9 Lessons Universities Can Learn From Tesla and Wall Street: Part 2
In Part 1 of this three-part series, I discussed how several megatrends in organizational models and technology have impacted other industries, as well as how they will affect the higher education industry. During a time of drastic change and disruption, it is vital for colleges and universities to reevaluate their current strategies, processes, and software systems, and to implement a plan of action that will prepare them for the post-pandemic future. Higher education institutions would do well to learn lessons from Tesla and Wall Street.
In Part 2 of this series, I discuss how data has enormous value and why it’s important for universities to maximize the benefit of their alumni engagement data rather than give most of its value away to social media companies. Forward-thinking universities can better meet the challenges of today and tomorrow by creating an engagement model where alumni-centric and donor-centric become two sides of the same coin.
Drawing upon thirty years of experience with Silicon Valley, technology, and Wall Street, I believe that alumni relations and prospect development will come to play a larger and more critical role in advancement.
Stop Giving Away Your Data
The world creates 2.5 quintillion bytes of data per day. 90% of all the data ever created in the history of the world was created in the past 2 years. Over 10 million Snapchats and 90 million texts were sent just in the time it took you to read this far.
In the digital era, data turned from being difficult to collect and expensive to store to being abundant and cheap to store. But the proliferation of data also meant that there was a growing need to process and analyze the data. The emerging field of Big Data, which is projected to create 4.4 million jobs over the next two years, was a response to the need for large-scale data analysis.
For successful companies, it is important not only to collect data, but to understand it. Every night, Tesla receives terabytes of autonomous driving data, collected from each of its users. Tesla uses this data to identify bugs in performance, see how customers use their product, and improve its cars over time.
Your online alumni engagement activities are a valuable source of data. However, most of that value is given away by universities. 90% of the value goes to social media companies. They collect information about your alumni that they do not share with you, but instead sell to advertisers and data brokers. How successful would Tesla, Netflix, or Amazon be if they gave away 90% of the data they collected?
Why would a university give away most of the value of its platform’s engagement data to Facebook as opposed to being the beneficiary of 100% of it? Too often the default reaction is to maintain the status quo and focus solely on the ‘cost’ of doing something different. However, the focus should be on the benefit side of the cost-benefit equation in order to increase giving. Can a university really afford not to embrace the ‘cost’ when the potential upside of major, principal and planned giving is so high?
Megatrend: Data in all its shapes and forms (quantitative, qualitative, and online behavior) has enormous value.
Lesson #4: Make sure you get the cookie and not just the crumbs. The entire value of your alumni community’s engagement belongs to your university, not a social media company.
Technology Constraints are Yesterday’s Problem
Technological megatrends led to organizational restructuring and evolving business models on Wall Street.
One of the golden rules in technology is Moore's Law, which states that the number of transistors on a computer chip doubles every couple of years. For over 50 years, computer speed and capabilities have doubled every two years, all while computers themselves have become exponentially cheaper. In 1981, the cost of a hard drive per gigabyte was $500,000. In 2020, it’s less than 2 cents!
To put that into perspective: in 1980, cars cost $7,000 on average. If the automobile industry showed similar efficiency gains, cereal boxes wouldn’t come with toy cars inside — they would give you a real car instead!
The increase in computing power was the impetus for innovation on Wall Street. By the turn of the century, the price of personal computers decreased substantially, while their computing power skyrocketed. When past technology constraints no longer applied, Wall Street experienced an explosion of financial creativity and profits. The same concept can be applied to higher education.
The removal of technological constraints creates an opportunity for increased creativity, productivity, and time to spend on higher value activities. And, when employees have more freedom to be creative and productive, it boosts morale as well as output.
Megatrend: The cost of collecting and storing data has become negligible, and the benefits of that data are unparalleled.
Lesson #5: Technological advances have dramatically decreased the cost of acquiring and analyzing alumni data. Advancement needs to go far beyond capturing quantitative data and augment it with qualitative data and online behavioral data.
In the late 1980s, financial products such as derivatives were still in their infancy in terms of their complexity and adoption. Wall Street was dominated by traders whose main skills were an ability to build relationships with their clients, some basic knowledge of data, and a good “feel” for the market.
However, this system wasn’t perfect. During the 1990s, the financial industry was characterized by business unit silos. Each department operated as its own entity, with separate systems, databases, goals and metrics. Departments worked independently on their own objectives without much interchanging of information. Towards the late 1990s, it became apparent that the silo-based approach was hampering banks’ ability to increase revenue and control costs.
In the financial industry, business departments hoarded customer data because they wanted to ‘own’ the client relationship. Senior management at banks had to make it clear that ‘ownership’ was at the institution, not department, level. Once this was clarified, departmental focus shifted from defending turf to exploring ways to find synergies between them.
In the higher education industry, a holistic approach is required to ensure that the relationship between the university and its alumni drives both annual giving and major giving. In return, the university must also meet the different needs of both younger and older alumni.
Universities want to have a lifelong relationship with their alumni. Presumably, alumni also desire a lifelong relationship with their alma mater. However, a major challenge in alumni engagement is that each alum is at a different stage in their professional and personal lives. Additionally, each alum will move through various stages over time.
For a young alum, the primary points of contact with the alma mater may include alumni relations and career services. However, for the same alum at a later stage in life, the primary point of contact may be a major gifts officer. The key is to have a seamless transition so that the relationship is strengthened not just at the individual point of contact level, but also at the institution level.
Busting silos does not necessarily have to mean a change in reporting structure. In fact, a department can increase its institutional standing by demonstrating how it can help other departments achieve their goals.
A re-imagination of alumni engagement is required to provide greater value to alumni as well as to extract more value from that engagement for development and other stakeholders. Alumni engagement content can be repurposed to simultaneously benefit multiple university stakeholders. For example, an impact story from an alum who was a first-generation scholarship student can be used by Development for donor Discovery, Cultivation, and/or Stewardship; by Admissions in outreach to that demographic; and/or by Student Affairs to increase retention.
A holistic approach also helps foster a ‘culture of philanthropy’ within the institution itself. I will expand on this topic in a separate article.
Megatrend: Departments achieve better results when the walls between them are broken down, not put up or kept up.
Lesson #6: Leverage technology to automate the process of collecting alumni-generated content, analyzing it, and ensuring that development and other departments can readily access the specific content that will best serve each of their objectives.
Read Part 3 to discover even more lessons universities can learn from other megatrends.
Disclaimer: I own Tesla stock. I bought it several years ago when it was priced at $28 per share (post-split equivalent). At the time of writing, its stock price is $800. (Prices have been included to make it clear that this article is not based on hindsight bias.) Transformational companies often experience extreme volatility in their stock price. So, Tesla’s share price could be dramatically lower at the time of reading. Nonetheless, I stand by my thesis that, among other reasons, Tesla’s data-driven approach, which values software over hardware, will result in their long-term success.
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