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The Virtual Value Chain The Learning Marketspace November 1, 1999 -- Written monthly by Bob Heterick and Carol Twigg, The Learning MarketSpace provides leading-edge assessment of and future-oriented thinking about issues and developments concerning the nexus of higher education and information technology. In our first issue we mentioned two Harvard Business School professors, Jeffrey Rayport and John Sviokla, who coined the term "marketspace" to distinguish the virtual world of information from the physical world of the "marketplace." Their explication of this distinction contains many insights for those of us in higher education. Academics, consultants and managers have commonly described the stages involved in the process of creating value in the physical world as links in a "value chain." The value chain, according to Rayport and Sviokla, is a model that describes a series of value-adding activities connecting a company's supply side (raw materials, inbound logistics and production processes) with its demand side (outbound logistics, marketing and sales.) By analyzing the stages of a value chain, companies and institutions can redesign their processes to improve efficiency and effectiveness.Colleges and universities often have difficulty in describing higher education's traditional value chain. The most frequent confusion that we have observed is to treat the student as the "raw material" that moves along the production line only to emerge, like Detroit's snazziest model, fully finished at the end. Colleges and universities supply knowledge to those who need it; a successful transaction between teachers and students is what we call learning. Heretofore, that transaction took place almost exclusively in the physical world of the campus, surrounded by a series of ancillary services that also add value for the customer (for example, credentialing.) Although the value chain of the marketspace can mirror that of the place (buyers and sellers can transfer funds over electronic networks just as they might exchange cash when face-to-face), the value-adding processes that organizations must employ in the information world are unique in that they are virtual. More importantly, the economic logic of the two chains is different. A conventional understanding of the economies of scale and scope does not apply to the virtual value chain as it does to the physical value chain. In many instances, products and services can be brought to market faster, better and cheaper in the marketspace. New competitors emerge who are viable because of the new economics of doing business in the world of the space. One simple example of how these differences apply to higher education is to think about how easy it is to start a university in the world of the space. No need to build classrooms, libraries and dormitories; no need to convince faculty and staff to live in an undesirable location; no need to recruit a football team. Today we are witnessing the creation of entirely new online institutions in less time than it takes to develop a plan for a traditional campus. Whether today's versions of the virtual university succeed in the long run is irrelevant; if they do not, someone else will learn from their experiences and build a better mousetrap. Rather than focus on the creation of whole new institutions, let's consider another characteristic of the virtual value chain: the ease with which its links can be disaggregated, or pulled apart. Unlike the physical value chain which exists as a linear sequence of activities with defined points of input and output, the virtual value chain is nonlinear, a matrix of potential inputs and outputs that can be accessed and distributed through a wide variety of channels. The links in higher education's value chain include, among others, marketing (providing information to prospective students); admissions (qualifying and selecting students); enrollment services (registration, billing, financial aid); presentation of instructional material (lectures, books and other materials); student interaction and academic support (advising, tutoring, library); student services (placement, counseling, information technology help, athletics); evaluation and credentialing (grades, degrees, certificates, transcripts.) Even today, pieces of the physical value chain are being "outsourced" to others in an effort to improve efficiency and effectiveness. Enrollment management firms, textbook publishers, testing organizations, library and administrative software suppliers, and so on sell their products and services either to institutions or directly to student customers. The world of the space escalates the opportunity to create value in new ways at each stage of the virtual value chain. Each extract from the flow of information can constitute a new product or service. The consequences for higher education are huge. Hundreds of new companies, each specializing in one link of the value chain, will emerge. These companies may supply products and services to institutions or they may decide to by-pass them and go directly to student consumers. Others may see as their customers the major aggregators of the demand for higher education, a.k.a. employers. Or they may do all three simultaneously by employing different branding strategies. In any event, institutions will be able to take advantage of these developments to increase and improve services for students at a lower cost. Here's an example of what we mean. A significant area of student need-and one that institutions have difficulty meeting effectively--is for tutoring help in basic courses. SMARTHINKING is a new Internet company that will provide human, real-time, on-line academic support for core courses in higher education. Through chat technology, virtual whiteboards and personalized feedback, SMARTHINKING will offer students one-on-one tutoring and homework help, on-line writing labs and an extensive library of self-help resources. (Please see http://www.SMARTHINKING/coming_soon.cfm for more information.) Co-founded by two young entrepreneurs, Burck Smith and Christopher Gergen, and backed by venture capital, the company will launch a pilot program in math and writing during the spring 2000 semester. By drawing on a pool of teaching assistants larger than any single institution can attract, SMARTHINKING can insure the highest quality TA's at affordable prices for client institutions. Whether students take classes on-site or at a distance, whether they need help at 2pm or 2am, qualified help will be only a click away. Faster, better, cheaper-watchwords to adding value in the learning marketspace. --CAT (Copyright 1999 The Learning Marketspace - Bob Heterick and Carol Twigg) |
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