Check Yourself before you Wreck Yourself

by Seth Odell

(Or, what Disruption really means for Education)

“What the theory of disruptive innovation suggests is that the business model of many traditional colleges and universities is broken. Their collapse is so fundamental that it cannot be stanched by improving the financial performance of endowment investments, tapping wealthy alumni donors more effectively, or collecting more tax dollars from the public. There needs to be a new model. The only question is whether traditional universities will undertake this replacement themselves, or whether community colleges, for-profit universities, and other entrant organizations aggressively using online learning will do it instead—and ultimately grow to replace many of today’s traditional institutions.” – Disrupting College

In Higher Education we can use the term “disruptive” and “disruption” kind of like we use “awesome” and “innovative.” That’s incorrect and I aim to set the record straight in a sobering way. Though it sounds surreal, when people talk about “disrupting” education they are referring to kicking off a process that will radically change education, perhaps markedly deforming it or turning it upside down. This sounds good if we can better educate our children, but it’s also terrifying if you also realize that it may incite countless jobs losses and many schools may shut down. As educators, we need to understand how the process of Disruption (with a capital D) will transform our industry – because it would be nice if we can stay employed or even become remarkably successful in the new order.

So, Disruption, innovation, and progress are not one and the same. Disruption is a process that is most popularly laid out in a business book classic called “The Innovator’s Dilemma” by Clayton Christensen, a business professor at Harvard.  The book proposed a theory to explain successful approaches to market using new technology and new business models. This “dilemma” turns out to be that every new business wants to get attractive customers, but if they go for attractive customers first thing they will generally be soundly rejected from the market. Instead, successful approaches to market almost always start with customers that are “over served” or are not even buying in the existing market because the service is too expensive, inconvenient, or too complex. However, once these organizations start outside the traditional market with these non-consumers, they gain a secure foothold and move towards the existing market. Thus, Disruption is often painful to well-established organizations that will lose market share to new competitors and undergo severe layoffs if not collapse altogether.

Christensen has spent a bit of time thinking about Education, and is partly responsible for the Innosight Institute – a think tank that thinks about how the process of disruption can improve education. The good news is that he thinks there’s lots of hope for education, the bad news is that he’s more or less attacking our sacred university system. In particular, his paper called “Disrupting College” discusses that there is, in fact, a Higher Education Bubble, despite the denial of some of our boosters, and it is a problem of “conflated business models.” The brick-and-mortar institutions we know today have had to balance teaching, research,and a cultural environment in which young people develop – three fundamentally different types of business models that have incompatible goals and economics. The result is in an administrative and overhead cost “burden” of spending nearly four or five dollars for every dollar spent directly on teaching or research.

There has been an “Arms Race” to compete for the most attractive students, the ones who have the best academic records and the ones who pay the most. Christensen has found a similar competitive trend in every industry he’s studied, and he calls the phenomenon “sustaining innovation” in which a set of competitors with similar business models improve what they do to compete with each other for the most attractive customers. In the context of education, Christensen paints the picture clearly:

“The facilities for student dining, athletic activity, and classroom learning that existed 30 years ago at Harvard University were Spartan compared to the opulent facilities that today’s students enjoy. Harvard has no option but to keep ratcheting up its attractiveness and, therefore, its cost structure in order to compete successfully against the likes of Stanford and Yale. As the Universities of Michigan, Virginia, Texas, North Carolina, and California toil to emulate the elite private universities, they too keep adding costs at a rate substantially faster than the overall rate of inflation. For those institutions that choose to bow out of this arms race, they cease to add the ancillary services necessary to stay competitive, as the competition has been defined in this inner ring. The overall nominal 10 percent rate of inflation in the tuition of higher education is a synthesis of the rising costs of sustaining competition within each circle.”

These enormous and escalating costs suggest that the industry is vulnerable to the process of “Disruption.” If you look at the market landscape in education with this lens, for-profit businesses that do not look like what we think of as providing a true education are learning to serve non-traditional students well and profitably, and they will move “up market” towards more valuable students and compete with our mainstream educational institutions. Up until this point, for-profit online and blended models have been slow to serve what we traditionally think of as students – 18-24 year olds supported by their family in search of a traditional college experience – they have served students who weren’t even accessing traditional colleges (busy adults who were primarily trying to get a better job or change career paths). Despite the fact that “market-driven” online programs currently serve non-traditional students and are scoffed at by parents willing to pay $100K for their teenagers education, this does not mean that new market entrants are not competitors in the long run.

Another unsuspecting threat, perhaps even more Disruptive, is the nascent “UnCollege” or “DIY” movement promoted by Dale Stephens, a recipient of Peter Thiel’s 20 under 20 grant, and Anya Kamenentz, an author for Fast Company: young people who traditionally went to college will be able to access a lot of the learning, services, and credentialing on the internet through a variety of means, and they may forgo anything that looks like a four-year degree on a residential campus. These “students” will likely not even go to the online, for-profit, degree granting programs. They may find a way to “hack” together all the benefits of what we think of as education, and do it for nearly no cost on the Internet. This self-assembled education concept is illustrated clearly in DIY U by Kamenentz, in which she explains that the Internet has disintermediated and unbundled services in every industry it’s got around to transforming. So, learning and credentialing may be accessed directly, and the myriad services provided by college my be had more effectively at one-off sites.  As a matter of fact, she just published The Edupunk’s Guide to a DIY Credential, in part funded by the Gates Foundation, and Dale Stephens is working on a similar book.

One peculiar attribute of the process of Disruption is that the established providers in the market often scoff at the entrants (because they’re serving less attractive customers, for example NYU scoffs at DeVry) until they realize they are competing, at which point it is too late for the established provider to change and survive. Christensen also highlights that disruption often follows an “S-curve” growth pattern. Meaning, the disruptive market entrants (for-profit online and blended learning schools) will be slow to grow, but as soon as they start to serve existing customers of our traditional universities and can do it at lower cost, they will grow furiously. The rule of thumb seems to be that the entire market shifts in about ten years. If we assume that the Great Disruption is starting to kick off, one can assume that in about ten years alternative modes of education will be highly competitive with great educational institutions we know today, including our great state schools and elite private institutions.

While the process of Disruption sounds threatening, Christensen suggests the only way to combat the trend of ever-increasing costs of education is to enable and embrace the process of Disruption and teach institutions how to “Disrupt themselves.” And that, unfortunately, is another essay altogether. Stay tuned for the Disruption survival guide entitled 2 Legit 2 Quit….

A T-Shirt Illustrating the need to Disrupt Yourself

Michael Staton is the Co-Founder and CEO of Inigral a company that provides social technology to educational institutions, helping them stay relevant by offering mobile and social services to their students.  Follow him on Twitter at @mpstaton

Shout Outs to Kevin Carey from the awesome think tank Education Sector for giving feedback on this article. 

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This entry was posted on Thursday, August 4th, 2011 at 12:45 pm. It is filed under Blog Posts, Featured and tagged with disrupting college, disrupting education, education reform. You can follow any responses to this entry through the RSS 2.0 feed.

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