Riding the tide of disruption in higher education

In the face of technological change and cost pressures, universities, and non-elite institutions in particular, must develop a value proposition that resonates with stakeholders and clearly articulates what makes them relevant to the market.

It’s time to get comfortable being perpetually uncomfortable. The known, mostly predictable, rhythms associated with universities of the past 100 years have given way to syncopation caused by two off-beat troublemakers: technological change and cost pressure.

Taken individually, these twin dynamos of disruption are not unfamiliar. Indeed, both have been found residing side-by-side within the business world, upsetting the status quo, frustrating otherwise well-intentioned people, and forcing less nimble competitors out of existence or into extreme makeovers just to survive. We’ve seen the cycles of disruption in industry, from the invention of the horseless carriage to the veritable dissolution of the newspaper industry. Transitions like these rarely occur easily, and many unprepared organizations have quickly found themselves in the ashbin of history.

For the “glass half empty” crowd, such change is fraught with danger, pain and loss. But for “glass half full” believers, the changes represent opportunity and the chance to revive and revitalize one’s future. The challenge lies not in deciding which half of the glass represents your perspective, but in how you plan to thrive in this decidedly uncomfortable new world.

This dilemma confronts universities around the world today, especially those we describe as “non-elite”. We are quite familiar with the elite: Duke, Stanford, Oxford, MIT, the Ivy League, University of Tokyo, and more; the names are familiar to all. These universities have attained an extraordinary level of prestige, with international reputations for excellence across multiple domains.

Non-elite institutions may be perfectly competent and known in their local markets, but they increasingly struggle for relevance and visibility in a global higher education world competing for the best talent (students, faculty, staff, partners). With technological change bringing new content delivery platforms and, along with them, radical new cost models (i.e. free), the need for non-elite institutions to redefine who they are, what they do, and how they do it, is essential if they are to survive, let alone thrive, against the superior funding and resources of elite institutions and the elegant simplicity of technologies offering free content. In effect, technological changes and cost pressures mean universities must do more than just deliver content. They must take clear advantage of the contexts in which they operate to have a differentiated position that resonates with target stakeholder audiences.

If you are a faculty member from an elite research university, then you may well be quite comfortable with the discomfort wrought by technological change and cost pressures. After all, your institution has weathered the storms of change for decades, if not centuries. Elite institutions are in a unique position of marketing a product with relatively inelastic demand. College tuition fees rise every year, typically faster than inflation.

According to Bloomberg, US universities, for example, have experienced tuition increases outpacing inflation for decades, yet demand remains stronger than ever. According to US News & World Report, Stanford University had the lowest acceptance rate in the US in the autumn of 2013 at 5.7%, and the first 10 schools on the list had acceptance rates under 9%, with acceptance rates for the top 25 institutions under 15%, including seven of the eight Ivy League universities, according to US News.

Of course, most institutions are not among the elite, nor even recognized beyond local markets. The main ranking bodies review only the top 500 institutions, out of more than 17,000 universities worldwide, yet we suspect they operate in highly competitive markets and compete for many of the same talented students as the better known schools.

While we don’t believe that all of these universities are under threat, we do believe that a good number of them will struggle unless they develop a value proposition that not only resonates with their stakeholders (students, faculty, employers, the professions, government), but clearly articulates what makes them different and why that distinction is relevant to the market. Even with a clear value proposition, departments within universities may not all be protected, despite the valiant efforts of the faculty within to maintain viability, forcing some to close down entirely, or merge with others. Of course, for the least prepared institutions in extreme situations, merger or even demise may be their only options.

Clayton Christensen’s work in innovation and growth provides useful insights into the challenges posed by organizations that fail to innovate, and the opportunities for those that do. In 2002, Christensen and colleagues contended that disruptive innovation represented a growing threat to education in the US. More than 500 institutions had closed down the previous decade, and more than 2,000 corporate universities and online/distance learning institutions had grown rapidly. Disruptive innovation appeared to be a key driver of these changes.

Christensen argues that disruptive innovation explains why corporate training constitutes a threat to traditional approaches to business education. Why? Simply put, corporate training offers a more accessible, often uncomplicated and tailored product well-suited to problem solving at work, at a price point that competes favourably with the high cost of a top tier MBA programme.

In addition, Christensen cites the University of Phoenix (enrolment 200,000 plus) as another example of an education disruptor because it targets non-traditional education consumers, and emphasizes a student-centric philosophy through its online course offerings designed for the busy lives of adult learners. In a similar vein, Lindsay Tanner, the former finance minister in the Labour government in Australia, gave a speech which warned that universities that do not embrace new technology will lose students and ultimately face closure.

John Davis is Regional Managing Director at Duke Corporate Education, Singapore, and Professor
Mark Farrell is head of the Graduate School of Business and Law at The Royal Melbourne Institute of Technology.