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Education and Value Creation

Author: Elio Borgonovi, SDA Bocconi, Italy
First published: 1999

For a society striving to improve its economy as well as the individual and social wellbeing of its members, creating 'future value' is a must. Education can substantially contribute to creating such value, as it aims to spread knowledge, competencies and skills.

The basic social goal of education is an increase in that 'invisible asset' of society, the quality of people, which is unanimously considered the key success factor both in economic competition and in co-operative behaviour, and to make it possible to build new institutional and social models, based on better interaction. In this context, two questions are to be answered: (i) what does education really mean; and (ii) what do we mean when we use the concept of 'value'?

Education is different from 'instruction'. It is a two-way process whereby someone (generally called teacher, professor, trainer, facilitator, instructor) knows theories, methodologies, techniques, and tools in a certain field and someone else (called student, participant, trainee) has a direct contact with real problems, with facts, and has a need or an interest to apply theories and methodologies, and to use tools. This is the special value of education: being a bridge between theory and practice, which is the basic condition for any form of progress (scientific, economic, social).

As to the meaning of 'value', it is important to distinguish between 'business education' and 'management education'. The first term is conceptually related to 'economic value'. It implies the diffusion of knowledge on how to produce, transfer and consume goods and services in order to maximise the perceived utility of consumers. Price in transactions between producers and consumers being the most widely accepted measure of economic value in market systems, the aim of business education is to make people accountable for the difference between income or revenue on the one hand and cost on the other (principle of profit maximisation).

Conversely, management education pursues a strengthening of people's knowledge, competencies and skills in dealing with 'complexity and rapid change' in any kind of institutional setting. Management education helps people to generate, analyse, and choose the 'best ways' of relating means (always limited) to goals (always increasing in quality and quantity). In any kind of social institution (business enterprises, banks, public institutions, non-profit organisations) management education is based on the idea of 'maximising results once resources have been defined' or of 'minimising resources once results have been defined'. This is the real 'added value' that management education provides to cultural change in modern societies.

As to the process of value creation, significant changes are taking place in the field of management education.

First of all technology, in particular information technology and telecommunications, is having and will have an even more radical impact on pedagogy and will make the process of knowledge creation and diffusion faster. Ever more powerful computer capacity helps trainers and trainees to:

elaborate a quantity of data that was unbelievable just 2-3 years ago;
collect and update enormous databases of quantitative data, qualitative information, performance indicators, organisational relations (action result, revenue and cost, demand elasticity, etc);
manage complex simulation models that enable to test 'in advance' the impact of different policies and alternative courses of action;
introduce the use of 'expert systems' in educational programmes, which make it possible to modify technical, economic, and organisational relations on the basis of data that are continuously collected and recorded: the use of expert systems favours the strengthening of ways of 'thinking in models', which is highly effective in education.

Telecommunication technology creates extranet and intranet networks with increasing opportunities:

to spread information and knowledge virtually in real time and, by doing so, to influence the behaviour of hundreds, thousands and, in some cases, millions of people; . to share the results of research (of individuals and groups) in different parts of an organisation (intranet) or the entire world (extranet) and, by doing so, to create immediate links between research and education;
to exchange and to compare educational programmes delivered by different organisations, which is the best way to activate 'virtuous circles' of learning from each other: having access to the syllabi of educational programmes and to teaching material, for example, enables potential participants to 'choose programmes which satisfy their real needs' and to stimulate competition among educational institutions;
to deliver new distance teaching-learning programmes and to 'reinvent' traditional ones; this makes it possible to eliminate, or at least, to reduce 'barriers to access' to education (either basic or advanced) and so to reach thousands and millions of people who, in the past, were excluded from the 'virtuous circle' of knowledge;
to increase the effectiveness and interactivity of classroom teaching and to create 'tailor-made programmes', collecting different modules from different standardised programmes.

In other words, future education will create value by making it possible to manage an apparent contradiction:

to disseminate a more uniform knowledge in society on the one hand; and
to create opportunities for 'more and more personalised' education on the other: personalisation is the best way for society to recognise and to use energies and each person's own contribution to development.

Secondly, the educational arena will be characterised by increasing differentiation. In addition to traditional institutions providing different degrees of education (primary schools, high schools, institutions of higher and postgraduate education), there will be an increasing number of 'corporate universities' and consulting companies involved in education. The aim pursued particularly by these 'new entries' in the educational arena is to reduce the time lag between practice, theories and the adaptation of the content of educational programmes. Future education will increasingly have to:

reduce the gap between theory and practice;
relate itself to 'corporate objectives' (for corporate universities or consultants) and to 'social needs and objectives' for independent institutions.

Thirdly, education will positively contribute to society if it assigns priority to:

the quality of people involved (as teachers and as participants), programmes, facilities, teaching environment;
the assessment and evaluation of results, which include the satisfaction of participants and a measurement of the impact of education on knowledge and behaviour.

In conclusion, it can be said that society will greatly benefit from educational activities especially if performance evaluation systems, quality assessment and quality improvement, accreditation and certification are introduced and practised correctly, or, in other words, if more competition enters the educational sector.