Christensen and Eyring: Students Will Win When Disruption Hits Higher Education Sector

In their new book The Innovative University Clayton Christensen and Henry Eyring explore why higher education is heading for disruption. As budget deficits and healthcare costs squeeze government support for higher education, enrollments at traditional institutions will steadily shrink. This will force the education sector to major changes and the students will come out winners, as is typical when disruption reshapes an industry. InnovationManagement asked the writers to elaborate on trends in higher education and the way education is delivered to students.

Why did you decide to write this book?

We’ve both spent much of our lives in universities, and while we’ve been richly blessed by what they do well, we’ve also spent a lot of time thinking about how they could do some things better. Several years ago it became clear that higher education was headed for disruption. We wanted to explain why disruption is inevitable and what traditional universities and colleges can do about it.

As budget deficits and healthcare costs squeeze government support for higher education, enrollments at traditional institutions will steadily shrink.

What trends do you see in higher education when it comes to the way education is delivered to students?

The cost of a traditional college education now exceeds the financial means of all but the rich. Were it not for state support and federal grants and loans, the typical university or college would be empty. As budget deficits and healthcare costs squeeze government support for higher education, enrollments at traditional institutions will steadily shrink. Students are increasingly turning to online learning as a cost-effective, high-quality alternative. In fact, many don’t have to “turn” at all– they’ve already adapted to online learning in high school. Even if the cost of a face-to-face education could be reduced dramatically, the students of the future will demand hybrid courses to give them the best of both worlds. The fully face-to-face college education will quickly become a thing of the past.

How will this impact and possibly disrupt the traditional education providers such as universities and business schools?

That depends on how traditional providers respond. If they make the most of online technology and other business model innovations, they could come out of the current crisis better off than they were before. That’s possible because not all industries are equally disrupted. Take, for example, hotels, fast food and professional sports. The market values of Marriott, McDonald’s and Manchester United will rise and fall over time, but three things make them hard to disrupt: 1) the power of their brands; 2) the importance of their physical location; and 3) a dearth of technologies for doing their jobs at lower cost or higher quality.

Traditional universities and colleges are vulnerable on the third point, disruptive technology. However, because high-order learning is hard to measure, brand matters tremendously. And, for young students, college is a place to “go,” not just to get a degree. In fact, the typical 18-year-old expects his or her college to provide all of the services that Marriott, McDonald’s, and Manchester United do, on top certifying employment-readiness.

New entrants to the higher education industry are unlikely to make the financial investments required to compete with traditional institutions’ physical campuses and athletic teams. If traditional players can enhance their academic curriculum via online technology, engaging in what we call “sustaining innovations,” they have a chance to compete successfully in the market for young college students.

How will this impact future students?

Students will come out winners, as is typical when disruption reshapes an industry. Working adults and others who don’t value the campus experience will be able to get a college degree at a fraction of the historical cost, particularly when the opportunity cost of leaving the workforce and the out-of-pocket costs of relocating are factored. That’s already happening, and the cost advantage of getting an online degree will only grow as the market matures and competition drives tuition prices down to the marginal cost of production.

Students will come out winners, as is typical when disruption reshapes an industry.

Students who want the campus experience will pay more than their fully online counterparts, but less than they do today. They’ll also enjoy greater flexibility in the way they learn and higher quality in the learning experience. Ultimately, every face-to-face course will be offered in hybrid and fully online versions, designed and continuously improved by teams of faculty subject-matter experts and instructional design experts. The traditional classroom will become “inverted,” as students watch lectures online and then go to class for help with the homework. Computer-adaptive tutorials will allow students to improve their learning and ultimately increase their chances of graduating.

Do you think that established education providers have the knowledge and skills to meet this disruption?

Higher education attracts some of the brightest and most motivated people in the world. The problem is that these folks work in a complex, tradition-bound system of policies, procedures and incentives that thwart institutional innovation. For example, an untenured professor might have the knowledge and skills to develop an online version of his or her course, but if the time required to do that comes at the expense of research and publication, such a contribution to the university’s online innovations is tantamount to career suicide. The disincentive is even greater if the university isn’t growing its student body — in that case, the online course competes directly with the face-to-face version and potentially makes the professor expendable.

What three actions would you say traditional education providers need to take to meet this possible disruption?

Traditional universities and colleges need new operating models that emphasize innovation and growth. Currently, many are emulating the great research universities, focusing on scholarly publication, student selectivity and other measures of prestige favored by the publishers of rankings. This operating model is tremendously expensive on a per-student basis. It makes institutions dependent on three sources of additional revenue: 1) tuition increases, 2) federal research grants, and 3) endowment earnings. These revenue sources are running dry just as online learning, a disruptive technology, is coming into its own. The confluence of these trends is potentially disastrous. Traditional institutions — even the most prestigious and best-endowed ones — must change to survive.

These revenue sources are running dry just as online learning, a disruptive technology, is coming into its own. The confluence of these trends is potentially disastrous.

Given their high costs, the least painful way for universities to change is to grow. Fortunately, there are ample would-be college students and professors. And online learning technology makes it possible to serve additional students at a cost they can afford.

Traditional institutions can harness this technology. The first key to doing so is to establish individual incentives for serving more students at a high level of quality. For example, creating online courses should be one of the ways for a faculty member to advance in academic standing and compensation. A second priority is the acquisition of state-of-the-art learning technology. That is where for-profit institutions are focusing their financial investments.

The third crucial innovation doesn’t involve technology, just common sense. Universities and colleges need to operate year round, as other physical and human asset-intensive businesses do. Filling the campus during the summer reduces the cost of instruction, even if the faculty is paid more, because the fixed costs of buildings and employee benefits can spread further. Students enjoy not only the reduced cost of college, but also the ability to graduate faster.

By Karin Wall, Chief Editor 

Clayton M. Christensen, Kim B. Clark Professor of Business Administration, Harvard Business School and Henry J. Eyring, Advancement Vice President, BYU-Idaho, are co-authors of “The Innovative University: Changing the DNA of Higher Education from the Inside Out” (John Wiley & Sons, 2011).

Read a review
of The Innovative University by IMD professor Bill Fischer.

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