The Net, the Universities, and the Market

John V. Lombardi
Florida Government Technology Conference, September 22, 1998

"I don't get it," my technology distrustful friend said, "How come these people make all this money on the stock market with Internet companies, their prices rising ever higher, and all they do is lose money on operations? What kind of business is this?"

Of course, he doesn't get it. The Internet isn't a business it's an opportunity, a vision, and an idea; and while it has a host of real world technological high priced complicated attributes, those are but the plumbing of a magnificent idealized architecture. The Internet, like pork bellies and corn, sells futures; it sells the delivery at some time in the future of a product whose value is at some risk. Unlike pork bellies we don't know what the product of the future is on the Internet nor do we have a clear idea about when we expect delivery. As a result, we speculate wildly, we invest as if it were the California gold rush of 1848; we repeat in awe the stories of past miraculous discoveries to energize our wild investment in the possibility of a future miracle.

Each week, month, or year we read breathless articles in our print media (and that's what drives the hype on the Internet, one of the minor ironies of the process) --in PC Week and InfoWorld, the currently dead but perhaps to be resuscitated Byte, the Popular Mechanics of the Web, PC Magazine, and others of their ilk-- extolling the breakthrough technology about to transform our world, migrate us to a new level of interactivity and communication. Breathless, because if we don't hurry, we believe, we'll miss the boat, someone else will get the gold, and we, poor slow schleps that we are, will end up left out.

Not to worry, we won't end up outside the Net. The Net will be with us for quite some time, and like the Wild Wild West which it so clearly resembles, the idea and the technology of the Net will modify itself (morph as the trendy among us would have it) into ever more consumer-focused and business-driven models.

Once the province of the technologically literate and creative, the Internet now belongs to the consumer. We who wandered the Internet pathways in the old days, proud of our pioneering skills and tracking ability, now find ourselves relegated to museum grade exhibits. The consumers own the store. Why else do we all understand the title of the movie and TV show labeled The Net? The slogan, "Where do you want to go today?" isn't aimed at the technological elite, but at the consumer public. The consumers will drive the next stage of our technological revolution, and we need pay more attention to them.

"How can you require computers for all students?" my faculty colleague demanded. "They won't know what to do with them, they will complain bitterly about the expense, the system can't handle the extra load," he complained.

"Nope, not so," I replied

We, old people that we are, fear a speed of a technological change that our students do not even notice. Not mere observers, they are part of that change. The students arrive, unpack their computers, plug them in, and begin computing. The students have no problem with universal computing as a technical matter and recognized the utility status of computing and the Net without any instruction from us. No, the problem isn't with the technology and our ability to use it; the problem is with substance of what we have to use.

Our students, and everyone else out there on the Net, want content not technology. We are here at the Florida Technology Conference, but it isn't really about technology at all. Sure, the system administrators have to keep the Net running, we have to prevent hackers from messing up the place, we have to teach ourselves how to behave in the new electronic public places, we have wire campuses, and connect devices. This is expensive and complicated activity and we need good people to figure out how to do it. Yet technology only serves as the medium and not the message. It is the message that requires the most work, and it is the message that animates the world of computing investment, that drives the stock prices of Amazon.com, Yahoo.com, and a host of other portal and merchandizing companies off scale. They hold the promise of content.

In the technology driven phase of personal computing, the content depended on the capabilities of the technology, limited as we were by small memories and miserly storage devices. We scrutinized the technical specifications of every product to find the marginal advantages that made a difference in what we could do. We had large printed instruction manuals to save space on our disks, we lived from upgrade to upgrade because each one made it possible to do something obvious we could not do before.

Today, as the technology phase fades into the background, the business, commercial, and content phase drives the market. The struggle isn't over which server to deploy with what technology; the struggle is over which portal provides the content that the consumer wants. A fast, reliable, powerful, multiprocessor server without content is irrelevant when just about every server can deliver killer content. Yes, like the engineers in our power companies and the experts who worry about the telephone system, our network and hardware technology innovators and managers serve a critical role in our lives, but they don't actually drive this business. Content drives the business.

"So," one of my technoid colleagues commented, "you don't think it matters about DVD about ASDL about NT and Netware and all the other things that will transform the bandwidth?"

Of course technology matters. But it is no longer in doubt nor is there any mystery about its outcome, only about the details. We will have massive bandwidth at reasonable prices for everyone. Is there a lot of money to be made by making the right choices at the right time in technology? Sure, but that conversation misses the point. The value of bandwidth comes from satisfying its consumers, not from its technical wizardry. Absent a satisfied consumer, we have capacity and expense without profit, a condition that over time, even our superheated marketplaces can't sustain. So the issue is content.

Content comes in many forms. It may embarrass us that pornography became the first to use bandwidth for profit. The rest of us put pictures of our trip to the Rocky Mountains on the Net, and no one cared, but the porn merchants knew immediately that dirty pictures took advantage of everything good about the Net and developed some of the first for-profit, pay-before-you-enter web sites.

Our contempt for the content and its success shouldn't confuse us about the Net. The Net has no values; it only carries our values. So the porn merchants taught us that content matters, the consumer matters, and the match between medium and message matters. Who else makes money on the net? We don't know for sure, but the task engages lots of people. Some successful examples provide apparently free services that in fact transfer cost from the company to the consumer without a bill.

Before the Net became a commodity, computer and software vendors gave us large manuals filled with technical information. We dialed 800 numbers to ask their large technical staffs to help solve problems. Not any more. Our hugely more complex Microsoft Office comes with pathetic manuals that advertise the basic features and tell us nothing we really need. For help we log onto Microsoft's site and get information on our time, with our machine and phone line. When something strange happens to my Dell, I go to the Net. At the Dell site a computer takes my machine code, it shows me new things or fixes for my particular machine, I download the fix, I print the instructions, I follow them and upgrade my bios, and I think I'm pretty smart.

Who paid for that free transaction? I did. The company no longer pays for staff, prints manuals or helps me by phone. Instead, I'm on line, doing my own maintenance and think I'm getting a bargain because the Net delivers content.

"Fine," said an exasperated listener at one of my technology rants, "but we're university people. What does all this mean for us? Are we out of business, is this the end of the residential university, are faculty obsolete?"

Universities produce content and content is everything for the faculty and students. We do lots of other things to be sure, but the core product of the university is content. We teach it in the classroom and we produce it with our research. So for the university, the Net and its associated computing technology provides us with yet another medium for our content.

Being basically medieval institutions, the challenge of the new forms of delivery make us fret. Universities house the most innovative members of our community within the most hidebound, traditional, and change-fearing structures in the world. So our Jeremiahs cry out that the university "as-we-know-it" is as good as dead, consumed by the dissolving power of universal access to all knowledge through the faceless and nameless Net. Faculty, fearful for their jobs, imagine on-line universities taking their markets. Universities, protective of their monopoly, shudder at the prospect of for-profit network enterprises hiring their best talent to deliver better quality and lower prices to students anywhere. Intellectuals, eager as always to elevate the normal process of human change to crisis proportions, oscillate between a fevered defense of the humanistic residential university and dramatic announcements of a new age that will sweep away all traces of irrelevant old universities to make room for networked knowledge.

Of course, all this exaggeration is fun, it creates employment for writers and futurists, and it probably sells a number of newspapers or magazines. But it is mostly bunk.

Universities adapt and absorb everything technology offers, and have done so since the 1400s or before. We managed the printing press, the telephone, the television, automobiles, and computers. We survived the transformation from elite to populist institutions; we lived through wars, revolutions, and social change. We know how to capture the benefits of change. Most dire predictions about the end of the "university as-we-know-it" assume that we live in a zero sum world and that if technology and innovation succeed, traditional university activities must lose. Not so. In America, new and traditional types of higher education both grow at the same time.

"That's sure good to hear," a timorous colleague emailed me, "So we don't need to worry about change?"

"No," I replied, "we don't need to worry; we just need to change."

The consumer-driven networked world creates a host of opportunities for universities to deliver content. Entry barriers to knowledge on the Net deter almost no one; all of us have a web page some of us many of them. We put our courses on line practically free.

The Net removes monopolies on content imposed by geographic mobility and cost. I use any on-line library instantly, I need not travel, I don't have to wait, I am there. Our current university model places a heavy emphasis on geography: on campus, classroom, schedule, meeting times, and fixed sequences for content delivery. The Net model cares little about these constraints. The university's challenge is not to find the content, we already generate that, it is to deliver the content through this endlessly accessible medium.

Television, unlike the Net, imposed a prohibitive cost on placing content into the medium. While everyone could watch, not everyone could provide programming to this medium for free. The Net changes this paradigm because it gives low-cost access to both content provider and consumer.

The commercial possibilities of this medium for education appear endless. I can appear on line delivering education of the highest quality in about 90 days if I have a small fund to buy faculty talent and time. As a for-profit producer of on-line education I buy the faculty time without buying the faculty, and I buy their knowledge without paying for the cost of producing it. We see a host of on-line universities emerging to exploit the talent of our faculty, developed at university expense.

"We should stop the faculty from participating in this rip-off," said one of my more authoritarian advisors.

"No, " I replied, "We should compete and win."

The commercial model for delivering education does not invest in the creation of content; it only buys it from a primary producer. In the past, we controlled both the primary production of knowledge through faculty time in research and creative activity and its delivery through teaching in institutional campus settings. We avoided distinguishing between the two functions because our monopoly on production and dissemination gave us a vertically integrated enterprise. Now, when challenged, we need to recognize our comparative advantages, eliminate the obstacles to competition, and win.

Over the next decade, universities and colleges will find many ways of adapting to the changed opportunities for content delivery, and no one model will fit all. Success will come to those Net-ready universities that follow these six principles:

  1. The production and delivery of knowledge --research and teaching-- represent two products even if the same individuals do both functions.
  2. The faculty provide the irreplaceable resource for engaging the Net. Their participation requires incentives related to the commercial success of their products.
  3. The content and the medium are also separate products. Content delivered by the Net or in a classroom or elsewhere is by most measurement pretty much the same. The medium, the Net or the campus, adds additional features to the value of the content. Classrooms, campuses, face-to-face discussion, and bonding with instructors can enhance the value of the content to the consumer. Ease of access, flexibility of timing and scheduling, and other Net delivery features also add value for many consumers. Universities must separate and market both the content and the medium.
  4. Name brand matters. Because anyone anywhere can become a Net content provider, consumers will seek brand names. Universities have terrific brand names, and they must leverage those brand names to validate the quality of their Net content. Universities should resist the amalgamation of their content with generic providers and maintain high quality in Net products delivered with their brand name. matters. Because anyone anywhere can become a Net content provider, consumers will seek brand names. Universities have terrific brand names, and they must leverage those brand names to validate the quality of their Net content. Universities should resist the amalgamation of their content with generic providers and maintain high quality in Net products delivered with their brand name.
  5. Focus on coherent product strategies. Universities must pick their market niches carefully and only compete where their educational products reinforce the recognition of their name brand's reputation for quality.
  6. Pay attention to the money. Universities, as self-contained communities, have notoriously poor cost controls and cost accounting. The deconstruction of our content through the Net requires us to what everything costs us to produce. We have to know when the work we do for the Net generates a margin or produces a loss for the rest of the university subsidizes a loss. We must ensure that our work on the Net produces a margin that we can reinvest back into the university to maintain and enhance our quality. What distinguishes us from the for-profit content delivery institutions is that we also produce some portion of the knowledge we deliver.

Over the next decade the marketplace and we will sort this all out. Some wholly Net based for-profit academic content providers will succeed, many marginal producers will hang on, and a few universities will prosper by adapting and absorbing the Net into their operating culture.

We expect to absorb the Net, and I expect we will have lots of company among universities and colleges, large and small, who capture the opportunity of the Content Enabled, Universal Net.

1998

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