Pitfalls of Vendor Selection and the Future of Higher Education

Jan 01

External vendors can be an effective business tool when internal expertise is unavailable or limited. In education, textbook publishers have been an essential external vendor for centuries. A recent experience has led me to question whether current trends in higher education, such as Internet based companion resources to textbooks which provide coursework and exams, are beneficial to the educational process. I believe that, when used properly, publisher resources can add to the educational process. When used poorly, these resources can result in a poor educational experience. When used exclusively, these resources are an insufficient substitute for highly trained and capable professors.

A Tale of Two Classes

My two classes last semester provided highly contrasting experiences. One class was taught by a practicing attorney with about 30 years of experience. He teaches in the evenings and had recently taken several years off before coming back to teach my class. The other class was taught by someone who has spent the past 11 years as a professor, during which time she completed her PhD. The outcomes from each class were surprising and provided me some insights into vendor selection and its effects on higher education. What’s interesting is that the first thing each professor said was how much he or she disliked the assigned textbook. That was the last thing the classes had in common.

As a result of his displeasure with the assigned textbook, the instructor for my ethics class added two additional books to the required reading for the semester. For each class session he assigned a half dozen or more papers, articles or topics for study. These included some of the most profound writings on ethics from all time. This amounted to hundreds of extra pages of additional reading aside from the textbook. One of the papers he assigned us to write near the start of the course solicited a statement of personal ethical inclination. When he found that most of the class leaned toward one particular ethical persuasion, he adjusted the future course content to include critical analysis of that persuasion. I’ve had similar experiences with other professors. It seems that there is always something about a textbook that’s not to a professor’s liking and they supplement it in some way.

The instructor for my accounting class also complained about the course textbook on the first night. Unlike other professor, there were no other books, papers or resources of any kind assigned. In fact, all the material for the entire course would come from the publisher of this book, including homework and exams. Another peculiar deviation from the first professor was a rather long complaint and warning about cheating and how so many students from previous classes had cheated and how she knew when they were cheating and so on. There was virtually no lecture in class, except to sometimes go through a problem from the textbook. In those cases she sometimes presented the material with a slight deviation from the text. Aside from those few minutes, the entire course was offered using resources provided by the publisher of the textbook.

This accounting course is the first and only college level course (graduate or undergraduate) that left me without a single artifact from my graded work. I don’t have a single assignment, quiz or exam to look back on, although the professor did allow us to look at the first exam for five minutes to ask questions before requiring us to return it.

The Pearson Solution

The textbook was Management Accounting: Information for Decision-Making and Strategy Execution (6th Edition). While the book may appear highly rated, I’m not sure the ratings are legitimate. All the five star reviews on Amazon are one liners about some clever feature of the book. None of them provide any details about the book, but instead say it’s “easy to read” or “practical and useful”. It’s impossible to say who is responsible for these reviews, but if you look at other reviews by the person who left the five star review for this textbook, you’ll see an interesting pattern. All reviews are one liners and they are all five star ratings. There are only three or four ratings, which include this book and another random product. I’ll let you draw your own conclusions about who is responsible for putting in those stellar reviews, but they are suspect and don’t describe the book I used.

Pearson has also created a companion website to accompany the  textbook. As part of the course I was granted eight weeks of access to this companion website. All homework assignments were completed and graded through this companion website. The homework was a combination of multiple choice and fill in the blank. Each problem could be done as many times as necessary to get the right answer. This was accomplished by changing the problem parameters and then going through the solution again. When number values were required, rounding needed to match the websites preferences, which was sometimes difficult to work out. The site would walk through the solution in a step-by-step fashion. Unfortunately, I never felt like I gained anything from the online homework. This may have been due to the format, but it may have been due to the fact that there was no lecture to prepare for the homework and the textbook did not cover the material in a coherent way. Technically, the site was stable and functioned as advertised.

The quizzes were always multiple choice, and I’m not sure if they came from the companion website or not. They did focus in on terminology from the chapter.

The tests apparently came from the Pearson material, and possibly from the website, based on comments from the professor. There were ten or so questions per exam. The choice of words was at times ambiguous. I don’t have either exam with me, which makes it difficult to give specific examples.

In addition to the textbook and the companion website, Pearson offers full solutions guides for each chapter, which include solutions to the problems, cases and possibly the test questions that were generated for each exam. The teacher used these extensively.

Nothing New?

While the Pearson Solution I’ve just described may not be new or novel, this class represents the first and only college level class (undergraduate or graduate) where the professor single sourced the material for the entire course. Outsourcing the educational experience to this extent was a completely new experience for me.

Outsourcing

When organizations lack specific expertise and capabilities, it’s often wise to seek a trusted vendor who has that expertise. The same may be true in circumstances where the cost to develop the expertise in house is too high. In the right circumstances, outsourcing expertise can make otherwise impossible projects possible. However, there are situations in which dependence on external capabilities, rather than hiring or developing those skills internally, is undesirable. In those situations, outsourcing can damage a company’s image and reduce the perceived value of its offerings.

When to Outsource Expertise

Outsourcing expertise makes sense when that expertise is not unique to a business. This may include management of commodity items, like computer networks, printers and office supplies. There are some cases where outsourcing is the only sensible option, such as with electricity generation. Every company uses electricity, but it would be extremely difficult to justify investment in equipment and processes to produce electricity in house. Other examples include the manufacturing and cleaning of uniforms or construction of facilities.

In the cases mentioned above and many others, there is no competitive advantage to be gained through development of these capabilities in house. In fact, the opposite is likely true. Due to economies of scale available to the vendors in a given space, any effort to develop similar capabilities in house would be costly and slow.

When Not to Outsource Expertise

On the other hand, there are many circumstances in which it is not appropriate or advantageous to outsource expertise. A few pivotal cases arise when the expertise relates to trade secrets, competitive advantage or exclusive positioning.

Naturally there are others, but these three are sufficient to explore possible pitfalls of outsourcing expertise. The first two should be obvious mismatches. Trade secrets differentiate one company from another. Without trade secrets, most outputs become commoditized, which reduces margin and increases competition in ways that diminish profits. When business factors provide competitive advantage, outsourcing can be dangerous. Factors likely to fall under this category include proximity to critical resources or patents and other intellectual property.

External vendors have a business interest in increasing their subscriber base. If expertise related to critical company differentiators, such as processes, materials, supply chain, customer acquisition, recipes, etc. is outsourced, there is risk that competitors gain access to it, or that vendor activities diminish its value.

Exclusive Positioning

Some products and services are entirely defined by a company. The value of products and services in those cases is also tied directly to that company and would likely decline in its absence. A look at the restaurant industry will help to illustrate both sides of this. Chain restaurants, such as Denny’s, primarily sell commodity style food offerings. This makes it easy to outsource many aspects of the food service business. Much of Denny’s success relates to its real-estate strategy, placing restaurants at key interstate off ramps,  rather than on the food it offers. Compare this to a seaside seafood restaurant with a proprietor who owns one or two small boats and brings in his catch fresh each day to serve his customers that evening. In the case of Denny’s, outsourcing would have very little impact on the perception of the public toward the company. On the other hand, if the small seaside restaurant outsourced the daily catch to another firm, this could have a severe impact on the quality and perceived value of their offering.

When the position of a company within an industry occupies a unique or niche segment such that perceived value is greater than competitors in the same industry, this is Exclusive Positioning. Heightened value is associated with exclusivity. In the example above, the seaside seafood restaurant has positioned itself as an exclusive provider of daily fresh seafood while Denny’s doesn’t claim to provide fresh or original food, at least not at a premium.

Similar expectations of exclusivity occur within the medical space. Doctors are expected to be expert at diagnosing and treating medical conditions. If a specialist doctor were to outsource diagnosis of illness to software programs and prescriptions to pharmaceutical company recommendations, he would no longer be exclusively positioned, since those software vendors and pharmaceutical reps serve many other medical professionals who would be in a position to provide identical service, regardless of individual capacity.

Consulting is another example of exclusive positioning. One problem with true consulting, in the traditional sense, is that it does not scale up. In other words, when one individual has acquired his exclusive position by virtue of many years of study and practice in a narrow field, it’s not possible to simply hire more warm bodies to fill his same role. If the exclusive position is to be maintained, then every person to occupy that position must be capable of providing the same depth and expertise. This is not generally possible in exclusive positions.
 

Education should be Exclusively Positioned

Of all the industries that should exhibit exclusive positioning, education is historically and culturally one of the most compelling examples. The acquisition of graduate degrees is very exclusive. It is expected that an individual who does obtain a graduate degree, such as a PhD, has very specific and deep expertise. By virtue of that expertise, a professor is then uniquely qualified to pass that knowledge on to his or her students. However, the expectations don’t end there. Culturally, there is an expectation that professors engaged in academia as a profession must go beyond simply imparting information. They are expected to craft unique course materials that cater to the latest research and the specific needs of their current students. They are expected to adapt the course over time to keep it relevant.

For the time being I’ll set aside a detailed review of the effects of Grade Inflation on the quality of college graduates, even at the most prestigious universities. It should be sufficient to say that grade inflation and the prevalence of standardized testing has the potential to impact incoming students and future professors. Hundreds of millions of dollars are spent on standardized tests which have not been proven to accurately measure or improve educational outcomes. I worry that we may be seeing the first wave of a trend that not only outsources testing, but instruction as well.

The exclusive position of higher education instructors is at risk of being outsourced to publishers of textbooks and standardized tests. In my experience, all professors but one have retained control of their course. They have secured their exclusive position by leveraging appropriate resources and supplementing them with a variety of other methods. What I worry about is the explosive growth of education and the trend toward online formats. As class loads rise and courses are more frequently taught online, will new professors have the time and capacity to create meaningful ways of teaching online, or will they buy into existing online resources that lock them into content, homework, quizzes and exams created by someone else?

Vendor dependence

Dependence on publishers for all course materials and evaluation mechanisms brings some serious risks. Introducing ancillary resources, to facilitate discussion or evaluation of student progress, will be increasingly difficult if an entire course is taught by way of a publisher’s companion website. Even if professors wanted to introduce other resources, the online infrastructure may not easily accommodate it. The proprietary formats used by different publishers may even make it difficult to use materials offered by competing publishers, which could result in a superior textbook being rejected due to technological integration issues. That surely is not in the best interests of the student or the learning process.

Fear of Cheating

Internet technology is fast moving, but still lacks maturity. When the largest corporations can’t ensure the protection of credit card data or other personal data, it’s no wonder that professors who rely on online resources are worried about cheating. In an increasingly electronic world, those who want to gain unauthorized access to instructional or testing resources will get access. It’s a fair bet that the solutions manuals for all major textbooks are available online already. The most sure way to combat cheating if you’re a professor is to come up with original material for your course.

Decreased Ability to Adapt

When a solutions manual is the primary source of truth in a course, adapting to students or contemporary circumstances doesn’t happen easily. In my accounting course, for example, every aspect of the course was compared to the solutions guide, which my professor kept in her folder, just out of view. When we had questions about the case we were working on, rather than look at what we were doing, she would compare the answer we had found to the solution guide, looking back and forth, and give a yes or no.

In one extreme example, I had apparently approached a case in a different sequence than the solutions manual. When I was discussing this with her, she became agitated and exclaimed that it was absolutely wrong. My team heard this and kept asking me to help them find the right answer. It took me twenty minutes to explain to them that the answer was right, but that the professor didn’t like the sequence. Some of them remained confused about the solution because the professor was unwilling to acknowledge that the solution could be achieved by following a different sequence.

The Future of Higher Education

There are many wonderful professors in higher education. There are also many fantastic textbooks and even online and offline resources which make the educational experience rich and meaningful. I believe that institutions and individual professors can maintain their exclusive position in the educational process. This will require them to question the value of available resources and to leverage or create alternative methods for supplementing inadequate resources.

I clearly have a poor opinion of the textbook used for my accounting course. However, as part of a coherent and thoughtful set of resources, it may have been very useful. Even if perfect textbooks and related resources existed, many of the pitfalls discussed above still apply. The point of this discussion is not to throw out a bad textbook, but to highlight the fact that what makes a textbook, or any other educational resource worthwhile, is the skill with which it is used by the professor. In his exclusive position, the professor is responsible, even accountable, to craft the educational experience.

Lessons in Business

In a broader sense, these same caveats apply to business in general. Exclusive position is a powerful tool to increase value and maintain profits in the face of competition. When outsourcing activities threaten exclusive position, it’s wise to carefully evaluate the true cost of outsourcing. No matter how compelling vendors may be, there is also great risk in single sourcing any function. After all, if a vendor can provide all of what you do, what is your purpose for being in business? What is your Unique Selling Proposition?

Once lost, exclusive position can be very difficult to recover.

4 comments

  1. It sounds like your accounting professor hasn’t yet attained the exclusive position required to be an “expert” in the field if all they were offering is the pre-produced information from a text book. I considered teaching a class, but the logistics did not work out. Instead of teaching I ended up enrolling as a student and had the chance to experience online textbooks for the first time. Of the 5 classes I experienced briefly, one used a very customized version of a Pearson text whittled down to specifics covered in the course. The professor explained in a private conversation with me that the book we purchased for the class was select chapters out of an anthology version that cost 4 times as much. Due to the number of students, the professor was able to negotiate a custom printing and give the students a reduced cost book that was very specific for that class. The online content matched the text and it worked very well. In contrast, another class I took we all received the entire book and the online exposure to all of it. The professor provided his notes during lecture time piece by piece. The two did not match up and we were left with an expensive paperweight because the textbook committee decided that was the book they had to use. A third example was an instructor who, on the first day, explained how much she disliked the confusing material presentation in the text and encouraged us to get our money back because we would not be using a text. I believe each was in an expert position and as a student the benefit was to various degrees based on my ability to learn from the instructor’s position.

    With respect to the future of higher education: if you standardize the testing, you make education a commodity. The price goes down and it more readily accessible. This should be the case for more generalized programs or perhaps the introductory years of education. I believe that specialist training should not be standardized because the adaptability to the change in content could/likely would not allow the area to change as needed.

    Great article thanks for sharing your thoughts.

  2. As I concluded the coursework for my doctoral program I felt a different extreme. Several professors ran their class based entirely on their personal opinion and emphasis with little or no input from students or other sources. It led to a course without any meaning for the student. I appreciate your article, thank you

  3. Chris /

    Daniel,

    It was really interesting reading your thoughts situated entirely within a business context. It’s a compelling topic and a very well organized response. I can tell you put quite a bit of time into it. I also appreciated the way in which you positioned your frustration with one of the classes. Far beyond “this teacher sucks”, you illustrate it from your original context of outsourcing, expertise, and exclusivity. Well done.

    It’s frustrating for me to be reminded that the graduate experiences still exist that focus on the absolute adherence to “the right answer.” In your closing remarks you reference one of the most important considerations in higher education. You state that, “…the professor is responsible, even accountable, to craft the educational experience.” I couldn’t agree more. With this as a frame of reference, considering it to be at the core of my own pedagogical and curricular bent, I have a couple of additional thoughts.

    The concept of grade inflation assumes two things that I don’t agree with.

    1) The course should produce a bell curve or some variant thereof. This would mean that for a certain percentage of the population it is not possible for them to be successful. This reeks of poor design of the “educational experience”. If you were to buy a car that only 20% of the population was able to successfully drive, it would be an abject failure. It’s most certainly a product of the inflated American competitive penchant for hegemonic hierarchies. We want to be in the top 10%. So, we impose a competition where one isn’t needed. We stitch it into every part of the American educational system while out the other side of our mouth claiming that we want to build systems that lift all boats!

    We design a level of failure into the experience and call it rigor. A detailed analysis of most of these so-called rigorous experiences show that the punishments received for poor academic performance are largely arbitrary, built on devices that have less to do with learning and more to do with a specific predetermined skill set. If students don’t write as well as Daniel, do we punish them? Do we compare them all with you? The truth is that we do. Professors are always in the process of comparing student work. You don’t see it because it happens on the grading side, but it exists. Fairly or unfairly, student products are compared. This, like much of our current grade book approach, is veiled. Additionally, your related experience about having the right answer but in the wrong sequence is just one example of this “what’s in my pocket?” game. Many professors hide the fullness of the experience or knowledge they want you to gain and test you in coercive and manipulative ways.

    2) The second is like unto the first. Education was once about sorting. Horace Mann described it as “raking a few diamonds from the dirt.” A very progressive idea at its time over 150 years ago, but we see it now as an approach that fails education at all levels. School is to lift not to sort. True, natural sorting does exist as students determined they lack interest, drive, direction, or any other characteristics which deter them naturally from a course of study. But generating systems that do this arbitrarily are foolish, in my opinion. We also impose this implied rigor to an end, don’t we?

    We say we want to teach responsibility, for the real world, and to prepare them for a future we see for them. It’s all quite lovely but completely impossible. Socially and culturally we can’t agree on what responsibility is, what curriculum we would use to teach it, and how it should be assessed. If a program bills itself as a competitive experience, that is one thing. But our graduate degree experiences bill it as an opportunity for YOU to become the person you want. We can’t even agree on something as simple as the Pledge of Allegiance. The real world is just as nebulous. It’s all contextual, is it not? Can you define the standards of a real world? Can we develop a curriculum to prepare someone for this world? We are even less equipped to prepare them for future that we can neither see or understand It doesn’t actually belong to us.

    We may not be in accord in this topic because this line of reasoning still sees quite a bit of resistance in certain contexts including business. Now, more on your thoughts in writing…

    Does the possibility of high quality always mandate it? The ethical argument may be in the affirmative but the actual distribution of it in the marketplace is quite different, isn’t it? This is not to say that institutions won’t claim that they try and provide the highest quality resources and expertise to their students. But, they are still bound by the strictures of supply and demand are they not? This is to suggest that the PhD candidate selected to teach a course that he/she is not an expert is an attempt to fill the demand with the “best available” supply. Your experience has been that a person with practical expertise built on 20 years of professional practice SHOULD represent the “best available.” in the field or represent an exclusive position within the knowledge You may be aware of this in your experience as well.

    Graduate programs also outsource their expertise. Most graduate programs hold only 20 to 30% of their faculty in tenure-track lines. This means up to 80% of the course work is taught by people who are not in permanent positions. Many also have a larger percentage of their workload allocated to scholarship rather than teaching. This creates the need for these departments to outsource to the best available instructor. Strong departments have the ability to outsource better than weaker ones.

    Very few graduate students take the time to look beyond the graduate degree program name and granting university. An MBA from UCLA and another from Texas may seem to be equal, but digging deeper shows them to be more or less valuable depending on how you want to use it, in what market, etc. The value of a degree extends exclusively into the populations that understand or respect it. I often describe higher education providing you with a set of keys to a specific set of doors. Part of selecting the best program is understanding those keys and doors. That being said, the end results are often nebulous and depart from the norms. Using myself as an example, it would have been impractical for me to assume that having 3 degrees from the same institution would allow me to teach here. The norm is that you gain your knowledge at one institution and take it to another. However, the exclusivity of the knowledge that I chose to create during my personal and independent studies at the University situated me to be an expert worth keeping. I am the unlikely combination of both a university professor AND a native son.

    If I can wrap all of this up in one paragraph it would be as follows. Education SHOULD be exclusively positioned but because of the current organization may only be exclusively positioned in small subsets of the total knowledge base. Outsourcing SHOULD be done in a way to bring in the best additional expertise but there is far more demand than supply. This creates a greater value proposition for those who can capture and retain expertise. Cheating only matters if all knowledge and experience are absolute. However, if we can place our own learning in a personal, authentic, and situated context, cheating is moot.

    You write very well. Thanks for blowing an hour of my time this morning as well. 🙂 Unfortunately, I can’t avert my eyes from the academic conversation.

  4. Jason /

    Great article Daniel and interesting viewpoints that I can vouch I have experienced too. Thanks

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