Published on 2015/04/06

Effectiveness Over Efficiency: Serving the Right Customers the Right Way

The EvoLLLution | Effectiveness Over Efficiency: Serving the Right Customers the Right Way
If institutions don’t go through the process of identifying their niche and then making sure everything is aimed to serve that market, they will fail.

In the first installment of this two-part Q&A series, Hunt Lambert discussed that, given the disruption occurring across the higher education space, colleges and universities must commit to identifying niche markets and serving them better than anyone else. After all, the status quo approach to the market—be the best at everything and serve everyone—is unrealistic and often unfulfilled. What’s more, it leads senior leaders to detract from the parts of their institution that were truly successful in order to prop up the unsuccessful elements. In this interview, Lambert expands on what it takes for institutions to be truly innovative in the modern era.

Click here to read key takeaways.

The EvoLLLution (Evo): How has the traditional higher education business model, with its focus on trying to be the best at everything and serving everyone, impeded institutional effectiveness and growth? 

Hunt Lambert (HL): Management guru Peter Drucker wrote that a business’s only purpose is to create a customer. A byproduct of creating a customer and serving them well is making money. If you accept this definition, then your particular organizational type—whether you’re a business or higher education institution—doesn’t matter. You are trying to serve people and be sustainable in serving them.

The history of higher ed—particularly with its regulatory infrastructure, its legislative protections and its legislative subsidies from states and from the federal government—created an environment where universities have never had to be effective. They have always had a subsidy through their research functions, Pell Grants, federal financial aid and state funding, allowing them to continue trying to be a bit of everything to everybody. For the most part, universities do not even have a governance structure where they could decide who not to serve and what not to do. In a university structure, there is nobody at any level who has the power to decide what not to do. That’s a challenge today because so many universities try to serve so many markets in which they are neither effective nor efficient.

Evo: How has this fundamental misunderstanding of what businesses actually do challenged you throughout your career?

HL: I’ve always been lucky in that, on the industry side of my career, I was always doing the disruption. As a disciple of Peter Drucker, I always insisted that if a company was serious about it, they let us innovate on the edge rather than in the core. I wasn’t competing with the operations of the core business; we were building something new on the edge until we knew it was good.

Even when I came to higher ed, the state of Colorado let me do that to start Colorado State University-Global Campus. The purpose of this was never to lower the cost of delivering education; it was to figure out a way to serve a very specific student demographic—in this case adults in Colorado who started higher ed but never finished. We designed an entire campus to do nothing but to serve adult part-time learners and make it really effective for them to get through. The model we took was from the Penn State World Campus, the University of Phoenix and Rio Salado Community College, among others. What we discovered is if you optimize everything you do for that population, the byproduct is a fairly low-cost delivery model of high-quality education using online tools.

This is the model Southern New Hampshire University followed as well. CSU-Global Campus was focused on the state and surrounding region, but SNHU focused on the whole country. Arizona State University is now doing the same thing. They have both been very successful because they know exactly what markets they serve and they optimize how to serve them. The education is good and it’s fairly priced.

Evo: How can higher education institutions become more agile organizations?

HL: It’s a complete misnomer for a university that’s over 50 years old to pretend it can be agile, just like big companies cannot be agile. They aren’t agile by their very definition. They don’t make their money by being agile, but by dominating markets and by serving customers really well. If you want to be agile, you become agile on the edge. When Harvard went into this much more seriously than it had, it became agile on the edge by funding EdX in partnership with MIT. We created a separate non-profit with its own board, CEO and management team to go after this Massive Open Online space because we thought it was really important to understand it and it fit three key mission areas that are important to Harvard.

Innovation is done on the edge. You learn from the innovation and let it migrate back into the core. In a faculty governance environment, you can’t really tell the faculty what to do. Instead you invite them to participate and if they see good tools for teaching and learning, they will use them. On the edge, you can protect the innovation and understand it, allowing it to become a viable option for the rest of the institution. This is a better approach than telling faculty and staff to do this or that.

Evo: One common complaint growing among extended education leaders is that their capacity to innovate is disappearing as they move closer to the institutional core. How does the movement from institutional periphery, where they serve clearly defined markets, to the main campus, which tries to serve all markets, impact the effectiveness of these units?

HL: The effectiveness of these units is absolutely affected by that movement from the periphery to the center. If you move an online unit to the core, instead of serving the online adult learner and remaining focused on that, you will probably kill it. In a matter of months, the center can consume an infinite amount of money, which means there will be no money to reinvest in serving your niche.

If you let them stay separate and you let them bring in incremental revenue, pay their expenses and distribute surpluses back to the campus, either as technologies or people or cash, then the core can use that money to follow them to incorporate what they do.

Evo: Is there anything you’d like to add about the importance of effective business processes in creating a top experience for non-traditional students?

HL: It all comes back to knowing who you serve, knowing your strategy and your positioning and serving your students well. If you do this, you’ll be able to charge enough money to make a surplus, providing you’re not subsidizing a lot of activities you shouldn’t.

I speak here for most large divisions of continuing ed. At least half of what we do doesn’t make money. We do it because we know our mission and we know who were trying to serve. We offer many small classes because they are really important to the learning outcomes of the students we choose to serve. We also have quite a few large online classes that create greater surpluses that cover the losses of the small classes.

We manage a portfolio of offerings aimed at very specific groups of students we’ve chosen to serve. We are entirely designed to serve adult part-time learners. We are very thoughtful about what product we put out there and how we package it to keep everything we do focused on them.

This interview has been edited for length. – – – –

Key Takeaways

  • Institutions need to focus on identifying and serving their customer before all else. An effective business makes money as a byproduct of creating and serving customers.

  • Innovation exclusively happens at the periphery of institutions, as it gives the experiment an opportunity to grow without interference from the core.

  • Larger and established institutions need to create these experimental spaces for innovation to grow because, as they become bigger and more established, the institutional focus turns more to dominating marketplaces with established practices than finding and serving new ones.
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