A highly ambitious project
66. The idea for the e-University project was originally
developed at the height of the dotcom era when it was thought
that anything could be achieved through the internet (see paragraphs
5 to 8). The market for online learning was projected to grow
rapidly in the future and, with ventures that had already started
in the US, the UK Government was keen to set up the e-University
project to ensure the UK would be a major player in this market.
67. We have found that, although there were ambitious
aims for the project before UKeU was established, it added to
the pressure by taking very ambitious business decisions. Not
only did UKeU decide to start with the global market first, but
they also took on the whole product chainright from the
68. As the PA Consulting Business Review of UKeU
'Like any new enterprise, the first task for UKeU
has been to determine the business model, or value proposition,
through which it will seek to generate value and earn income in
its chosen markets. Most e-businesses seek to build their competitive
position in some but not all elements of the customer value chain.
The business model and strategy developed by UKeU for the eU is
notable in that it seeks to offer a fully-integrated end-to-end
value proposition which reproduces the full customer experience
offered by a conventional university. The services offered by
UKeU extend from market intelligence through the sourcing of products
(from selected universities) to channel management (through country-based
business managers and HE partners) to on-line delivery (via its
proprietary platform) with associated customer support services,
and finally to cash collections from end customers.
'This is an especially challenging strategy for UKeU
to have adopted, since it demands a wide range of very different
business capabilities and operating cultures within one organisation.
It also entails a high fixed cost infrastructure which must (a)
be fully developed before any revenues start to flow, and (b)
must then be maintained and serviced before those revenues show
a profit. These features of the eU value proposition lie at the
heart of the financial difficulties facing UKeU. The chosen strategy
has entailed a very long and expensive start-up phase for the
business, not yet completed, which then demands a very rapid ramping
up of revenues in order to achieve break-even within an acceptable
69. UKeU chose an 'especially challenging' strategy
that demanded a wide range of very different business capabilities
and operating cultures within one organisation. In trying to do
it all, UKeU set itself an impossibly ambitious business model.
It should instead have focused on just some of the elements of
the 'customer value chain'.
70. UKeU also set itself ambitious objectives as
a result of the markets it targeted in the early stages (see paragraph
23). There is no reason why UKeU could not have started in guaranteed
marketsor indeed in the home market. In his evidence to
the Committee, Sir Anthony Cleaver said:
'We did not know at the beginning what quick winners
71. Based on detailed work on target markets by CHEMS
and PwC, the original PwC business model assumed that the initial
low-risk markets targeted by the e-University would be:
a) selected UK postgraduate and continuing professional
b) servicing the needs of 'corporate' universities;
c) selected overseas markets.
72. The grounds on which UKeU decided to move away
from the advice of the original PwC business plan are not clear,
other than an ambition to enter the perceived global market for
wholly internet-based e-learning. The Minister for Higher Education
'I think probably it would have been very wise to
have had a crack at postgraduate work first. There very often
you might have another job, you might be doing other things, and
you would want to be primarily based on your PC or your laptop.
I think we could have tested that one first before going for this
great mass of undergraduates that we assumed would be flocking
to this platform.
(there was) a great deal of ignorance about
might have been a success.
had perhaps the focus
been a little narrower at first and less ambitious
well have been a success.'
73. In focussing so explicitly on the global market,
UKeU was not just migrating from the original business plan, but
also failing to undertake one of the explicit aims and objectives
for the project as identified by the Minister in the HEFCE Grant
Letter of 2001. The 2001 Grant Letter highlighted two particular
aims and objectives for which the project was originally set up,
including 'ensuring that the social inclusion agenda remains a
priority, primarily through the development of undergraduate courses
to reach those in this country who find it difficult to access
the more traditional campus-based university' (see Annex 1). In
choosing to focus so exclusively on the global market, UKeU clearly
failed to meet this Government objective.