Friday, September 28, 2012

Breakpoint: Endings and Beginnings

I am at the endpoint, as I should be. Only a few hours to go before a phase in my life ends and another begins. Despite the thrills of the new beginning, it is the sadness of the ending that dominates my thinking at this time. Yet, endings are inescapable and often, as now, desirable, and a matter of entirely my own choice. 

John Lasseter, the Pixar maestro, ascribes all of studio's success to one simple principle: It's gotta be about how the main character changes for the better. Regarding my various endings and beginnings in life, I keep asking the same question: Did it leave me a better person? This ending passes this Pixar test. This is one episodic tale where I really changed things, dramatically and significantly, and transformed the whole proposition. But, more importantly, in so doing, the work changed me - for better. 

It has something to do with the many wonderful people I worked with. I have always held the view that everyone has a gift: But the college being what it is, I saw so many gifted people together. In fact, if I did anything to transform the college, it is to bring and hold together a set of gifted individuals. In the end, indeed, legacy got better of our efforts, and outside environment overwhelmed our gains. But this shouldn't undermine the joys of the journey itself, the wins, the learning and the finally, a different legacy, which we created and would now be lived through the lives of all of us.

When one goes, it is best to carry nostalgia - memory without pain - and not the excruciating details that marked a typical day. But there were battles to fight, often based on values and what I saw as the mission of Higher Education, often to define the vision and the strategy of the enterprise. Indeed, the ending marks a defeat of sorts, that the ideas were ill-fitting as it finally succumbs to the imperatives of individual motives, but when something is lived through, it is not just the outcome, but the process matters as much. This is the process that make the victors look lesser men, winner of a pointless victory, and the departed more noble, as they had and lived for a nobler vision of what could be. These stories will reside within the daily details, and therefore, this shouldn't be glossed over, but should be lived through, again and again.

But I feel happy, as this is, in a way, the end of the beginning. This is my long preparation for what I wanted to in the field. My real life schooling of the enterprise, at the very heart of the sector, which, combined with my studies on the theory of Higher Education, connected me to real work, but in a rather grand way. As I move on, I take all this with me - now to be put in practice, now to be built upon. As the day starts, the climax of a long goodbye, I brace myself for another start, but a confident one, as if this current episode never really ended.

Sunday, September 23, 2012

Breakpoint: Making The Transition

I have finally left the college I was working for, after two and half years, and now setting myself up again for a new venture. My life hasn't changed much yet - I shall go out Monday morning and turn up in office - but next Friday being my last day in this job, I am not doing anything significant anymore. The last week is always awkward, a time to say goodbye and to write emails, to take stock and to look at all the relationships and think which ones are worth preserving, all the while preparing to start something new.

As always, I am looking forward to the next phase now. That is surely going to be exciting, though in no sense restful. It comes in good time. Two and half years back, when I took this job, I was tired of travelling and wanted to have a stable life. However, now having done this for a while, I am now tired of the predictable trains and the usual office work. Still, I feel happy about what I have achieved, a complete turnaround in delivery efficacy and value systems within the college; but I am bored too, as most of the ideas I came up with during the period was never implemented (except one, that of setting up a funded learning business from scratch, with relative success).

What I am planning to do next is not anything new or novel, but something I have been pursuing for last few years and have talked about many a times: I am trying to set up a global e-school, with the objective of training a new generation of business leaders, entrepreneurs and innovators, captains of the brave new world of our century. However, this isn't about creating any elite institution for the socially privileged, though: For me, having come from a distant country and disparate background myself, this isn't about privilege or preparation, but hard work and hunger for success. What we are working to create is an institution which will democratize opportunities, no matter where they started from, to, borrowing Steve Jobs' words, 'make a dent in the universe'.

However, I am aware I am signing up for a life of start-up, and lots of things are indeed uncertain: That indeed is the fun. This means going through a phase of keeping my head down and taking one day at a time, learning on the fly but remaining steadfast on the objective, taking opportunities while remaining anchored to the core value proposition. I am all set to live this life all over again.

Again, because I have done this before, once: Incidentally, that happened on a 23rd September, of 1998, when I, alongside three colleagues, walked out of secure and predictable life of a large company and tried to get our own Internet training start-up going. Being much younger and less experienced, I did make a number of mistakes then: We did not really sit down and worked out among ourselves our priorities. As it turned out, we were trying to pursue different things: I was after a cutting edge Internet Training and Certification company serving the technology sector, while one of my colleagues wanted to set up a chain of study centres in schools and yet others were looking at networks of franchise centres. We thought we could pursue all these things concurrently: That, indeed, was the fun of a start-up, but became its undoing in the end.

This time, therefore, I have chosen to build a team ahead of taking the plunge. Having worked with the same set of people for a number of years, and through difficult times, I am clear that our values are totally aligned. We have spoken so much about the idea, ever since 2009, that we have imagined, debated and agreed most of the key issues involved. We have been in an investment raising process for the last few months, when we were trying to raise the money for our former employer: We were bolting on the plan we had on top of the existing platform which we thought would benefit everyone around the table. However, it transpired that our views about the future, of the sector and the business, were very different, and it is good that we came to that conclusion sooner than getting ourselves into a more longer term commitment. However, this was great shadow practise of sorts: We have been pitching our ideas to a range of investors, and going through this process allowed us insights into what the investors are looking for and an idea what the market dynamics will be.

Finally, someone asked me whether I feel sad. In a strange way, I do. I am fond of many people I worked with and wish I could work with them longer. I have put in a lot of effort to craft a turn-around in the college, and regret that I couldn't bring it to a conclusive commercial success. Leaving means leaving behind a number of relationships, memories and possibilities. However, I feel free too: My work context was not great for new ideas and innovation. Whatever I had to achieve needed politics, which I am rather crap at, and everything took twice as much longer to get done even if the need was urgent and the matter was critical. Now I feel I can do things as the opportunities emerge. I would like to preserve this million-dollar feeling for as long as I continue to work.

On For-Profits in Higher Education

For-Profits in Higher Education generate strong emotions, somewhat unjustly so. They are portrayed as money-grabbing student-cheating scams, and while there are cases where this is indeed true, For-Profit can innovate and deliver good education. In this day and age when the usual publicly funded model is coming under pressure, both because of availability of money but also as higher education is coming to be seen as a private good, For-Profits is a model one has to indeed consider. It is in the interest of the wider society, as well as Education Entrepreneurs, to have a honest debate about profits in Higher Education, or more specifically, on how much is enough.

Indeed, most countries mandate that while they like private investment in education, they like it to be in Not-for-Profit form. It is possible to argue against the absurdity of prescribing philanthropy: However, it is plain to see that such regulations only attract entrepreneurs who cut corners and set up Not-for-Profit form but make money through cross-charging and other less detectable means. Not-for-Profit does not mean Not-for-Money, one of them told me, quite justifiably so. However, insistence on Not-for-Profit form keeps the availability of capital limited, create less palatable practises and attract entrepreneurs of a different mindset into the Education business. 

No doubt where For-Profits have been allowed to flourish, most notably in the United States, some limitations of the model is already very visible. In the US, the more successful For-Profits are already publicly listed, and many more of them are owned by private equity. However, they have fallen behind in student attainment, and other outcome measures such as the rate of default on student loans. Even considering the intake quality, that For-Profits will often attract non-traditional students, their performance does not measure up against, for example, community colleges, who draw from a similar student pool. Besides, existence of For-Profits do nothing to stop the cost spiral, the biggest problem in Higher Education, and does not add much on innovation. If anything, the public and private Not-for-Profit universities have led the innovation and For-Profits mostly operated with copying the popular models and offering courses with highest demand.

However, most of the criticism of For-Profits comes from special interest groups, like teachers' unions, who justifiably fear some loss of privilege with the For-Profit form. The For-Profits indeed try to squeeze efficiencies and measure performance, and spend very little on research and only minimally on staff development, often relying on Adjunct Tutors and rarely ever offering tenure. The Teachers' Unions claim that this lowers the quality of student learning opportunities, which may be true, though the same trend prevails in the public universities, where the shift away from tenure is quite visible. Increasingly, the measurement agenda of funding bodies have driven the public and other not-for-profit universities, and one can possibly argue that the quality of research is compromised in a result orientated university. Besides, the Public Universities, with their large class sizes and reliance on graduate students to do the teaching, mostly because the tutors are too busy too teach because of their research or consultancy commitments, hardly offers a better model for student experience. 

Many of the elements For-Profits are accused of are already there at the heart of public education system. On the other hand, For-Profits often borrow one thing from their Not-for-Profit cousins, that the real sweet money in education comes from rent. The current thinking in Education is that it is important to create rent, through selective admission processes and investment in reputation, so that students become ready to pay an absurd amount of money for access to, for example, Harvard's class of 2012. This is the model most For-Profits would love to emulate. However, at the non-selective end of the market where the current For-Profits are, this often leads to a real estate war: Education regulators and parents often equate quality of education with quality of facilities, often wrongly so. The other rent that they seek to extract is the premium the working class students put on an imagined prospect of good life, which is often greater than those coming from middle class families: In other words, they aggressively sell the dreams of good life to poor students and often charge them a high premium in line with the value they attach to that imagined future. For-Profits who want to maximise revenue solely through creation and extraction of rent income often contribute to the cost spiral and does nothing to lift student attainment. They focus themselves on, guilty as charged, poor alternatives to the public and Not For Profit universities, as expensive but open to all comers.

All this needs to be interrogated now as we are in the middle of an era-defining recession, which may last a generation. This isn't a temporary business cycle thing, but one that changes our societies and politics irreversibly. It is hard to see the public subsidies to education growing the way it did in the last twenty years, yet we are going to require more skilled individuals to provide the increasingly complex products and services that we need. Therefore, the need for education that works is at an all-time high. So is its demand, with a billion people joining Middle Classes from India and China, and the African societies emerging into urban modernism. The Public systems of education has no answer to this explosion of demand for education, and Not For Profits offer only a limited solution. It would be incumbent on For-Profits to do the heavy lifting, to prepare a generation of middle class, and they can only do this if they can sort out their business model beyond the rent-seeking that they currently do.

So, in a way, we are a tipping point when higher education may emerge as a capitalist enterprise at the expense of the rent-seeking entities that exist now, but we also need a new model for this enterprise as the current models of For-Profit emulate too much of the rent-seeking behaviour themselves and do not seem to be sufficiently ready for the job at hand. For this, we may need to look closely at the very western thinking of 'Profit Maximization' at the expense of everything else, a model which is already coming under pressure because it is inherently unsustainable, from the perspectives human relationships and environmental requirements. This thinking, shaped in an era of slave trade, discovery of new lands and materials and colonial dominion, is at odds with our time of greater public responsibility and dwindling natural resources. Today, it is important to see a business organization's job to create a value stream over a period of time, and profit as a pay-off that the organization will draw at a given moment: In essence, a balanced view of long term and short term is extremely important if one has to build a sustainable business.

Such thinking is currently absent in For-Profit Higher Ed and needs to be introduced. Higher Education is a long term business by design and the value stream thinking is most relevant in context, far more than the traditional margin thinking that dominates western enterprise. It is impact, not margins, that defines the success even of a For Profit college, and one must therefore build capacity to create that impact, even if this moderates the short term returns on capital. This is exactly why endowment funds (where the institutions had it) or debt funding worked better in creating better institutions than money raised in public capital markets or the public money in the modern era, which is often tied to short term returns (as in the UK). It is possible to have a For-Profit enterprise without having the Profit-maximization mantra, as many organizations across the world demonstrate through greater commitment to customers, people and environment (ahead of shareholder returns). Higher Education still being in early stages as an enterprise, such matured thinking hasn't yet emerged in the sector: But it is time it does so.

Tuesday, September 18, 2012

Going Global: Ideas for A New Education

Our contexts are global already, and with every passing day, it will be more and more global. This is irreversible: The Information and Communication Technologies, the cheap travel, the global movements of capital, all point to the same direction. However, I say this with sadness, as I mourn the passing of the local, the familiar and the native; I am not a cheerleader of the march of the flat world. Rather, I am deeply foreign, a person from the periphery rather than the centre, and my world and upbringing are full of special things that will need preserving. But I say this as a statement of fact, something that is happening in front of us, and with foreboding, because if we live in denial, we get marginalised.

If this isn't a celebration of globalism, I am not complaining either. It is not just that global reach of technologies and global reach of money has suddenly ripped open the treasure trove of my childhood land; I see globalism as an inherent tendency, an inescapable future of our universal human nature. It is not just that technology mandated globalism, we shaped technology to enable our deep desires to know and to connect. It is only the format, that of the centre and a periphery, that I resent to, and reject the assertions that it has to be likewise: In my global conception, there are many nodes connected to each other, each an originator and a receiver of ideas, each with equal claim to authenticity: The ultimate flat world. 

I argue that if going global is inevitable, staying home isn't the best way to address the imbalances. This is why I travelled. I engaged with different cultures and people with respect, not losing my sense of identity but expanding it to absorb, to know and to adapt. This, despite the occasional accusations of lost identity, has given me a vantage point to enjoy and celebrate globalism. For me, the meshing of the global and the local, the babble of Bebel on Facebook unified by friendship and attempts to read one another, is the form and function of humanity in our age: It can not be anything else.

However, still, culture shocks reign supreme. I see this as a failure of education. We have evolved deeply national forms of education, which gives us the illusion of knowledge. We seem to know what is already passe, a divided world operated with rules of another century, of a time before technologies and possibilities ripped open our walls and thrown open our individual boundaries. Those were shaped before our lives could expand beyond the visual fields of of our political masters. Our Education didn't seem to get that we have been freed of serfdom all over again.

So, surf, not serf - is the mantra of our age, and we need an education to match that. This isn't what college offers, tied as they are with their funding bodies and filled forms. Indeed, education is about reproducing the society as it is, ad infinitum, rather than disrupting it and recreating it. But this is how it is, and how it should be, if the education has to make any sense in the lives of the graduates it produces. This may be the task that us, people of the global generation, must take upon ourselves.

I have said this before: This is what I want to do. The journey may be difficult (I have my fair share already), the path may be circuitous, and the outcomes indistinct, but having leaped already, I feel certain that we must throw open the possibilities for a generation of global leaders, entrepreneurs and thinkers to emerge. This isn't just about exporting the wares from the centre to the periphery, but also to make the reverse journey, to integrate and to exchange, to build respect and understanding, to free up and fire up a new, global imagination. It is not about hub-and-spoke, but being without a centre: It is about freedom of imagination and ideas, regardless of where they emerge from, interlinked with the possibilities of a common human future.

In this age of instant communication, global warming, Facebook and weapons of mass destruction, it is lamentable that only our Education should remain confined in our friendly neighbourhood classroom.

Monday, September 17, 2012

UK For-Profit Higher Ed: The 'Home Market' Opportunity

The 'Home Market' opportunity is the buzzword in the For-Profit Higher Ed in the UK, not just for the colleges themselves but for the Private Equity houses that chase them. There is a sense of fatalism here: The 'Home Market' is at the fore because there may be no other market available. The big overseas market which sustained private Higher Education in Britain for the last three decades is all but shut out, given the cavalier attitude of the UK Border Agency. They have done everything they can to indicate that British Higher Ed is closed for business and overseas students are not welcome here. This leaves UK Higher Education in general, but For Profit Higher Ed in particular, without an option but to focus solely on the 'Home Market'.

Except, that no one really figured out how the Home Market looks like. There is a fairly simplistic assumption underlying the Home Market proposition, which may turn out to be false. The underlying idea behind this talk is that the British government has now committed themselves to the irreversible path of privatising Higher Education. The indications are surely there. First, the shifts in student funding, where the money follows the student as a loan rather than given as grants to institutions opens up the field for myriad private and public players including the Further Education colleges. Further, the private providers, For Profit and Non-Profit alike, are expected to offer degrees at a lower cost, thus lessening the burden of debt on students and attracting them away from the universities. Finally, for the last key dependence in this model, the fact that private providers have to work with public universities to grant a degree, the government is relaxing the norm to allow any institution with more than 1000 students to get degree granting powers. All these indicate a real willingness to get private providers in the Higher Education game, backed by provision of student loans and autonomy to grant degrees.

However, there are several problems in this model. For a start, all private providers and investors are looking at the excess student numbers who can't find a place in the universities. There were roughly 250,000 of those last year. This number may now disappear, given that even the elite universities are reporting available vacancies at the wake of the fee hike this year. Besides, the number of 18 year olds are decreasing in the UK, as the population ages. In fact, if the university seat capacity remains the same, the excess student numbers will still disappear in 2015. This isn't exactly a sustainable business model for huge expansion of private higher education.

As for lower costs of teaching, the private players going for this will be training people for those middle ability, middle income jobs that are disappearing. What good would be a Business undergraduate degree from a indistinct college when the Customer Service and Sales jobs are either getting automated or outsourced? The current model so favoured by the investors and entrepreneurs is aligned to mediocrity, whose time has well and truly passed for the students, who are conscious of the job market trends and wouldn't easily sign up for a course which does not get them anywhere.

75% of British undergraduates surveyed this year stated that they considered studying abroad, particularly in Holland, Germany and France, whose universities have started experimenting with English language led teaching. This is a huge change, as the British students are notorious for their parochialism. This may ultimately turn out to be a great boon for the British society in general, but in the short run, this would further dampen the 'Home Market' opportunity for the private sector.   

The intended expansion of degree granting powers are also problematic. Britain already has more than 150-plus degree granting institution against the 30-odd in Australia. Indeed, the Australian population is roughly 1/3rd of Britain, but Australian government's policy of controlling the degree granting powers within a small group of universities have worked so far and resulted in creation of some of the most dynamic new universities in the world. Apart from the apparent public-to-private shift, the pursuit of degree granting power presents a problem to the sector, a trend that Andrew Rosen, the Chairman and CEO of Kaplan Inc., calls 'Harvard Envy'. The degree granting powers will invariably get the sector into a reputation game, rather than being about the provision of good quality affordable teaching. Going by the experiences across the pond, where this was already played out, this means cost spirals and pointless degrees ['mickey-mouse degree' being a very British expression in vogue for a few decades].

The interesting point in this whole discussion about the 'Home Market', however, is the conspicuous absence of any education innovation. UK has a Higher Education problem like anywhere else; the issues regarding national competitiveness in skills and enterprise are alive and kicking. There is a huge requirement of reskilling the workforce. The economy, desperately dependent on Banking, may need to balance itself, a possibility many of us don't want to think about, and educational innovation is the only way one could do it. However, the 'Home Market' seems to refer to only the traditional undergraduate students, in the parlance of education investors, and not anything slightly complicated.

 Seen that way, the 'Home Market' scramble looks very much like Yeltsin-era Russian privatization, than any wave of innovation or new ideas: With this, we are likely to get indifferent players with Higher fees, drawing on public subsidies [there are two kinds of subsidies - direct, through student loans, and indirect, as the tenured lecturers from public universities often moonlight in the private colleges] trying to chase a dwindling student population. This is setting up to be not just policy disaster, but bad business too: While there may be some short term gains to be achieved from public-to-private conversion of assets, for Private Equity, they should be able to sell these assets on based on a growth proposition. With the student numbers turning south by 2015, costs moving up with competition and overheads, and placement opportunities looking as limited as ever, the investors may have to wait a lot longer for their payday if they solely look at the traditional undergraduate market and try to ween it away from the public universities.

Sunday, September 16, 2012

Saving History: Note on the Long Tail of Education

History, and alongside it, Philosophy, Sociology and Literature, are lucky: They may be saved from extinction.

It did seem, at one point, that these disciplines, whatever their importance, are irretrievably consigned to the past. They have become 'trivialized' - knowledge that no longer matters! People were writing defences for them. The ascendancy of professions, and technology, and the mass conversion to education for private benefit and the application of commercial principles in provision of education, both in public and private spheres ('does-this-make-money' principle), meant the disciplines such as history will be reduced to margins, not suitable for the smart, the ambitious and the academically able. 

However ludicrous that may sound, it was indeed turning out to be that way. In India, the sunshine state of Andhra Pradesh in the 1990s, at the time when Bill Gates and Bill Clinton paid a visit and praised the technocratic administration of the state, and shiny new software factories and new technical schools were built, the Government proposed to take history out of the school syllabus.  As the governments across the world equated higher education with job growth and economic competitiveness of the nation, but at the same time cut back on public money available for Higher Ed funding, these disciplines, which may be without an immediate or apparent economic value, started losing their audience. Private, particularly For-Profit, institutions, which tend to focus on areas of widespread demand, completely disregarded disciplines such as these. At the same time, public universities, squeezed for money and the losing side in the public debate, acquiesced to mass marketisation, and started pushing History and its cousins out of the view.

This is nothing new, indeed. The fortunes of disciplines are fickle. Who would now visualize that medicine was treated as an inferior discipline, and Medicine students at Harvard couldn't sit together with the Classics and History students a mere 120 years ago? Also, Stefan Collini has a view on which disciplines get priority: His point is that universities have always served the needs of the society, and it was always about 'careers' though the term may have entered the lexicon later. Thus, when universities taught the clergy, Classics and Theology were at the center-stage: Soon, it was about training for careers in public service and diplomacy, and history and philosophy duly emerged. In the last century, however, it was about fulfilling the needs of an industrial society, and not unusually, technical and professional skills have taken over.

No one should be unhappy about this except a few poor Historians, but there is a wider significance of such a move. This is happening at the same time as Higher Education moves firmly to the private domain. One of the features of private enterprise, particularly when in pursuit of profit, is unrestrained follow-the-herd mentality (for all the myths of innovation, it is usually public money or monopolies which begets groundbreaking ideas), something that has now been unleashed in education. So, it is hardly surprising that Engineering seats now go vacant in India, after years of high demand, as the markets have ensured oversupply, as they always do. And, despite the low economic value of history (and other humanities subjects), its various defenders vigorously and justifiably presented the case for its social value: Even if we consider such reasoning special interest representation, there are students who wish to study history and are fascinated by it. These hidden historians (I consider myself among them) may take up another career because they are actively discouraged by parents and the higher education system to pursue their interest, as the mass Higher Education invariably gets narrowed down to a few subjects certified for employability.

This is where Online Higher Education makes a huge difference. As did in Electronic Commerce, Online goes a long way in saving education's long tail, the subjects only a few wants to study. This is where Online is different from the Mass market Higher Education: It does not necessarily have to just offer the areas of maximum demand. In fact, coming late in the day, the Online Higher Education have to seek out the gap that its face-to-face predecessor has left, and despite the profit motive, in fact because of it, it may help create a great humanities offering, serving all those hidden historians and amateur philosophers around the world.

Saturday, September 15, 2012

India: Gambling For The Future

India is burning! Somewhat - or, so it seems on Facebook. But then India is rarely stirred, given the gravitas of our culture, our indifference to the shocks and flavours of the day. Irrespective of what the Facebook chatteretti says, life will go on in India: At least, that's what the Government hopes at this time.

In a way, the Indian cabinet has done well. Within 24 hours, they have broken through the shackles they found themselves into in the era of coalition politics and thrown the gauntlet back to various demagogues and populist politicians, who, despite being in the coalition and in the government, continued to behave as the opposition, trying to benefit from both sides.

In a way, these moves were expected. Indian government, and particularly its Prime Minister, was being lampooned in the world media for their inability to get anything done. The story of India's government for last few years have been the story of endless corruption, and nothing else. This was dangerous, particularly in these recessionary times: Many were fearing a tipping point when the India story becomes stale and international capital takes a flight, which, given that most of this capital has come in the form of Foreign Institutional Investment and were parked in the Bombay Stock Exchange and relatively easy to withdraw (as opposed to Foreign Direct Investment, which goes into factories, machinery and businesses and relatively harder to withdraw). This would have sparked a crisis in India compared to the one faced by South-East Asian nations in the late-90s, or Russia during the Yeltsin era and Argentina in 2001, setting the country back by many years and possibly creating a political disintegration. The Armageddon was very real and very proximate.

Then, a number of things happened. First, India's ineffective Finance Minister, Pranab Mukherjee, was retired upward as the President. Mr Mukherjee had earned a name for being a skilled political operator, which meant his policies were about endless adjustment and giving in to the demands of regional politicians with outsized egos: His exit from Cabinet somehow injected new initiative in the government. Next, the Indian government started a series of policy reversals, like the retrospective re-examination of various Foreign investment deals, which was threatening India's stature as a stable democratic country with a rule of law and discouraging even the little FDI the country manages to attract. Finally, came the bonfire of dithering, measures announced in the last 48 hours, which included highly contentious partial withdrawal of subsidy on Diesel, and allowing FDI in the retail sector, opening up the sector to large multi-brand retail players like Tesco, Walmart and Carrefour. They have also thrown open the Country's commercial aviation, unlike most other countries, and allowed the ailing domestic players to seek investment from outside. They have also okayed divestment in four Public Sector Units (PSUs), which is expected to raise £2 billion for a minority stake.

Indeed, these steps are only interim. The government needs to go further in reducing diesel subsidy and may need to raise at least double the current amount from divestment to meet its deficit reduction targets. There are a number of sectors outside Retail and Aviation that needs to be looked into if the urban jobs and growths have to return. The government may have to recalibrate its strategy vis-a-vis rural growth and, though it may shy away from land reforms and forcing capitalist forms in agriculture, it will expect some of that to come through the change in retailing and consequent transformation of purchasing and distribution. It will take further courage to tackle issues such as wasteful fertiliser subsidies, and one may expect these to be left untouched until after the next election.

The opposition and the allies took the streets, but surely their bluff was now called. Mamta Banerjee, a government ally, the West Bengal's Chief Minister and the naysayer in chief, now says that she would protest against the moves but will not leave the government: She continues to play to both sides but this time looks weak as the government has now exposed her duplicity. The BJP, supposedly the right-wing party whose own government in Gujrat will entertain the FDI with open arms and whose Chief Minister will soon be lobbying with the global giants to put up their HQs in the state, are currently protesting against these moves and trying to rally the public. But, though it seems counter-intuitive at this time, the government has suddenly seized the initiatives.

The Indian electorate has, in the past, punished corruption quite severely. This government has a terrible record in that regard, and if history is any guide, they are unlikely to be returned to power in 2014. The consequent political desperation, perhaps hopeless, may work out well for India. Much needed changes may finally happen, as no government trying to balance various electorate will never have the courage to pursue them at a more normal time. These changes will mean deeper integration of India into the global economy, and the global capital getting access to India's domestic demand, which is still alive and well. India's growth and prosperity in the last two decades were stock-market fuelled, and India was showing alarming symptoms of becoming a tycoon economy in the relative stagnation in the last decade or so: These changes, and if more follows, may now transform the inward-looking business sectors, retail (and as extension agri-business), domestic air travel (and by extension the transportation industry), and further, and open up new opportunities for newer players. Indian market will invariably mean that business models have to be adapted and innovations in service and delivery have to happen: This means more opportunities for Indian entrepreneurs and executives to play a greater and more rewarding role.

This is all a gamble, one that the usual democratic politics didn't allow us for a long time. But they were unavoidable, and irreversible too, whichever government comes to power. One would hope that this government, in its desperate twilight years, will push ahead with more and more reforms. This may break their coalition, and may, in the end, lead to a different configuration of Indian politics. But all this had to happen, sooner the better, and we arrive here almost by accident, as we run out of options: This always happens in India.

Thursday, September 13, 2012

Breakpoint: An Update on My Life

Start up or not to start up, is indeed the critical question. Having now spent almost three years working in and studying about Private Higher Education in the UK, I feel ready to launch my idea of technology-led higher learning network; what is holding me back is the issues related to capital raising and how the things should be structured.

My primary interest is indeed institution building, so ownership issues are somewhat a distraction. However, for the last one year, I have been advised, quite rightly, not to plan to do a start-up, but rather align the whole project with an existing entity. The rationale is straightforward: The project is too ambitious, too complex and may require a large seed capital, and therefore dissuade investors from backing a start-up. This led me to reformat our efforts and sent us on a wild goose chase of finding a suitable platform, the reassurance of a brick-and-mortar college, which, it seemed, most investors are in the look out for. This meant compromising some of our original plans and a significant diversion of efforts, something, with hindsight, I regret doing.

Hindsight is indeed an exact science, but not very useful. When I now reflect back on various conversations I had on the start-up project, I clearly see that I misunderstood the investor concerns. In a way, when they were saying that the project is too complex and ambitious, they were possibly questioning my credentials (and of other people in the team) to pull off such a project. They would have had no such doubts if I spent last several years in the cozy comfort of civil services, or spent a number of years carrying out anonymous tasks in a big name corporate house; but I did just the opposite - spent time in entrepreneurial businesses trying to create and shape innovative products - and this does not fill them with confidence that we can run a business, which is about doing exactly as we did before, of creating and shaping innovative product offering.

This leads to my other point about private equity mindset. With some exceptions, the investment community fails to see that the private higher education business in Britain has reached a point of discontinuity, an inflection point as I frequently refer to this as, and at times like this, a start-up, unencumbered by legacy thinking and baggage of the past, is better placed as a business form than any division of an existing, complex business entity whose business model has just vanished. Indeed, I can quote established business thinking to prove my point - Clayton Christensen would vouch for the value of start-up spirit in pushing ahead with new business models - but such thinking is usually lost on bankers limited to their spreadsheets and rationalized models of risk perception. This is particularly so as in Higher Education, legacy and continuity is seen as valuable assets, unlike areas such as software, where innovation and new thinking is valued over and above everything.

I have a clear view on such thinking. I love this story about Frank Woolworth, who set up his second discount store in Lancaster, Pennsylvania in April 1879 (after his first store in New York failed) and was immediately greeted by a bigger and more established store on the same street with the sign "50 years in business - never failed" on their shop-window. As the story goes, Woolworth responded with a sign on his window "Just Opened - All Fresh Stock!". This may be counter-intuitive in education, where pretending to be old is a good thing and often schools adopt rituals and symbols to make them look medieval: However, I believe that we have reached a point where someone needs to say "New School. No Pretensions: Just Meaningful Education."

I am an optimist after all and believe that the world can be made a better place, and therefore dream about changing the model of education. At this time, For Profit education is mostly a cheap diploma machine, a pretentious business whose only useful social role is produce armies of semi-skilled graduates who feeds the expanding service industry and keeps the skills premium down to a minimum. This is quickly leading the current models of education to irrelevance: This recession, which is showing no signs of abetting and indeed would condemn a generation of graduates to low paid jobs and hopelessness, is likely to throw these issues into limelight and open up new debates on what an education institution should do. Which means discontinuity, and opportunity for Googles and Facebooks of Education industry to emerge.

If all this seems wishful thinking, one should consider the quick proliferation of MOOCs and other online initiatives, Udacity, Coursera, MITx, Minerva Project et al, and see how quickly the education innovators are taking advantage of the enabling technologies and global demand for knowledge. These are perfect examples of how private profit-seeking investment in higher education is actually driving innovation and changing the game: A far cry from me-too tendencies of medieval pretensions, cost spiral and indifferent graduates, these initiatives are based on knowledge and skills (they often don't lead to certification), on courage of fresh thinking and of reviving the education long tail (I am reviving my interest in philosophy and Greek and Roman Mythology on Coursera). What I wish to do is in this tradition of challenging the status quo in education and creating something new, rather than succumbing to the easy charm of creating a diploma mill of some description. 

Even if I sound disappointed, this is meant to be a statement of hope, a new start, of clear intentions of committing myself to a life of start-up rather than remaining a prisoner of the stifled thinking. I want to be involved in creating an institution of new thinking, rather than giving in and solely limiting myself to economic opportunity and asset bubble forming around the Higher Education, which is mostly on the basis of a new enclosure of what used to be public sphere into private activity. I have spent enough time looking inside the For-Profit education: I have now reached a breaking point when I would commit myself to turn the model upside down.

Saturday, September 08, 2012

New Partnerships for Transnational Education

David Willetts, the UK Universities Minister, advised its universities to go overseas in search of students. (EducationInvestor, 17th May 2012) Whether he, like his other colleagues in Government, seems to think that Britain is besieged by student migrants, or this is a statement of exasperation and frustrated acknowledgement that the current immigration policies will drive away the international students, is a matter of conjecture. He may draw comfort from the available data, which showed that in 2011, the 5% growth in the number of students coming to UK (total number 428,225) was far outstripped by a 23% growth in the number of students studying overseas for a British degree (total number 503,795), and particularly in programmes delivered through partner organisations (a growth of 40%) [Source: UKCISA]. He may also point to various experiments in overseas campuses, the most celebrated being by the University of Nottingham's China campus, which, beyond its symbolic value, was underwhelming in most respects, and that UK universities are finally waking up to the new realities of the marketplace and treading into waters where no one has gone before (like creating private subsidiaries, as Times Higher Education reports).

It may sound strange that a government which is pleading its case for extraordinarily lax regulations in order to prevent its banks from shifting their HQs abroad is so relaxed about its universities going to another country. Universities are, in their current form, are intensely national organisations; I shall even claim that these were, alongside national newspapers, the building blocks of modern nations. They are grounded by the nature of their funding, mostly from the local and national governments, and tied to the land they operate in, much more than any commercial entity. Most universities put their local and national objectives, be it in research or in training youngsters, ahead of their global character: For all the talk of globalisation, the greatest task of modern universities is the enhancement of national competitiveness. Cutting their funding, squeezing them out of their most profitable students and asking them to go abroad will leave them without their soul. Or, at the least, turn them into a very different organisation.

However, it is important to recognise that we have reached a defining point for transnational education. It will no longer be what it was thus far - getting students to sign up for courses in rich countries, mostly, in the hope that this will find them a way to settlement and life in a rich country. First, the rich/poor balance seems to be shifting. It is harder to settle in rich countries now than it ever was, and most countries are keen on cutting off the automatic linkage between studying and settling. Besides, the students from the developing world, particularly from BRIC countries, are increasingly aware that their local perspectives are at least as important as those offered by the universities in other countries. And, at the mass end of higher education, which is a very twentieth century phenomenon and aimed at the creation of a large enough professional workforce for the industrial machine in the West, there is not much for the developing country students to take home: The offering itself is geared towards the lower echelons of the host country workforce, and once that door is firmly shut, there is almost nothing for the travelling students.

Therefore, Willetts' suggestion may be pragmatic (though not practical) that the universities should find ways to create a new model of international delivery reaching out to students in different countries. This has to be more than online delivery, which we have seen a lot of; it does not seem to work with traditional undergraduate students, the mainstay of the Higher Education system. Besides, one has to work around two very different problems: First, how does one go around the various national boundaries around Higher Education, as most developing countries tend to protect the territory as stringently as they can; and second, how to make the academic staff from the rich country university to adopt the mindset of a nimble commercial supplier, who often wins because of adaptability rather than any inherent superiority.

There are some emergent models to go around the first problem, where the courses are usually locally accredited. This is often a costly and lengthy process, and universities are queasy about submitting themselves to two different quality control regimes. What is completely natural in one place may cause trouble in another: I remember talking to a Middlesex University academic whose journalism courses had to tread a very subtle line between maintaining free speech and students rights while avoiding blasphemy and other seditious offences in their campus in the Gulf region. Often, the solution is to find the right partner - who runs an locally accredited programme, which is then mapped on to the curriculum - though finding the right partner remains a huge challenge, given the academic management structure of the universities and the subsequent steeped-in notion that quality means 'nothing should ever be done for the first time'.

The second issue on the table, how to make the academics nimble and responsive, leads to out-management of the partnership, not quite the serial franchising, where a partner closer home can builds partnerships in another country, thus saving the commercial and operational aspects of the relationship from bureaucratic big freeze, while maintaining it within one quality control regime. The actual delivery organisation may still have a locally accredited qualification, and thus be the right side of local law; the students may often have to take in additional modules, side-by-side with their regular course of studies, to attain the international qualification. These relationships introduce two levels of partnerships between the student and the university: That of delivery partner and a facilitation partner, which would be a strict no-no going by the book. However, this is exactly how the growth of transnational education is being achieved, and each of these partners, mostly commercial organisations, bringing to table some elements of value - the delivery partner is offering local knowledge and student contacts, the facilitating partner is contextualising the relationships and keeping it relevant, from the students point of view, and consistent with the university's home country offering.

The UK academia, an intensely local affair (their international reach being, often, a red herring, note the demise of once-mighty University of Wales, with more than 120 international partnerships, in a matter of days, over a local political dispute), is only lately waking up to the possibilities of transnational education. They are infinitely constrained: The universities are often quite small (with balance sheets of £150 million or so), dependent on public funding, and led by people with a background in local government or academia. This is hardly the foundation one can build a successful international engagement on. The only way for these institutions to take advantage of the new wave of transnational education, and to save themselves from the seismic policy shifts in the UK both with regard to local and international students, is to innovate the way they work with other institutions, often commercial entities. Beyond the rhetoric of overseas campuses, this work has only just began.

Saturday, September 01, 2012

On the Economics of UK For-Profit Higher Education

The debate about For-Profit Higher Education is reaching a fever pitch in the UK. On one side, the Pro-Choice group, the predictable band of private equity, businesses, and politicians, the latter group being committed to a corporate state and reduction of public expenditure in Higher Education, at least in the medium term. On the other, the Pro-Life-as-usual group, the disaffected public sector teachers' unions (University and College Union, or the UCU), and most public universities, who are wholly unprepared for a competitive marketplace. Predictably, as is the spirit of the age, the rhetoric of choice is trumping the pleadings for status quo: By making this a battle for privilege and perks, the UCU has dealt themselves a losing hand. There is very little research and understanding on how For-Profits work (despite a large body of literature from across the Atlantic and other countries) among the ranks of the Public Sector universities. This is the context of setting out this sketch, from an insider's perspective, how the economics of For-Profit really works.

I have seen For-Profit Education from inside for at least fifteen years, in different countries, both in its corporate form and at a owner-operator level. I am a huge believer that the Higher Education sector in a modern economy should be diverse and innovative, and having seen a few of the lesser UK universities at work, I am wholly convinced that they have failed in that task completely. In some sense, the current policy drift towards the establishment of For-Profit universities and their expected rapid proliferation has been justified by the failure among the ranks of public sector universities to offer an alternative view, and defy the pack mentality which dominated the sector.

However, I am equally sceptical that the Private Equity or Public Capital markets help create a better model of Higher Education. In fact, reading the Harkin Report and other evidence coming out of the US For-Profit sector, the business looks like a cross between Russian Oligarchy, which made its billions on the back of public assets, and petty swindle, where money was made by seducing credulous and vulnerable students.

It is also notable that Harkin report squarely blames Wall Street and Corporate mentality, particularly unrealistic pressures of growth in returns, and decision making in distant corporate Head Quarters rather than campuses, which such investment structures invariably impose, for this over-reach.

In many ways, it does seem that the foundational assumption of For-Profit Higher Education is wrong: Karan Khemka, a Principal in Parthenon, a highly regarded consultancy specialising in Education, wrote in Harvard Business Review that Higher Education is an attractive business because students pay in advance and the business is always awash with cash. However, this undermines the need for capacity building and investment, both physical and intellectual, critical for a good educational experience and outcome. Contrarily, the For-Profit models are often based on on-demand intellect, aka adjunct tutors. In fact, I shall argue that For-Profits have so far made money on the back of public education system in two ways: First, by grabbing a share of public subsidy (as in the US), and two, by using a part-time teaching pool made of people moonlighting from the public institutions (a common practice in the UK). However, the key contradiction here is the dependence of For-Profit profitability on the existence of public education sector, and once the latter is comprehensively dismembered, which will happen if the corporate form of For-Profit Education grows unchecked, the profitability of For-Profit is also likely to disappear.

Unless, indeed, For-Profits help to innovate new ways to delivery, and converting non-users of education.

This is seen as the primary rationale behind For-Profits - that it helps to convert non-users, people who dropped out of Higher Education, through innovation in learning. Private education, as some commentators have pointed out, exist side by side with public higher education in almost every country in the world to satisfy one of the three needs: of MORE Higher Education, or of DIFFERENT Higher Education, or of BETTER Higher Education. This gives us a typology of sorts of the Private Higher Education, as conceptualised by Daniel C Levy, a scholar of Private Higher Ed in State University of New York in Albany, that of Demand-Absorbing, Religious/ Cultural and Elite/ Semi-Elite schools.

However, For-Profits find it difficult to fit into two of these three segments: Creating Better Higher Education means higher costs and creation of significant intellectual capacity upfront, and runs counter to the belief in Wall Street and elsewhere how Higher Education business makes money; similarly, most For-Profit ventures tend to focus narrowly on a few vocationally relevant areas of Higher Education, IT, Business, Law, Fashion, etc., and tend to concentrate on high density population areas and tend to be non-selective. This makes the Better or Different routes antithetical to For-Profit models. Henceforth, the For-Profit education's model so far solely depended on demand-absorption, but this is highly dependent on business cycles or quick dismemberment of public education systems. Indeed, such a volatile model will be grossly unloved by Private Equity or Public Capital Markets, and this forced most For-Profit Higher Ed businesses to be innovative about demand-creation.

This clearly caused the fragility of the current For-Profit Higher Ed business models in United States. Since the furore started regarding the default rates of Student Loans by students of For-Profit institutions, which is much higher than public institutions and often tops 40%, the recruitment practises of these institutions have come under scrutiny. It does seem that the For-Profits actively set out to create demand, not just by reaffirming the hypothetical value of college education but also making misleading promises and admitting unprepared students to higher courses of study. The whole saga is indeed very alike the Sub-prime mortgage problem. One would wonder, therefore, as the Student Debt in the US exceed credit card debt, whether in a few years time, barring access to Higher Education will become as acceptable as denying a mortgage to an aspiring home-buyer has lately become.

Indeed, the policy-makers in the UK have learnt little from the experiences of the United States and are currently creating their own version of the problem. The Student Loan Company (SLC) is duly in place, a new funding regime where money follows the students is in place and dismemberment of public universities have begun. The Private Equity interests have reached a peak, and a bubble is forming in education investment, as few good Higher Education assets (those with degree granting ability) are being snapped up at very high prices: This would, expectedly, lead to pressures on earning later and artificial demand-creation for education! The signs are already visible, with Student Loan funded networks coming in place, and businesses have seen the opportunity to get the funding and channel it to the unemployed, who, by signing up, can benefit from increased social security payout. This would surely lead to a problem of completion rates etc., but neither in stock-markets nor in democratic governance, such considerations have any place.

UK indeed had a thriving For-Profit Higher Education sector for at least two decades, contributing to the economy an estimated £2 billion at its peak, and though, unlike US, this sector received little public subsidy. Instead, the institutions survived on extracting 'rent', being the easy route to residency in the UK for applicants from overseas. I must stress that this is different from being 'visa colleges', as all these institutions are currently portrayed. They were legitimate For-Profit colleges, with massive infrastructure, staff and range of courses. However, instead of trying to compete with subsidized public universities, these colleges went after the most obvious opportunity: The International students ready to pay a premium for an UK education and access to UK job market. This is exactly what the businesses do in any society, exploit emergent and often risky opportunities. It is possible to see the resulting crisis, and tightening of visa, as one and the same as the problems with demand creation in America - the UK colleges made misleading promises and admitted the less able - and can be treated as symptomatic to the current For-profit business models.

It is important, therefore, to look for an alternative business model for UK For-Profit Education, because, believe it or not, the international student market has become more, not less, attractive in some sense. The universities have already scrambled to take advantage of this, and offered their sponsorship to the students coming to For-Profit providers; bigger For-Profit providers like BPP tried to take advantage of this attractive opportunity. From the 'rent' perspective, we should note that the 'rent' on UK visas have only increased, and the incentive to abuse the system has just gone up. This is what happens when supply is cracked down upon instead of penalizing the demand: By restricting which institutions could sponsor a visa, the government has raised the price that potential immigrants will pay for a visa and therefore raised the incentive of abuse; cracking down on illegal work and actual deportation would have penalized demand and create a disincentive for abuse. The government tried to, rather cleverly, mask the ineffectiveness of its own agency and its ability to enforce the immigration rules by shifting the blame and the responsibility of immigration control on the Higher Education sector in general and smaller For-Profit institutions in particular, but this has indeed made UK immigration only more susceptible to abuse, and the contagion, as evidenced in the recent events of London Metropolitan University, is now spreading wider.

However, the weak economy and job creation, which will dampen the legitimate international demand as well as demand at home for education, are more potent reasons to force a restructuring of the sector. The private equity interest in the sector is currently fuelled by perceived regulatory arbitrage, that the public money will now be diverted to private providers and the public universities will now have to engage on a level-playing field: But this is not a real business case and is unlikely to result in great expansion in student numbers as the country faces a difficult economic climate for years to come. In this climate, For-Profit providers, alongside their PE backers and investment bankers, need to look at sustainability of their business models, which must look at value creation, and not just arbitrage.

This brings me to the final point: How do For-Profits create value in the Higher Education sector? As I mentioned earlier, the usual expansion of choice argument is lazy and overused: In a contracting market for education, this may not even be economically viable. However, there are at least two areas where For Profits can make a difference, and create new opportunities in Higher Education.

First among this is by creating GLOBAL education, which standards-bound and usually risk-averse public universities fail miserably at. Despite the talk of transnational education, the governance structure and the priorities at the public universities are resolutely insular: It is extremely difficult for any of these institutions to effectively create a truly decentralized global network, offering all its students an education fit for global age. It is no surprise that private universities and business schools have a lead on this, and For-Profits can take this work further and create a truly differentiated offering.

Secondly, For Profits can make a difference in TECHNOLOGICAL INNOVATION in Higher Education, which not only falls in line with their own quest for efficiency, but also in their lineage as businesses to apply available technologies. Indeed, the most successful For-profits have already greatly enhanced the application of technology in education, and new and exciting offers seem to come upstream at regular intervals in this space.

So, to sum up, the current business models in For Profit Higher Education may not be sustainable, as they have so far depended on public subsidies, direct or indirect, or demand creation, which invariably leads to abuse and disaster.  The For-Profits can, however, move away from the demand cycles and create differentiated offerings, just as successful businesses in other segments will do: The two tools available to For-Profit providers in this respect are global certification and technological innovation. For-profits already do these things well, and instead of copying the strategies of public providers, or other not-for-profit institutions (which may be governed by a different set of priorities), For-profit Higher Ed should focus on these areas. We haven't yet seen a Google or Facebook in this space, but if we believe education is the killer app of our generation, it is time to bring about one.

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