Edited by David W. Breneman and Paul J. Yakoboski
Chapter 1: Is the Business Model of Higher Education Broken?
David W. Breneman In recent years, several industries in the United States have struggled with failing business models. The examples are numerous: automobile manufacturers, newspapers, electronics manufacturing, textiles, clothing, shoes, and airlines, to name but a few. Recently, the business model concept has been applied to non-profit organizations as well, including colleges and universities. In that framework it’s legitimate to ask whether, and to what extent, the business model of higher education is broken, or unsustainable, in its current form. This chapter, originally prepared for The Miller Center of Public Affairs at the University of Virginia as background for their National Debate and Discussion Series, provides a context for the chapters that follow. When the business model concept is applied to for-profit industries, the focus is primarily on the survival of firms in the industry. In most cases, there is limited public interest in preventing firms from failing, as new suppliers, often with lower production costs or new technologies, enter the marketplace, displacing older industries and providing consumers with newer, often better, products.1 Non-profit higher education differs from the case of for-profit firms, however, in that a public interest exists in the education of our citizens, not only for careers but for civic and community leadership. Both public and non-profit private institutions of higher education, and their students, receive billions of dollars in public subsidies to ensure adequate investment in the nation’s human capital.2 For institutions charged with broad public purposes, many would argue that the concept of a broken...
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