Posted 7:42 AM by George Siemens
Flight for Survival: A New Operating Model for Airlines
Quote: "One traditional company after another — manufacturers and service providers alike — is facing a vexing problem: Their business models have become so complex that it is harder and harder to generate profits. Over the years, these companies have added layers of product and process complexity to their business models in order to grind out incremental returns. Although each incremental decision can usually be justified on its own, the aggregate revenue benefits often fail to compensate for the overall costs of complexity.
As these companies struggle to remain profitable while serving a broad set of customers with complicated and varied needs, they’re frequently undermined by smaller, nimbler competitors that supply a more focused product, usually to a specific set of customers, at a lower cost. In these situations, a company may know the cost of complexity is dragging it down, but changing its business model is easier said than done."
Comment:Excellent article...very relevant to traditional education providers. Like airlines, higher education is encountering profit-driven, agile competitors who are responsive to "customer" needs. The issue, however, is not the nature of the new competitors...it's the apparent inability of traditional institutions to innovate and respond at a speed and manner reflective of the current climate. "The new operating model for hub and spoke airlines [education?] that we suggest would greatly improve their chances of survival, as costs would be more closely balanced with customer needs... Although this transformation may seem daunting, the risk of inaction is much greater than the risk of acting and dealing with some missteps along the way."