By
Dr. Arthur J. Lendo, President 1991-2009
Peirce College Philadelphia, Pennsylvania, USA
Introduction:
In 1990, Peirce College in Philadelphia, PA launched a national presidential search with an aim to recruit a leader with a strong background in both higher education and commerce who would receive a mandate from a forward thinking Board of Trustees to chart a new course for a 21st century, post-secondary institution. I became the College’s sixth president on July 1, 1991 after holding senior positions in both higher learning and a Fortune 500 high technology company.
Peirce was founded in 1865 so the returning veterans of the American Civil War could more fully participate in the workforce expansion and economic development emerging from the Industrial Revolution. During its century long evolution, the College gradually developed a practical curriculum primarily in business, legal and technical education emphasizing state-of the-art technology. Over the years, however, the College also shifted its focus from serving war veterans to educating traditional-age students between the ages of 18 and 21. By the late 1980s, the College had joined other regional colleges to compete in the red ocean of post-secondary education. Despite a good regional reputation, accredited quality programs and legacy which included US Presidents as commencement speakers, Peirce College faced mounting challenges. The primary concerns were: limited financial resources, aging, costly facilities, and a prospective student pool with escalating and expansive remedial learning needs resulting from the failing K-12 education.
To fulfill the mission entrusted to me by the Board of Trustees, I initiated and led a series of changes at Peirce to set the College onto a new path of profitable growth. Consider some results. Twenty years ago, Peirce was one among many regional colleges struggling to serve their local young population. Now, Peirce has students coming from 43 out of the 50 states, the District of Columbia, the U.S. Virgin Islands, and 30 other countries. With the interchangeable platforms of campus-based, corporate/public site-based and internet-based education, Peirce now delivers the College’s degree programs and student support services to a vast pool of adult learners without geographical boundaries. The combination of an innovative learning model and the College’s 135 year tradition has created a powerful brand for Peirce. While the College has been offering its students one of the lowest college tuition rates, its financial performance has been superb according to major performance indexes.
A Blue Ocean Strategic Move: Pursuing Value Innovation in Higher Education
Peirce achieved this dramatic turnaround through a strategic transformation that aimed to combine “the best of old and new” to turn the College into a 21st century institution of higher learning. My experiences with Sperry UNIVAC (now Unisys) in the mid-1980s provided me with a clear view of the coming technological revolution, especially the emerging Internet platform and its extraordinary potential to serve post-secondary students. To translate this into value for students, however, I realized that a different mode of strategic thinking and actions would be needed. As we took measures to enforce the needed change, our research and study also led us to track the leading-edge thinking of W. Chan Kim and Renee Mauborgne, cofounders of the Blue Ocean Strategy Institute and professors of strategy at INSEAD in Fontainebleau, France. Their views on strategy, chronicled in the landmark book, Blue Ocean Strategy, helped us codify the strategic logic behind our successful actions, thereby allowing us to continue pursuing and reinforcing our transformational strategy more systematically in the future.
Indeed, what we have pursued at Peirce in the past two decades is largely in line with the prescriptions of Blue Ocean Strategy. To break out of the red ocean of bloody competition in the market of post-secondary education, Peirce has endeavored to offer unprecedented value to learners on the one hand and build a more efficient and cost effective business model on the other. The College has three interchangeable delivery systems: on-campus (land-based in Philadelphia); on-site (land-based corporate and community cluster locations); and online (Internet-mediated distance learning). They have produced educational options that are interchangeable: offering the same curricula and course syllabi; taught by the same professors; and yielding the same educational outcomes. Students have moved seamlessly among the three systems. This design has fostered quality assurance, convenience and flexibility. Students have received the same highly relevant education regardless of whether they are in Philadelphia, Chicago, San Francisco, or Barcelona. Moreover, students around the country and across the globe receive high-quality and tailor-made customer services. They may register on a year-round basis and graduate from Peirce obtaining bachelor’s degrees and relevant professional certifications. In the meantime, Peirce has managed to achieve all these breakthroughs in value for learners at the lowest possible costs. To fund the needed technological growth and development for delivering an unprecedented learning experience, we diverted resources from those taken-for-granted areas of expenditure into areas that are central to learner’s academic experience. The viable business model we have achieved at Peirce helps ensure the sustainable delivery of key value factors to learners. In a nutshell, what we have pursued at Peirce can be summarized with the notion of value innovation -- the cornerstone of Blue Ocean Strategy that calls for simultaneous pursuit of differentiation and low cost.
Noncustomer insights
We started our journey of value innovation by looking at unmet needs of noncustomers. Whereas most colleges were focusing on serving traditional-age students, a vast pool of learners was overlooked or underserved. Working adults, for example, found it hard to complete an on-campus degree program while fulfilling their duties at work. Moreover, as adult learners mostly sought to improve their career prospect through enhancing their academic credentials, community and regional colleges that only offered associate degrees were less attractive to them. Next came military personal as well as those who worked in employment sectors that required constant relocation. Traditional campus-based learning models obviously did not suit their needs. Finally, there existed a vast number of learners residing in other regions or even in foreign countries that Peirce never considered as its potential customers.
We found that, despite their differences, all these people wanted to pursue higher learning in a credible and high-quality program with a practical, career-oriented curriculum and flexibility in terms of registration, completion time, and learning location. Exploring the commonalities across these people provided us with important insights for market reconstruction to pull in all-new demand.
Looking across conventional boundaries of competition
In reconstructing market boundaries, we mainly looked across strategic groups of post-secondary education. In the traditional market of undergraduate education, there were mainly two strategic groups: community and junior colleges that offered two-year associate degree programs and accredited colleges and universities that focused on offering four-year baccalaureate programs. Whereas two-year programs offered less competitive academic credentials and were often pursued as preparations for entering or transferring to four-year colleges, the four-year programs were usually more expensive with less practical curricula. As the internet age dawned, for-profit institutions began to enter the market by offering online courses. Powerful and technologically advanced as they were, they were bringing to learners only internet-based courses, not entire programs. Nor were they giving out four-year degrees. Peirce’s new offering cut across these strategic groups. We elevated Peirce from two year to four year collegiate status and delivered the baccalaureate degree programs through the completely interchangeable platforms of on-campus, online and onsite learning.
Our insights for market reconstruction also came from identifying a complementary time trend that was clear, irreversible and decisive to our business. With the advent of the information age, internet-based learning model was clearly gaining momentum. And Peirce actually benefitted substantially from the massive ability of for-profit entities to educate sophisticated consumers about the many advantages of online learning. What we needed to do was to better link this technological trend with buyer value through providing an alternative model rooted in smaller class sizes, world-class customer service so as to bypass the high volume high attrition model of larger for-profit universities and generate excellent retention/graduate rates.
The ERRC actions
Looking across market boundaries allowed us to eliminate, reduce, raise and create key factors against existing industry offerings so as to stand apart and arrive at an appealing value proposition for the learners and a viable business model for the College. Our major strategic actions are summarized in the following ERRC grid.
Eliminate |
Raise |
Unnecessary facilities (dormitories and ancillary buildings) |
Program accreditations |
Extracurricular programming (e.g., sports and clubs) |
Degree conferred from associate to baccalaureate |
|
Flexibility of registration time (year-round) and accelerated degrees |
|
Recruiting levels to secure employees from outside of higher education with needed professional operational skills |
Reduce |
Create |
Tuition rates |
Interchangeable learning platforms and delivery systems (on-campus, onsite, online) to bring learning to students instead of having students come to school |
Burdensome, long-term debt service by reallocating & restructuring existing resources with subsequent fund transfers to better usage areas |
State-of-the-art customer relationship management system tailored for older, working students |
Independent technology development |
Strategic partnership with high-quality, external entities to enhance the academic core, while maintaining academic control and integrity |
As the ERRC grid shows, Peirce eliminated and reduced factors that the industry had taken for granted and raised and created new factors to achieve breakthroughs in buyer value.
On the cost side, Peirce reallocated existing resources, including those invested in facilities, to fund growth and development instead of acquiring burdensome, long-term debt service. To this end, we eliminated unnecessary facilities that were largely irrelevant to core academic activities. For example, the Dean’s House, a historically registered building with significant value, was sold to fund the College’s growth initiative. Traditional student dormitories, which mattered less to adult, part-time students, were also closed to substantially reduce maintenance and administrative costs. Extracurricular programs were largely eliminated as they were not critical or necessary to adult students’ learning experience while constantly incurring administrative costs and hassle. In this way, Peirce was able to free resources to fund technology development needed for delivering the educational content. As the college borrowed less, it in turn achieved further cost savings due to reduced debt and interest payments.
While we were determined to turn Peirce into a leading-edge college of the 21st Century, we also aimed to achieve cost savings through effective and efficient utilization of technology. In particular, Peirce reduced independent technology development through establishing strategic partnerships with third-party technology firms. After extensive national searches, the College established long-term, contractual strategic partnerships with two high quality technology firms: eCollege, Denver, CO and Jenzabar, Boston, MA. We selected organizations with time-tested systems. We effectively bypassed years of potentially expensive development costs. eCollege provided the online platform and Jenzabar handled our administrative technology needs.
Such a cost effective business model has allowed us to charge one of the lowest private college tuition rates to students and has supported and sustained our delivery of other key value factors to a vast pool of adult learners.
On the value side, we raised the offering levels of a few factors that were central to buyer value. Firstly, we expanded our institutional accreditation to include online learning and secured additional program specific endorsements in business, legal and technical education. This raised the credibility and value of the degrees to prospective students. Secondly, we took extra efforts to elevate the College from two year to four year collegiate status. Compared with the traditional offerings of community and regional colleges, Peirce’s accredited programs leading to bachelors’ degrees in practical areas catered better to the need of adult learners for career advancement. To make learning easy and convenient for working adult students, we also raised the level of registration flexibility. Over time we transitioned to a year-round calendar, emphasizing the accelerated degree format, which greatly improved institutional effectiveness and efficiency while satisfying adult learners’ needs for accelerated and flexible learning.
We also raised the level of recruiting to secure qualified employees from outside of higher education. Such a recruiting method was adopted in order to acquire the skill sets needed for success in a 21st century, high technology, global environment. Administrative leaders were selected from the healthcare, banking, government, public education, communications, and computer sectors. They were talented individuals sharing a common value system emphasizing accountability, responsibility, service, and continuous quality improvement. Their technical and organizational expertise helped improve the operations of the College and the services provided to students. In particular, with the talents we recruited, we were able to implement a state of the art customer relationship management system, a unique factor we created for adult learners.
One core factor we created was the interchangeable learning platforms and delivery systems of on-campus, onsite and online programs. With Peirce Online, learners residing in more remote locations, with limited land-based educational options are now able to complete the entire degree online whereas community college students seeking a bachelor’s degree may take courses on campus while continuing to use the Internet platform in harmony with work/career responsibilities. The establishment of Peirce Corporate and Community Cluster College effectively took our degree programs and student support services to adult learners around their workplaces or homes. Part-time students can now attend Peirce College courses and even earn degrees in corporate or community locations without the need to travel.
Strategic partnerships with corporate and academic institutions have helped Peirce deliver its value offerings to buyers. Peirce College has partnered with over 20 corporations in the Philadelphia region and across the United States to offer accelerated, practical degree programs onsite and online. It has also partnered with many academic institutions such as local, regional and national schools to ensure seamless transfers between programs. When students transferring from other academic institutions to Peirce, their credits are usually recognized, allowing them to pursue further learning without the need to repeat any of the courses they previously took. This motivates interrupted learners and associate degree holders to enroll in Peirce programs leading to a higher degree. As a result, upper division undergraduate classes, i.e, junior and senior years, offered both online and offline, has become a large portion of our blue ocean.
The results
Positive results emerged quickly. Online enrollment forecasts were exceeded by 300% in the first year alone. The market penetration moved across the country. As mentioned before, today degree seeking students have enrolled from 43 of the 50 states, the District of Columbia, the U.S. Virgin Islands, and 30 other countries. The College has achieved a national scope with international reach in less than a decade.
Beyond having access to vastly greater numbers of prospective students, the College unlocked markets among military personnel (active, reserves, and retired) as well as other employment sectors where relocation, and related disruptions to the educational process, are a significant challenge. Learners residing in more remote locations, with limited land-based educational options, emerged as an important constituency as have online community college students seeking a bachelor’s degree while continuing to use the Internet platform in harmony with work/career responsibilities. The average age of a Peirce student shifted from 21.5 to 34.5 years.
Total enrollments have nearly tripled. The College has enjoyed strong financial performance with a string of annual operating surpluses. This has enabled the College to properly resource further expansion; increase scholarship funds; avoid borrowing; improve employee compensation; and maintain one of the lowest private college tuition rates. Land based offerings have also benefited from overall institutional image enhancement. Today, about 65% of our total annual tuition revenue comes from Peirce Online – a delivery system and source which did not exist ten years ago!
Implementing Blue Ocean Strategy at Peirce
Such excellent performance outcomes would not be possible without effective implementation of our intended strategic transformation. In executing our strategic shift, we largely followed BOS principles of tipping point leadership and fair process.
Tipping point leadership
BOS identifies the importance of concentrating on the kingpins, the key influencers in the organization. For strategic, systemic organizational change to have a meaningful and lasting impact, the employees in all areas of the College must advance en masse. And one effective way to move the mass is to pull the lever in key areas. This condition required that experienced, natural leaders hold key positions campus-wide. These individuals were required to possess considerable practical experience and managerial skills; command respect; be persuasive; and passionately strive for excellence every day. It took me about six years to recruit and develop a team of kingpins to drive the institutional transformation. As mentioned before, in order to acquire the skill sets needed for success in a 21st century, high technology, global environment, I needed to go outside the boundaries of traditional U.S. higher education. Talented and experienced administrative leaders selected from a variety of external sectors were blended with internal faculty leaders to trigger the achievement of annual goals and objectives and positive movement toward our new strategic objective. An extensive, concentrated amount of time, energy, and resources were expended on developing and supporting kingpins. The individual and collective performance of these employees has been exemplary in mobilizing employees and tipping the organization toward the 21st century and the blue ocean ahead. All have remained at the College. Zooming in on kingpins has proved to be an essential ingredient for institutional success.
Fair Process
BOS emphasizes the significance and lasting power of stimulating employee commitment, trust, and voluntary cooperation by using fair, open processes. BOS outlines the mutually reinforcing components of fair process: engagement, explanation, and clarity of expectations. Peirce College utilized these concepts and other themes to develop its own, unique human resource development tool to facilitate organizational change, progress, and achievement. The College created the Professional Development Plan (PDP). The overall goal was to drive a performance based culture. The underlying philosophy was that the educational needs of our students were of primary importance. Employee needs were vital, but excellent salaries, benefits, and working conditions as well as individual professional growth could only be derived from effectively and efficiently addressing the educational requirements of our adult students.
Every full-time employee has a PDP. It is an annual written document comprised of two parts. Part A ranks the employee against a set of performance factors. Part B measures achievement of the College’s goals and objectives. Individuals are judged on their own merits and how they contributed to achieving institutional goals and objectives. The PDP determines compensation.
The PDP has greatly facilitated the development of a working environment based on both teamwork and optimizing human capital growth. College-wide goals and objectives superseded departmental or divisional interests. Employees fully participated in the development and implementation of the instrument. Nearly two years of internal research and analysis were conducted to prepare the best possible performance instrument. Extensive feedback was solicited from external, third-party experts to devise reasonable, but challenging metrics and measurements. Best practices were thoroughly explored.
Much time, effort, and funds were expended to insure employee acceptance. Mechanisms have been established for employee input regarding document review and setting annual goals and objectives. They have been regularly communicated, explained, and clarified through college-wide forums. Budgetary considerations have been openly discussed.
In summary, our faculty, staff, and administrators have worked together to fulfill our institutional mission because their work has been respected and acknowledged; recommendations have been seriously considered and implemented; and important information, especially financial data, has been fully and openly disclosed. The PDP has pulled individual efforts together and aligned them to achieve positive overall results. Fair processes have been the heart and soul of our institutional transformation and accomplishments.
Conclusion:
In conclusion, during Peirce’s major strategic transformation, the blue ocean strategic logic was the driving force for needed fundamental institutional changes featuring original, entrepreneurial thinking and prudent risk, bolstered and actualized by employee teamwork. By looking across strategic groups and across time to reconstruct market boundaries, Peirce was able to unlock a vast market of adult learners with its unique value proposition featuring flexible, convenient, and seamless learning experience across three equally effective platforms at a strategic price. And with a viable business model that concentrated resources to enhance students’ core learning activities and a proper implementation process that harnessed employee motivation and potential, Peirce’s BOS move yielded rewarding outcomes.
The College measures its institutional performance on an annual and strategic (multi-year) basis. Models, including benchmarks and analysis, are utilized from two outside organizations: The National Association of College & University Business Officers (NACUBO) and Moody’s.
The NACUBO Composite Financial Index (CFI) & Ratio Analysis Model measures four institutional strength factors. They are as follows: primary reserve ratio; net income ratio; return on net assets ratio; and viability ratio. The College received an overall rating of 8.4 for the three year period covering fiscal year 2006 through fiscal year 2008. Peirce ranked between strong financial health (8.0) and superior financial health (10.0).
Moody’s undertakes ratio analysis. As a tuition-dependent institution, Peirce closely tracks two Moody’s Demand Ratios (admissions and financial aid). For these two key performance indicators, Peirce substantially outperformed the norms in both fiscal years 2007 and 2008 in comparison to similar colleges.
Peirce College, a mid-sized, non-profit institution, is well positioned educationally and financially in large part due to BOS. Institutional performance has improved dramatically and continuously over the years. The College has already begun its review process to determine when and how to value-innovate again. A deep, underlying commitment to continuous quality improvement by our employees insures that the College, its adult students, and the organizations which hire them will be well served.
Arthur J. Lendo, Ph.D.
Biographical Sketch
Dr. Lendo served as President, Peirce College, Philadelphia, PA from 1991 to 2009. His tenure placed him among the most experienced college presidents in the country. He shepherded the College through a charter change to four year status; established the successful Peirce Corporate and Community Cluster College; and created the acclaimed Peirce Online which offers accredited degrees completely online and was rated 20th nationally in the OEDb Online College Rankings for 2008.
The College now has a national scope with international reach. Degree seeking students have enrolled from 43 states, including 17 of the 19 U.S. Congressional Districts in Pennsylvania, the District of Columbia, the U.S. Virgin Islands and 30 other countries.
President Lendo has received numerous awards, including a National Award for Economic Education from The Freedoms Foundation, Valley Forge, PA. Dr. Lendo holds a B.B.A. from the University of Notre Dame, M.Ed. from the American University and Ph.D. from Boston College as well as certificates of advanced graduate study from Harvard University, The Aspen Institute, and Oxford.
His professional background has included administrative and faculty positions at The American University (DC), Boston College (MA), Northeastern university (MA), and Saint Joseph’s University (PA). While at Northeastern, he co-founded the instructional television program, Network Northeastern University (NNU). Dr. Lendo gained Fortune 500, high technology experience with Sperry UNIVAC (now UNISYS). He was part of the Worldwide Marketing Division and managed educational technology grants.
President Lendo presented a major policy paper at Oxford University in 2004 regarding asynchronous online learning which received wide distribution. He was a featured author in the 2009 edition of the book series, Inside the Minds, concerning leadership, innovation, and technology. His 2009 paper, “The PDP: The Secret to Our Institutional Success,” appeared in ExecBlueprints—an online publication.
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