Disruptive Innovation Hits the University

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Disruptive Innovation Hits the University

The U.S. higher education system is ripe for disruption.  As Harvard Business School professor Clayton Christensen has explained in many books, articles, and lectures, disruption occurs in an industry when a product or service, through many incremental innovations, becomes bloated with many features that add expense without adding value.  Competitors enter the low end of the market with a disruptive innovation—typically a low-frills offering that attracts customers that the industry incumbents don't want to serve.  Over time, the new offering attracts more and more of the mainstream market, until the upstart competitors dominate the industry.

This pattern has played out countless times in all types of industries, from computer disk drives to steel, from televisions to automobiles—and now, it is just beginning to unfold in the higher education system.

Consider the following facts about the price-performance of traditional colleges and universities:

  1. The average cost to earn a bachelor's degree now exceeds $100,000, and education costs are rising faster than healthcare costs.1
  2. The high costs of tuition are creating an obstacle to higher education:  In 2010, the Organization for Economic Cooperation and Development ranked the United States 14th in the world in the percentage of 25-34 year-olds with college degrees.  As recently as 1990, the U.S. ranked first.2
  3. The emphasis on research rather than teaching at many universities contributes to high tuition costs and subpar learning:  As Christensen points out, the vast majority of colleges give a large portion of their faculties' salaries to fund research that doesn't benefit anyone.3
  4. Grade-point averages have been on the rise because of grade inflation, rendering them meaningless as a way to judge a job candidate's readiness for a job.  A 2012 study revealed that the percentage of A's given by college teachers nearly tripled between 1940 and 2008.4 
  5. The failure of college education to meet the needs of employers has created a skills gap:  Only one in four employers think that two- and four-year colleges are doing a good job preparing students for the global economy, according to a 2010 survey conducted for the Association of American Colleges and Universities.5
  6. A college degree is no longer a guarantee of employment.  According to Future Jobs:  Solving the Employment and Skills Crisis, by Edward E. Gordon, half of recent college graduates were either jobless or underemployed in 2012.  This was the fifth consecutive year that graduates faced such a tough labor market...

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