One of the most interesting presentation I heard at the recent EADTU Conference in Paris was Variable cost minimisation (VCM) business models in higher education by Yoram Kalman of the Open University Israel. I confess that initially I wasn’t
One of the most interesting presentation I heard at the recent EADTU Conference in Paris was Variable cost minimisation (VCM) business models in higher education by Yoram Kalman of the Open University Israel. I confess that initially I wasn’t hugely enthused by the title and, if I’m honest, I nearly sneaked out before the presentation began :} I’m very glad I stayed though, as Yoram gave a highly enlightening and engaging talk covering business models, disruption and MOOCs. There’s a lot of talk about business models and disruptive innovation in higher education at the moment so it was very helpful to hear a detailed analyses of what these terms actually mean.
Here are the notes I took of Yoram’s presentation, if I’ve misrepresented or misunderstood anything, my apologies!
Disrupting higher education
Free has been disrupting industries for a long time (e.g. music, journalism, travel). Is HE the next industry to be disrupted?
What is a business model?
It is possible to summarize an organisation’s unique attributes using a small number of components. This model provides useful insight and allows comparison of similarities and differences. Business models are not only applicable to businesses – can be apply to any type of organisation.
The language of business models may be unfamiliar to higher education but can be roughly equated as follows:
Customer, finances, industry = student, resource, sector
Business model interdependence
Business models have three components that are interdependent:
- Customer value proposition – how do we characterise our customers and what are their needs?
- Infrastructure – resources and processes.
Business model analysis shows that you cannot change one component without impacting on the others.
Disruptive innovations are called disruptive because they disrupt the business model. As a result of the disruption, the business model cannot sustain itself. Disruptive innovation is not revolutionary; disruptive innovation disrupts the business model and kills the organisation.
Very few companies have managed to survive a big change in business model. Apple is one of the few that have done it. Smart phones and itunes really changed Apple’s business models.
Variable cost minimization
Disruptive innovation is often made possible due to the constant reduction of ICT costs, e.g. bandwidth, storage, processing. Often the only variable costs that can be minimized are ICT costs.
Free business models
There are many free business models which are explored in detail by Chris Anderson in his book Free (http://www.scribd.com/doc/17135767/free-by-chris-anderson)
- Free as a metho