Exploring the Impact of the Amazon Effect on Higher EducationDavid Frayer | Director of Executive Programs at the Eli Broad College of Business, Michigan State University
The “Amazon effect” is a phrase used to describe a number of different competitive impacts created by Amazon and its highly effective value chain and online business model, especially as seen through the eyes of more traditional brick-and-mortar competitors. For example, customer expectations with regard to availability and delivery lead times are being influenced by Amazon’s wide range of products and rapid distribution model. Amazon Prime has challenged the conventional wisdom related to shipping costs. Even in businesses that are not direct competitors of Amazon, such as industrial conglomerates, aerospace companies and defense contractors, we regularly hear about changing customer expectations, shaped by the new realities of the consumer space, influencing requirements.
The common plea heard from customers is, “If Amazon can do it, why can’t you?”
In some ways, the “Amazon effect” is a challenge to existing customer value propositions and the business models that support those value propositions. And, while this is certainly of great concern to organizational forces opposed to change, understanding these new value propositions can create competitive opportunities for those willing to transform. The development of new online routes to market, coupled with the growing realities of the omni-channel supply chains required to support them, is creating significant momentum for change. This momentum has great potential for unlocking new forms of value for customers and the economy.
The Amazon Effect’s Impact on Higher Education
While commercial businesses are clearly experiencing the changes brought about by the “Amazon effect,” there are many other sectors of the economy that are being impacted as well. For instance, higher education is beginning to reevaluate its own value propositions and business models in light of changing customer expectations, new budgetary realities and the explosion in online learning. The number of online degree programs and online certificate programs continues to grow, but what is more intriguing is the rationale for this growth. Is it an attempt to expand institutional reach and better meet customer needs, especially those of students, parents and employers, or is it simply a means to fill budgetary gaps?
In the Eli Broad College of Business at Michigan State University, we have taken a very customer-oriented approach to online learning and have put customer needs, as well as the overall student experience and learning outcomes, at the forefront of our online development efforts. The needs of students are changing. Millennials are adept at computer-aided learning and today’s working professionals are too busy for extended stays on campus. As a result, we have taken extraordinary steps to ensure the same quality of learning that you would expect in a ground-based classroom in our online offerings.
However, much like commercial businesses experience, the pace of change in the online space is significant and the need to remain an agile learning organization remains paramount. In spite of what some believe, higher education is not a “field of dreams.” If you build it, there is no guarantee that students will come.
In the business world, we have seen three primary adjustments that commercial organizations are making to better accommodate changing customer expectations. First, organizations must understand the needs and requirements of their customers at a level of intimacy well beyond what has been typical in the past. Second, organizations must understand which customers they should serve and then segment these customers to better align resources and value propositions (i.e., one size does not fit all). Third, organizations must remain open to new business models as a way to sustain growth and opportunities over time.
These changes all point toward the need to avoid complacency and reliance on the status quo. And, for the first time, organizations have access to advanced analytics and the actual data to help them understand and address these issues.
For higher education, these potential changes are just as relevant. There are a few key questions every postsecondary leader should consider on this topic:
- Does your institution know exactly who its customers are and what their needs are for the future?
- Is this based on past experience or some enlightened understanding of the new realities facing students, parents and employers?
- Where does research fit in this equation?
- Does your institution understand which customers it should serve and how this decision could be made?
- Can you provide different degree or certificate offerings for different customer groups and how do you effectively manage these different offerings?
- Is your institution open to alternative business models, not to replace the primary one, but to supplement and enhance the overall portfolio?
While many higher education institutions are beginning to ask these questions, few have clearly articulated the answers (at least in very public ways).
The Value of Improved Nimbleness and Flexibility for a Higher Education Division
Flexibility and agility are critical considerations in commercial organizations and are growing in importance for higher education. In my area of expertise, executive education, we are being challenged to think differently about education. In the past, we tended to frame our offerings and primary value proposition as creation of educational “programs” that served the needs of individuals and organizations. In today’s business environment, though, intensive educational programs are not necessarily the best option. Organizations are seeking solutions to specific challenges and issues that may involve coaching, competency assessments, advisory services, etc. While these approaches may become part of a holistic solution, it is doubtful that the solution for one organization will align with the requirements of another organization. And, this is true for individual learning engagements as well. In the past, the inclination would be to create a generic program that would serve the needs of many different individuals; however, the risk is that such a program might not address the full set of needs for any one individual.
As a result, we need to become much more flexible and agile in defining requirements and how best to meet those requirements. Competency-based learning, micro-learning, MOOCs and any number of other emerging approaches must be considered in this “solution” context. Flexible, online learning is an important part of the solutions mix, too. We have the flexibility to do this in executive education, but we also need institutional support to make it happen.
Of course, not all institutions are willing to support these kinds of transformations. After all, change is difficult, especially within institutions that are much older and more formalized than the customers they serve and surround themselves with. Change can also require considerable resources, so many higher education institutions will find these changes even more challenging.
While it is impossible to accurately predict what might happen if higher education is unable to adjust to these new realities, the experience from business suggests that the result could be dramatic. The Fortune 500 of today looks dramatically different than the Fortune 500 of even 20 years ago. Bankruptcies, consolidations and new technologies continue to transform the commercial marketplace. It would be foolish to think that something similar couldn’t happen in higher education, too. The challenges are significant, but the opportunities for those who can embrace these new realities could be equally significant and exciting!