Higher Education Has a Business Model Problem

Higher education has a business model problem. The business model for U.S. colleges and universities — how they create, deliver, and capture value — hasn’t changed since Harvard, our country’s first college, was founded in 1636. Our higher education system is a national treasure that creates enormous societal value, but its 380-year-old business model fails to deliver affordable access and post-secondary credentials to an increasing percentage of our population.

The American social contract was clear throughout the Industrial Era. While many jobs moved out of reach for those without a college degree, there were still ample opportunities for everyone to earn a good living in order to support a family. The U.S. became an economic powerhouse with a robust and thriving middle class.

Then the rug got pulled out from under the economy. The Industrial Era ended, taking with it most of the career opportunities for those without a college degree or relevant post-secondary credential.

The existing social contract broke and was replaced by a new one, with the expectation that everyone gain some form of post- secondary credential in order to be relevant to the new economy and to earn enough to sustain a good living.

Unfortunately, while societal expectations for higher education changed, its business model hasn’t. As a result, far too many citizens have been left without affordable access to a post-secondary credential that will put them on a pathway to a good living.

When I was an accidental bureaucrat leading a state economic development agency, my friends asked me how, after working in the private sector for so long, I could put up with government’s slow pace. I responded that, after 20 years in the private sector, I was convinced that big corporations didn’t move quickly either.

I also teased my friends in academia that colleges and universities move even more slowly than either big business or government! Higher education has the most intransigent business model on the planet.

Here are 10 reasons why colleges fail at business model innovation:

1. College presidents and boards don’t really want a new business model.