harvest intel

HARVEST Intel Ideas for the future

16 June 2014 Prepared by: Brian Doyle

TIMS7301 Entrepreneurship and New Ventures Student Number: 4049325

HARVEST Intel ____________________________________________________________________________

_________________________________________________________________________ TIMS7301 Entrepreneurships and New Ventures - Brian Doyle: 4049325

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TABLE OF CONTENTS 1.0 EXECUTIVE SUMMARY .................................................................................. 3 2.0 INTRODUCTION ................................................................................................ 4

2.1 Outcomes .................................................................................................................. 5 3.0 UNIVERSITY OPERATING ENVIRONMENT .............................................. 6 4.0 PESTEL ANALYSIS ............................................................................................ 8

4.1 Political ..................................................................................................................... 8 4.2 Economic .................................................................................................................. 8 4.3 Social ......................................................................................................................... 8 4.4 Technology ............................................................................................................... 9

5.0 BUSINESS MODEL ........................................................................................... 10

6.0 BUSINESS MODEL - STRUCTURE ............................................................... 12 6.1 Key partners ............................................................................................................ 12 6.2 Target segments ...................................................................................................... 13 6.3 Key partner motivation ........................................................................................... 13 6.4 Key activities .......................................................................................................... 14 6.5 Value proposition .................................................................................................... 15 6.6 Customer relationship ............................................................................................. 16 6.7 Channels .................................................................................................................. 16

7.0 FEASIBILITY ANALYSIS ................................................................................ 18 7.1 Financial analysis .................................................................................................... 19

8.0 BUSINESS MODEL ASSUMPTION TESTING ............................................. 21 8.1 Assumption testing methodology ........................................................................... 21 8.2 Critical assumption - results .................................................................................... 22

9.0 REPORT CONCLUSION .................................................................................. 24 9.1 Options .................................................................................................................... 24

APPENDIX 1 – ASSUMPTION TESTING ............................................................... 25 APPENDIX 2 – SURVEY QUESTIONS .................................................................... 26

APPENDIX 3 – SURVEY RESULTS ......................................................................... 28 REFERENCING ........................................................................................................... 29

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1.0 EXECUTIVE SUMMARY HARVEST Intel is a start-up proposal designed to act as an engagement platform between the University of Queensland and industry target markets to facilitate the sale of postgraduate class intellectual property. Its purpose is to generate an appropriate commercial return on investment for its own business in addition to a new revenue stream for the University of Queensland. This opportunity has been identified due to the existing and future challenges faced by both domestic and global universities.

1. Relevance of bricks and mortar universities in the digital age. 2. Future funding model uncertainty 3. Proliferation of education options competing for students

Value propositions for the three stakeholders were established against which to examine the start-up proposal.

1. University of Queensland – Revenue stream/platform for industry engagement 2. Market/clients – Intellectual content/revenue and marketing opportunities 3. UQ Students – Enhanced real-world learning experience

In evaluating the viability of HARVEST Intel a detailed review was undertaken including a PEST, business model and financial feasibility analysis as well as testing stakeholder assumptions. This report concluded that HARVEST Intel in its existing form is not viable for two reasons.

1. Income statement projections indicate unsustainable losses 2. Assumption testing confirmed that the probability of securing a license to go to

market with the University of Queensland brand was low. Assumption testing did confirm that there was both a market and desire for industry engagement from all stakeholders. To successfully access this market requires an alternate engagement model to the HARVEST Intel proposal.

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2.0 INTRODUCTION Harvest Intel’s (HI) purpose is to leverage its industry experience and skill sets to facilitate a channel to market to generate a new revenue stream for the University of Queensland (UQ) through the commercialization and sale of Intellectual Property (IP) generated from UQ postgraduate program class output. Established as an independent service business HI will seek to act through a licensing agreement as an engagement conduit between the UQ and Industry to realise in monetary terms the value of a dormant UQ resource. HI’s proposal differs from the traditional direct supplier, client relationship. Within the context of HI’s proposal there is a symbiotic relationship between three stakeholders the UQ, postgraduate students and industry clients. Within this reciprocal relationship the UQ can be categorised as the first among equals in that it is the initiating relationship that allows relationships with the other two stakeholders to exist. Accordingly, to motivate all parties to engage with HI each require an individual value proposition:

o UQ – New revenue stream o Market/clients – Access to usable and salable IP o UQ Students – Real-world learning experience

HI’s opportunity has arisen from the evolutionary storm that is sweeping the educational sector globally. HI’s proposal is framed within the context of the existing and future challenges faced by not only UQ but also universities globally. There is uncertainty with regard to the relevance of bricks and mortar universities due to the disruptive technological impact of the digital age. University funding uncertainty, the proliferation of educational options, competition and a search for relevance within a framework of industry and societal needs are important issues, which will be dealt with in more depth in this paper. Similarly to industry the university sector is facing the challenges of a changing world. Within the context of these challenges the existing Australian university model is being tested. It is conceivable that the existing model, established on a base of large assets and back office structures will result in all but a few cases proving to be unviable in the long run (Ernest & Young, 2012). This landscape of uncertainty presents an opportunity for HI in that it creates an environment that amplifies HI’s value proposition to UQ. HI’s proposal contends that engaging with industry through the sale of postgraduate IP will generate positive outcomes for all stakeholders.

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2.1 Outcomes University of Queensland

o Sustainable new revenue stream o Scalable engagement and delivery platform o Brand equity growth due to enhanced student satisfaction (industry engagement

experience) Market/clients

o Access to quality IP o High content usability – internally and externally o Marketing opportunities to utilise content to leverage client organic growth or

new business UQ students

o Enhance educational experience through university/industry engagement o Fee outcomes – Opportunities for UQ to develop a sustainable new revenue

stream will have a positive influence on fee pressures The key elements of HI’s business model will be discuss to provide a deeper understanding of the business proposal and its interaction with stakeholders. Business feasibility will be discussed in detail including a financial analysis to determine if HI can appropriate sufficient value to justify investment. All elements will be reviewed to make a determination as to HI’s viability and the key reason supporting the decision and what options or modification are required to reverse the initial determination.

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3.0 UNIVERSITY OPERATING ENVIRONMENT A recent research paper published by Ernest and Young (2012), where they explored Australian universities role in society, their modes of operation, in addition to their economic structures and values, was responsible for coining the phrase, ‘a thousand year old industry on the cusp of profound change’ to describe the challenges faced by the sector. EY’s (2012) report was comprehensive in that it interviewed 40 leaders from 20 universities, including 15 Vice-Chancellors. Its research summary concluded that at a minimum, incumbent universities need to significantly streamline their operations and asset base while at the same time incorporating new teaching and learning delivery mechanisms, a diffusion of channels to market, and stakeholder expectations for increased impact. At its extreme, private universities and possibly some incumbent public universities will create new products and markets that merge parts of the education sector with other sectors, such as media, technology, innovation and venture capital. HI’s engagement proposal opportunity was conceived through this shared perspective, which was articulated in the EY (2012) paper, that the university sector is critical to Australia’s future. Australian universities educate our leaders and entrepreneurs of the future, generate new ideas and knowledge through their research programs, and earn much needed export income. From a societal perspective universities provide opportunities for students of diverse backgrounds to increase standards of living for themselves and future generations (Ernest & Young, 2012). To succeed universities will need to forge new business models that are dynamic, innovative, modern and fit for purpose for the decades ahead (Ernest & Young, 2012). It is within this context where HI’s business proposal to UQ provides a compelling value proposition to generate a new revenue stream while supporting new value propositions for industry engagement and students through a rich on-campus educational experience. To better understand the drivers of change in this brave new world a PEST analysis follows that will provide a deeper understanding of the challenges faced by universities in the future and act to reinforce the value proposition proposed by HI. Before continuing to discuss the PEST elements, I have included verbatim, interview comments captured from university leaders by EY (2012) through the development of their research paper. I include these because the comments are stark, candid impressions, absent of any vetting, editing and packaging of content for the research paper. These personal views to my mind encapsulate the fear, emotion and concern held by university leaders on future challenges and further reinforce HI’s value proposition to UQ to pursue a new revenue stream by embarking on a commercialisation and engagement strategy for postgraduate IP.

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“Teaching methods have to change. We can’t rely on delivering content anymore – it’s all about contextualization, ways of thinking, and the student experience.” – University Provost “Our major competitor in ten years time will be Google… if we’re still alive!” – University Vice-Chancellor “We will come under increased pressure on Government funding, whichever way you look at it.” – Head of university representative group “There will be 15-20 independent, global brands… the rest will be playing for the silver medal.” – University Vice-President “The big game will be co-investment with the private sector.” – Head of university representative group “The traditional university model is the analogue of the print newspaper…15 years max, you’ve got the transformation.” – University Vice-Chancellor “Universities face their biggest challenge in 800 years.” – University Vice-Chancellor “We’re not businesses…but we need to be run in a business-like way.” – University Vice-President “The big change will be partnerships with industry around niches…” – University Vice-Chancellor “We’re all looking for additional sources of income.” – University Vice-Chancellor “It’s going to be a tough decade.” – University Vice-Chancellor Source: Ernest and Young: University of Future

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4.0 PESTEL ANALYSIS

4.1 Political Contestability and deregulation of markets and funding – Competition for students, in Australia and abroad, is reaching new levels of intensity, at the same time as governments globally face tight budgetary environments. Universities will need to compete for students and government funds as never before. The introduction of a demand-driven funding model in Australia in 2012 has driven whole new levels of competition. For example, as the enrolment data for 2012 was processed it became clear that four Victorian universities lost 3.5% or more of their market share (Ernest & Young, 2012). “If we do not have the right government support, new entrants will cherry pick our most profitable courses. We’re going to be left providing loss-making courses that serve the public good” – Vice Chancellor’s Chief of Staff (Ernest & Young, 2012)

4.2 Economic Global mobility – Global mobility will increase for students, academics and university brands. This will not only intensify competition, but also create opportunities for much deeper global partnerships and broader access to student and academic talent. The international student market is growing rapidly with global growth of 6.6% per annum over the last decade. This will impact Australia’s traditional foreign student markets of China, Malaysia, South Korea, increasingly become global-scale destinations for international students in their own right (Ernest & Young, 2012) “China has an audacious agenda to create a handful of true world class universities… and the will and resources to make it feasible.” – President, Yale University (Ernest & Young, 2012)

4.3 Social Democratisation of knowledge and access – The massive increase in the availability of ‘knowledge’ online and the mass expansion of access to university education in developed and developing markets means a fundamental change in the role of universities as originators and keepers of knowledge. Access to universities has traditionally been dominated by a modest proportion of society in developed markets ranging to 20-30% of post-secondary students with a very narrow proportion of society in emerging markets, typically the elite. Today access is expanding in developed markets, such as Australia and even more fundamentally in emerging markets. China’s tertiary education participation rate more than trebled from 8% to 26% in the first decade of this century, and is likely to double again in the next 10-15 years (Ernest & Young, 2012).

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4.4 Technology Digital technologies – The disruptive influence of digital technologies have transformed media, retail, entertainment and many other industries. Higher education is next where university campuses may remain, but digital technologies will transform the way education is delivered and accessed, and the means by which ‘value’ will be created by higher education providers, public and private alike. While Moore’s law of technological development is specifically related to the hardware elements, its accelerated premise is appropriate in characterising pace and disruptive change the digital age has brought to the education sector. These new technologies will enable media and technology companies to enter the university space, either in partnership with incumbents, or potentially in their own right. The so-called Massive Open Online Courses (MOOCs) are an early stage example of the search for new business models. Some of these models will decline and fail, other will create very substantial economic value. Winners are likely to be a mix of new, pure play online businesses with powerful online models and capability (Ernest & Young, 2012).

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5.0 BUSINESS MODEL

Figure 1. HARVEST Intel business model – represents HI’s ultimate objective of commercialising and selling postgraduate IP from all UQ faculties

Figure 2. HARVEST Intel – Beta test engagement model – represents the first phase of operations where the focus is restricted to BEL given its size and proportion of postgraduate students to other faculties.

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Figure 3. HARVEST Intel – Beta test engagement organizational structure – represents the organisational structure of HI in the initial phase incorporating the required skill sets required for the roles

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6.0 BUSINESS MODEL - STRUCTURE To facilitate an effective evaluation of HI’s commercial viability the key elements of the business proposal as follows:

1. HI is a privately owned proprietary company. 2. HI seeks to secure a UQ license for the rights to commercialise postgraduate IP

from the Business, Economics and Law (BEL) faculty for on sale to industry. 3. HI seeks to secure a UQ license to use the UQ brand for the purposes of marketing

and selling BEL postgraduate IP. 4. UQ to receive a 70% share of IP revenues for BEL IP commercialisation and brand

license. 5. HI will under the licensing arrangement have immediate access to BEL postgraduate

IP and branding, revenues only flowing to UQ on account settlement to industry sales.

6. UQ to provide appropriate office space and services (communication, IT etc.) at standard commercial rates for an initial period of one year with a roll over option for an additional one year. Any requirement beyond two years will be subject to further negotiation.

7. All start-up and ongoing costs will be HI’s responsibility. 8. HI’s organizational structure for the first twelve months during the initial start-up

and beta testing phase will consist of two people. Additional personal will be secured in sync with business growth and the firm’s ability to support organisational growth.

9. For consideration in developing a financial viability model both HI staff will receive a remuneration level at market rates to their qualifications, skills and experience in addition to a car allowance, as well as the usual tools of business (mobile phone, tablet and laptop).

6.1 Key partners As discussed earlier this proposal is based on an interrelationship between three stakeholders. From HI’s perspective its key partners are UQ, postgraduate students and its industry clients. The key resources to be acquired by HI is the rights to commercialise and sell postgraduate IP and to use the UQ brand for marketing and selling, in addition to the willing participation of the postgraduate students. The third key partner is HI’s target market, which is industry in general. In the pursuit of sales the prospect of going from business to business seeking sales opportunities is far too resource intensive and provides little opportunity to leverage our initial success and build a lasting client relationship with firms on which to pursue follow on sales. Therefore HI proposes to segment that the target market to leverage existing client industry networks, resources and contacts across industry.

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6.2 Target segments

o Consulting firms – This segment includes the larger consulting firms in addition to a broad range of generalist and specialised consulting firms that deal with both public and private clients across the full spectrum of industry sectors.

o Government (state/federal) – The government has for some time now been rationalising its department structures in addition to its procurement processes. There are opportunities within government to establish relationships with the key industry engagement and economic development agencies to leverage networks and contacts. For example, in the federal sphere Enterprise Connect is an agency that operates similar to consulting firms with their mission to support small to medium sized businesses.

o Industry peak bodies – Similar to consulting firms in that peak bodies represent their members and provide the support apparatus to address members needs.

o Alumni – Leverage Alumni positions, networks and contacts to maximise HI engagement with the consulting firm, government and industry peak body segments in addition to stand alone industry opportunities presented within the Alumni network.

6.3 Key partner motivation UQ o To establish a new revenue stream within an environment where non-public funding

options will become more important. o To develop a platform for industry engagement to position UQ to combat future

competition from alternate educational provider options. o To facilitate the transition from a product specific mode of delivery to a consumer

focused delivery mode. Increased relevance, enhanced brand value/equity and all the associated flow on affects as a result (student enrolments, funding and status etc.).

Target segments o Ability to access high quality postgraduate IP.

o Generate opportunities to augment existing organisational capacities. o Facilitate organic and new business growth for clients and members.

o Enhance market positioning through engagement and association with a tier one institution such as UQ.

A multiple channel approach through segmentation is proposed on the basis of developing a portfolio of sales options in addition to minimising the risk of reliance on one revenue source. Essentially, not wishing to place all HI’s eggs into one basket. Another dimension to this particular multiple channel strategy is to implicitly establish a competitive environment. Through targeting multiple channels where there exists an overlap of interest (Alumni’s in target organisations, Consulting firms working for

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industry and government etc.). For example, there is an implicit motivation for the consultancy industry to consider establishing a relationship with HI. The alternative is that HI establishes alternate contacts with their clients through one of the other three channels. Also, given that ultimately UQ has a finite number of postgraduate programs from which to generate IP the concept of product scarcity comes into play as a motivating factor for clients to engage HI.

6.4 Key activities What key activities does our value proposition require?

o HI will require the cooperative coordination of marketable programs by teaching period/semester.

o Acquire a two-way communication and collaboration platform to facilitate seamless, real-time access to all stakeholders. Fundamental to HI’s value proposition for stakeholders is that the process to identify, develop and bundle IP output is non-intrusive. If the processes and procedures generate additional work or present an additional degree of difficulty or complexity to any stakeholders’ normal workload it will significantly undermine HI’s prospect of success.

o Accordingly, it is planned that in the initial six-month development phase prior to commencing beta testing on a selection of IP offerings, the administration and operational procedures will be developed in consultation with stakeholders. It is planned to seek third party accreditation to the International Standards Organisation (ISO) for a quality management system certification. At this stage of HI’s proposal development it is envisaged that certification to the ISO9001 standard will be pursued to support the design, marketing, sales and operational elements. Acquiring this internationally recognised standard is designed to ensure best practice is adopted in all business operations and in particular protecting the application and value of the licensed UQ brand and IP.

o While financial modeling is to be finalised on HI’s proposal to establish viability, once a decision to commence operations has been made a detailed financial business plan will be required incorporating predetermined performance milestones. It is also envisaged that a monthly reporting structure be established including appropriate KIP’s as a measure of HI’s performance and its future prospect of viability against established targets.

o In addition to the business and finance plans, HI will develop a detailed Sales and Marketing plan to identify preferred clients and to formulate a target strategy. A stakeholder management and engagement plan (SME) will be required to establish a two-way communication channel for all stakeholders. There is some overlap to the Sales and Marketing plan, but the primary objective of the SME is transparent, honest and timely communication. A failure to do so will undermine HI’s performance and prospects of viability against established targets.

o Within the framework of the Sales and Marketing plan HI’s objective will be to establish and nurture strong lasting relationships. The success of this endeavor will depend largely on the quality of work produced by HI and UQ and the value it brings to our clients and ultimately their clients.

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o A key objective for HI in the initial six-month development phase is to identify and secure sales for ten postgraduate classes. While assumption testing has established a price point for postgraduate output of $30,000, a price point of $15,000 has been placed on the beta phase classes. However, not achieving this price point is not a deal breaker as a mandatory threshold. The final arrangement is open to negotiation. Significant opportunities to establish early relationships with quality clients with scope for ongoing volume business will be viewed favorably as an opportunity to establish our market credibility and develop a demand for HI’s services. For the sake of the Income Statement forecast $15,000 for each courses has been used in the analysis.

o HI will work with the UQ BEL faculty teaching and administration staff to establish production processes and procedures. It is envisaged that direct production will be the responsibility of individual class lecturers. As stated earlier, the success of HI’s venture is dependent on a seamless user experience. In fact, a HI sales and marketing objective is to develop the engagement experience into a selling feature. Implicit in this objective is that the engagement experience is equally satisfying for UQ staff, particularly lecturers. It is envisaged that class lecturers will act as project managers for the IP output, which will be designed to replicate the process undertaken now with existing assessment work. The only difference being that consultation with the faculty, lecturer and the market will establish what content is available for sale. HI has the view that initial IP marketing offerings would offer little flexibility from the existing content being presented in each class. In this regard HI recognises that existing class structures and curriculum are designed to meet both the internal needs of UQ and the external needs of certification and ranking bodies and organisations. However, HI has formed the view that a secondary outcome of industry engagement is that over time with industry feedback and content requests UQ would, within their compliance framework, move to align course content and delivery to the evolving needs of industry and the continued enhancement of the student experience. The speed of this change would reflect on the success or otherwise of UQ’s evolution from the tradition product orientation of delivery standard content to an engaged innovative provider of creative IP in addition to HI’s success as an industry engagement platform.

6.5 Value proposition Specific value propositions for all three stakeholders have been discussed earlier in this paper. However, it is important that the characteristics at play within the context of this proposal are clearly articulated. There are four primary characteristics represented in HI’s value proposition. o Performance – HI’s performance in meeting the client’s need for innovative, high

quality postgraduate IP against the client’s business brief is paramount. It will be consistent performance to a client brief that will generate demand and bring clients back. Assuming HI’s offering is maintained at a consistently high quality, addressing the clients brief within a framework of value for money, in conjunction with the value add impact to the clients business will create a compelling motivator for the client to return to HI to replicate the experience and outcome. In this regard HI’s successes will breed success.

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o Brand/status – HI’s proposal facilitates the opportunity for business to access postgraduate IP from one of Australia’s leading tier one universities and a member of the ‘Group of Eight’ who consistently places in the top tier in multiple global rankings.

o Customisation – The opportunity to tailor projects to a client’s needs. The format of existing course offerings and the opportunity to evolve course structure and output over time has been mentioned earlier. However, within the context of existing course structure and UQ’s compliance constraints, HI will work with all stakeholder to maximise opportunities to win new business through product customisation. The ability to provide a degree of flexibility to satisfy client’s briefs will be critical in the early stages of establishing client relationships and pursuing new sales. In this regard it is logical to assume that the opposite of being flexible, being inflexible in product bundling with prospective clients will impede HI’s success.

o Convenience/usability – Again the need for HI’s engagement to be seamless has

been touched on. In the early beta stage it is envisaged that the existing management and communication technologies (MS applications, e-mail and Skype etc.) will suffice. HI’s view is that its proposal facilitates UQ’s transition from a product-driven educational model to a customer and in this case an industry centric focus. However, HI will prepare for a further transition to a technological focus that drives the customer centric orientation. While a hands on approach for the beta phase is appropriate, given the relative small number of courses under management, it is recognised that as HI’s business grows with an increased number of clients and courses under management, and in consideration for all stakeholder regarding convenience and usability, a transition to an online collaboration solution is inevitable. At this stage of HI’s proposal sufficient research has been completed to identify a range of technological solutions and their costs for inclusion in the financial viability analysis. At this stage there is insufficient analysis on which to make a decision. However, HI has the view that a successful transition to an online portal selected to enhance the user experience for all stakeholders will add value to HI’s business and act as an enabler for business growth.

6.6 Customer relationship All three stakeholders are also important customers. HI’s business proposal has no inherent value without the participation of all stakeholders, as it is a symbiotic relationship. The university must be on board with allowing access and use of its IP and brand supported by the postgraduate students and ultimately, industry must be given the opportunity to consume UQ’s postgraduate IP.

6.7 Channels In essence HI is the channel between UQ and the segmented market targets, with UQ managing the interaction and output of postgraduate classes. As discussed earlier the channel in the beta phase will essentially be a manual process given the number of target sales for the test. With growth, a technical solution will put in place and adapted to address stakeholder needs. These technical solutions will be scalable and evolve with the business and stakeholders needs (web page, on-line purchasing, tablet and mobile

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apps etc.). In developing an effective integrated channel a number of development phases will be addressed. Awareness phase o Market awareness will be developed through the establishment and implementation

of a Sales and Marketing plan underpinned by a stakeholder engagement and communication plan.

Evaluation phase o Critical in the development of the business is the need to help the customer to

evaluate HI’s value proposition. Pre-sale evaluation opportunities will be via both technical means such as a web site, electronic market promotions and manual process such as sales calls, prospecting and presentations. Post-sale evaluation will also utilise various management tools as appropriate such as performance KPI’s (repeat business/enquiries), market surveys and process audits.

Purchasing phase o Postgraduate IP will be purchased in class lots and possibly customised to a client

brief within the framework of UQ’s compliance requirements. Given the pre-planned nature of UQ’s timetable from semester to teaching period it is envisaged that the sales and marketing model will replicate the media sales model for selling and buying time slots for television advertisement. Similar to UQ postgraduate classes, television programing time is finite. Once, an allocation has been sold it is no long available. In HI’s model each teaching period will have a finite number of classes from which to generate IP for sale. Once, the class IP output has been purchased by a client it is no longer available. HI has the view that over time demand will play a role is establishing the price for specific IP outputs. Again, at some future point the prospect of extending the customisation model to cross faculty collaboration for postgraduate IP will further enhance the total value of IP output.

Delivery phase o HI’s delivery methodology will ultimately be determined by the needs of the client.

However, initially HI will establish a range of protocols to ensure product delivery within a framework of professionalism and quality. These initial protocols will be modified over time with stakeholder feedback and HI’s own philosophy of continuous improvement.

After Sale phase o HI’s After Sale services elements will be incorporated into the stakeholder

engagement and communication plan and will be adopted as standard operating procedures. Post sale feedback on all elements of HI’s business model interaction with stakeholders is critical to evolving business development to support growth. This customer service element is also a key compliance requirement in ISO quality management systems and a central part of ISO continuous improvement philosophy.

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7.0 FEASIBILITY ANALYSIS UQ postgraduate IP’s feasibility as a product and service has already been established. UQ’s MBA program has already packaged a number of courses for industry consumption. While no monetary gain has flowed directly from the output, the clients have demonstrated their satisfaction by coming back and reengaging with new classes. While no revenue has been generated for the class IP output, the level of satisfaction generated has resulted in clients pursuing other paid consulting and research services within UQ. Based on the success of the MBA courses and the feedback from HI’s market assumption testing there is demand for this output within industry. From an organisational perspective HI has access to the necessary human resources with the required suite of skills and experience to establish and manage this start-up.

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7.1 Financial analysis

Figure 4. Harvest Intel – Income Statement Forecast Financial analysis assumptions

o BEL conducted 110 postgraduate courses in the first semester 2014 (source: BEL Administration).

o Saleable courses has been set at 50 courses per semester o Revenue for 2015 was based on beta testing of 10 courses at $15,000 per course in

the second semester.

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o Forecast revenue is based on a staggered increase in course numbers and course value until the second semester in 2019 were BEL has reach the nominated capacity of 50 courses at a price point established from market assumption testing of $30,000.

o Per annum value of BEL output is $3,000,000 o Salaries and benefits reflect an increase is staff numbers from 2 in 2015 to 5 in

2019, three of which attract a car allowance. o HI’s marketing budget reflects an initial high spend in the establishment phase

dropping to a maintenance position in following years. o Depreciation reflects initial and periodic expenditure on the tools of trade (laptops,

tablets, mobiles). o Software license reflects the acquisition of an on-line portal/collaboration solution.

o Professional fees relate to on going development and customerisation of HI’s collaboration solution.

o All expense elements reflect either CPI increase adjustments and or service price increases.

o Rent relates to the HI’s original business model where UQ would supply office space and services at market rates. Rent has been adjusted with each increase in staff numbers.

o The largest cost in ‘Cost of Goods Sold’ is the 70% license payment to UQ.

o A provision was made in Cost of Goods Sold for additional material and labour. Not a deal breaker within the context of evaluating feasibility as the total value is immaterial in impacting the bottom line.

o HI’s model states that UQ will be paid on full payment of client account. In this analysis no consideration has been made for bad debts and any impact on either UQ’s license fee or HI’s bottom line.

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8.0 BUSINESS MODEL ASSUMPTION TESTING To facilitate the testing of HI’s business model assumptions a list of target participants was established. Participant selection was based on their position and experience within a target business market segment. The full list of assumption testing contacts is listed is Appendix 1. Participants who accepted and were interviewed are nominated as ‘face-to-face’ interviews. Participants who where not available in the nominated time frame or who did not respond to my requests for an interview are nominated as ‘no response’.

o Contact list – 22 (including focus group of four QUT postgraduate participants) o Positive responses resulting in interviews – 13 (59%)

8.1 Assumption testing methodology Assumption testing was undertaken through a series of face-to-face interviews and one student focus group (4 participants). Two means of information gathering was adopted. Quantitative – A simple survey (nine questions) was constructed on the Care-to-tell platform (caretotell.com) and administered via an Ipad tablet (kiosk mode) during interviews. Results were tabulated and made available via HI’s Care-to-tell web account. For survey continuity participants were asked to answer from the perspective of a potential client evaluating the business proposition and service offering, drawing from their work experience and educational background to formulate their answers. Qualitative – Questions and general discussion was used to develop a broad perspective with regard to the challenges and opportunities in the tertiary education sector within the context of commercialising university output and industry engagement. Information generated from the qualitative discussions was captured via written notes and audio recordings. Note – Question 8 related to nominating a sale price point created a great deal of discussion. All respondents had the view that it was difficult to nominate a specific dollar value. A number of reasons were discussed within the framework of the proposed start-up.

1. Format, type, quality and quantity of the output. 2. Degree of difficultly and complexity. 3. Was it standard postgraduate output or MBA postgraduate output? The

distinction here is that some participants placed MBA output at the premium end of the spectrum.

4. Commercial impact to clients’ business. There was a general recognition that postgraduate work in relation to the experience and hours spent on a project would be sold for a significantly higher value for similar work provided by a standard consultancy firm. Government participants also raise an

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important point with regard to the dollar threshold within each state and federal department against which work can be ordered before an open tender is required. Privacy - Qualifier Details of all contacts have been published in Appendix 1 of this paper to demonstrate the attempted scope of the start-up assumption testing across stakeholders. However, in the interest of individual privacy, interviews were conducted under the following requirements:

1. Responses to quantitative and qualitative will remain private. 2. No direct reference in the report is attributed to a specific individual. 3. Written notes and audio files will be destroyed and deleted on completion and

submission of this report.

8.2 Critical assumption - results UQ wants to engage with Harvest Intel – While no senior UQ decision maker was interviewed in this assumption testing the view expressed by UQ representatives is that the university is actively seeking opportunities to generate new revenue streams and to increase their engagement with industry and that proposals that do so would be evaluated on their merits. Harvest Intel has access to the UQ Brand – The views expressed with regard to UQ licensing its brand to HI for the purpose of commercialising postgraduate IP were negative. My interviewees believed that acquiring a license would be difficult if not impossible. The position was that UQ had built a globally recognised and respected brand over many years and a licensing agreement with a privately owned start-up would demand too much risk. Sustainable/viable market demand – All respondents held the view that there is sufficient market demand for HI’s product. In fact, the view was that industry would welcome an engagement platform that provided access to UQ IP (postgraduate). All respondents held the view that existing engagement options were problematic and ineffective (industry speak versus academic speak). Accordingly, HI’s seamless conduit will access latent demand. Market supports established price point – All respondents agreed that UQ IP marketed by HI should not seek to win business based on price. The view was that ultimately a premium return should be pursued for postgraduate IP. However, there was recognition that it was unlikely that the price point would ever reach the levels demanded and charged by private consulting firms. Willing student involvement – All respondents agreed that allowing UQ and HI to sell their IP was a win-win for them and UQ. This initial response was based on students receiving a real-world educational experience. However, once the idea that additional revenue streams from selling IP, while not necessarily being material in itself, would

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add to other UQ revenue initiatives in influencing fee programs the level of enthusiasm increased dramatically. Legal compliance – All UQ respondents agreed that the legal aspects of HI accessing and selling postgraduate IP are complex. UQ retains ownership and control of all IP generated by both staff and students. However, all respondents expressed the view that the existing legal position was not a deal breaker, rather a series of hurdles to be jumped.

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9.0 REPORT CONCLUSION HI’s start-up proposal in its existing form is not viable for the following reasons.

o Based on the income statement projections (figure 4) HI is not commercially sustainable. The business will continue to generate losses into the fifth year. While the yearly losses are reducing and opportunities may exist to turn the business to profit through the expansion of the engagement program to other faculties to achieve larger economies of scale the time line to recoup HI’s investment and to generate an effective commercial return is not satisfactory. Incorporating the opportunity costs for the invested funds into this analysis further confirms that the existing model is not viable.

o Assumption testing confirmed the scope of the legal impediments to accessing UQ postgraduate IP. Testing also determined that there was a high probability that these issues could be overcome to give HI IP access. However, testing also confirmed that there was a low probability that UQ would license its brand to HI. Given that a key blank of HI’s sales, marketing and engagement strategy is based on approaching the market with the UQ brand and its associated gravitas, the inability to do so would negatively impact HI’s sales and marketing success. The resulting adjustments to the uptake of UQ IP in the Income Statement under the HI brand would increase the losses already forecast in the Income Statement.

Would I invest? No.

9.1 Options Through the process of analysing HI’s start-up proposal there has always remained one constant, the very real challenges faced by universities for survival. The reality is self-evident, that universities must evolve. In this regard industry engagement is important not only as a new revenue source, but perhaps more importantly, as an enabler and catalyst in shaping the universities of the future. Within this context HI’s start-up analysis has demonstrated that there is an opportunity there, where value can be appropriated from the market place. However, a private company structure, after paying UQ for its IP is left with insufficient funds to pay its bills and generate a satisfactory return. Yes, HI could move the numbers around, reduce the commission to UQ until the numbers stacked up, but it would not reflect reality. In addition to the negative numbers, the likely inability to access the UQ brand is a significant drawback to market success. Logically, the reverse of the previous paragraph would result in a successful venture in selling UQ IP through industry engagement. Rather than a private company UQ could either bring the operation in-house or establish a wholly owned entity. UQ ownership would negate all issues relating to brand access and the legalities of acquiring postgraduate IP for sale.

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APPENDIX 1 – ASSUMPTION TESTING Participant list Information deleted for Linkedin posting

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APPENDIX 2 – SURVEY QUESTIONS

Questions Response Options

Q1. In your view is it appropriate for universities to pursue commercialisation and engagement strategies? (Choose one answer)

o Uncertain o Yes o No

Q2. In your view would industry derive a benefit from the ability to access postgraduate output in the pursuit of business objectives? (Choose one answer)

o No o Uncertain o Yes

Q3. Would your business utilise such a service? (Choose one answer)

o Yes o No

Q4. Would your business recommend such a service? (Choose one answer)

o Yes o No

Q5. If you are not likely to use or recommend our new service, why not? (Choose one answer)

o Do not need a service like this

o Do not want a service like this

o Satisfied with competing services currently available

o Can not pay for a service like this

o Not willing to pay for a service like this

Q6. How important is convenience when choosing this type of service? (Choose one answer)

o Extremely important o Quite important o Moderately important o Slightly important o Not at all important

Q7. What would make you more likely to use our service? (Select any or all options)

o Value add for our clients o Quality outcomes o UQ brand o Value for money o Achieving business

objectives

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Questions Response Options Q8. What value would you place on the output of a postgraduate class? (Nominate a dollar value on the sliding scale)

Survey allowed interviewees to select a dollar value on a sliding scale from $0 to $50,000.

Q9. In your view what cost would the market accommodate for this service? (Nominate a dollar value on the sliding scale)

Survey allowed interviewees to select a dollar value on a sliding scale from $0 to $50,000.

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APPENDIX 3 – SURVEY RESULTS

Questions Response % Q1. In your view is it appropriate for universities to pursue commercialisation and engagement strategies?

Yes – 100%

Q2. In your view would industry derive a benefit from the ability to access postgraduate output in the pursuit of business objectives?

Yes – 100%

Q3. Would your business utilise such a service?

Yes – 100%

Q4. Would your business recommend such a service?

Yes – 100%

Q5. If you are not likely to use or recommend our new service, why not?

Not Applicable – based on responses to Q1 to Q4.

Q6. How important is convenience when choosing this type of service?

Extremely important – 100%

Q7. What would make you more likely to use our service?

Quality outcomes UQ brand Value for money

Q8. What value would you place on the output of a postgraduate class?

Survey average - $30,000

Q9. In your view what cost would the market accommodate for this service?

All respondents duplicated their response to Q8

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REFERENCING Ernest and Young (2012). University of the Future. Ernest and Young Australia:

Sydney. Retrieved on 12 April 2014 from: http://www.ey.com/AU/en/SearchResults?query=Universities+of+the+future&sea

rch_options=country_name

harvest intel

Documents

business model structure

new ventures brian doyle

assumption testing methodology

key partners

key activities

pestel analysis

feasibility analysis

financial analysis