New Biz Model for Universities

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    05-Dec-2014

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these slides apply the concept of a business model to universities. They assess the existing business model and the changes that are driving the emergence of new business models. Student debt is rising as are licensing income and endowments. Information is also becoming widely available. What should universities do?

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<ul><li> 1. A/Prof Jeffrey Funk Division of Engineering and Technology Management National University of Singapore Primary Sources: Beyond the MOOC Hype: A Guide to Higher Educations High Tech Disruption, Jeffrey Young MOOCs: Opportunities, Impacts and Challenges, Michael Nanfito MOOC U: Who is Getting the Most Out of Online Education and Why, Jeffrey Selingo </li> <li> 2. The cost and importance of education has risen Student debt has ballooned Do universities need a new business model? With the rising cost of education, should they try to lower their costs? try to increases the chances their students will find better paying jobs? Teach those skills that are in demand? Help students better understand the job market, including skills in demand? Help forge stronger ties with companies? Do any professors even think of these things? </li> <li> 3. Traditional Business Model Change: Increasing Importance of Research Revenues at Universities What are the implications of increasing important of Research for current business model? Change: Increasing availability of information from the Internet What are the implications of this increasing availability of information from the Internet on University Business models? What should universities do? </li> <li> 4. What is value proposition? Who are the customers and how do they vary? What is method of value capture? What is scope of activities? What is method of strategic control? </li> <li> 5. What is value proposition? Provide education, enable higher salaries Learn about life, make friends and enable social mobility Who are customers and how do they vary? Students, parents, governments Differ by income, major, gender, ethnicity, interests, families What is method of value capture? Tuition, Government subsidies, Research funding What is scope of activities? Many universities offer wide variety of courses, do all teaching, also do research Some outsourcing of teaching, maintenance, other things What is method of strategic control? Monopoly on providing certificates of capability High barriers to entry since broad curriculum is needed Large importance of brand </li> <li> 6. At the moment colleges have a monopoly on the sale of college credits, the only units of learning that can be assembled into credentials with wide acceptance in the labor market. Monopolies are valuable things to control, and monopolies tend not to relinquish them voluntarily. But the MOOC explosion will accelerate the breakup of the college credit monopoly Should students receive credit from online courses? Students can receive credit from a physical course with a C but online students cant receive credit even if they receive an A Kevin Carey </li> <li> 7. Which US universities have graduates with the highest salaries? </li> <li> 8. Rankings of US Universities by Mid-Career Salary http://www.payscale.com/college-salary-report-2014/full-list-of-schools RANK SCHOOL NAME STARTING SALARY MID-CAREER SALARY 1 Harvey Mudd College $73,300 $143,000 2 United States Naval Academy (USNA) at Annapolis * $77,100 $131,000 3 - tie California Institute of Technology (Caltech) $68,400 $124,000 3 - tie Stevens Institute of Technology $64,900 $124,000 5 Babson College $59,700 $123,000 6 Princeton University $56,100 $121,000 7 United States Military Academy (USMA) at West Point * $74,000 $120,000 8 - tie Stanford University $61,300 $119,000 8 - tie Harvard University $55,300 $119,000 8 - tie Brown University $52,300 $119,000 11 Massachusetts Institute of Technology (MIT) $68,600 $118,000 12 - tie Colgate University $51,800 $117,000 12 - tie Yale University $50,000 $117,000 14 - tie Polytechnic Institute of New York University (NYU-Poly) $60,700 $116,000 14 - tie SUNY - Maritime College $59,400 $116,000 14 - tie Cooper Union for The Advancement of Science and Art $61,400 $116,000 17 - tie Tufts University $48,800 $115,000 17 - tie Haverford College $38,600 $115,000 19 Washington and Lee University $48,000 $113,000 20 - tie Lehigh University $58,500 $111,000 20 - tie Williams College $50,400 $111,000 20 - tie University of California - Berkeley $54,700 $111,000 20 - tie Rose-Hulman Institute of Technology (RHIT $65,100 $111,000 24 - tie University of Notre Dame $54,000 $110,000 24 - tie Santa Clara University $53,300 $110,000 24 - tie Manhattan College $55,200 $110,000 27 - tie Swarthmore College $51,000 $109,000 27 - tie University of Pennsylvania $57,200 $109,000 27 - tie United States Air Force Academy (USAFA) * $64,900 $109,000 27 - tie Virginia Military Institute (VMI) * $54,200 $109,000 27 - tie Rice University $55,700 $109,000 32 Georgia Institute of Technology $60,700 $108,000 33 - tie Worcester Polytechnic Institute (WPI) $62,100 $107,000 33 - tie Cornell University - Ithaca, NY $57,000 $107,000 33 - tie Carleton College $44,700 $107,000 36 - tie College of the Holy Cross $45,600 $106,000 36 - tie Colorado School of Mines $66,700 $106,000 36 - tie Rensselaer Polytechnic Institute (RPI) $61,000 $106,000 39 Carnegie Mellon University (CMU) $60,200 $105,000 40 Amherst College ** $53,000 $104,000 41 - tie Georgetown University - Washington D.C. $53,000 $103,000 </li> <li> 9. And if not why arent they healthy? </li> <li> 10. Most universities will have to lower their cost structure to achieve long-term financial sustainability and to fund future initiatives The financial health of U.S. universities is weakening Not just online universities Financial crisis of 2008 and the continued weak economy have led to budget deficits in many countries </li> <li> 11. Of 500 universities Moody Downgraded almost 40 universities Upgraded 9 July 11, 2014 http://www.washingtonpost.com/local/education/moodys-us-college-credit-ratings-downgrades- far-outnumber-upgrades/2014/07/11/4248f474-06c5-11e4-bbf1- cc51275e7f8f_story.html </li> <li> 12. http://www.motherjones.com/politics/2013/05/student-loan-interest-rate-plan-obama-republican-warren </li> <li> 13. Can we expect the financial health for most universities to rise? Or will students turn to low cost alternatives? </li> <li> 14. Traditional Business Model Change: Increasing Importance of Research Revenues at Universities What are the implications of increasing important of Research for current business model? Change: Increasing availability of information from the Internet What are the implications of this increasing availability of information from the Internet on University Business models? What should universities do? </li> <li> 15. Are research expenditures rising at universities? Where is this money coming from? How is this part of open innovation? How do you think open innovation is impacting universities? </li> <li> 16. Institution 2011 Research Expenditures 2011 Patents Issued 2011 Startups Licensing Income Northwestern U. $484,149,349 67 8 $191,541,162 U. of California 5,418,601,941 343 58 182,049,620 Columbia U. 714,343,087 88 15 146,319,455 New York U. 430,752,000 64 9 142,202,157 Princeton U. 192,940,000 33 4 115,206,000 MIT 1,490,429,000 174 25 76,120,000 U. of Washington 966,817,063 70 9 67,362,185 Stanford 66,797,246 U. of Texas 2,546,669,877 156 20 65,359,377 U. of Wisconsin 1,111,641,832 156 4 57,730,000 Wake Forest U. 187,598,965 15 3 45,733,291 U. of Rochester 407,244,000 27 2 41,813,373 U. of Utah 410,305,757 47 19 37,054,745 U. of Massachusetts 586,708,000 64 1 35,048,951 U. of Florida 559,156,034 86 12 29,493,522 Cal Tech 498,688,951 132 10 29,043,617 http://chronicle.com/article/Sortable-Table-Universities/133964/ </li> <li> 17. Comparisons from year to year are difficult because number of participating institutions changes. But.. In 1991, only about 1,500 patents were filed by institutions 2002: 6,500 2009: 12,109 2011: 11,687 (157 universities) Other figures for 2011(157 universities) Total licensing income of $1.8 billion Creation of 617 companies </li> <li> 18. http://larrycady.wordpress.com/ </li> <li> 19. Source: Abrams et al, How are U.S. Technology Transfer Tasked and MotivatedIs It All About the Money? </li> <li> 20. Sales of equity Dartmouths $64 million sale of its equity stake in Medarex in 2000 Stanfords sale of its $355 million equity stake in Google in 2005 Legal settlements University of California won $200 million settlement from Genentech over human growth hormone in 2000 won $30.4 million settlement from Microsoft in 2007 over accessing interactive content on web pages University of Minnesotas won settlement from Glaxo over Ziagen in 1999, valued at $300 million. </li> <li> 21. 1996-1999: $335,000 or $83,800 per year 2000-2005: $1,515,000 or $252,500 per year 2006-2009: $3,557,500 or $508,200 per year Far below 191M per year for top US university Not even in top 100 for U.S. universities What must NUS do in order to license more technology? What might be the positive and negative changes from trying to license more technology? Academic Entrepreneurship in Asia: The Role and Impact of Universities in ...Edited by Wong, PK </li> <li> 22. Institution Endowment (2010) billion USD Columbia University $ 6.517 Cornell University $ 4.379 Duke University $ 4.824 Emory University $ 4.694 Harvard University $27.557 Massachusetts Institute of Technology $ 8.317 Northwestern University $ 5.945 Princeton University $14.391 Rice University $ 4.100 Stanford University $13.851 Texas A&amp;M University $ 5.738 University of California $ 5.441 University of Chicago $ 5.638 University of Michigan $ 6.564 University of Notre Dame $ 5.235 University of Pennsylvania $ 5.669 University of Texas System $14.052 University of Virginia $ 4.457 Washington University in St. Louis $ 4.473 Yale University $16.652 Not really related to open innovation, but big money nonetheless.. And part of a Universitys business model NUS 1.688 USD Billion Source: Wikipedia </li> <li> 23. From teaching to research and perhaps even more so to commercialization Greater emphasis on research Greater emphasis on commercialization Endowment is also partly driven by research and commercialization Rich alumni donate money to universities Buildings are named after generous donors </li> <li> 24. Traditional Business Model Change: Increasing Importance of Research Revenues at Universities What are the implications of increasing important of Research for current business model? Change: Increasing availability of information from the Internet What are the implications of this increasing availability of information from the Internet on University Business models? What should universities do? </li> <li> 25. How does it impact on: Customers? method of value capture? What is scope of activities? What is method of strategic control? value proposition? </li> <li> 26. How do the following impact on value proposition for students: number of patents? Number of startups? licensing and other research income? </li> <li> 27. Traditional Business Model Change: Increasing Importance of Research Revenues at Universities What are the implications of increasing important of Research for current business model? Change: Increasing availability of information from the Internet What new business models does this information enable? What should...</li></ul>