Cost Analysis (continued from cover page)
Activity Based Costing
A useful way that many institutions have found to examine cost questions is Activity Based Costing (ABC). The costing models developed by the Teaching, Learning and Technology Group (TLT Group), the Western Cooperative for Educational Telecommunications (WCET) and the Pew Center for Academic Transformation all use ABC. In a nutshell, ABC looks across departmental budgets to sort costs based on the activities that go into achieving your objective. In academic settings, this usually means sorting costs based on how much time people spend on certain activities. So, instead of trying to make decisions based on payroll and other costs in your budget statement, you are looking at the costs of say, marketing, designing, developing and delivering an online course across multiple units’ budgets. It may sound complicated at first, but it is one of the best ways to get a handle on your activities, and therefore your costs.
To Learn More:
Attend the National University Telecommunications Network (NUTN) conference in June co-sponsored by Sloan-C that focuses this year on quality. Sessions include cost-effectiveness and business models. For details, visit http://www.nutn.org.
Join the “The Business Issues of Online Education Special Interest Group” http://community.sloan-c.org.
Business Issues (continued from page 3)
5) Collaborating with internal/external partners. Collaborations were being developed for a variety of purposes: to share costs, increase scope or scale, or mitigate risk. Collaborations were developing:
--within a given institution (shared resources, courses)
-- with similar programs across multiple institutions
-- cross-institutionally, at the institution or system level
-- with industry, professional or governmental organizations
6) Understanding costs and measuring “success.” A partial list of success measures includes:
--Penetration and growth measures (market share, faculty teaching/trained, enrollments)
--Financial and operations measures (revenue, costs, margin or “net cash”, investments)
-- Marketing measures (lead generation, conversion, yield, retention, repeat customers)
7) Finding sustainable business models. Business models show how an organization captures value by offering a product or service and turns it into a revenue stream that can sustain and grow the business. Taken together, the six areas discussed above are part of the puzzle of creating a business model. Though the mission of an institution may be to deliver quality education to learners, in fact the customer (purchaser) is not always the individual learner. Customers can be groups such as collaborative partners that contract for educational services. The “capturing value” part of the model assumes that one understands what the attributes of online education are that attract customers. In addition to educational value, here are some attributes which emerged in the course of my interviews:
--Standardization across geographies
--Demonstrated quality control