Suomalaisen korkeakoulujärjestelmän kriisi

Suomalainen korkeakoulujärjestelmä on kriisissä. Vanhat rakenteet tulee kyseenalaistaa. On aika uudistua.

Jokin aika sitten matkasin bussissa takaisin kohti Helsinkiä. Facebook-viestieni joukossa oli linkki artikkeliin, jossa amerikkalainen kirjoittaja piti ilmaista koulutusta jopa ihmisoikeutena. Viestin lähettäjälle kerroin olevani bussissa ja totesin maanteitä ja koulutietä vertaillen, että Suomen teillä saa ihan kuka tahansa liikkua vapaasti ja jopa ilmaiseksi, mutta jostain syystä bussikuski vaati minulta maksua ennen kyytiin pääsemistä.

Uusin teknologia mahdollistaa sen, että oppia voi tarjota käsittämättömän suurille massoille yhtäaikaisesti, ilmaiseksi ja hämmentävän laadukkaasti. Avoimet verkkosisällöt, uudenlainen yhteisöllisyys, vertaisoppiminen ja jakaminen ovat uusi tapa toimia ja osa tulevaisuuden opin valtateitä. Tekniikan ansiosta kuka tahansa voi ”kävellä opintiellä” ilmaiseksi.

Suomalainen korkeakoulujärjestelmä ajautuu kilpailuun maailman parhaiden yliopistojen kanssa. Moni suomalainen valitsee jo nyt avoimen, ilmaisen ja maailman parhaan yliopiston. Suomessa avoin opetus on pääsääntöisesti maksullista. Globaalissa kisassa pärjätäksemme suomalaisen korkeakoulun on tarjottava avoin verkko-opetus ilmaiseksi.

Linja-auto vertauskuvaani viitaten, kaikki ei kuitenkaan ole kaikille kaikkialla ilmaista. Median murros tarjoaa meille hyviä oppitunteja. Median on täytynyt löytää keinot kilpailla avointa ja ilmaista vastaan. Lisäksi kaupallisen median kilpailumahdollisuuksista ja julkisen palvelun roolista käydään jatkuvaa keskustelua. Korkeakouluille tulee luoda nettiaikakauteen sopiva liiketoimintamalli ja yksityisen ja julkisen rooleista tulee myös korkeakoulutuksen yhteydessä keskustella.

Fyysinen koululuokka ja siihen liittyvä hierarkkinen koulujärjestelmä on rakenne ja jäänne, joka toimi teollisella aikakaudella tehtaan ja kyläkaupan vieressä, mutta ei enää toimi tietoyhteiskunnan aikakautena. Kivijalkakoulun tarve tulee arvioida suhteessa netin mahdollisuuksiin. Monen koulun hallituksessa istuu paikallispoliitikko, jonka nettitalouden ymmärrys on vähäistä ja ensisijainen pätemistarve kohdistuu fyysiseen rakentamiseen. Uudistuminen vaatii koulujemme johtamisjärjestelmän uudistamista.

Iso haaste on kyetä opettamaan asioita välineen kautta. Nyt usein opetamme esim. markkinointia, asiakashallintaa, toiminnanohjausta jne. ilman ohjelmistoja. Tilanne on hiukan sama kuin jos ajokortin saisi pelkällä teoriaosuuden suorittamisella. Uudistaminen vaatii investointien kohdentamista uusiin työvälineisiin, ohjelmistoihin ja opettajien koulutukseen.

On aika tunnustaa, että koulujärjestelmässämme on keskeisiä valuvikoja. On aika luoda Suomeen nettiaikakauden korkeakoulujärjestelmä.

 

 

What can the Strategist Learn from Game Theory?

I have for some time now been interested in Game Theory. During the summer I read the book “Strategy – an introduction to game theory”, by Joel Watson. The question is what insights can game theory give us on strategy?

From a game theory perspective strategy is all about interaction. It emphasizes vicarious thinking. A strategist should continuously be thinking, what are others thinking and how should I react to what they are planning. My key question to a strategist is, can he think? Game theory teaches you to think rationally. My second question to a strategist is are you open enough and true to yourself in your thinking? Are you really willing to question and analyze your position and your very existence?

To be provocative game theory does not talk about vision and mission. Joel Watson defines strategy “as a complete contingent plan for a player in the game”. Game theory begs the strategist to ask himself (and his organization) where am I, what can I do?

Best response is a term introduced by game theory. The term seems to be self-explanatory. One is doing the best one can in a given competitive environment and situation. However it is not trendy, nor common to hear a CEO announce that our strategy is a best response strategy. It is perhaps more fun to talk about vision and mission. But really, when you think about it, playing a best response strategy in a given situation is a great achievement.

The local alcohol monopoly Altia is an interesting example. Alcohol is not good for you. It is well known that overuse leads to serious health problems. One could argue that granting a monopoly to a state owned company is a best response strategy by our society to a difficult issue (a vicious problem). The role of law, in this case, is to intervene in the market place and to lock-in a societal “best response”.

The CEO of a company should actually be contemplating, what is preventing him from playing an even better strategy. Should he act to change the rules of the game? Should he lobby to change laws? Should he maybe buy out competition?

When each player is acting in their best interest i.e. playing a best response this might lead into a situation which is unsatisfactory to every single player (this is known as a prisoners dilemma). On a grand scale our societies have found themselves facing what a prisoner’s dilemma with climate change. It is not in the interest of a single company to reduce pollution. This teaches us that there are areas in which markets are not the best solution, if left to their own. It also teaches us that we need vision and mission to overcome the shortcomings of a best response approach.

The concept of Nash equilibrium is fascinating.  One of the insights is that sometimes your best strategy is to randomize i.e. keep the opposition guessing. I recall when in my high school studies we started to throw a coin to determine which of two possible choices we would give to a test question. The teacher was quick to rebuke us. Randomizing and bluffing is something we do not expect business leaders to do. We don´t regard it as acceptable.

The Nash equilibrium teaches us, very clearly, that randomizing can be a best strategy. Another word for randomizing is bluffing. Very often communication has been cited as the number one challenge in implementing a strategy. One should always remember that communicating one´s strategy is always part of the strategy. Hence one should approach communicated strategy with a critical mind and sometimes put more value on observing how strategy really is implemented.  

It is interesting to observe the role of strategy in the public sector. A good politician to gain power will bring up issues, which the earlier government did not talk about. Is this not, in the grand scale of things, a randomizing strategy?

When working in the public sector, I have, on several occasions, found what I believe to be a potential new market. When suggesting that we could do things more efficiently (e.g. with online learning) and that we could perhaps cut down on the amount of financing per student and scale up operations the ideas get quickly hushed away. Have you ever heard anybody in the public sector announce, that please give us less money? Could it be that in the public sector many of us fall back to implementing a bluffing/randomizing strategy, because we can´t find a clear dominant strategy?

I am a technologist. Technology can create new Nash equilibria. This in practice means that present society might be locked in inefficient equilibria and technology can provide new ways for societies to be more efficient. Why do we for instance not have electronic signatures in Finland, why do we not have an internet enabled university. The Internet is one of the main technologies which are now challenging the way we organize things in our society.

To restructure our society we need vision but we also need game theory to teach us how we can be locked into inefficient situations and why are real strategy may in reality be a randomizing strategy.

 

Copernican revolution in education

In the 16^th century people believed that the Earth was the center of the universe (http://en.wikipedia.org/wiki/Copernican_Revolution) . It must have come as a shock to the intellectuals of this particular era when Copernicus argued that it is the Earth that revolves around the Sun. To back his arguments he introduced scientific method. Beliefs were challenged by scientific rigor. Gradually science transformed into engineering and humans learnt new skills to build new structures.

Something similar is now happening in education. Books and classrooms have been at the center of how knowledge and information is distributed. In comes the Internet. Books and classrooms move to the edges. The internet is taking center stage.

Universities seem to be surprisingly slow to react to this change. As with Copernicus, the science of the internet era is gradually turning into an engineering art and discipline. We are learning how to design internet enabled businesses and institutions. It is time for the internet engineers of education to step in and to design internet centered schools. This seems to be happening already in the US, but not in Finland.

In strategy the PESTEL framework is a known tool for analyzing ones strategic position. Recently I was speaking on the experimentation I have done together with my colleagues with online education at a conference of higher education research in Finland. I was somewhat surprised with the atmosphere at the conference. Among the participants there were politicians, sociologists, economists and administrators. All the letters in the PESTEL framework were represented, except for the letter T. The letter T stands for technology.

The education environment, when you think about it, has not had to go through and experience technology enabled radical change. The education environment in Finland is built around public offering. There are no private universities in Finland. It seems that within the Finnish educational decision makers, there are no individuals who have experienced how the very existence of one´s organization, including its services, business model (free education?), legal structures and the way it is organized, can be questioned by the existence of new technologies. The internet has changed and continues to change the industrial landscape of the Finnish economy. It is alarming to observe what seems to be a depth of ignorance in the local educational community. The present leaders of educational systems do not seem to see a need for “the engineers of internet based education”.

This is nothing new in the history of innovation. Major radical innovations have always come from outside existing institutions and incumbent businesses. Internet enabled education is gradually reaching maturity and closing in on a tipping point.

The key question really is: where and when will education tip?

 

Information cascades, structural change and public sector governance

Information cascades, structural change and public sector governance

I have recently been reading The Wisdom of the Crowds – a book by James Surowiecki.

In particular I found the experiment devised by economists Angela Hung and Charles Plott (p. 64) interesting and will test it out in a classroom on some appropriate occasion myself. The experiment is a good tool to visualise concepts like imperfect information and information cascades.

Two boxes both containing marbles are put on top of a desk. One box has twice as many white marbles compared to black marbles and the other box twice as many black marbles compared to white marbles (you can choose any colour off course).  Information is imperfect, because every third marble in a box is of a different colour.

The students are told the above, but they are not told which box is which. One box is picked and then the students are asked to pick up a marble, to have a look at it, but not to show it to others. The students are asked one by one to guess whether the box contained more black marbles or more white marbles. If you have a black marble in your hand and three students prior to you have guessed that the box contains more white marbles than black marbles, would you not change your opinion and perhaps guess that the box has more white marbles? The situation in which you rely more on the collective view than in your own information is known as an information cascade.

In the early stages of this millennium in around 2004 a common view in Finland was “what is good for Nokia is good for Finland”. I would argue that this was an information cascade. At the time Nokia was doing well and it naturally had a lot of lobbying power in Finland.

During the same time i.e. in 2004, I began to question the logic of transaction based pricing, which was the dominant logic on the mobile, but did not exist on the Internet. Indirectly and sometimes very directly, I was questioning the business model of Nokia. My personal experience and feeling from the time was that thinking which questioned Nokia, was not allowed. In particular, I felt, that it was not allowed at the Helsinki University of Technology at which I was working with my PhD thesis (present Aalto University).  I walked out from the Helsinki University of Technology and argued my thesis in Oulu University. My experience off course is very subjective.

Learning from the experience, however, I would argue that information cascades can be dangerous because they clearly can create a bias and can lead to situations where what one can think or say becomes limited. The Emperor´s New Clothes – a fairy tale by Hans Andersen, is only a step away. I would even go as far as to argue that we Finns are “a country of cascading information networks” - a feature which is present also in the international term Finlandization. In Finland we value consensus. With consensus we have a strong sense of direction. However consensus built on cascading information can be a dangerous choice.

Information is power and value is created to an increasing degree through information. It makes sense not to tell. At the same time openness is one of the buzz words of the information society. It is interesting to note that companies are required to be increasingly more open about their operations although at the same time their businesses are built on creating value through data. Companies have to find a balance between an increasing amount of data, creating value through data and with the challenges brought on by the demands of openness.

Withholding information can also become a problem. A conflict of interests might arise. For example withholding information could be in your personal interest or in the common interest of you and a few of your colleagues and perhaps not in the interest of your company and its stakeholders. For these reasons we have strict corporate governance principles.  

The public sector has through legislation controlled the private sector. Media has in turn had a role in monitoring the activities of legislators. I am concerned of what will happen in the public sector. On the one hand it will face the challenges of increasing the amount of data and using this data to redesign its operations. The public sector will also face the challenges of structural change. On the other hand the public sector will also face increasing demands for openness. The public sector is over 50% of the gross national product of Finland and I am also somewhat concerned that public sector governance principles are not up to date and that neither social media nor the traditional media have had the tools, including the understanding, to monitor what happens in public sector governance.  

In Finland we have had a case in which the prime minister Jyrki Katainen contracted philosopher Pekka Himanen to make a report on the future of Finland. This study was not open to competition and it also seems that both the Academy of Finland and the Finnish Funding Agency for Technology and Innovation felt pressured into co-financing the study (http://yle.fi/uutiset/tekes_would_have_put_himanen_research_out_to_tender/6512955). In another case there has been public debate on how the government should use ownership control in government controlled companies. The problem pointed out in the editorial of Helsingin Sanomat 16.10.2013 is that this control can be politically motivated. In one case the central party minister pressured the Finnish State Railways to contract railway carriages to ensure employment in the rural area and thus bringing jobs into their constituency. In another case the Finnish minister responsible for government ownership was forced to resign because as a member of the Green party it seems she wanted to protect the Arctic and was actively preventing the ice breakers from implementing their Arctic strategy.

These above actions can be regarded as inappropriate and they have surfaced through the media, including social media and at the end of the day they have had to face the scrutiny of public debate and public opinion. However what if we have seen is only the tip of the iceberg?  It would be foolish to assume that everything is visible or that everything will surface. The Finnish public sector is now facing structural change brought on by the internet i.e. the information age revolution. We do not use the word structural corruption in Finland, but I am sure that some of the established practices, which will emerge during structural change, will bring debate on what can be regarded as good public sector governance principles in the information era.   

Testing Operator Services - Case saunalahti

I have a subscription with Saunalahti. The price of the subscription I made one year ago would remain the same for one year and after that the price was due to go up. It was therefore time to renew my subscription.

The page oma.saunalahti.fi is relatively good. I can get feedback on my usage pattern and a recommendation on what I should buy.

One of the subscriptions I have is a heavy data user. On a single weekend the mobile device might and has consumed up to 7 Gbit of data. It was hence important for me that the use of data would be unlimited and available for the same flat rate monthly price with no degrading of speed i.e. service quality. This information was not readily available through the website and hence I called the customer service.

Service by phone is not readily available. I first waited for ten minutes. The person who answered informed me that he will transfer me to his colleague. He did not tell me that I would have to wait for a further ten minutes. Finally I got hold of a person who could help me. She confirmed twice if not three times that there is no data limit and no degrading of service to their data connection. I was happy with this and will probably be renewing my subscriptions.

However since service has moved to be provided through the Internet can I any longer trust what I am being told by phone? I neeed to learn some new skills. I need to learn to access subscription documents, read them and browse discussions on the net ask friends on Facebook etc. Buying services is no longer a question of looking the salesmen into the eye, or chatting on the phone, asking questions and deciding whether to trust the salesman and the company or not. Purchasing through the Internet is a new skill and it needs to be learnt.

I have also purchased a mobile certificate (mobiilivarmenne in Finnish). I have not realy yet found a place where I could use it and get comfortable with its use. Now I did. The website oma.saunalahti.fi is a good place to test. I tested by trying to log into the website using the mobile certificate. It took about 5 minutes before I was sent a message to my mobile phone and asked to verify myself. FIVE MINUTES is ridiculous and unacceptable. It should never ever be more than 30 seconds.

When a CEO does not understand his business

What happens when a CEO does not understand the business logic of the business he is in?

Do not get me wrong. I am not saying the CEO is an idiot. I am simply saying that he does not understand the underlying logic of the business he is running.

Think of it this way. A business is embedded in market competition. In the market a business develops its products and services to find perceived competitive advantage. A business is just as much a process of evolution as it is a process of understanding and engineering skill.

With evolution however it is chance and time which perhaps help in getting things right. Evolution is not about understanding.

Ok, let’s cut the theory and the philosophy and get to the case in point.

The CEO of Sonera (TeliaSonera subsidiary in Finland) Robert Andersson proposed that mobile data will be priced according to usage (Aamulehti 25.3). Seems reasonable doesn’t it? Well, he could not be more wrong.

One should remember that the Internet emerged as a process of evolution and one of the chance choices during the process, was that it was not priced based on usage. In fact if you look at the user profiles in Internet traffic you will notice that someone will be using his connection very conservatively (i.e. consuming very little data), somebody else will be using his connection extensively (i.e. huge amounts of data) and yet paying the same monthly fee. When observing even more thoroughly, one will note that some users are very connected and others less connected. Yet they are paying the same monthly price. It is this connectedness you need to make the Internet work. The users spin the web. The challenge is in creating a pricing method which allows for high connectedness, but does not need huge data consumption.

The Ceo of Sonera, as anyone else in the business, should be asking: why? Why did the Internet emerge with a model of all you can eat data? They should focus on understanding the above explanation.

I actually answered this question in my PhD in 2006 and in the interview by Howard Rheingold email, scale free networks and the mobile internet in April 2005, predicting that mobile will migrate TOWARD flat rate data and that flat rate is a prerequisite for the success of the mobile internet. Today mobile internet has become a success and there are more or less 500 million users with a more or less flat rate plan. Connecting people efficiently is a skill (almost an art) and some companies have clearly lost ground because they have not uderstood how to connect people efficiently. Nokia is a case in point.

The Ceo of Sonera wants to change this i.e. move to usage based pricing. Within the constraints of the logic of flat rate data i.e. ensuring that connectedness is preserved moving away from flat rate data is possible. These moves however should be so very slight and their affect to connectedness should be measured and understood.

The CEO of Sonera does not seem to have this understanding. He is basically following blindly other players in the industry (and this is not a way to create competitive advantage) by arguing that others have “bucket pricing”, "price caps" or "degrading of service speed" i.e. quality after a certain amount of data consumption has been reached. He is treading in difficult waters, without an underlying understanding. Let´s see what happens. Let´s also see what the customers will have to say.

It seems, that used based pricing, is actually only wishful thinking. In reality TeliaSonera has been very active in advertising that data prices throughout the Baltic and Nordic states (please check the fine print of your agreement) are fair and that you need not be concerned of an oversized bill, when roaming abroad. International data roaming is one of the last frontiers of usage based data pricing and the very reason why tourists do not use their mobile when abroad and the reason why operators in Finland recommend to their customers that they buy sim cards which do not allow data roaming abroad.

 

 

 

Why comparing prices does not make sense

Yesterday we were discussing the characteristics of the information economy in our class. I was using and referring to the book by Shapiro and Varian (1999) titled “Information Rules”. It is a great book, a true classic and in many ways very valid today despite the fact that it was written over ten years ago. It explains many of the characteristics of the information economy very clearly.

I wanted to make sure that at least in some way I was able to explain some of the ideas and concepts of the book. To do this I made a populist test by asking a question before I started the lecture and by repeating the same question at the end of the lecture. I told students that comparing prices makes no sense in the information economy. Then I asked how many compare prices? Everybody does. At the end of the lecture I repeated my hypothesis and once again asked the same question: how many compare prices? Once again everybody continued with comparing prices. It seemed that no change had taken place. Had my lesson gone to waste? Or was I barking up the wrong tree?

The point Shapiro&Varian make in their book is that the fixed cost of producing information goods are both large and sunk. The fact that the cost is also sunk means that it is very difficult - practically impossible - to retrieve the cost one has invested in making an information product. For example if you have invested hundreds of hours in writing a book and the book does not sell, there is no way you can retrieve the cost of your investment i.e. get paid.

Shapiro&Varian point out that the variable cost of information production also has an unusual structure: the cost of producing an additional copy typically does not increase even if a great number of copies are made.

From these characteristics of information goods Shapiro&Varian conclude 1)“Information markets will not, and cannot look like text book perfect markets in which there are many suppliers offering similar products, each lacking the ability to influence prices”, 2) low variable cost offers great marketing possibilities and 3)they instruct companies to avoid commoditization.

My populist conclusion from all of this was: “comparing prices does not make sense”

One should and this I was trying to explain to the students be very aware that at best pricing can be very personalised. Even shops and supermarkets could have different prices in the morning and different pricess in the evening. At best they could have a price specifically tailored to you i.e. when you walk in the shopkeeper decides instantaneously whether to give you low medium or high prices. Of course in a physical environment this does not really work.

In the virtual environment personalised pricing is very possible and often the norm and by versioning products and services one can make the product look different and hence avoid price comparison and commoditization and from the perspective of the consumer this leads to the statement that there is not necessarily much sense in price comparison.

What should the consumer do? Well in my view he should be very aware that prices can fluctuate in the information economy. He or she should also have a general understanding of prices and price levels. In particular he or she should focus on what the value of the product or service is to him or herself and to express the value also in money. Then all the consumer needs to do is wait until somebody has a promotional price which is acceptable to the consumer and once this happens: grab the deal!