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  • The Netflix Way

    September 23, 2011 @ 3:02 pm | by Davin O'Dwyer

    The announcement last Sunday that Netflix was to separate the DVD rental-by-post business that made it famous from its movie downloading business generated all sorts of criticism in the US tech press and blogosphere, and not just because the new name was the palpably lame moniker Qwikster (isn’t that a chocolatey powder drink?).
    It’s not hard to see why everyone got so riled – chief exec Reed Hastings published a lengthy blog post trying to explain the thinking behind July’s decision to charge for Netflix’s movie downloading and DVD rental business separately , rather than the attractively low, bundled price it had previously been. But instead of explaining that, Hastings actually introduced further inconveniences to the service: “A negative of the renaming and separation is that the and websites will not be integrated,” he wrote. For Netflix customers, not only were they being charged more, but the service just got worse.
    Now this is of merely academic interest to Irish film-lovers – Netflix is North American only, unfortunately – but what is of interest is Hastings’ rationale for focusing on streaming and separating the two sides:
    “For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly.”
    Now this is just common sense – DVD by mail might be a lucrative business now, but it’s obviously a dead dodo walking, with a “best before date” looming in the next five to 10 years. And there are plenty of pundits out there suggesting alternative motivations behind the split (studios demanding per-subscriber payments, possible takeover by Amazon, yada yada yada).
    But Hastings is articulating a critical business truism that is so rarely heeded – changing from one revenue stream to another revenue stream that will be more lucrative down the line often means harming the current cash cow. It’s a brave move, and such bravery is exceedingly rare in companies that are actually profitable – that’s why many operations only innovate and reinvent themselves when their backs are against the wall and their current revenue stream faces collapse, which is obviously a bad time to be reinventing yourself.
    There are plenty of examples of this phenomenon – Microsoft’s reliance on Windows and Office licensing has long acted as a major hindrance on its ability to innovate. Only now that Apple is reinventing personal computing with the iPad is Microsoft showing a willingness to change its ways with Windows 8 and Metro.
    And it’s not just the technology business that’s prone to this quandary – newspapers are in a similar position, trying to shore up their legacy paper operations while building digital platforms to carry them into the future. Needless to say, the past and the future aren’t comfortable bedfellows.
    So well done to Hastings for having the bravery to make this move, but there are more than a few people who think he might get to test his theory that “Companies rarely die from moving too fast”.
  • An Irish top ten university

    September 16, 2011 @ 12:32 pm | by Chris Carpenter

    The QS World University rankings for 2011 were published last week.  There was considerable media comment,  including by the Irish Times, noting that most Irish universities were continuing their recent downward trend:  TCD has slipped down 13 places to 65;  UCD is down 20 places to 134; NUI Galway down 66 places to 298.  However UCC is up marginally up 3 places to 181,  and RTE also reported that UCC was the first Irish university to receive five gold QS stars!  Nevertheless, my own reading of the QS results shows that in fact the University of Limerick also has five such stars.  The QS star rating,  in my view is confusing: it is a new methodology “using more comprehensive indicators to those used in the rankings”.   However,  the QS star rating is an “opt-in” mechanism in which universities volunteer to participate:   for examples the universities ranked 4th, 5th, 6th and 7th in the world (Yale, University of Oxford, Imperial College London and UCL) have no QS star rating :-)

    Also last week,  many in Waterford made a renewed call to upgrade WIT to full university status.   Our Government is reputedly divided on this particular issue at this time,  with some thought to be in favor and others concerned about further dilution of the already scant national education budget.   As I understand it,  some other institutes (amongst them DIT and CIT) are also seeking university status.

    Ireland already has seven universities (DCU; NUIs Galway and Maynooth; TCD; University Colleges Cork and Dublin;  and the University of Limerick). Of these seven,  four – i.e. 57% – are in the top 300 universities in the world (according to the QS rankings)!  By contrast,  the UK has 115 universities,  with 30 in the top 300 – i.e. 26%.  The United States has 4,084 universities offering 4 year undergraduate courses;  of these,  only 69 are in the world’s top 300 – i.e. less than 2%!

    When challenged over the slippage of most of the Irish universities down this year’s rankings,  those involved have argued for an increase in funding,  including the re-introduction of fees for those who can afford to pay.   It thus seemed interesting timing that also last week UCD included an eight page special report in the Irish Times on the new UCD Science Centre.  According to the report,  this represents a €300M investment in total across a number of phases.  The first phase opened last week at a cost of €60M,  the vast bulk of which apparently came from the Irish taxpayer.  The second phase will cost €110M,  with €80M coming from the Irish taxpayer and a further €30M from private sector fund raising.

    In many universities in the United States,  it is quite common for freshmen undergraduates to be continually reminded that they are able to be in their university,  with its buildings and facilities and faculty,  largely due to the generosity of those students who have gone before them and who now,  as alumni, have given back so that a new generation may also benefit.   The message to each new student is clear:  we expect you to donate back to your alma mater during your career.   In my view,  sadly,  this message is rarely as enthusiastically delivered to freshmen in the Irish university system.   However,  even if it were,   it would probably not in fact be true:  students in Irish universities are in their university,  with its buildings and facilities and faculty,  largely due to the generosity of the Irish taxpayer and Irish society at large.   The implication should be clear:  our Irish nation has a right to expect that each student will contribute back to Irish society during their career.   Furthermore,  the Irish universities are owned by the Irish taxpayers,  and should be thus as widely accessible as possible to citizens who have the appropriate educational attainment.

    The strength of the national university system and the quality of the graduate pool underpins our economic growth.  The better the education of graduates,  the more likely that companies will undertake ventures which add high value,  and the less internationally mobile these ventures will be (one of the most disturbing aspects of last week’s announcement about the closure of the Irish operations of Talk Talk last week is the apparent ease at which this venture can be relocated to a lower cost location).  Equally,  our graduates should be mentored to be entrepreneurial,  articulate and creative.  Also last week,  Professor Brian MacCraith and President of DCU announced his “Generation 21″ initiative to ensure graduates are employable no matter how uncertain the future:  each student will develop an “e-CV” as they progress through DCU,  auditing their learning and character develop.

    Cultivating confidence and eloquence in students is one of the major benefits of the Science Gallery (of which I am founding Chairman) at TCD.  The Gallery brings together scientific discovery and artistic expressiveness,  reminiscent of the great natural philosophers and artists,  which science’s specialized narrow focus has lost today. Our student mediator programme fosters students to be articulate and expressive, able to explain themselves and technology to the public visitors to the Gallery exhibitions.  Employers have been noticing the quality of students who have been trained as mediators at the Gallery.

    Whilst employers do consider the QS rankings and character,  employers are increasingly using other techniques to evaluate graduates as I’ll explain just below.   Rather,  the QS ranking system is intended for international students,  providing a tool to help them chose a top university appropriate to their budget.   The business of international students can be a significant addition to a university income.  This business used to be largely a one-way traffic of Asian students heading to western universities,  but today the picture has considerably changed.  While there are 440,000 Chinese students abroad,  China is targeting 500,000 international students to come to its own universities.  There are now more “international” students taking degree courses from UK universities in their own home countries,  than there are international students actually coming to the UK:  there are some 340,000 students attending branch campuses of UK universities overseas.   Some surprising new international university locations have emerged,  such as Germany.  For example the Ruprecht-Karls-Universität Heidelberg and the Technische Universität München are both higher than any Irish university in the QS rankings:  both have undergraduate and postgraduate study through English, and at very low cost to EU nationals.

    A further trend is towards distance learning and online education.   This term,  for the first time ever,   anyone can register and attend (live over the internet) certain undergraduate degree courses offered by Stanford University’s Department of Computer Science.  Online students are expected to submit assignments and attend online examinations,  and will receive a certificate of attainment at the end.  Announced just a few weeks ago,  so far over 100,000 students have registered worldwide.

    One may question the value of online and distance learning,  and perhaps even more so the large portfolio of online podcasts of educational material available,  compared to a traditional university teaching.  However,  given the internationalization of global business and education,  it is becoming increasingly difficult for employers to accurately judge the calibre of graduate candidates from so many different universities.   One obvious way to overcome this is to run examinations as a part of the interview process:  regardless of the degree status and university ranking,  or even whether a candidate actually attended any physical campus but instead studied online,   a graduate can be put directly to the test.   Many professional bodies – in engineering, law, accounting and so on – already insist on their own independent examination systems:  the move to online study may accelerate such assessment mechanisms for many employers.

    Where does this all leave the Irish third (undergraduate) and fourth (post-graduate) level education system ?  Whilst 57% of Irish universities are in the top 300 QS ranked worldwide,  none are in the top 10 or even the top 50.  Online study (such as the new Stanford model) increasingly available from the top 10,  or even the top 50,  taken together with independent assessment by employers and professional bodies,  threaten established lower-tier universities.  The emergence of English as the teaching language of choice in non-native English but top universities,  puts further pressure on the lower-tiers.

    In my view,  the Irish national system must make every effort to have one Irish university amongst the top 10 in the world.  Given that this top-10 university is likely to be substantially funded by the Irish taxpayer,  this university should be widely available to all appropriately attained students in Ireland (together with international students).  Thus,  the emergence of online access is not only a threat,   but an opportunity.   If we had a single Irish university amongst the top 10 in the world,   with the very best faculty and teaching available,  then we can ensure its education is available nationwide through a combination of online access,  but also augmented by “branch” campuses as need be in further locations across Ireland.   I believe there is a compelling argument and urgency for a focus of our taxpayers resources into just a single Irish university,  having online access and a branch network,  with the specific aim of nationwide availability to an Irish world top 10 university.

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