What Will New Leaders Lead? Elements of the New University

If we look at business models in general we can divide them into two basic types:  not-for-profit (NFP), and for profit (FP).  NFP organizations in the U.S. are funded through federal dollars, state dollars, and private donations (similar models exist around the globe).  This model is subject to a variety of external economic and political influences.  It is not a closed system.

FP organizations are funded through traditional business means—investors, profit, and reinvestment.  A product or service is provided in exchange for compensation, designed to make more money than spent.  Such organizations consist of units and functions designed to keep the business sustainable by achieving its goals, purpose, and plans. FP systems are thus more controlled in nature.

As discussed in an earlier post, higher education has moved away from a basic for profit model to a not-for-profit structure composed of individual investments, supplemented by state and federal subsidies. Now as external sources of funding for education are drying up, it is clear that this current NFP business model is not sustainable, and in fact may not make sense given the new function of higher education, which is grounded in a much more pragmatic societal context.

In short, as the function and the business model of higher education evolved, the basic FORM of higher education did not.  We are left with an agrarian, elitist model to serve a knowledge-based, complex, technologically sophisticated society that requires broader access for individuals.  And without a viable business model that aligns with the new function.

Accordingly, we can ask what a new and practical model would look like.  I suggest that it must be organized around key elements that define higher education as a business in the truest and most simple sense.  With that perspective, let’s look at four basics of a new model:  funding, physical plant, human resources, and technology.

The first and most basic element is funding.  Likely sources are alumni, local communities, private business investors, or business organizations.  But securing investment will depend on being able to show return on investment to investors, both in money and in jobs. And institutions will need to show growth, not just in student numbers, i.e., enrollments.  They will also need to identify new opportunities—partnerships, mergers, and disciplinary expansion.  In other words, they will need to innovate.

Institutions will then need to balance the current model with the innovation model for a reinvestment strategy to ensure sustainability.  In order to do all this, institutions will need to establish market differentiation and value propositions for investors, including students and the workplace.  Importantly, it will be necessary to reorganize institutions in order to accomplish these things.  Business as usual will be radically changed.