“Building a Better Business Model”
Rich Novak, Senior Fellow
Association of Governing Boards
Board of Governors Summit
August 2, 2014
© Copyright 2014 | Association of Governing Boards of Universities and Colleges
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Reasons for Re-thinking the
Business Model
• Unpredictable and unstable state fiscal
environment
• Approaching a ceiling on tuition
charges and affordability
• Federal research dollars at risk
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A New Business Model
• May entail significant changes for some
institutions
• Tweaks of existing model for others
• No one model for all
© Copyright 2013 | Association of Governing Boards of Universities and Colleges
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Consider a “Strategic Finance”
approach – aligning all resources
with mission, vision and
strategic plan
• Examine costs and revenues
• Non-academic and academic
• Focus on student outcomes: resources
for student success (remediation,
academic advising, undergraduate
curriculum)
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“Strategic Finance” approach –
aligning all resources with mission,
vision and strategic plan
• Make decisions based on data and
evidence, and on cost as well as
anticipated benefit
• Know cost and revenue drivers
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Framework for a New Business
Model: Managing Costs
Focus on “cost effectiveness,” not just
budget-cutting by:
1) reducing spending in areas least
damaging to access and attainment
From “{Improving Cost-Effectiveness: Leadership Challenges for Public Higher Education”
by Jane Wellman and Ellen Chaffee
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Framework for a New Business
Model: Managing Costs
2) increasing the proportion of students
who complete degrees, and reducing the
costs of degree production
3) reinvesting in core academic capacity
From “{Improving Cost-Effectiveness: Leadership Challenges for Public Higher Education”
by Jane Wellman and Ellen Chaffee
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Managing Costs: increasing
productivity and efficiency in
administrative areas
• Consolidate back-office functions
among departments and colleges
• Consider shared services among with
sister institutions
• Pay special attention to employee
benefits
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Managing Costs: increasing
productivity and efficiency in
academic areas
• Benchmark academic cost structures
• Incentivize innovation,
entrepreneurship, and partnership
• Engage faculty
• Focus on positive student outcomes
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Framework for a New Business
Model: Enhancing Revenues
• Understand what the economic engines
are for the institution
• Know top programs by FTE
• Know top programs by net revenue
generation
• Incentivize innovation,
entrepreneurship, and partnership
From ”How to Review Your Business Model: Some Best Practices in March/April 2013 AGB
Trusteeship Magazine, by Rick Staisloff, rpk consulting, and AGB Consultant
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Framework for a New Business
Model: Enhancing Revenues
• Mission: What are we good at?
• Market: What do people want?
• Margin: How do we bring these
together in a way true to mission and
generates resources?
From ”How to Review Your Business Model: Some Best Practices in March/April 2013 AGB
Trusteeship Magazine, by Rick Staisloff, rpk consulting, and AGB Consultant
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Framework for a New Business Model:
Enhancing Revenues
Mission
Market
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Margin
The business
model is your
institution’s plan
to generate and
sustain revenue so
that it can meet
its expenses while
bringing value to
stakeholders.
Structure for a Business Model
Review
• Creative a baseline of data
• Appoint a Leadership Team (include
faculty and staff)
• Develop a communication plan
• Board engagement is critical
From ”How to Review Your Business Model: Some Best Practices in March/April 2013 AGB
Trusteeship Magazine, by Rick Staisloff, rpk consulting, and AGB Consultant
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Implementing a New Business
Model
Develop metrics:
1) Key Performance Indicators
2) Dashboard indicators
3) Comparison groups
From ”How to Review Your Business Model: Some Best Practices in March/April 2013 AGB
Trusteeship Magazine, by Rick Staisloff, rpk consulting, and AGB Consultant
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Some Institutional Examples
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Thank You
Rich Novak
AGB Senior Fellow
RichN@agb.org
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