Published on 2012/04/25

Niche Versus Diversification

Niche Versus Diversification
When considering whether or not to diversify offerings, many colleges and universities ask themselves “To be, or not to be?” Photo by Gonzo Carles.

To be, or not to be, that is the question:/ Whether ’tis Nobler in the mind to suffer/ The Slings and Arrows of outrageous Fortune,/ Or to take Arms against a Sea of troubles,/ And by opposing end them: to die, to sleep/ No more; and by a sleep, to say we end”.

(Shakespeare W., 1603)

While there is some debate as to the interpretation of the above quote from Shakespeare’s play Hamlet, suicide seems to be the most popular opinion—which brings me (nicely or not, as the case may be) to the question in hand; should Universities and Colleges be niche providers or should they diversify and take their provision to the masses?

Effectively, colleges and universities should only diversify if they have the capital and the capability to do so… and many do not. This is why universities and colleges get into trouble when they try to take an outstanding provision and offer it to the masses, or when they venture into markets where they have limited experience. However, there are some colleges and universities whose diversification strategy was their salvation, and these examples should set the model for other institutions looking to expand their servies.

The majority of colleges (certainly in the UK) are General Further and Higher Education Colleges, providing a range of provision from A-Level (high school) English to HNC/D/Foundation Degrees in Engineering. They try to be all things to all people.

However, if you look back far enough, many colleges started as niche market colleges serving a particular sector and drifted into being general colleges of further education, in effect diversifying, de-specializing. Many agricultural colleges now offer a range of provisions including, for example, sport sciences. Why? Well because they had the land to build the sport center, tennis courts and other recreational facilities, whilst others did not, especially inner city colleges.

Two of the top five universities in the world (Oxford and Cambridge) offer a wide and diverse curriculum. California Institute of Technology (Caltech), is listed near the top and majors on science-based research; Harvard University tops the charts in Business, amongst other things, and then there is Stanford University, leading across computer science, life science and social science.

Whilst all these universities have diversified, they have two things in common:

  1. An unrivaled world reputation gained over many, many years.
  2. Renowned for their groundbreaking research.

Having contemplated niche markets or general diversification into many markets, I am wondering if the question is wrong. The question should be, “Can you diversify?”, not “Should you diversify?”. Institutions can only diversify if they have the capability to do so.

Many colleges could not diversify into high quality research, they just don’t have capability or capital and it would be a very costly experiment.

In the context of providing outstanding teaching, learning and researching; is it not that any diversification will just result in a dilution of quality?

It has to be recognized that all educational establishments operating in today’s economic climate are in the main driven by their financial position. Those colleges and universities that are financially wealthy have buy-in capability and increase the likelihood of successfully diversifying into a new general or niche market, remembering that some niche markets (the mobile phone industry, for example) end up as very, very big general markets, with lots of players.

Going back to Shakespeare and Hamlet:

To be, or not to be, that is the question:/ Whether ’tis Nobler in the mind to suffer/ The Slings and Arrows of outrageous Fortune,/ Or to take Arms against a Sea of troubles,/ And by opposing end them: to die, to sleep/ No more; and by a sleep, to say we end”.

(Shakespeare W., 1603)

Would it be suicide for a college or university to diversify away from or into a new niche market or enter a generally more competitive mass market with other players?

Would or could there be an impact on teaching, learning and research quality?

The answer is not simple; it could be yes or no and depends on four basic elements, the Four C’s:

  • Capital
  • Capability
  • Commitment
  • Courage

You could, of course, argue that outstanding colleges and universities have an ethical and moral obligation to extend their outstanding educational provision and research abilities/facilities to widen access from minority to majority, but at what cost?

For me its simple, if you want a world-class educational system irrespective of which part of the world you operate in you will need:

  • The capital to invest in the infrastructure;
  • The capital to buy the capability;
  • The capital to buy the commitment,

And the courage? The courage to take the leap of faith into the unknown.

Sad is it not, that one of the most valuable gifts, the gift of an education carries such a high price.

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Readers Comments

Chuck Zahn 2012/04/25 at 11:14 pm

I think focusing on a niche is the way forward for higher ed institutions. There are too many institutions out there for everyone to serve everything to everyone –

Schools need to find a particular strength and focus on it!

Michael Blishen 2012/04/26 at 10:22 am

Sensible thoughts, Tom.

Something else to consider is the cyclical nature of organisations (particularly in service markets).

1 – You start off as a small niche provider, highly responsive to the needs of your market segment.
2 – Seeking expansion, you move into other related markets and gain volume and some economies of scale, making you more efficient and better placed to expand still further.
3 – Eventually you emerge as a large, generalist serving a broad market. However, you have had to sacrifice some of your market responsiveness to the goals of scale economies and control systems and you now have a large range of activities, some of which are less profitable than others.
4 – New, niche providers emerge who can give your most profitable segments the sort of responsiveness that you used to give but don’t any more – and they carve off the best bits of your business.
5 – You are left with a large volume of less profitable activities. At this point fundamental reorganisation may be needed.
6 – The new niche providers start to expand as in 2 above and the whole cycle goes on.

For education providers, understanding where you are in the cycle is vital, as this should inform your strategy.

I would add another C to your list – Clarity. Too many providers move into new areas without a clear idea of why they are doing this or what they want out of it. Its the old problem – “Something must be done; this is something; therefor this must be done”. Usually the individual responsible for the mess that this sort of thinking creates has moved on to another institution before the problems really build up.

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