In an article in the Nov. 2014 Harvard Business Review, the question was asked what Alibaba, AirBnB and Uber have in common. The answer provided by authors Barry Libert, Jerry Wind and Megan Beck was that they were all “network orchestrators,” a new trend in business that is breaking up old paradigms, experiencing accelerated growth, generating enormous profits, and attracting major investment.
The authors studied the last 40 years of financial data from the S&P 500 and divided the companies into four groups:
• Asset Builders – companies that build physical assets such as Ford, Walmart and FedEx.
• Service Providers – companies providing services to customers such as United Health care, Accenture or JP Morgan.
* Technology Creators – companies that develop and sell intellectual property such as Microsoft, Apple, or Oracle.
• Network Orchestrators -- companies that create a network of peers in which participants interact and share in value creation such as Alibaba, Airbnb and Uber.
In comparing these four categories of companies, the article found that Network Orchestrators receive valuations two to four times higher, on average, than the other categories and outperform the other categories in terms of annual growth rate and profit margin. Yet fewer than 5% of all the companies in the S&P 500 were network orchestrators, mainly because the mentality that pervades business is to own assets and sell goods.
Network orchestrators, however, rely on knowledge and relationships rather than assets and property. They emphasize synergies between individuals and organizations and thus engage in “non management” and “non ownership” between peers, each of whom may own assets and properties but the focus is on synergies between partners rather than owning everything in the chain of exchange.
Airbnb, for example, has significantly disrupted the hotel industry by understanding that every home is a potential “hotel.” While traditional hotel chains have focused on owning properties and developing fixed assets, Airbnb does not own anything. It simply puts owners of homes in touch with potential customers. The focus is on the relationship, not the asset. It now operates in 192 countries, has nearly 2 million home owners in the network and has serviced over 60 million people staying in those homes. Its valuation is north of $40 Billion.
Similarly, Uber has disrupted the taxi industry by understanding that every car is a potential “taxi.” While traditional taxi companies have focused on owning taxis, Uber has simply enabled customers to get directly in touch with car owners to take them where they want to go. Uber is now worldwide with a valuation north of $70 Billion. Both Airbnb and Uber have been challenged by traditional interests and governmental restrictions but they have established the model and are succeeding beyond the wildest dreams of their founders and initial investors.
These companies have significantly disrupted their industries by radically democratizing and globalizing synergies between vendors and customers. This has allowed them to scale globally without fixed assets. They have thus been immensely profitable.
The situation in the educational domain is positively archaic. Many institutions have been around for centuries, some for over a millennium. Oxford, Cambridge, Harvard, the Sorbonne all exemplify the storied history and mystic of traditional educational institutions. All own property and assets. In almost all cases, existing educational institutions were founded in an age when education was framed by the needs of the industrial revolution for pliant workers equipped with minimal verbal and analytic skills. All are accredited by conservative bureaucracies resistant to change, all are nationally rooted and identified, and all are seriously challenged with the impact of technology on education. The educational equivalent to hotels and taxis are thus all the individual educational institutions competing against one another for students in crowded and increasingly expensive and complex markets.
The beginnings of the Network Orchestration model was developed by Laureate Education, which since 1999 has been building a global network of universities through acquisitions. Laureate has either complete or majority equity ownership in a network of 88 brick and mortar universities and colleges worldwide. Laureate has been very successful with this model and is headed into an IPO. While it has been creating synergies between its assets, its challenge is that it is encumbered with very significant real estate and operational costs in dozens of countries. Considering the fragility of the global economic system, such enormous capital costs are risky, requiring enormous time and attention to maintain. What is needed is a Laureate 2.0, the creation of a truly global network of synergies without ownership.
This is the challenge that the university of which I am president has taken up. Prior to 2012, we were like all the other schools -- locally rooted in California and licensed by the State agency as a graduate school. We competed for limited students from a specific base in San Francisco. We were bound by local restrictions and could not innovate without express permission of the state agencies.
In 2012, we transitioned from a nonprofit graduate school into a for profit education and technology platform company with a vision of establishing a global common exchange with educational networks and innovative learning companies worldwide. Instead of competing, Ubiquity began strategically collaborating and creating mutual profitability with dozens of partners globally.
The university began building a global network of partnerships with brick and mortar schools, so in that sense Ubiquity is like Laureate, but Ubiquity is doing so through synergies, not ownership. This means that Ubiquity gets all the benefits of the network as well as the revenues, but none of the local real estate and operational costs. To date, Ubiquity has agreements with educational networks with hundreds of schools and tens of thousands of students worldwide. Our partners secure students for Ubiquity and provide their own marketing and recruitment. Many want to use our technology platform for their own courses.
Ubiquity is also developing collaborative synergies with innovative companies on the cutting edge of learning technology. Our goal is to develop a global multi-jurisdictional common exchange between educational institutions and innovative learning companies to bring high quality affordable learning to young people and life long learners worldwide. Our business model is as an integrated learning platform and alliance for educational establishments and innovative learning companies. This is a significant advance over Laureate -- No ownership, all synergies, thus making Ubiquity very adaptive, scalable, and, potentially, immensely profitable.
There are certainly challenges to the network orchestrator model in education just as AirBnB and Uber have faced challenges in their domains. But the model is sound and the forces of globalization are making network orchestration inevitable.
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Forbes ran a cover story in November 2013 with the headline, “No field operates more inefficiently than education. And a new breed of disruptors are finally going to fix it.” They predicted that disruptive education will be the next $1 trillion opportunity, on a par with the dot.com boom of the 1990s. Education through network orchestration is the most disruptive trend in education today and the key to an enormous opportunity.
ISIS represents the first Intifada against the United States. We have treated Afghanistan and Iraq pretty much the way Israel has treated the West Bank and Gaza, and now, like Israel, we are reaping a whirlwind. Just when we thought we could slip away, ISIS is arising out of the ashes of our wars, demanding our attention. Knowing we can wipe them out with overwhelming force, they dare us to attack as they behead three of our young men – one American, one British, one French. We want to wipe them out, but ISIS represents something virtually unconquerable. They are willing to die, indeed expect to die, in the face of our overwhelming force, but they are going to die with their fists in the air doing as much damage as they can. This passion lies at the heart of Intifada.
To die in this way, especially for young men of military age, represents a very deeply embedded and powerful impulse in the male psyche, even if it can be distorted by ideology. But to focus on ISIS as some kind of brainwashing or manipulation of the uninformed is to miss the point and very reason why ISIS is so successful. ISIS is speaking to young men in particular, but also to young women, who are desperately seeking to give themselves to some cause larger than themselves, who have become deeply cynical about our governments, and, as a consequence, who want to join some kind of resistance. The testimony of this young Canadian man, now in Syria with ISIS, shows this mixture of idealism and defiance very powerfully: https://news.vice.com/video/islamic-state-member-warns-of-nyc-attack-in-exclusive-interview-the-canadian-jihadist
What is ominous is that while Israel’s Intifada is essentially local, ISIS is potentially global. Like the Spanish Civil War, ISIS has become a cause celebre among the young and they are flocking to join. Several thousand are reportedly already there, drawn from numerous western and Asian nations far beyond the conflict. What is ISIS telling them? Stay home, stay in your own country, wreck havoc from there. This puts ISIS potentially far beyond the capacities of Al Qaeda. Al Qaeda was essentially a shadowy and ultimately very small network of extended family, business, and political relations of Osama bin Laden. Brilliant and deadly, Al Qaeda was nevertheless a localized immediate network of no more than several hundred people, virtually all of whom were rooted in the Middle East.
ISIS represents what is now coming – a network of young idealists who are not there but here, who live amongst us, and see ISIS as their front line. They share ideology with ISIS but never leave home, thus potentially making ISIS a global rather than local network. This means that the next 9/11 might not necessarily come from Middle Eastern guerrillas slipping through our border under false pretenses and setting up the attack. It may well be one of our own citizens, one of our own neighbors, who will be launching the attack on behalf of ISIS but from behind enemy lines. ISIS signals global Intifada. Let us make no mistake. Like the Ebola virus, we potentially have a global contagion on our hands.
As we contemplate this, let us consider what we have sown in our comportment in that part of the world, initially since overthrowing Iranian democracy in 1952, and especially since Bush II in Afghanistan and Iraq. Like Israel with the Palestinians, the U.S. leaves in its wake a legacy of hatred and defiance. We misjudged when we entered and we misjudge as we leave. We thought we could judiciously withdraw. Instead, we have ignited a hornets nest, and the hornets are starting to fly about.
One can get a measure of the hatred and defiance involved in those young men and women fighting for ISIS, as well as the widespread support they enjoy, by considering how much both Israel and the U.S. have slaughtered excessive numbers of civilians in the region. With ISIS, the U.S. has suspended any restrictions on killing civilians in ISIS airstrikes. This may kill more of them, but it will not conquer them. It will only deepen their defiance. Beyond ISIS, U.S. drone policy doesn’t even require identifying who will be killed, and it accepts all collateral damage as simply part of the operation. We need to confront this because this is precisely how millions of people across the Middle East, especially in Afghanistan, Iraq, and Pakistan, have come to experience and now expect from the United States. Abu Graib and Guantanamo stand as iconic indictments to our disastrous course. Now, with ISIS, we need to understand that what was a local phenomenon is now the beginnings of a global contagion and that this, rather than our vaunted democracy, may end up being our legacy from our wars there.