Before you start reading I want to apologize. I know a blog post should never be 2,500 words like this one. Hopefully if you make it to the end you will see why I needed all those words to state my case whether you agree with me or not.

Over the last few months I’ve been spending a lot of time thinking about the future of higher education. Three articles earlier this year really began planting the seeds that we have fundamental things that are broken and need to be fixed.

• Is Your College Going Out of Business – An article posted on LinkedIn by Mark Cuban on the debt of colleges
• Moody’s Gives Colleges a Negative Grade – In The New York Times Business Section on how bad the financial outlook of colleges really is
• College Branding: The Tipping Point – In Forbes and basically states that schools need to build their value proposition or fail through indifference

Mark Greenfield has been presenting at conferences for a few years on how higher education is getting flattened and I completely agree with everything he says. So at this point there is nothing new about the challenges that we face or the disruptive forces knocking on our doorsteps. The big question is exactly how this whole game plays and what the end result looks like for our industry?

An Industry Struggling With Change

Over the last handful of years everyone has been talking about online education. Over the last year or two the new buzzword in the industry is MOOCs. Just a couple of weeks ago there was another great article on Forbes discussing how disruptive of an element MOOCs are to the traditional higher education model.  What I found especially valuable in this article were three main points the author makes.

1. There is surprisingly little variance in strategy among universities in the US. Think about it for a second. How many schools do a great job of specializing in a few core elements and striving to be the best at just that? If we are brutally honest the only differences in many schools are who is ranked higher by some third party (*cough* US News) or geographic location.
2. No clear market dominating player(s). Think about this for a second. In so many industries there are a handful of powerful companies that own the vast majority of the market and then lots of smaller firms that fight for the remaining places. In the technology world, specifically, we think of this concept as winner takes all. If you want some examples think of Google’s dominance in search, Intel’s in microprocessors or the duopoly of AT&T and Verizon in mobile communications.  Sure we have small players in the market but there are those power players that really call the shots. In higher education the biggest state schools like an Ohio State or Penn State still hold less than 1% of the total market.
3. Disruption and change will take time to happen. Higher education has always prided itself on tradition and been slow to adapt. That is no surprise to any of us who work with technology in the industry. What I find very compelling is the author’s comment that, “There is no active market for university exits.” It is almost weird to think of a school that has been around for decades (if not centuries) to “go bankrupt” right? So many students have deep affinity towards their alma mater and will fight hard and as long as possible to keep a sinking ship floating. I think it’s also irresponsible to not think of failure as an option.

An amazingly eye-opening book I read a few years ago was The Innovator’s Dilemma by Clayton Christensen. I blogged about this and shared my book highlights over on my personal blog. The main takeaways for the purpose of this discussion is that smart people who run successful companies and make rational business decisions, in the pursuit of profit and growth, have consistently been shown to ultimately run their business into irrelevance. A popular example is what Netflix has done to Blockbuster Videos in the way we rent and consume movies. Also look back at how Wal-Mart’s low prices have made Sears a shell of the former company it was in its glory days. Interestingly enough e-commerce is a disruptive force today that has put Wal-Mart on the defensive of Amazon. You see these iconic and successful businesses have a hard time “cutting off the hand that currently feeds itself.”

Online Education IS that Innovator’s Dilemma for Higher Ed

Online education clearly goes directly against the idea of traditional education on a large and historic campus. Schools are focused on rankings and trying to move up to snag premium students. In many cases this is a rational, logical and smart business decision, but does it make them irrelevant in the future? As we pointed out above a lot of times there is no clear variation from one school to another in the eyes of a prospective student. In a prospective student’s mind they could very easily look at three schools that have the degree they want and they probably will make the ultimate decision based on price and location. So what if location wasn’t an issue anymore?

I have heard the argument, and even made it myself, that there is real value in the whole college experience. Living on campus in proximity to a bunch of other students your age is a priceless experience, but ultimately it probably won’t impact how good you are at your future career despite those friends you might make for life. I look back on my college experience and I hope everyone has the opportunity to experience the same thing, but I can’t help but wonder if that was just how things worked in a different “era.”

There is also the argument that online cheapens or degrades from the education experience. The problems I have with that argument are that we are now able to provide easy access to information at any time. Anyone that has a smart phone in their pocket has access to more knowledge than existed in an entire university a decade ago! Also, with the ability to watch videos and engage with others through all of the social channels today this argument is all but busted.

The real resistance to fully adopting online education is that it directly competes with a school’s traditional cash cow and offers very similar services for a lower cost. It isn’t enough that schools struggle with running lean, but they also absolutely resist much of the ideas of change. Hence we are presented with a classic innovators dilemma – an equivalent service (a degree) can be offered through technology to more people and for a lower cost.

Looking at History for Lessons on How Change Plays Out

If you want to see an example of an industry that is resistant to change but still had technology ultimately force disruption you don’t have to look any further than the changing role of the recording and movie industry.  It wasn’t much more than a decade ago when we went to a store to buy a CD or VHS (yes, VHS) to consume this content. Napster, iTunes, Netflix and TiVo are probably some of the bigger names associated with this whole disruption. Now we can consume any content anytime we want and only pay for the content that we want. It truly is a great time to be a consumer!

Why shouldn’t we be able to take a class on any subject we want exactly when we want? We see private industry creeping in and offering levels of this now. For example I’m a Microsoft Certified Professional (MCP) who also has A and Network certifications. In my first IT jobs these certifications were more important and relevant than my college degree in computer science. If you want to learn how to use a specific software application, sites like Lynda.com offer thousands of video courses for a low monthly price. This opens up a whole other discussion of what is the value of a degree anymore? I’ll save that debate for another day.

If you want to take a second and explore what consolidation in the higher education industry looks like I think the US banking system is a perfect example. I don’t pretend to be an expert on the history of the banking industry, but I do know that it has only been in the last thirty years that major banks came into power. Banking was regional and fragmented. North Carolina was one of the first states to allow mergers. NC began to be taken over by a few powerful banks, and by the time the rest of the states began allowing more mergers the remaining banks in NC had a competitive advantage and grew the fastest. Today, we have far fewer banks and Charlotte is one of the biggest banking capitals in United States. We could argue why fewer banks aren’t necessarily a good thing, but hopefully you understand that isn’t the point I’m making. I think we are sitting on the edge of a reflection point where thirty years from now there will be far fewer but larger schools.

Like the health care industry, higher education has been pouring money into buildings over the last decade. And also, like the health care industry, higher education has been experiencing runaway inflation, but the main difference is health care is bringing in record profits and higher education is not. (If you are curious about the health care story I HIGHLY recommend reading the special issue and article Bitter Pill: Why Medical Bills Are Killing Us, but you must be a Time’s subscriber to read the whole article.)

Besides struggling with profitability another big problem with the building strategy is education is going more and more online.

Are MOOCs the Answer?

Again I want to compare MOOCs in relation to other technology industries.

• Apple didn’t invent the smartphone
• Google didn’t invent the search engine
• Facebook didn’t invent the social network

It wasn’t necessarily that they invented these industries or products; it was that these iconic technology companies simply made a better version of what had come before. I think we haven’t seen the final version of what massive online classes look like. I think pieces of what we have in place will absolutely continue to exist, but there is always a better way to do anything.

A similar comparison could be the church I attend. My wife and I attend NewSpring, which is one of the newer types of community church that is embracing technology. NewSpring has a central campus in Anderson with eight additional campuses spread across South Carolina. We attend the Spartanburg “church” located in the downtown Marriott hotel and we watch a five minute delayed feed of the pastor preaching in Anderson.  My family has five generations of United Methodist Ministers, and I grew up in the Methodist church. At first this was a very weird and uncomfortable experience understanding the mind set of going to a location to watch a sermon on TV. With this “disruptive” approach the results have lead to amazing growth for the church. In just looking at the NewSpring Spartanburg campus, it first opened last Easter 2012 and on this past Easter Sunday we had 5,000 people attend across five services!

The light bulb moment for me was that it is MORE VALUABLE for me to watch a great sermon from a great pastor every week than attend a church with a live pastor who is only good. I think this is probably the most powerful element of a MOOCs. Why would I want to hear a GOOD live lecture from a GOOD professor on some subject when I could watch a GREAT lecture from a GREAT professor? At NewSpring it doesn’t mean that each of those local campuses doesn’t have a campus minister who you can pray with and who can organize local community events. It just means that the local pastors are more junior individuals who focus on GREAT local community elements during the week and not stress about giving a GREAT sermon every week. It is a win-win for everyone involved!

I could very easily see this same model being applied directly to higher education – a few large institutions existing with many satellite campuses. For example, suppose in South Carolina I attended the local Harvard satellite campus and sat in a room with other students to watch a video lecture of the same Clayton Christensen I mentioned earlier. Professor Christensen just so happens to be a professor at Harvard. I might have a local graduate assistant or adjunct professor who I can ask questions of directly after class and who administers and grades assignments. In this scenario I am able to get a world class education from a true expert in the field and not have to move to Boston. I think at the end of the day I could easily see a model like this being extremely successful, less expensive and more valuable to students. Of course the change that needs to happen to get us there is going to be a really hard battle.

 What Does All This Mean?

I don’t pretend to have all of the answers for the future of higher education, but I believe technology and innovation have pushed us to a point of no return. History famously repeats itself and there are so many other industries we can and have looked at that have been completely turned upside down in the last decade by disruptive technology. Higher education is the last big holdout to resist a similar disruption.

I think that being web experts we are in a very good position to turn up on the other side of this change. Our jobs and responsibilities have become more relevant and important to the mission of the school than a decade ago. I don’t necessarily think when the dust settles everyone will be working for the same school by name. I can see consolidation in the industry happening in some form or another.

Also, I think a decade from now we are going to think differently about professors. Like Major League Baseball we’ll probably see a group of “all-stars” who lecture to larger and larger audiences and more junior professors who have a high level of education but are moved to the role of assistants. I don’t know if it will go so far as those all-star professors being “free agents” during their career, but the incredible value and credibility they can provide one of the remaining institutions will be huge.

So what do you think? Am I dreaming? Am I crazy? Leave a comment below and share your thoughts on the future of higher education.

Photo Credit: World’s Collide

This post was written by Kyle James