start-ups, to established traditional incumbents, to innovative organizations who look to shake-up the status quo with a new model. They would all benefit not only from mapping their own value architecture and the elements of value they provide to universities, but also from taking a partnership approach of flexibility and transparency that supports this third-way.
Here’s a final case in point. I recently spoke with Nathan Hatch, former president of Wake Forest University, who was renowned for using strategic partnerships as a crucial piece of his innovative transformation agenda. He told me universities often face strong headwinds because of a bias toward building all capabilities in-house. They fear brand dilution, he said: “It’s cutting against the culture to cooperate and bring in outside players.” But Hatch studied other institutions that have used partnerships with great success, from Georgetown to Northwestern to Brown. He then succeeded in working with partners to build a thriving school of professional studies at Wake Forest.
His key achievement was persuading his university colleagues that working with partners to reach new learners wouldn’t dilute Wake’s brand. Instead, it enhanced the university’s reputation. Hatch’s story is telling, because it points the way for others. Amid much uncertainty, taking creative approaches to forging new markets is the surest way for higher education to see growth in the years to come.