Reflections on a week at Harvard Business School (and thank you NAS)

For the past two weeks I have been digesting the terrific week of learning at Harvard Business School that National Arts Strategies offered as part of its Chief Executive Program.

The week’s theme was The New Nature of Relevance, and our case studies, HBR articles, and group exercises were designed to foster conversation about leadership and how to steer our organizations through the opportunities and obstacles presented by the post-recession, digitally-enabled, generationally-shifting, globally-connected world.

For me, the location of our conversations was a vivid reminder of the challenges we face. That’s because the business of higher education is undergoing the same sea change we are navigating in the nonprofit cultural sector. I was gob-smacked when on the second morning of program, the weekly email from Strategy + Business landed in my In Box, this one titled “The University’s Dilemma” with the subtitle, “In the face of disruptive change, higher education needs a new, more innovative business model.” After I read the piece, by Tim Laseter, the entire week became a play within a play. On the one hand we were having deep conversations about boldly creating new organizational forms, new outcome norms, and new ways to engage people in the arts. On the other hand, we were doing it within a delivery system that is itself grappling with the need to change. (More than one professor told us that in 20 years, more than half the colleges in the U.S. will no longer exist.)

Don’t get me wrong. Harvard executive education is an extraordinary experience. We worked in state-of-the-art classrooms in a beautiful setting; read outstanding preparatory materials; engaged with well-prepared, articulate and challenging professors; ate really good food (at least by institutional standards!); and were attended to by a courteous, helpful staff. The gym was palatial, the reception areas spacious, and everything was spotless.

But as Laseter points out in his essay on why education needs to change, universities are failing on multiple fronts. Costs are skyrocketing (Harvard’s website estimates the cost of a year at the Business School for a single person is about $87,000); fewer than two-thirds of students enrolled in a four-year institution attain the targeted degree (national data from Laseter); and even as college enrollment has grown, employment forecasts predict a shortage of employees appropriately prepared for the kinds of jobs being created. The employer/university relationship is frayed because higher ed is not keeping pace with employers’ needs; its relevance is being directly confronted. The value proposition — that a college education will result in a better, higher paying job, justifying the time and expense of college – has eroded. Sound familiar?

Laseter says, “In the business world, such poor performance typically leads to industry re-structuring fueled by new entrants, as well as innovation by a subset of incumbents. Those moving too slowly or in the wrong direction don’t survive … Although [those] few elite institutions may be buffered from disruptive forces, the vast majority of institutions of higher education face disintermediation in their existing relationships among employers and students. Pressure from new entrants as well as the leaders among existing players could squeeze out weaker institutions, repeating the pattern of so many other industries. To navigate through these forces, universities need to follow the example of their business counterparts and fundamentally rethink what they do. They need to foster new capabilities, reconsider their means of attracting revenues, and allocate costs more closely to their value proposition. In short, using the language of strategy, it’s time for a new business model.”

Perhaps we can take some comfort in the notion that it’s not only the arts sector that faces these pressures. It means we all are in this together, that there’s no clear path out, no models to copy. It is a creative time to discover how to move forward. Fostering new capabilities, reconsidering means of attracting revenues, and allocating costs more closely to our value proposition are ideas the cultural sector has been grappling with for years.

So what to do? Laseter’s suggested actions correspond almost directly to our NAS/Harvard readings and case studies.

First, consider your potential rivals. “Benchmark your rival and potential rival innovators, not only in your own industry but across industries.” For the nonprofit cultural sector, this requires a close look at for-profit entertainment providers, user-generated projects and collaborations, peer-to-peer learning exchanges, amateur cultural activities, all variety of media consumption, and ways audiences have become participants, curating their own experiences, rather than passive, consuming programs of our design.

Laseter focuses on technological disruption in learning systems, and identifies on-line gaming, third-party credentialing organizations, and on-line courses as examples of disruptive entrants into higher ed’s space. Paralleling his ideas, as part of our Harvard course we read a case study of the Metropolitan Opera’s Live in HD program, and discussed whether this disruption strengthened or undermined the ecology of the cultural sector (with good arguments on both sides).

Second, know yourself. Organizations need to identify and understand their unique value propositions. This will differ across arts disciplines and might include an organization’s ability to curate (separating signal from noise, bringing unexpected or new work to light), to amplify (helping artists and projects achieve scale), to engage (creating clear pathways for cultural participation), to touch directly (offering face-to-face instead of mediated experiences), to expand knowledge (offering interpretative, participatory or scholarly programs), or to animate (bringing creativity and energy to cities or neighborhoods). Above all, Laseter warns, don’t try to be all things to all people. Determine how you can excel and then go for it.

Our readings included V. Kasturi Rangan’s 2004 Harvard Business Review article, Lofty Missions, Down-to-Earth Plans. The piece exhorts non-profit organizations to go beyond their “broad, inspiring mission statements” to create systematic methods of establishing a “strategy platform,” which determines how the mission will be achieved, including what programs will be run and how they will be run. Rangan says, “Instead of trying to be all things to all people, non-profits should pick a niche, craft an operational mission, and flowing from it, formulate a coherent strategy platform. Then it should vigorously pursue those programs that support the logic of the entire strategy.”

Now. Forward to the basics. Laseter says institutions — more than ever — must have a clear, explicit rationale for what they deliver, particularly in light of declining results and growing costs. And, he says, “Institutions of higher education have the ability to solve the crisis they currently face, but resolve presents the greatest impediment.” 

Consider this last observation as it applies to the arts. Cultural institutions have the ability to move forward energetically, if only they have the resolve. Often, colleagues in the NAS program report they “can see it,” they know what to do. But that does not make the “how to do it” any easier. It helps to discuss examples of successful change, to consider cross-sector examples, to think about rival innovators, to agree on the key value proposition, and to know we’re in it together.

(Our readings included Leading Change: Why Transformation Efforts Fail, by John Kotter.  A classic of the literature, this is a piece to read and re-visit regularly.)

I imagine that after we left, Harvard administrators were in meetings across their spectacular campus, engaged in a parallel conversation. Undoubtedly they are examining their fixed costs, thinking about technological innovation, creating new ways to engage students, and working to preserve their primary value proposition, that higher education is the gateway to a better life. How they will continue to deliver high quality educational experiences in a changing world? I hope that some of our creativity rubs off on them. They’ll need it to define the new nature of relevance. It will be interesting to see what comes next at Harvard.