One of our most popular posts this summer was “50% of Universities Will Be Bankrupt in 10-15 years”. This article was a summary of one of Clayton Christensen’s talks on Disruptive Innovation. As a follow-up, we wanted to take a deeper look into one of the famous charts.Christensen uses to demonstrate disruptive innovation, and describe its relation to Higher Ed.
Source: Clayton Christensen, The Innovators Solution
The first metric, the blue trajectory, is the performance of a certain service or product over time. Christensen states that, “In every market there is a trajectory of improvement that innovating companies provide. Some of these improvements are incremental, others are dramatic breakthrough improvements.” It is clear that over time the performance of any service or product will increase over time due to these innovations.
The second, trajectory, in red, is the ability of customers to use the improvements. As evident in the graph, the performance of the product will overshoot, and continue to grow beyond what the customers need or even can use. In Christensen’s words, “The trajectory of technological progress that innovating companies provide almost always outstrips the ability of customers to use the progress.” A great example of this is in early personal computers. Often, a user would have to stop typing to wait for the processor to catch up. The product didn’t meet the needs of the customers then, but now, customers only use about 15% of their computers’ processing capacity. The green trajectory is for a disruptive innovation. “A disruptive innovation transforms something that in the middle was complicated and expensive, disruption makes it so much more affordable and accessible that whole new populations of people have access to it.” A disruptive innovation doesn’t help make better products for customers of the current product or service, but instead it is an innovation that targets people who are in a completely different customer base.
Traditional higher education and alternatives such as online learning fit this model very well. In this case, the certain service or product represented by the blue trajectory is the current higher ed system. College performance continues to increase year after year. This can be measured in the sense that over time, various aspects continue to improve and or increase. This includes, the quality of faculty, number of courses, dollars spent on palatial facilities, and level of technology integrated into the classroom.
However, at the same time, the price of traditional higher education is also skyrocketing. And at this point in time, higher ed performance has surpassed the performance need of many customers (learners). Yes, customers are always looking for better professors and more classes to take, but does everyone need the million dollar dorms, or cafeterias? Many customers no longer need all of what traditional colleges and universities are offering, as well as making them pay for.
That’s where online education comes in as the disruptive innovation. It transforms the higher ed system which is complicated and expensive, by making it affordable and accessible. Additionally, it targets those who don’t have the interest or the means to go to a traditional college or university. Even if some early forms of online learning weren’t outstanding, customers were still excited, because as Christensen says, they were infinitely better than their customers’ alternative, which was nothing. With a client base capable of holding it afloat, online learning now has the time to grow with sustaining innovations, and eventually there will be a breakthrough. Online education’s performance will continue to rise and will eventually meet the performance that many of the customers of traditional higher education truly need. This, combined with the two driving factors of online learning being cheaper and more convenient, makes it possible that online education will begin to steal consumers away from traditional schools.
Now, when will parity between the performance that customers want and the performance of online learning occur? We’re not sure, but Christensen says that, “50% of the 4,000 colleges and universities in the US will be bankrupt in 10-15 years”. It will likely occur first in community colleges and mid-tier private universities, and could start in as early as five years. Another good question is how will universities react? Traditional higher ed schools will adjust to incorporate more online elements and begin to use something called blended learning. One tell tale signs that online learning is following along this track will be a continued growth in the number of courses offered through various online learning platforms. Other signs will be if there are more instances of certifications from MOOCs, and if completion rates continue to rise, especially for paid courses, as those are more of a direct competitor of higher education. The last, and most important sign, is the continued growth in the cost of higher education.
What kind of innovations do you think it will take for online learning to get to the point where it meets the needs of customers and begins stealing people away from traditional schools? And how far away from this do you think we are?
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A 15-part series on defining and acting on a higher education strategy to guide leaders during these difficult times. It is targeted at educational leaders who are participating in shaping their school's actions during and after the COVID-19 pandemic.
