Henry Ford used to say that “they can have any color car they want as long as it is black.” This is industrial age, or goods-dominant, logic at work. Unfortunately, too many policy makers are using this same kind of logic as they attempt to address funding, performance and accountability issues in higher education.
Why? Ford’s assertion assumes that the supplier of an offering creates all the value and thus dictates its valid form and function. Our public and institutional debates about the future of higher education are stymied by this 20th-century goods-dominant logic. However, because higher education is, in fact, a service, we need to use a service logic, wherein we realize that value is co-created by the student and the higher education institution.
A new “College as a Service” (CaaS) logic can help reframe a substantive debate that pulls together what seem to be very disparate strands of thinking regarding practices and policy. CaaS provides a systemic way of thinking about nettlesome challenges such as how a student’s customer profile of preferences, needs and active participation leads to student success; how information yields accountability; and how self-service can improve higher education.
In this way, College as a Service is a new logic for how higher education systems behave that is distinct from a wholly financial (colleges function a certain way because of how we pay them) or political (colleges function a certain way because of who has most sway over the political process) perspective and can help us better understand how value is co-created by students and colleges and thus how it should be measured and improved.
Services Take Over the World
Over the last three decades, the service sector has come to dominate the economies of the developed nations -- ahead of agriculture and manufacturing combined. In fact, traditional industry classification data reveal that in the United States, approximately 80 percent of our GDP is generated by services and 80 percent of our labor force is employed in service jobs.
Service offerings are defined as “deeds, processes, and performances” that are provided in “exchange relationships” among organizations and individuals. They are often performed in close relationship with the client, meaning that many service offerings are local. In fact, the value of the service itself is co-created between the customer and provider.
Value ceases to exist absent one or the other. Think of a doctor and a patient managing a chronic illness such as diabetes or a financial adviser and client managing a stock portfolio. In both cases, neither party can create a positive end result alone. Examples of traditional service industries that become larger as nations develop include education, health care, financial investments, transportation, professional, hospitality and retail.
Why is this important? In a goods-dominant production economy, producers can easily believe that they create all the value through the invention, design and manufacturing of goods while customers simply consume the end result, whether it be a car, refrigerator or a roast beef sandwich. Hence, Henry Ford’s famous quote from the start of this piece. In this way of thinking, consumers are an afterthought in what is considered value, even quality.
Progressing through the mid-20th century, this type of logic evolved into a set of management, quality and productivity theories and analytical tools to enhance the ability of organizations to create tangible products. The quality movement of the 1980s and the re-engineering movement of the 1990s provide stereotypical examples. The current emergent body of research regarding productivity and technology-enabled higher education uses these goods production theories and tools to benchmark quality, cost-effectiveness, flexibility and innovation in the sector.
Yet, colleges and universities deliver a highly sophisticated service -- one that seeks to transform the knowledge state of the client/student through a series of exchanges between student and faculty, staff and other institutional resources (e.g., computer labs, libraries). By definition, a service is an offering in which the consumers and producers co-create value in relationship with each other.
Like many sophisticated services, such as healthcare and business consulting, higher education instruction is best conceived of as a journey – a series of critical encounters that take place over time, among individual actors and across institutions – that creates value incrementally. Within this journey concept, the student becomes a central figure in the creation of value in higher education. Students are key actors in the transforming of their knowledge state even as they change from moment to moment along the journey.
Student participation, based on their preferences, values and starting points, is required for change even as a diabetes patient may need to change eating habits and monitor glucose levels in support of a doctor’s expert care, prescriptions and coaching. (Note: This means that “college” cannot be defined as something students are not ready for, but rather as an offering that has no value until a student is engaged.)
In order to promote increased accountability and productivity in higher education we need a set of theories, analytical tools and measures designed to unlock the co-creation of value process in services, not one designed for goods production.
Fortunately, over the last three decades research into how value, quality and efficiency is produced in services has been developing in tandem with the global economy. Two leading centers of thought in this space are the Center for Services Leadership at Arizona State University and IBM’s Almaden Research Center, and they provide a platform for service science leadership across many industries.
These organizations are leaders in using analysis and tools that assess how actors (people, businesses, nations) co-create value through dynamic configurations of service system resources, including people, technology, shared information, and organizational practices. These techniques are emerging as ways to drive quality, productivity, compliance, and innovativeness in all service systems including healthcare, public services and transportation.
An early example of service theories and tools being applied to higher education appeared in a paper released last year by the Center for American Progress, in collaboration with the Center for Services Leadership.
The paper titled, Leveraging Service Blueprinting to Rethink Higher Education, used an analytical tool called “service blueprinting” to map, from a customer’s perspective, various higher education services including financial aid application and online course delivery to identify the “pain points” where a student’s journey was stymied. Blueprinting helps to identify ways to integrate all resources (people, technology, shared information, and organizational processes) to redesign service delivery for better results.
If this process sounds familiar to policy and practice experts in higher education, especially those who are focused on technology and reform, it should. Analytical approaches similar to service blueprinting have been used by the National Center for Academic Transformation (NCAT) to do what it calls “whole course redesign” and the course redesign work being done by the Carnegie-Mellon Open Learning Initiative (OLI).
What these two approaches gain by being placed in the broader context of service theory is the specification of students as resource integrators and value co-creators that consciously help create the offering by knowing their needs and actively selecting resources that, in turn, alters their knowledge state through learning. NCAT and OLI, more so, have been primarily seen as technology-driven initiatives that can be used to bring down costs while maintain quality in the supplier’s model for delivering higher education.
Yet, in the service perspective, both initiatives are much more about giving student customers the power to drive the creation of the value in offering – or self-service. Students help determine what goals to pursue, which resources to use and what quality means for them. It is because of this specification of customers that service research has a well-articulated body of knowledge regarding self-service in sectors such as transportation, healthcare and investing.
Unfortunately, this thinking is underdeveloped in higher education. What aspects of higher education should be self-service? Which should not? Currently, in higher education, we aren’t even asking these questions in a methodical way.
Khan Academy, a popular software-driven, web-based education solution, provides a perfect example of this lack of a methodical approach to asking self-service questions. One of the authors was once in a room with higher education leaders as they were introduced to the Khan Academy approach, and to say that the group was befuddled is a kindness.
It wasn’t the technology that baffled them; it was a completely different way of conceiving of how learning happened that is dependent on a detailed understanding of how students engage with content and adapting the education delivery to create a mutually supportive journey toward mastery. CaaS would allow access to theory and tools, at first borrowed from other sectors, that go beyond the technology and into how a service journey is created in the higher education context.
Service research has still more to offer. The service literature includes a great deal on the psychological state of customers as value co-creators while they go through a service journey. For example, customers are far more likely to think of a service positively and complete an extended service interaction, such as working with a phone representative to resolve a banking error, if it uses their knowledge and agency to move the process. The consumer is empowered and thus perseveres.
In light of this, consider the recent article in Change magazine, “Supporting the Student of the Future,” which highlights the success of the Academy for College Excellence at Cabrillo College in advancing the college goals of at-risk students. According to the Academy’s founder, Diego Navarro, “a key focus of the program is raising students’ self-efficacy in the education journey.” Again, the service lens provides an operating model for why this might consistently be the case in student/education interactions, while individual higher education researchers struggle to build this point from the ground up over and over again.
Service research also has nuanced observations to offer regarding how people make decisions about purchasing service offerings from both traditional and innovative providers. Objective data, such as scorecards and rankings, can move purchase decisions best when they are in the context of relationships defined by trust. In other words, customers seek input from others who have been through the experience and give their recommendations more weight even than they do purportedly objective data on satisfaction, quality and value from unknown entities. In higher education, this suggests a far more holistic approach to how public policy makers should deploy the use of scorecards and model financial aid letters.
Finally, early service research that arose from the quality movement of the 1980s provides some basic consumer context for the college campus amenities wars. The service quality literature is clear that in lieu of strong, trusted information on quality, customers defer to tangible evidence as a means of judging quality.
Think of the recent innovations in branch design in retail banking. Commerce Bank of New Jersey, now TD Bank, grew its market share considerably throughout the 2000s by redesigning its branches to be about customer engagement, not security, and pulled customers away from competitors.
In higher education, anecdotal evidence is easily gathered by taking a walk through the average community college administration building and that of its competitor for-profit school campuses. The latter tend to be clean, well-organized, and with art work themed around student success, while the former often leave something to be desired. The service research both acknowledges this deference to tangibles when no quality data is available as well as suggests processes for helping build consumer confidence in lieu of them.
Some may say that the wealthiest of universities have, in fact, figured out this element of the production of services and build proverbial rock walls to accommodate it. Student co-creators of value, however, are seeking transformed knowledge states -- learning -- and the tangibles can be misleading. As in health care, where the best facilities do not always mean better treatment results and lower post-op infection rates, service analysis, at least, provides a nuanced way of thinking about the problem.
Globally, education is a $1.36 trillion sector, and experts estimate that inefficiencies in education are greater than 35 percent, making education one of the most inefficient sectors of the economy. Service research provides ways of understanding these inefficiencies, inclusive of dimensions of quality, as determined by students as co-creators of value based on their purchasing preferences, learning styles, and current knowledge state. It is thought that the use service analysis and tools can improve outcomes by up to 30 percent across the sector.
The gains that could be realized for taxpayers and students should encourage institutional leaders and public policymakers to mine service research and service thinking for effective theories and analytical tools that will build better learning journeys, co-created with students, and help society get more for its money. In the 21st century, Henry Ford’s statement should read, "They can have any color car they want, because they are creating it with us."
Louis Soares is a senior fellow at the Center for American Progress, and Amy Ostrom is a marketing professor at Arizona State University's Center for Services Leadership.