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THE PARTHENON GROUPBoston • London • Mumbai • San Francisco
International & Commercial Perspectives on the Post-Browne Landscape
March 1, 2011
DDYYCODE_##2
Objectives for today
1. Provide a perspective on the post-Browne landscape informed by experience overseas and commercial tools
1. US
2. India
3. Commercial frameworks and tools
2. Offer a commercial framework for thinking about the new landscape
3. Detail two commercial tools, and explain how they are useful
1. Business model analysis
2. Cost curve analysis
DDYYCODE_##3
Perspectives on the Post-Browne Landscape The Browne reforms mean HEIs need to complement existing strategic analyses with new, market-oriented tools
• The Browne reforms create a quasi-marketplace for English higher education. This reform adds to already significant forces at work:
– Globalisation of higher education, especially student and researcher movement
– Global tightening of immigration rules as a reaction
– Concentration of research funding
– Changes to teacher training
• As with most large reforms, we believe people are over-estimating the short-term impact (and probably under-estimating the longer term implications)
– Even in the US, where tuition fees are a much freer market and a higher proportion of students enter higher education, the basis of competition is not predominately price, but a complex mixture of factors, including in-state subsidies for local universities.
– In India, IIT and other top universities are achieving scale whilst retaining student intake quality due to the size of the domestic market. The private provider scale model is also proving viable
– In England, demand will still exceed supply and it is likely that most institutions will be able to charge £7,000 - £9,000 per annum in the short term. The overall financial impact for most institutions that are not directly targeted by specific changes in government programmes (e.g., teacher-training colleges) will be moderate
– In countries where higher education is market-like, the for-profits have a strong interest in delivering at scale for lower-achieving students who want vocational & career-oriented qualifications. They will cherry-pick students from universities that have use these students and subjects as cash cows
• To understand the medium and longer term implications, market-oriented analysis and tools are required. In any market success depends on delivering what the market is seeking. This requires institutions to align strategies and business (or operating) models to demand, and adopt organisational and leadership models that are aligned with the business model
DDYYCODE_##4
Note: An independent student’s income or the income of a dependent student’s parents is considered “Low Income” if it falls within the lowest quintile of US household income. The upper limit of the lowest quintile was $18,500 in 2004 and $20,712 in 2008. “Private Sector” category excludes private not-for-profit institutionsSource: NCES BPS 1996-2001; NCES BPS 2004-2006; NCES IPEDS database; Census Bureau; Parthenon Analysis
Perspectives on the Post-Browne Landscape - US For-ProfitsThe typical focus is low income, ethnic minority and older students
-5%
0%
5%
10%
15%
20%
Public Sector
-2%
Private Sector
Low-incomeEnrolment
CAGR('04-'08)
13%
CA
GR
(‘0
4-’0
8)
Low-Income Student Enrolment Growth, 2004-08
-5%
0%
5%
10%
15%
20%
Public Sector
3%
Private Sector
Non-whiteEnrolment
CAGR('03-'07)
14%
CA
GR
(‘0
3-’0
7)
Non-White Student Enrolment Growth, 2003-07
-5%
0%
5%
10%
15%
20%
Public Sector
-1%
Private Sector
Age 25 andOver
EnrolmentCAGR
('03-'07)
17%
CA
GR
(‘0
3-’0
7)
Age 25 and Over StudentEnrolment Growth, 2003-07
DDYYCODE_##5
Perspectives on the Post-Browne Landscape - US For-Profits There is a much more intensive focus on marketing than in public universities
Note: Selling and Promotional costs includes costs associated with enrolment counselors and other activities under marketing. Selling and promotional spend for Career Education is calculated by adding admissions and advertising spend. Splits between advertising and enrolment counselor expenditures from 2008 applied to 2009. Grand Canyon is a Christian university based in ArizonaSource: BMO Capital Markets Report, Company Filings
Marketing and Promotional Expenditure of Selected Providers, 2009
$0MM
$200MM
$400MM
$600MM
$800MM
$1,000MM
The ApolloGroup
EnrolmentCounsellors
andOther
PromotionalExpenses
Advertising
Spend
$960MM
CareerEducation
$484MM
BridgepointEducation
$146MM
Capella
$100MM
GrandCanyon
$85MM
MarketingSpend
24% 32% 33%30%26%
MarketingExpensesas a % ofRevenue
• US providers spend very significant sums of money on advertising and other promotional campaigns
• All manner of media are used including TV, radio, print, internet etc.
− “You can hardly go a day without seeing a University of Phoenix advert on TV, print, the internet or even billboards and flyers”
Operations Manager, University Of Phoenix
• The companies make huge investments in generating leads through
– Inbound enquiries through website/campaigns
– Buying lists of phone numbers/emails
• Every lead is fed into a sophisticated CRM system and is assigned an “enrolment advisor”
• Each lead is owned by an advisor who is responsible for constantly working on it until conversion or failure
• Metrics such as conversion rate, lead to start rate are measured to track efficiency
• Significant sums are also spent on training the sales force
− “If I were to leave my details with Phoenix, I can be sure that someone will give me a ring in the next 60-90 minutes. They’re that good”
President, Madison Education Group
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Perspectives on the Post-Browne Landscape Organisations in any market must create alignment between four elements
Identity & Strategy Business ModelOrganisation and
LeadershipMarket Needs and
Responses
• What are the main segments in terms of attitude and beliefs about:
- Price, Debt, reputation etc
• How will these segments evolve as:
- The market matures and new offers/ entrants emerge
- Customers become better informed
• How do we communicate our brand and offers?
• How does price impact this?
• What are we really good at – what is in our DNA?
• Which segments does this mean we are best placed to serve?
• Do we offer every subject, even if it’s loss-making?
• Where do we invest?
• Which geographies are crucial to us?
• What do we subsidise: research vs teaching, overseas vs domestic, sciences vs arts?
• What is the optimal profile of teaching & academic staff cost and quality?
• What range of curriculum is required?
• How much choice and support do we give students
• What new skill sets do we need for the post-Browne landscape?
• What skill sets do we need for our business model?
• How do we resolve tensions between academic freedom and commercial pressures in our organisation?
• How do we find and/or develop senior managers with commercial instincts and credibility with academics?
DDYYCODE_##7
Perspectives on the Post-Browne Landscape Cluster analysis reveals 12 types of university business model
• Cluster analysis (least squares) based on 5 variables for each of 40 cost centres (using HESA data)
– Total academic spend (teaching and research, excluding overheads, facilities etc)
– % of student FTEs
– Research and teaching spend per student
– Total research money
– UCAS entry points
Methodology
Clusters• 12 identifiable clusters and sub-clusters and number of institutions in each cluster, including
1. General Teaching (3 sub-clusters) 58
2. Art, music and drama specialists 22
3. Small Academic 18
4. Focused teaching 13
5. Traditional Academic 9
6. Science and engineering research 5
7. Scale & Research 4
8. University of London Research 3
• There are also several other specialist clusters - agriculture and forestry, medicine, education, Oxbridge and a range of other ‘one-off’ models, e.g.: Buckinghamshire, The Open University, Cranfield
• Most analyses of the sector are heavily oriented towards academic (research) quality and ranking
• However, the post-Browne marketplace will favour institutions that are excellent at what they do, be it research, teaching, providing value-for-money or creating economies of scale. All these factors are important elements of a business model
• Different institutions can legitimately have different cost structures and spending priorities; benchmarking within groups of institutions with the same business model is much more meaningful than comparing across business models
• We have used cluster analysis across a range of variables to identify institutions that have broadly similar business models
Rationale
DDYYCODE_##8
Overview of ClustersThere is a very strong correlation between % academic spend on research and average UCAS entry requirement. This gives a conventional view of the clusters’ standing
0
10
20
30
40
50%
200 400 600
200,000FTEs
London Research
Art,Music,Drama
Oxbridge
Education
200,000FTEs
Average UCAS Entry Requirements
% o
f T
otal
Aca
dem
ic S
pend
spe
nt o
n R
esea
rch
GeneralTeaching
Small Academic
Traditional Academic
Scale and Research
Focused Teaching
Science and Engineering Focused Research
Medical Specialists
Agriculture and Forestry
Note: Academic Spend is teaching plus research, and excludes operational and capital expenditure e.g. facilities and some overheadsSource: HESA Finance Plus Data 2008-2009
Research as a % of Total Spend versus Average UCAS Entry Requirement
Bubble size is total number of Student FTEs in the cluster
DDYYCODE_##9
Overview of Clusters However, plotting academic spend per student against the average number of students shows the greater similarity between several business models
0
10,000
£20,000
0 10,000 20,000 30,000 35,000
£1BN
SmallAcademic
Scale andResearch
LondonResearch
Oxbridge
Focused Teaching
Education
Medical Specialists
£1BN
Average Number of Students per Institution
Aca
dem
ic s
pend
per
stu
dent
GeneralTeaching
TraditionalAcademic
Science andEngineering
FocusedResearch
Art, Music, Drama
Agriculture and Forestry
Academic Spend per Student versus Average Student FTEs per Institution (Bubbles = total spend)
Bubble size is total academic spend in the cluster
Note: Academic Spend is teaching plus research, and excludes operational and capital expenditure e.g. facilities and some overheadsSource: HESA Finance Plus Data 2008-2009
DDYYCODE_##10
Overview of Clusters Average academic spend per institution plotted against average UCAS entry requirements splits the clusters by teaching and research focus
0
100
200
300
£400M
200 400 600
200,000FTEs
General TeachingSmall
Academic
TraditionalAcademic
Scale andResearch
FocusedTeaching
London Research
Art,Music,Drama
Oxbridge
Medical Specialists200,000
FTEs
UCAS
Ave
rag
e A
cade
mic
Spe
nd p
er I
nstit
utio
n
Science andEngineeringResearch
Focus
Education
Agriculture and Forestry
Total Academic Spend versus Average UCAS Entry Requirements of Universities
Bubble size is total number of Student FTEs in the cluster
Note: Academic Spend is teaching plus research, and excludes operational and capital expenditure e.g. facilities and some overheadsSource: HESA Finance Plus Data 2008-2009
DDYYCODE_##11
General Teaching Universities The large General Teaching cluster has at least three sub-clusters
0
25
50
75
100
£125M
175 275 375 400
Worcester
UWS
UWE
Thames ValleyTeesside
Staffordshire
Southampton Solent
Salford
Queen Margaret
Plymouth
Oxford Brookes
Nott. TrentNorthumbria
Manchester Met
South Bank
KingstonHertfordshire
Greenwich
Gloucestershire
Essex
Dundee
Derby
De Montefort
Cumbria
Coventry
City
Chester
Central Lancashire
Canterbury Christ Church
Brunel
Brighton
Bradford
Bolton
BedfordshireBangor
Aston
Abertay Dundee
Average UCAS Entry Requirements
Tot
al A
cade
mic
Spe
nd
Wolverhampton
Westminster
Ulster
Sunderland
Stirling
Sheff. Hallam
Robert Gordon
Portsmouth
Northampton
Middlesex
Liv. John Moores
Lincoln
Leeds Met
Huddersfield
Glasgow Caledonian
Glamorgan
Edinburgh NapierEdge Hill
East London Bournemouth
Birmingham City
Note: Essex has been sorted in with Sub Cluster 1 due to the % of its total spend that goes to research. Academic Spend is teaching plus research, and excludes operational and capital expenditure e.g. facilities and some overheads Source: HESA Finance Plus Data 2008-2009
Sub-Cluster 3
Sub-Cluster 1
Sub-Cluster 2
Total Academic Spend versus Average UCAS Entry Requirements
DDYYCODE_##12
General Teaching Universities - Sub-Cluster 3Total academic spend shows the focus on key subjects for this cluster; education, business, nursing, design and IT
Note: Academic Spend is teaching plus research, and excludes operational and capital expenditure e.g. facilities and some overheadsSource: HESA Finance Plus Data 2008-2009
0
20
40
60
80
100%
Ply
mou
th
SocialStudies
Psychology
IT
Electrical Engin
Geography
Biosciences
Health andCommunity
Earth,Marine &
Environment
Business
Education
Medicine
Design
Nursing &Paramed
Civil Engin
Architecture
DentistryHumanities
Agriculture
Mechanical Engin
107
Man
chest
erM
et
Health andCommunity
SocialStudies
GeneralEngin
Sports Science
Earth, Marine& Environment
Biosciences
Business
Education
Design
IT
Humanities
Nursing & Paramed
Mathematics
Modern Languages
Psychology
Electrical Engin
Catering
Architecture
Chemistry
105
Shef
field
Hal
lam
SocialStudies
Biosciences
SportsScience
Media
IT
Nursing &Paramed
Business
Architecture
Education
Design
General EnginMaterials Engin
Electrical Engin
Catering
Humanities
Psychology
Health and Community
Mechanical Engin
104U
niv
.West
ern
Eng
IT
Education
Media
Biosciences
Design
SocialStudies
Nursing &Paramed
Architecture
Business
Health andCommunity
ChemistryEarth, Marine &
Environment
Modern Languages
Mathematics
Geography
Humanities
Psychology
Electrical Engin
Mechanical Engin
91
Hert
ford
hsire
MechanicalEngin
Humanities
Health andCommunity
Biosciences
Psychology
SocialStudies
Business
Nursing &Paramed
IT
Design
Education
Sports Science
Physics
Electrical Engin
Anatomy &Physiology
Pharmacy
Media
Mathematics
91
Cen
tralL
anc
ash
ire
IT
Catering
SocialStudies
Agriculture
GeneralEngin
Nursing &Paramed
Health andCommunity
Design
Business
Humanities
Education
Modern Languages
Media
MathematicsPharmacy
Biosciences
Chemistry
Psychology
Dentistry
Architecture
90
Nort
hum
bria
Humanities
CivilEngin
Health andCommunity
Biosciences
ElectricalEngin
IT
Business
Nursing &Paramed
SocialStudies
GeneralEngin
Education
GeographyEarth, Marine &
Environment
Chemistry
Mathematics
Modern Languages
Mechanical Engin
Architecture
Design
Psychology
Media
Sports Science
88
Not
tingh
amT
rent
Health andCommunity
Humanities
IT
Biosciences
Psychology
SocialStudies
Business
Design
Architecture
Education
Sports Science
MathematicsPhysics
Media
Agriculture
Chemistry
Civil EnginModern Languages
85
Kin
ston
Biosciences
SocialStudies
Architecture
Media
Humanities
Education
Design
Business
IT
MechanicalEngin
Nursing &Paramed
Civil Engin
Sports Science
Mathematics
Chemistry
Pharmacy
PsychologyHealth and Community
84
Por
tsm
outh
Design
Architecture
Biosciences
ElectricalEngin
Education
SocialStudies
Business
Pharmacy
Health andCommunity
IT
MechanicalEngin
Mathematics
Geography
MediaHumanities
Earth, Marine &Environment
ModernLanguages
Psychology
Civil Engin
Sports Science
80
Uls
ter
Biosciences
CivilEngin
Architecture
Psychology
Design
Anatomy &Physiology
Nursing&
Paramed
Business
IT
MechanicalEngin
SocialStudies
Humanities
Electrical Engin
Education
Pharmacy
Sports Science
ModernLanguages
Media
Health andCommunity
Earth, Marine &Environment
Catering
79
Birm
ingh
amC
ity
Business
Education
SocialStudies
Design
Nursing&
Paramed
GeneralEngin
ITHumanities
Architecture
Media
Health and Community
77
West
min
ster
Media
Design
Biosciences
Architecture
IT
Business
SocialStudies
Electrical Engin
Anatomy &Physiology
Education
Psychology
ModernLanguages
Humanities
Health andCommunity
76
Liv
John
Moor
es
Architecture
Design
IT
SportsScience
MechanicalEngin
Media
Business
Biosciences
Education
Health andCommunity
SocialStudies
Nursing &Paramed
Psychology
Modern Languages
Civil Engin
Chemistry
Mathematics
Catering
ElectricalEngin
General Engin
Pharmacy
Earth, Marine &Environment
PhysicsHumanities
75
Brig
hton
Humanities
Architecture
SportsScience
Biosciences
SocialStudies
IT
Design
Nursing &Paramed
Education
Medicine
Business
MathematicsCatering
Civil Engin
Modern Languages
Health andCommunity
GeneralEngin
Pharmacy
Earth, Marine &Environment
Chemistry
74
Salfo
rd
SocialStudies
IT
ModernLanguages
Biosciences
Health andCommunity
Design
Nursing &Paramed
Architecture
Business
Media
Geography
Civil Engin
PsychologyPhysics
Humanities
MechanicalEngin
CateringElectrical
Engin
73
Leed
sM
et
Nursing &Paramed
IT
Architecture
SocialStudies
SportsScience
Business
Education
Catering
Design
ModernLanguages
Humanities
Civil Engin
Psychology
Media
Health andCommunity
Biosciences
ElectricalEngin
73
De
Mont
efort
Nursing &Paramed
Pharmacy
Health andCommunity
IT
Design
Business
ElectricalEngin
SocialStudies
Psychology
MediaEducation
Architecture
Biosciences
Humanities
MaterialsEngin
67
Oxf
ord
Bro
okes
Biosciences
Humanities
IT
MechanicalEngin
SocialStudies
Nursing&
Paramed
Business
Education
Architecture
Catering
Sports Science
Electrical Engin
GeographyMathematics
MediaDesign
Health andCommunity
Psychology
64
Cov
entr
y
Psychology
IT
CivilEngin
Media
Biosciences
Nursing &Paramed
Business
MechanicalEngin
Design
SocialStudies
Education
Architecture
Humanities
ModernLanguages
Mathematics
ElectricalEngin
Geography
Health andCommunity
58
Hud
ders
field
IT
Psychology
Chemistry
SocialStudies
Health andCommunity
Design
Education
Business
Nursing &Paramed
MediaMechanical
Engin
Pharmacy
Catering
ElectricalEngin
Humanities
Architecture
Biosciences
58
Tees
ide
Education
Design
MechanicalEngin
Psychology
ElectricalEngin
IT
Nursing &Paramed
SocialStudies
Business
SportsScience
Chemistry
PhysicsBiosciences
Health andCommunity
Humanities
ChemicalEngin
Civil Engin
57
Gla
mor
gan
MechanicalEngin
Humanities
Chemistry
Anatomy &Physiology
Psychology
SportsScience
Nursing &Paramed
Business
Design
Media
SocialStudies
IT
Education
Civil Engin
ElectricalEngin
Architecture
Health andCommunity
Mathematics
Biosciences
57
Bou
rnem
outh
Archaeology
Anatomy &Physiology
ElectricalEngin
Earth, Marine &Environment
Health andCommunity
Nursing &Paramed
Business
IT
Media
GeneralEngin
Psychology
Catering
SocialStudies
DesignSports Science
53
Gla
sgow
Cale
don
ian
Biosciences
SocialStudies
Architecture
Nursing &Paramed
Business
IT
Anatomy &Physiology
Catering
ElectricalEngin
GeneralEngin
Psychology
51
Bra
dfo
rd
MechanicalEngin
IT
Anatomy &Physiology
Earth, Marine& Environment
Biosciences
Nursing &Paramed
Business
Pharmacy
SocialStudies
Chemistry
Humanities
Psychology
ElectricalEngin
GeneralEngin
Civil Engin
Media
51
Sun
derla
nd
Media
Pharmacy
SocialStudies
Psychology
Education
Business
IT
Design
Biosciences
SportsScience
Nursing &Paramed
MechanicalEngin
Humanities
Health andCommunity
ModernLanguages
48
Der
by
ElectricalEngin
Humanities
Media
MechanicalEngin
IT
Health andCommunity
Nursing&
Paramed
Business
Design
SocialStudies
Education
Psychology
Architecture
Biosciences
Earth, Marine&
Environment
SportsScience
Geography
Catering
48
Sta
fford
shire
SocialStudies
IT
MechanicalEngin
Psychology
Business
Design
ElectricalEngin
Nursing&
Paramed
SportsScience
Geography
Health andCommunity
Mathematics
Biosciences
Education
Media
Humanities
Chemistry
47
Can
terb
ury
Health andCommunity
SocialStudies
Business
Humanities
Education
Nursing &Paramed
Psychology
IT
Biosciences
Geography
Anatomy &Physiology
Design
Media
SportsScience
43
Ban
gor
Business
Agriculture
Education
Psychology
Nursing &Paramed
Humanities
Biosciences
Design
MediaGeography
Chemistry
SocialStudies
SportsScience
ElectricalEngin
42
Cum
bria
SportsScience
Business
Humanities
Health andCommunity
Nursing &Paramed
Education
Design
IT
Psychology
SocialStudies
Anatomy &Physiology
Agriculture
42
Edin
burg
hN
apie
r
Biosciences
SocialStudies
Architecture
GeneralEngin
Business
Nursing &Paramed
Design
IT
CivilEngin
ModernLanguages
Catering
SportsScience
Psychology
Media
41
UW
S
Education
Media
SocialStudies
IT
Nursing &Paramed
Health andCommunity
Business
GeneralEngin
Civil Engin
SportsScience
Chemistry
Psychology
ModernLanguages
39
Stir
ling
Education
SocialStudies
Nursing &Paramed
Business
IT
Media
SportsScience
37
Sout
hS
olent
IT
SocialStudies
SportsScience
GeneralEngin
Media
Design
Business
Civil Engin
ElectricalEngin
Education
36
Edg
eH
ill
SportsScience
Design
Media
Education
Nursing &Paramed
SocialStudies
Business
IT
35
Lin
coln
SocialStudies
Business
Media
Design
IT
SportsScience
33
Nort
ham
pton
SportsScience
MaterialsEngin
Nursing&
Paramed
Business
SocialStudies
Design
GeneralEngin
IT
ElectricalEngin
Media
32
Ches
ter
SportsScience
IT
Media
Nursing&
Paramed
Design
Business
SocialStudies
32
Media
IT
Design
Business
SportsScience
SocialStudies
Catering
31
Media
IT
23
IT
CivilEngin
IT
12
Tot
al A
cade
mic
Spe
nd
Glo
ucest
ersh
ire
Worc
este
rB
olto
n
21
Abe
rtay
Dun
dee
12
Quee
nM
arga
ret's
Total Academic Spend of Institution by Cost Centres 2008-2009, £M
DDYYCODE_##13
Overview of ClustersThe most focused clusters are the University of London research-intensive and ‘focused teaching’ institutions
0
1
2
3
4
5
200 300 400 500 600
Science and Engineering Research Focus
Medical Specialists
London Research
Oxbridge
Small AcademicTraditional Academic
Scale and Research Education
Agriculture and Forestry
Art, Music, Drama
Focused Teaching
General Teaching
Average UCAS Entry Requirements
Ave
rag
e N
umbe
r of
Cos
t Cen
tres
with
>10
% o
f F
TE
s
Average Number of Cost Centres With Over 10% of Student FTEs versus Average UCAS Entry Requirements
Note: Academic Spend is teaching plus research, and excludes operational and capital expenditure e.g. facilities and some overheadsSource: HESA Finance Plus Data 2008-2009
DDYYCODE_##14
Cost Curve Analysis Economies of scale are not being achieved in most subjects (1 of 2)
0
10,000
£20,000
0 2,000 4,000
Absolute Number of Student FTEs
Aca
dem
ic S
pend
per
Stu
dent
Academic Spend per Student versus Number of Student FTEs for Business and Management Studies
Note: Academic Spend is teaching plus research, and excludes operational and capital expenditure e.g. facilities and some overheadsSource: HESA Finance Plus Data 2008-2009
DDYYCODE_##15
Cost Curve Analysis Economies of scale are not being achieved in most subjects (2 of 2)
0
2,000
4,000
6,000
8,000
£10,000
0 200 400 600 800 1,000 1,200 1,400 1,500
Absolute Number of FTEs
Aca
dem
ic S
pend
per
Stu
dent
Academic Spend per Student versus Number of Student FTEs for Psychology and Behavioural Sciences
Note: Academic Spend is teaching plus research, and excludes operational and capital expenditure e.g. facilities and some overheadsSource: HESA Finance Plus Data 2008-2009
DDYYCODE_##16
Perspectives on the Post-Browne Landscape Summary of takeaways
• There is no market in the world in which the predominant basis for competition is price, although there are price-sensitive segments
• Reputation and scale are much more common bases of competition
• In any market or quasi-market, alignment between the market needs, institutional strategies, business models and organisation is key to success
• Unlike typical ‘rankings’, there are several broad viable business models available (and plenty of variants of these).
• Most institutions have multiple departments that have no financial viability
• The ‘broad academic offer’ – which is the default for most universities – is financially challenging, and most institutions will not be able to sustain it in the longer term unless the breadth is a distinctive part of their offer
• ‘Winner-takes-all’ economies of scale mean that even profitable departments may find themselves under threat in the medium term
DDYYCODE_##17
Appendix
DDYYCODE_##18
The Parthenon Group Overview
About Us
• Founded in 1991 as a boutique strategic advisory firm
• 200 members in 2010
• Offices in Boston, San Francisco, Mumbai and London
• The firm serves CEOs and business leaders of Fortune 500 companies, high growth companies, private equity firms and educational institutions
Practice Areas
• Business and Financial Services
• Consumer, Retail and Restaurants
• Education
• Healthcare and Life Sciences
• Industrials
• Information/Publishing
• Private Equity
• Technology
Capability Areas
• Change Management and Implementation Support
• Competitive Analysis
• Corporate and Business Unit Strategy
• Cost Improvement
• Econometric Forecasting
• Innovation
• Marketing and Distribution Strategy
• Merger and Acquisition Strategy/Due Diligence and Execution
• Policy Development and Systems Design
• Pricing
• Sales Force Optimization
• Strategic Resource Allocation
DDYYCODE_##19
The Parthenon Group Representative Corporate Clients
Fortune 500 Middle Market
DDYYCODE_##20
Education PracticeMission and Vision
• Success that encompasses both business and educational results:
− Educational success, as measured by improved student outcomes and policy/system reform
− Business success, as measured by economic value-add
• Unique perspective on success that enhances Education Center of Excellence capabilities and opportunities
Success Stories and Impact On Learning and
Business Outcomes
• K-12 (primary and secondary) schools in both public and private sectors
• HE and other post-secondary institutions
• Corporate training, skills
• Foundations and grant-givers
• Local, regional and central governments
• Publishers, technology and other education support service companies
Unmatched Client list
• Highly capable and experienced education team leaders
• Comprehensive engagement in the education industry
• Experience across the globe
• A history of sustained investment in education
Unique Institutional Capability
MISSION AND VISION
To be the leading strategy advisor to the global education industry
DDYYCODE_##21
Education Practice – Unique Institutional Capability Experts in Educational Markets
Higher Education
Skills and Vocational
Primary & Secondary
(K-12)
Policy and Regulation
Education Support Services
Capital Markets
Educational Markets
DDYYCODE_##22
Education Practice – Unmatched Client ListGlobal Presence in Over 400 Education Projects Since 2001
= On-the-Ground Education Sector Projects Completed
= Parthenon Offices
DDYYCODE_##23
Education Practice – Unmatched Client List Representative Education Clients
Educational Services (Including Publishing)
Higher and Further EducationPrimary and Secondary Education
(K-12)
DDYYCODE_##24
Education Practice – Unmatched Client ListRepresentative Education Transactions (Completed Deals)
Equity Provider:Baring PrivateEquity AsiaJune 2008
Equity Provider:CHAMP Ventures
August 2008
Commercial due diligence
Operator of international schools and services
UK based job search, recruitment and training
agency
Equity Provider:Englefield Capital
October 2007
Commercial due diligence
Equity Provider:CBPE Capital
September 2007
Provider of vocational training in the UK
Co-educational school for international children
Equity Provider:Apollo Global (Carlyle)
July 2009
Provider of professional services training
Equity Provider:Nord Anglia
September 2009
Private day and boarding school in Switzerland
Independent provider of aviation training, personnel
solutions and technical support services
Commercial due diligence
Equity Provider:Star Capital Partners
February 2007
Educational travel services business, providing activity
and adventure trips, educational tours and
school ski trips
Vendor:Bowmark Capital
July 2008
VendorCommercial due
diligence
Provider of vocational skills training and
employability services
Provider of vocational skills training
Debt Provider:Ares Capital Europe
March 2010
Commercial due diligence (refinancing)
Equity Provider:Sovereign Capital
June 2010
Provider of supply teachers, teaching
assistants and nursery nurses, both short and long term, to schools
throughout England and Wales
Vendor:RJD Partners
July 2010
Provider of university access and English
language programmes provision of world-class university access and
English language programmes.
Equity Provider:Providence Equity
July 2010
Commercial due diligence
Commercial due diligence
Commercial due diligence
Commercial due diligence
Commercial due diligence
Commercial due diligence
VendorCommercial due
diligence
DDYYCODE_##25
Education Practice – Success StoriesInternational Strategy Development for UK University
Parthenon’s client is a leading provider of distance learning in the UK and internationally
International positions reflect historic activities, and do not take account of new opportunities
Identify 1-3 attractive markets for the client to enter
Give an overview of the kinds of customers, offers and partners required for success
Total opportunities to be material in the context of the overall institution
Identified potentially attractive markets by screening every country in the world through a series of macro-economic and demographic filters
Examined the regulatory and market dynamics of around 20 most-attractive countries, and evaluate their suitability for market entry
Surveyed potential students and partners in four most-promising countries to identify the most appropriate offer and potential partners
Identified four markets – one developed and three emerging – that were suitable for entry
For each market, identified partners who expressed an interest in partnering with the client, and set up follow-up meetings
Identified the offers most suited to that market
Now providing support to the client in considering market entry strategy
Situation
Objectives
SelectedResults
Parthenon Activities
DDYYCODE_##26
Education Practice – Success StoriesInternational Competitor Analysis for UK University
Situation
Objectives
SelectedResults
Parthenon Activities
This distance education oriented university is undergoing a strategic review. The Vice-Chancellor is aiming to turn the university in to a more nimble, innovative university of the future
Having established a new internal strategy team, the vice-Chancellor retained Parthenon to assist the internal team with refreshing parts of the overall strategy
Conducted detailed landscape of the U.S. market to understand the for-profit private higher education providers Developed in-depth profiles of competitors (business models, price points, spend on marketing) Engaged in scenario planning / game theory (developed a point of view on how U.S. competitors might enter the UK
market (e.g., through acquisitions or partnerships)
Determine the potential impact of entry of U.S. for-profit higher education providers into the UK market (e.g., Apollo, Capella, DeVry, Bridgepoint)
Identified critical areas where the university needed to invest in order to be stay ahead of its competition and to protect its student base from being taken by new competitors/market entrants
Recommended a more student-centric approach: Increase spend on marketing since the university had traditionally been very passive in acquiring new students Introduce more flexibility in start dates rather than continue the “one-size fits all” approach Adjust price points to ensure competitive position
DDYYCODE_##27
Education Practice – Success StoriesBusiness Plan Development for Oxford University’s Saïd Business School
Situation
Objectives
SelectedResults
Parthenon Activities
Oxford University’s Saïd Business School (SBS) was established in 1996 and is one of Europe’s leading business schools Its flagship program, the one-year MBA, represents the majority of the School’s focus and revenues, and is a differentiating factor
when compared to other UK-based business schools The School was considering an expansion (additional MBA stream and expanded Executive MBA) which would require the School
to make a capital investment in new facilities. At the request of the key donor (Mr. Saïd), an independent party (Parthenon) was engaged to conduct a review of the expansion plan that had been developed by the School
Conduct a high level assessment of the School’s business plan Validate and challenge the achievability of the School’s business plan, including the robustness of the plan’s structure, key
inputs and assumptions and the deliverability of the financial projections Advise on the School’s ability to repay debt (required to finance the expansion) at the levels envisaged in the plan Determine whether the School will be able to increase its funding in areas key for its competitive performance (such as faculty
salaries, doctoral and MBA scholarships, and the Careers and Alumni Relations Services)
Conducted interviews with key members of the SBS management team to develop a better understanding of the assumptions underpinning the business plan
Conducted desk-based research and analysis to benchmark SBS against comparable leading international business schools Ran sensitivities on financial projections, determined impact of sensitivities on projections Developed a view of the achievability of the School’s business plan
After pressure testing the assumptions, determined that the business plan was achievable Identified opportunities to drive improvements in efficiencies/ lower costs (to increase potential margins) Established that even in the worst case scenario cash flow generation would be sufficient to support the School’s debt
payments
DDYYCODE_##28
Education Practice – Success StoriesGrowth Planning in Private Post-Secondary Education Provider
Parthenon’s client is a leading for-profit U.S. provider of post secondary education that serves ~100K students annually
Declining rates of enrollment growth across the for-profit market required the development of a growth strategy to improve our client’s core offering
Assess relative company performance measured by local market share – determine the most meaningful definition of market share for the company
Identify drivers of profitability by local market and determine key levers to increase operating profit in near and medium term
Develop clear enrollment and financial targets in each metro area to achieve above-market growth over 3-5 years
Collected and analyzed specific enrollment data for both the client and competitors
Modeled enrollment demand and growth
Conducted detailed cost allocation analysis and variance by location
Interviewed students, faculty, administrators and leading external industry experts to assess performance drivers
Created comprehensive financial models and strategic growth plans for each individual market
Developed strategic growth plan intended to double revenues and triple contribution margins over 5 years
First quarter results exceeded expectations, with ongoing performance analysis underway
Situation
Objectives
SelectedResults
Parthenon Activities
DDYYCODE_##29
Education Practice – Success Stories Strategic Planning for Graduate School of Education
• The Graduate School of Education program is a premier U.S. and global education institution, and is part of a leading private university
• The school offers Masters and Doctoral degree programs and Executive Education programs, and also conducts cutting edge education research
• New leadership at the school seeks to develop a robust strategic plan to support ongoing investment priorities and corresponding growth initiatives
• Develop a comprehensive situation assessment and fact-base, including an overview of the school’s mission, an assessment of current degree and non-degree programs, and an in-depth profile of students/alumni and faculty
• Assess potential growth opportunities, including adjustments to current degree programs and the possibility of new degree offerings, particularly in the area of education leadership
• Provide recommendations regarding strategic priorities, corresponding investment requirements and an actionable implementation plan
• Conducted comprehensive interviews of the school’s administration and faculty to help inform and develop consensus around the school’s mission and programmatic priorities
• Analyzed market needs, gaps and preferences via in-depth discussions with and surveys of potential employers (e.g., U.S. public school districts, education foundations, etc.), prospective students and education leaders
• Completed a full assessment of the school’s current program portfolio, including an evaluation of Masters, Doctoral and Executive Education offerings within the context of recent market trends and broader financial planning requirements
• Identified a tangible market need for more robust and effective training programs for education leaders, with a specific demand for programs with a blended focus on education, management, and policy/politics
• Validated the Graduate School of Education’s strong positioning to address this specific market need
• Prioritized opportunities for the school to optimize its current portfolio of programs offerings through adjustments to its Masters programs and ongoing development of its Executive Education offering
Situation
Objectives
SelectedResults
Parthenon Activities
DDYYCODE_##31
Education Practice – Unique Institutional Capability Team Bios – Management team
Robert LytlePartner
Karl ChengPartner
Tammy BattaglinoPartner
Rob co-leads Parthenon’s Education Practice, with a focus on global for-profit education markets. For over 15 years, he has led client engagements on general strategy, profit improvement, and investment due diligence across a broad spectrum of business models in the following sectors: K-12 and post-secondary schools; educational publishing, testing, and service provision; and consumer education products and services. His clients include high-growth companies, publicly listed Global 100 companies, financial investors, and international governments.
In addition, Rob has participated in numerous high-profile corporate turnarounds, mergers, divestitures, and privatizations in Europe, North America and Asia. Prior to joining Parthenon, he was with Bain and Co. and served as a U.S. Army aviator. He holds a B.S.E. in Economics from the Wharton School of Business and an M.B.A with high distinction from The Tuck School of Business at Dartmouth.
Tammy co-founded and leads the firm’s Education Practice. For over 15 years, she has advised clients on issues related to operational excellence, strategy development, and new venture creation. Her clients include a wide range of organizations from start-ups to Fortune 100 companies, school districts, government agencies, and some of the world’s largest foundations.
Tammy’s extensive education experience spans for-profit and public sector entities across the K-12, higher education, and corporate training continuum. She has led dozens of engagements with organizations that include the NYC DOE, NY State DOE, Boston Public Schools, DC Public Schools and leading education-focused foundations and non-profits.
She holds an A.B. in Economics from Harvard College. She received her M.B.A. from Harvard Business School and her M Ed from the Harvard Graduate School of Education.
Karl has advised a broad range of clients in education, publishing, financial services, and industrial businesses. His functional areas of expertise include corporate strategy, business plan development, and pricing. He also has experience across both the private and public sectors, having advised corporations, non-profit entities, and public/private partnerships.
Karl’s public sector education experience includes improvement strategies and business planning engagements with Charlotte-Mecklenburg Schools, Chicago Public Schools and DC Public Schools. Karl also manages multiple client engagements with education-focused foundations.
Prior to joining Parthenon, Karl worked at Booz·Allen and Hamilton and ExxonMobil Corporation. Mr. Cheng received an A.B. from Harvard College, magna cum laude in Economics, as well as an M.B.A. from Harvard Business School.
DDYYCODE_##32
Education Practice – Unique Institutional Capability Team Bios – Management Team
Karan KhemkaPartner andMumbai Office Head
Chris RossPartner
Haven LaddPartner
Karan is the Head of Parthenon’s Mumbai office and international ECE practice.
He has extensive experience in the Asian private education sector, including business plan development across education verticals, a due diligence of an international language school with assets in China, a due diligence of an Indian IT training school, analysis of the Chinese market for English Language publications, and a due diligence of a network of for-profit universities in China.
Other education projects include U.S. and UK market entry strategies for a major multi-national educational publisher, and a due diligence of a leading UK educational publisher. He has worked extensively for clients in Asia, the Middle East, and Europe.
Karan holds a bachelor’s degree in International Relations from Georgetown University and a M.A. in Law from Cambridge University.
Haven is a Partner with The Parthenon Group, which he joined in 1997.
While at Parthenon, he has focused on strategic issues facing companies and schools in the U.S. education market. He brings a perspective on strategy built on 11 years of consulting across education and corporate clients in a variety of industries including professional information services, healthcare, insurance technology, manufacturing, and many others.
His work in education has included developing district-wide strategies to increase high-school graduation; designing sustainable growth plans for post-secondary providers, and building data and performance management systems across districts and networks. Functionally, his experience includes finance, organizational design, operations, and corporate strategy.
Haven received his undergraduate degree in 1997 from the Harvard University, Magna cum laude. He received his M.B.A. with distinction in 2003 from the Tuck School of Business at Dartmouth, where he was a Tuck Scholar.
Chris is a Partner with The Parthenon Group, which he joined in 2001.
He works on numerous corporate and education clients. Typical projects have included G&A optimization, merger integration, growth strategies, pricing strategy, portfolio optimization, and sales productivity.
In addition to client work, Chris coordinates all Associate training for the firm. Prior to joining Parthenon, he worked at PricewaterhouseCoopers in their D.C. office.
He holds a B.A. in Economics from Williams College and an M.B.A from the Tuck School of Business at Dartmouth, where he was elected Edward Tuck Scholar.
Lisa CloitreDirector, Education Center of Excellence
Lisa is the Director of Parthenon’s Education Center of Excellence and a member of the firm’s management team.
Lisa advises both corporate and public sector clients in the education industry, with a focus on engagements with state and district departments of education, foundations, school operators, and education nonprofits. She specializes in strategy development and implementation, business planning, portfolio optimization, and education reform.
Within Parthenon, Lisa helps oversee the firm’s Women in Business network and broader diversity initiatives. Prior to joining Parthenon in 2002, she worked for Fidelity Investments in Boston and Deloitte and Touche’s International Assignment Services in Brussels, Belgium.
Lisa holds an M.B.A. from the Tuck School of Business at Dartmouth and a B.A., cum laude in Government and French from Dartmouth College.