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Evolving Higher Education Business Models

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2017 Annual Meeting of the Council of Sponsoring Institutions
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Published in: Government & Nonprofit
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Evolving Higher Education Business Models

  1. 1. 72nd Annual Meeting ORAU Council of Sponsoring Institutions March 9, 2017
  2. 2. Agenda • ACE Overview • Pressures on Higher Education • President’s Views • Business Models Thinking • Networked Organization Leadership
  3. 3. ACE Mission ACE, the major coordinating body for all of the nation’s higher education institutions, provides leadership and a unifying voice on higher education issues and influences public policy through advocacy, research and program initiatives.
  4. 4. Strategic Focus Areas • Re-imagine Diversity and Equity in Higher Education for Today’s Students, Faculty and Leaders; • Enable the Expansion of Flexible Completion Pathways; • Develop Innovative Institutions and Leaders that are Learner-centered, Tech-savvy & Globally Engaged; and • Foster Effective Policy Reform through Expertise, Evidence and Engagement;
  5. 5. Division of Government Relations & Public Affairs Collaborating to Deliver Value
  6. 6. ACE Snapshot - Membership 1,658 Members 1,444 institutions and systems 214 associations, international
  7. 7. Pressures on Higher Education
  8. 8. State Funding Down
  9. 9. Tuition Revenue Increasing - Raising Affordability Questions
  10. 10. Moody’s Investors Service 2015 "The US higher education sector has hit a critical juncture in the evolution of its business model…….“ “……Even market-leading universities with diversified revenue streams are facing diminished prospects for revenue growth…..“ “……..many universities will have to lower their cost structures to achieve long-term financial sustainability and fund future initiatives.” Eva Bogaty, Assistant Vice-President, Moody’s Investor Service
  11. 11. • QUALITY IN QUESTION Study of 2,300 undergraduates – 45 percent “demonstrated no significant gains in critical thinking, analytical reasoning, and written communications during the first two years of college” – 36 percent “demonstrated no significant gains in critical thinking, analytical reasoning, and written communications during the first two years of college”
  12. 12. Change in Student Demographics
  13. 13. Balance Learning, Family and Work Source: Lumina Foundation Analysis of NCES Data Sets
  14. 14. Wrestle with Financial Issues on their own
  15. 15. A growing number of today’s students are students of color. Percentage increase in enrollment, 1996 - 2010 Source: Lumina Foundation Analysis of NCES Data Sets
  16. 16. Few of today’s students study or live full-time at flagship, four-year campuses.
  17. 17. Today’s Students Less Likely to Complete
  18. 18. • Funding anticipated to increase by the largest share of presidents included: – Revenues from private gifts, grants, and contracts (85%) – Tuition and fees (75%) – Endowment income (64%) • The funding sources anticipated to decrease by the largest share of presidents included: – State government (41%) – Federal government (28%) Presidents identified the top five areas likely to grow in importance: • Budget and financial management (68%) • Fundraising (47%) • Enrollment management (38%) • Diversity and equity issues (30%) • Assessment of student learning (30%)
  19. 19. ACE/TIAA Convening on Finance and Innovation September 2015
  20. 20. Three Themes • Get the Data Out There • Student Success and Innovation • Leadership with Data and Evidence
  21. 21. Black Box EDU
  22. 22. New Tools and Concepts • Granular Learning and Financial Data • Business Model Analysis • Networked Production Organizations
  23. 23. The primary elements of a business model include the following:
  24. 24. • Value Proposition In postsecondary education: this can range from meeting the needs of traditional students for a liberal arts education to a working adult for degree completion to a busy mom for nursing licensure preparation in alignment with mission • Resources In postsecondary education: mix of people (Faculty, Staff), SIS, ERP, LMS, partners, facilities, equipment, books • Processes In postsecondary education: courses, curriculum, advising, student life services, cross-subsidy, shared governance, tenure, transfer of credit protocols. • Profit Formula. In postsecondary education: enrollment management, pricing, public aid, loans, student mix, estimated time to degree.
  25. 25. Networked Production Organizations
  26. 26. Key Principles of Networked Organizations • Uniform standards governing the exchange of information • Rigorous performance standards based on consumer value and partner incentives built into the network • Sharing the benefits generated by the network with all partners • Online presence with information on all key business processes • Development and dynamic testing of new opportunities with network partners
  27. 27. Attributes of Networked Orchestrator • Establish a strong network performance by building, aligning, and enabling broad networks across the academic and administrative parts of the institution, students, partners and other stakeholders. • Expand the visibility and discussion of financial data and student outcomes to include all network members. • Prioritize network learning to understand and use the data. Culture of Evidence. • Develop network performance metrics for student and organizational outcomes in collaboration with network members. • Establish incentives to align the network toward institution-wide performance metrics. • Empower decentralized decision-making around the performance metrics. • Sense and leverage both formal and informal parts of the network to enhance performance.
  28. 28. Current Innovation Through A Business Model and Networked Organization Lens
  29. 29. Graduation and Progression Success – Creating the Information Standard • What- Collect individual grades and create projections for student success. • How- GPS advising system, a big-data system, develops predictive analytics based on 2 million grades earned, tracks undergraduates everyday with alerts, and get undergraduates back on track. • Why- Over 50 percent of students are on Pell Grants and minorities at George State University. • Outcomes- Retention rates have increased by 5 percent, and undergraduate degree conferrals have increased by 16 percent.
  30. 30. Predictive Analytics – Building The Network • What- Eadvisor is a personal tool and service that helps to ensure that students are on track with their studies - retention dashboard creates community among faculty, students, academic coaches and advisors. • How- Student-centered or customized education is a central element of modernizing student success services. Enables redesign math classes to include adaptive education, as well as in advising, where coaches are paired with freshman as a personal guide and concierge. • Why- Most students are coming from first- generation and low-income backgrounds at Arizona State University. • Outcomes- Retention rate has been increased by almost 10 percent, and graduation rate has been increased by almost 20 percent.
  31. 31. Predictive Analytics and Shared Data – Extending the Network • Who- 11 public research universities. • What- Identify interventions to improve student outcomes in highly innovative ways, duplicate them in different contexts, and disseminate them to the public. • Where- Oregon State University, UC Riverside, Arizona State University, University of Texas at Austin, University of Kansas, Iowa State University, Purdue University, Michigan State University, Ohio State University, Georgia State University, University of Central Florida. • Why- Raise college graduate rates to improve social and economic mobility. • Outcomes- Success of low-income students in terms of their progress and graduation.
  32. 32. Activity Based Costing – Getting Granular with Performance data • What- ABC (Activity Based Costing) • How- Tying together course and finance data, while also assessing teaching and instructional productivity. • How- By creating a transparent budget model, staff and faculty can better understand the flows of revenue and use of resources. Performance-based formula is employed while distributing institutional revenue. • Outcomes- Tying cost data with outcomes data at the major and course level to simultaneously boost outcomes, while reducing institutional costs.
  33. 33. Link Organizational Learning to Network Partners • What- College Pathway Programs • How- Partnering with local school districts to customize academic and support service to meet the needs of students. Partnering with Cuyahoga County to offer academic and workforce programs for residents. • Innovations- One Institutional Intelligence (OII) is a business intelligence system with a data warehouse, and improves institutional effectiveness in planning and decision-making. • Outcomes- Identify the points at which students drop out in individual courses, track intervention strategies, and meet student scheduling needs in upcoming semesters.
  34. 34. “Transfers revenue ownership and allocates all indirect costs to units whose programs generate and consume them respectively….. …..using centralized resource redistribution – to achieve balance between local optimization and investment in the best interest of the university as a whole.” -NACUBO 2013 Decentralize Financial Decision-making into the Network
  35. 35. Maintaining a Network Data Standard • Who- a benchmarking project and data sharing consortia among 4-year Title IV eligible institutions, started in 1996. • What- calculate institutional expenditures per student credit hour, estimate direct instructional costs at an institution, and create benchmarks across institutions and disciplines. • Why- Make better management, planning, and policy decisions, based on the factors that influence instructional cost and productivity. • How- • Collecting data regarding degree, human resource, course, and finance. • Benchmark teaching workloads, instructional costs, and productivity with other colleges and universities.
  36. 36. Business Model Change – Leverage Learning Data to Rebundle Network to Deliver Value • Purpose- CBE Aimed at working adults who need a college degree, but have limited time and budget. • How- Partners with employers nationwide, and provides a low-cost, competency- based, and applied on-line education. • How- Without using traditional grading scales, students are asked to develop and demonstrate competency mastery. • Outcomes- 70 percent of students graduate without any debt, and almost 90 percent students report that they have built skills for the current job.
  37. 37. Course Redesign – Business Model Process Change • Old delivery: 20 face-to-face lecture sections (about 60 students each) • New delivery: 800-student online section organized around 4-week modules • Technology enabler: web-enabled instruction and assessment/ • Staffing: program coordinator, 4 faculty, 4 grad students, • Outcomes and Savings: – student outcomes better, – reduced costs by over 50 %
  38. 38. Resource and Cost Attribution Tool Provost's Challenge (2012-2015) PSU Flexible Degree Pathways to Success Emergent Networked Organization?
  39. 39. New Business Model • Understand the institution as a networked organization guided by mission • Link financial and learning outcomes data to set metrics and manage network performance • Incentivize and prepare network members to drive performance • Use different business models to optimize value delivery • Adapt shared governance to use network tools • Develop Network Leaders and Institutions
  40. 40. Thanks
  41. 41. Peter Drucker “Innovation is change that creates a new dimension of performance.” “Social purpose organizations can employ a systematic approach to innovation based on good data, insight and shared leadership to innovate with integrity to mission and improve the lives of individuals they serve.”

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