Dealing with Disruption

By the Book

By Theodore J. Marchese    //    Volume 23,  Number 4   //    July/August 2015
AGB Trusteeship Magazine: July/August 2015, with cover article "Dealing with Disruption"

“Every other industry has been disrupted by technology! Are we next?”

All these for-profit competitors and MOOCs…can we survive?”

“Everyone complains about our costs. We need new ideas here!”

These statements, which I overheard at several recent board meetings, reflect trustee concerns and fears. Board members well know, from Trusteeship and elsewhere, that public colleges confront state-level disinvestment even as their independent counterparts watch tuition discounting devour their budgets. The public clamors about high prices and growing student debt; it demands accountability. In the face of these challenges, private equity and venture capitalists have poured billions of dollars into hundreds of new companies that would disrupt business as usual in higher education.

Remarkable developments are indeed afoot, but what do we know about them? In a search for answers, I turned to the spate of recently published books purporting to explain how higher education will be disrupted, unbound, remade—or ended—by new competitors. For busy board members, is there a book here worth reading? Or themes to weigh?

Starting on page 13, you’ll find snapshots of the books in question. For board members, here is what I learned from these works and subsequent web searches.

For-Profit Competitors: Coming and Going

Fifteen years ago, the great fear was that for-profit higher education would become a major disruptive force for change. Indeed, in the 10 years that followed, the for-profits’ share of overall enrollment jumped from 2.9 percent to 11.9 percent.

Then five years ago, a series of investigative reports uncovered problems in the industry. In many instances, it depended largely on federal student-aid monies, and default rates were high. In addition, job outcomes were often mediocre, and more revenues frequently went to management, investors, and recruitment than to instruction. A scathing 2012 U.S. Senate report prompted tighter federal rules and oversight.

Meanwhile, the University of Phoenix saw its enrollments drop from 475,000 to 213,000, and Bridgeport, Career Education, EDMC, and others saw enrollments plummet, as well. Jones International, Anthem, and Corinthian, which once had 116,000 students, closed.

Thus, for-profits themselves have had to adapt. DeVry, a top-end competitor that remains profitable, closed 14 campuses this spring. Along with Phoenix, and other companies in the sector, it is moving most of its operations to online formats. To increase student completion rates, some for-profits have augmented online instruction with tutors, help lines, and other forms of student support, pinching margins.

As it developed this past year, the online market share of traditional brickand- mortar colleges and universities— many of which copy for-profit delivery models but enjoy brand, price, and accreditation advantages—surpassed that of the for-profit sector. Today, the rising stars of online education are nonprofits as diverse as the Pennsylvania State University, Indiana Wesleyan University, Southern New Hampshire University, Rio Salado Community College, and Liberty University.

The last word has yet to be spoken about forprofit higher education. Many companies have smart management, access to capital, and freedom to adapt. Several are now investing in overseas markets. A model for that is privately held Laureate Education, based in Baltimore, which counts 850,000 students on its far-flung campuses, mostly abroad. According to Bloomberg, it enjoys annual revenues of more than $4 billion.

In several of the books listed on pages 13 to 15, the authors opine that where many for-profits are today—chastened and hunting for opportunities—could be where some traditional colleges will soon find themselves.

The MOOCs Scare: Lessons Learned

In fall 2011, Stanford University Professor Sebastian Thrun rocked higher education by putting his computer programming course online for all takers— and for free. Quickly, more than 166,000 students from 190 countries signed up. Thrun was soon appearing on “60 Minutes” to describe his Massive Open Online Course (MOOC). The following spring, three new companies—EdX, Coursera, and Udacity (the last of which was cofounded by Thrun)—formed to advance the idea, with major universities standing in line to participate and venture capital flowing in. Here was higher education’s future!

Well, not quite—at least, not yet. When the dust settled, it turned out that only 22,000 (13 percent) of Thrun’s enrollees actually completed the course; in the next MOOC that was offered, 8 percent did so. When Thrun offered a MOOC-like first-level math course at San Jose State University, students in conventional, face-to-face classes ably outperformed a matched online group. Not least among the problems facing the three new companies, after poor student completion and performance rates, was how to generate revenue for these free offerings, especially when course-development costs ran to six figures.

That noted, real lessons emerged. For one, top minds went to work figuring out how best to teach courses online, asking, “For what students and subject matter does this work? With what kinds of production values and student support?” “How do we bring to bear learnings from neuroscience and artificial intelligence?” “What about test security?” And so on. In the past three years, higher education has learned a lot about using information technology (IT) to improve not just online, but also classroom-based instruction.

Most important, an invisible wall was breached when institutions like Stanford University, the University of Michigan, Carnegie Mellon University, and the Massachusetts Institute of Technology— not just Phoenix—began offering online courses. A legitimization occurred. Today, 2,000 institutions offer pure online, blended, or hybrid courses. A survey that Babson College conducted shows 7.1 million students taking such courses.

Disaggregation and Unbundling

Years ago, colleges and universities embraced the value of outsourcing functions such as food service, maintenance, security, and the bookstore. A newer array of consultants now helps institutions recruit students, manage aid dollars, raise funds, conduct searches, develop a brand, engage in campus planning, build IT infrastructure, and find staff efficiencies.

Up until now, though, little of this has touched the heartlands of academic and student affairs. To earn a baccalaureate, a student has traditionally taken four years of courses on campus, with the institution’s budget built around that “bundle” of classwork. But today, a host of fledgling providers like offer commonly taken courses, such as English comp and introductory psych, at a fraction of on-campus tuition. Others, like, offer courses for free. The rub, for students, has been that most of the new providers aren’t regionally accredited, and thus a college or university needn’t recognize those credits.

But that has come to an end. In April, Arizona State University (ASU) and EdX entered into an agreement whereby a full slate of first-year courses will be available online for $200 per credit hour ($6,000 for the full year) to any and all comers. Since ASU is regionally accredited, such coursework is transferrable. In May, the University of Illinois and Coursera announced an online MBA for $1,000 per course or around $20,000 for a degree—a fraction of the $50,000 to $100,000 for on-campus versions. The Georgia Institute of Technology and Udacity will offer a computer-science degree for $7,000. More such alliances are on the way.

The new MOOC companies have also inked agreements with IT partners (Coursera with Google) and corporate sponsors (EdX with Fiat Chrysler) to offer credentials that, in effect, bypass the college degree. They seem to be finding their niches.

Meanwhile, a host of vendors have emerged with “solutions” that complement or augment courses, tutor students, advise or coach matriculants, bring student-earned badges and certificates to employers, arrange internships, and more. In some instances, the new provider is high-minded and provides a real advance. The coaching company InsideTrack, for example, set out 15 years ago to do something about student completion rates and developed sophisticated services to get students from acceptance to graduation. One million students later, the company demonstrates 15 percent gains in degree attainment. (Full disclosure: I served on its advisory board.)

Plenty of newer firms look merely opportunistic. But the sheer number of them—recent ed-tech gatherings in Austin and Phoenix had record attendance—plus their ability to connect with students and with venture capital, suggest they will be a force to be reckoned with.

This landscape of new providers, rapidly evolving, is rife with mergers and acquisitions, partnerships and alliances. Bigger companies like Pearson Education and John Wiley & Sons have scooped up start-ups to offer “bundled services” that enable colleges to teach online (200 have signed up for such services so far). Still bigger companies—Microsoft, Google, and Facebook—watch from the wings.

Learning and Degree Completion

As former Harvard University President Derek Bok argues convincingly, the two most difficult problems facing American higher education are bound up in the phenomenon of undergraduate underperformance— too few students are learning what they need to learn, and too few complete their degrees. In his view, an overall strengthening of undergraduate education would bring with it higher rates of completion. He documented that case in a 2006 book, Our Underachieving Colleges: A Candid Look at How Much Students Learn and Why They Should Be Learning More (Princeton University Press). In 2010, researchers Richard Arum and Josipa Roska published Academically Adrift: Limited Learning on College Campuses (University of Chicago Press), presenting findings across 24 colleges that showed limited freshman-tosenior- year gains in student writing and reasoning skills. In recent international comparisons, American college graduates have fared disappointingly.

This backdrop is relevant today because if it’s all a matter of fungible credits, of online that’s as good as the traditional, or of pushing more students through to a degree, the nation will never get what it needs from its colleges and universities. Nor will students.

The potential good news here is that, compared with 15 years ago, we know much more now about how people learn and about what works in undergraduate education. At Carnegie Mellon, EdX, and elsewhere, teams work to combine insights from practitioners, neuroscience, artificial intelligence, and the “big data” generated by their courses to create online experiences that prompt the student engagement and effort required for deeper learning. The wider impact of these new courses remains unclear, and they certainly face obstacles to adoption— from campuses that fear financial erosion to a “not invented here” mentality.

Mitch Daniels, the former Republican governor of Indiana and now president of Purdue University, last year commissioned a Purdue-Gallup study of the outcomes for 30,000 recent graduates— how much they earned and how well they navigated adult life. The most-successful graduates reported certain things in common: a professor who made them excited about learning or cared about them as a person, the encouragement of a mentor, working on a long-term project, a job or internship that applied knowledge, and heavy engagement with extracurricular activities. Three observations: only 14 percent reported having such an education; it’s not cheap to provide; and these experiences are hard to achieve online.

A Liberal-Education Counterattack

Academics grew up believing that a college education had three missions: to cultivate self-reflection and a life of the mind (per Cardinal John Henry Newman’s The Idea of a University, written in 1852); to prepare an educated citizenry for life in a democracy (per Thomas Jefferson); and to prepare for a life’s work (the Morrill Land-Grant Acts). As Columbia University professor Andrew Delbanco writes in College: What It Was, Is, and Should Be, “The American college has always been about more than the transmission of information or the inculcation of skills; it has been, at its best, about helping young people prepare for lives of meaning and purpose.” (See a snapshot of this book on page 15.)

This explains, in part, the distress that many faculty members feel when confronted with today’s focus on cheaper, faster, and more convenient. In state capitals and Silicon Valley, they notice, it’s all about getting jobs and boosting the economy; the civic and personal-development goals seem to have been lost. Convenience and access are good, but many faculty members want higher expectations of students and undergraduate rigor. Faculty members know from their own experience with students the validity of the Purdue- Gallup findings; can such opportunities for students be preserved? They worry about politicians who value today over tomorrow and don’t know much about the true workings of higher education, as well as about companies that peddle inferior education to students from impoverished backgrounds, saddling them with debt. Full-time faculty members are concerned about job security when most of today’s online instruction is being enacted by part-time or contingent faculty. But there’s more than self-interest to their wariness.

Academics applaud the real progress these past years in understanding what works in undergraduate education and what factors promote completion. The Association of American Colleges & Universities (AAC&U) has reviewed best practices from all sectors and developed a clear statement of undergraduate outcomes, with associated pointers for curricula, teaching, and assessment (“Project LEAP”) that are congruent with the best hopes of academics and employers alike. The AAC&U recommendations assume enactment by a fulltime, in-place faculty member, a condition that is hard to meet when 60 percent of undergraduate instruction today (up from 35 percent in 1975) is done by part-time and contingent faculty. Meanwhile, faculty members from 600 institutions have taken up the challenges of the Degree Qualifications Profile (DQP), a transnational movement to align curricula, raise standards, specify degree competencies, and encourage student mobility.

The Problem of Costs

There’s no simple explanation for the run-up in college costs, which public opinion still regards as our greatest problem. Depending on the institution, what pushes them up can be unfunded student aid (“tuition discounting”), rising health care and IT expenses, losses on athletics, compliance costs, aging infrastructures, and competitive pressure to keep up with student and parental expectations— and the Joneses. Critics observe tuition levels and think colleges must be in fat city. But look closer, and one sees leaky roofs from years of belt-tightening. Until recently, higher education’s lobbyists claimed, rightly, that most students attended low-cost public institutions, but public tuitions often now rise fastest of all.

One has to look hard to find convincing models or solutions. For-profit institutions at one time seemed an answer, with tuition rates just above that of the publics and well below the independents. But at $400 to $500 per credit hour and spotty outcomes, it’s hard to say they’ve found a sweet spot. Western Governors University, entirely online for about $6,000 per year and with credible outcomes for its adult audiences, may be one model. As The Innovative University: Changing the DNA of Higher Education from Inside Out details, Brigham Young University- Idaho represents a traditional campus with efficiencies carried to the Nth degree—intense scheduling, heavy teaching loads, yearround operations, and more—keeping costs under $6,000 a semester. But its six-year graduation rate (54 percent) remains unprepossessing.

In Designing the New American University, Michael Crow and William Dabars describe Arizona State University’s determined attentions to costs that have held tuition steady for years while serving evergreater numbers of students (although its completion rate remains a relatively low 57 percent). Still another approach is that of San Francisco-based Minerva University, which began classes last fall. In partnership with the Keck Graduate Institute (and with venture-capital backing), it aspires to instant elite status. It charges $10,000 a year, and attracted 11,000 applicants for 70 spaces. We’ll see how it goes five years from now.

Traditional campuses are enjoined to cut costs: Kill big-time athletics, go with part-time faculty, gut student services, and outsource everything you can. Such steps come with costs themselves, of course, whether to learning or public approbation. So the conversation continues.

The unanswered questions about costs are matched by what we have yet to learn about online education and undergraduate effectiveness. The root problem has been the drying up of federal and foundation support for innovative experiments. According to an estimate by Ryan Craig in College Disrupted: The Great Unbundling of Higher Education, the amount spent on educational research is 1/140th of that for medical research. (See a snapshot of each of the three books listed in this section on the following pages.)


For-profit, online, and newventurecompetitors make headlines, but sometimes the most important changes are cultural and escape notice.

For most of the history of American higher education, parents—through taxes, savings, and donations—paid the bill. Then came the idea that the prime beneficiary of a college education was not the public but the student, who after all would enjoy higher earnings over a lifetime; therefore the student should pay. This new understanding— a public good becomes a private good—justified everything from tuition hikes to state disinvestment to student loans. In 1987, the volume of loans surpassed that of grants and never went back.

Thus, today, we have graduates with an average debt approaching $30,000 and student bodies in which, to forestall further borrowing, 90 percent of students work an average of 25 to 30 hours a week— commitments not unrelated to student job-mindedness and the pursuit of specific majors to maximize their earnings.

Another change in mindset, a generation in the making, has to do with collegegoing itself. If earlier generations went to college for an education, today more go for the courses and a degree that lead to a job. The latter approach prizes product over process, convenience over rigor, good enough over deeper engagement, the vocational over the intellectual and civic. All of these shifts open doors to commodification and disaggregation.

Board members will know that the changes recounted here are easy to exaggerate— as well as to underestimate. The past four years have seen more new developments than in the previous 25, taxing the wisdom of boards and challenging the strategic plans that they oversee.

Yet most campuses will survive; they offer an indispensable experience. Most of the new providers will not survive, even as their ventures shake complacency and extend learning to wider audiences. Taken together, the elements seem at hand—ideas, capital, and worry about the future—for significant transformation. Inventive minds are at work; attentions are concentrated. The days ahead may write a new chapter in the history of an essential institution.

10 Recent Reads

At least 10 books have come out in recent months or within the past few years about the “disruption” or “unbundling” of higher education. The first seven listed below bear directly on the point. The final three offer relevant perspective.

American Higher Education in Crisis? What Everyone Needs to Know

by Goldie Blumenstyk (Oxford University Press, 2015).

Here’s a winner, a book for all board members, from a long-time reporter for the Chronicle of Higher Education. Blumenstyk takes pretty much all the issues we in higher ed are talking about, poses them in 75 or so questions, and answers each in factfilled paragraphs, 154 pages in all. To her, there’s no killer app in sight but a combination of ideas, actors, and money that will reshape higher education. Her book displays a reporter’s gift for clear exposition, a keen sense for best sources, and the deeper knowledge of a scholar. An entire board might read it prior to a planning retreat.

The End of College: Creating the Future of Learning and the University of Everywhere

by Kevin Carey (Riverhead Books, 2015).

This widely discussed, and both praised and bashed, book offers a critical take on the American university—seldom appreciating its multiple missions and real-life predicaments, while lambasting its pretensions, costs, and beggaring of student learning. From his perch at the New America Foundation, Carey sees universities beset by contradictions and protected by a wall of regulations, public subsidy, and cultural habit. That wall is about to come tumbling down, sooner than you think, he predicts, supplanted by a University of Everywhere in which any learner anywhere in the world with an Internet connection can take any course or degree at little cost.

The likelihood of this may be questionable, but Carey shines in his description of new IT- and AI-based courseware at Carnegie Mellon, EdX, and other providers that is personalized, engaging, and effective—as well as in his depiction of how the monopoly on credentials that traditional institutions enjoy can be broken by making student skills discoverable by employers independent of a degree. (The $1.5 billion acquisition of by LinkedIn this April affirms his point.) A book to recommend, if for no other reason than for its alternative view.

The Innovative University: Changing the DNA of Higher Education from the Inside Out

by Clayton Christensen and Henry Eyring (Jossey-Bass, 2011).

Clay Christensen of the Harvard Business School (HBS) is well known for his theory of “creative disruption”: the idea that fat cats fall because they continually enhance what they do and become unaffordable to customers. Meanwhile, new entrants thrive by offering “good enough” at an affordable price point—think Toyota, from humble beginnings, overtaking General Motors. For the authors, that will be the story for traditional higher education, too, as its “DNA” ever pushes it toward the bigger and better, seldom toward the simpler and more affordable, while its disruptors will be its new for-profit competitors. (Alas, for this thesis, came the for-profit downfall a year after publication.)

Their 401-page book details Harvard University’s development (the presumptive model to be disrupted) and a description of Brigham Young University-Idaho, an institution remade by HBS alumni into a super-efficient, low-cost provider for a predominantly Latter-day Saints constituency. Despite the authors’ repeated calls for outcome-based “success measures,” none are presented for BYU-I. The book’s main virtue is that it takes seriously the problem of costs, which others elide. Still, it’s a bit dated and not at the top of our reading list.

College Disrupted: The Great Unbundling of Higher Education

by Ryan Craig (Palgrave Macmillan, 2015).

This book covers much the same ground as Kevin Carey’s The End of College, yet from the perspective not of a policy wonk but of the managing director of a private equity fund (University Ventures) that invests in “next generation” higher education companies. As Craig sees it, the core problem for colleges is how to deliver “high-return programs” that solve the problems of affordability, student learning, and fitness for work. Within the next five years, he predicts, a joinder of online learning with competency- based education will cut delivery costs by half. As for unbundling, multiple college functions, including the instructional, will fall to new providers. (People don’t buy albums anymore, they buy individual songs; bundled cable is being undone by Netflix and Amazon.)

Craig displays a spotty knowledge of higher education, seldom mentions faculty or students, has contempt for collegiate boards not built to ask fundamental questions, and can ramble. The book’s strength lies in its insider knowledge of the hundreds of new companies that will compete for student attention and institutional dollars. On that basis alone, it may be a better bet for trustees than Carey’s book.

Designing the New American University by Michael Crow and William Dabars (Johns Hopkins University Press, 2015). Since taking the presidency at Arizona State University, Crow has remade his institution into the nation’s largest public university (86,000 students and counting), embracing growth on behalf of access, achieving a student body that reflects his state’s diversity, hiking graduation rates, incubating dozens of new enterprises, tripling industryrelevant research, reorganizing faculties for transdisciplinary impact, and embracing at every turn digital technologies and corporate partnerships to control costs. His message: Get clear about mission, serve your publics, take risks, and embrace change. This book tells that story, albeit in sometimes heavy prose. (Parts of the book appeared earlier in academic publications.) It may be a tough slog for busy board members, but surely a read for leaders of comprehensive universities.

Remaking College: The Changing Ecology of Higher Education

by Michael Kirst and Mitchell Stevens (Stanford University Press, 2015).

This book features 11 essays on various of today’s moving parts in higher education. Authors see a familiar “system” of campuses replaced by an “ecology” of providers and a consequent sharpening of differences by age, class, price, and geography. Thanks to foundation support and a series of author meetings, this collection coheres and breaks scholarly ground. The intended audience is not so much board members as fellow scholars and policy makers.

College (Un)Bound: the Future of Higher Education and What It Means for Students

by Jeffrey Selingo (New Harvest, 2013).

Selingo, a long-time reporter and editor of the Chronicle of Higher Education, takes us through the gamut of troubles confronting campuses today: ballooning student debt (now $1.2 trillion), cratering state support, the run-up in tuition and discount rates, questions about student learning and job-readiness, and a widening gap between the haves and have-nots (think students and institutions). To him, the whole system is collapsing under an unsustainable financial model and will be picked apart by a collection of new, well-funded providers. Selingo has a journalist’s eye for detail and story; he includes telling accounts of the “amenities race” among institutions, a shift in power from faculty to students, and the dumbing down of undergraduate studies. An enlightening read—only slightly dated by events—that is near the top of our reading list.

Other Relevant Titles

Higher Education in America

by Derek Bok (Princeton University Press, 2013; revised edition 2015).

During his Harvard University presidency (1971–91), Bok produced a string of influential essays and has since written important books on undergraduate education, racial preference in admissions, and university marketplaces. Here, in 412 authoritative pages, Bok looks across the board at higher education as a system, its governance, goals, competitors, collegiate function, professional schools, research commitments, and the trajectory of it all. Bok dismisses bogus criticisms about costs, faculty, governance, and board members. He identifies the university’s central weakness: undergraduate education in which too few graduate and too many learn too little. A beautifully written, thoroughly informed, critical yet hopeful book, for board members of traditional institutions with the time to read deeply.

Higher Education in the Digital Age

by William Bowen (Princeton University Press, 2013; revised paperback 2014, with updates by the author and a new foreword by Kevin Guthrie).

Like Derek Bok, Bowen, the former Princeton University and Andrew W. Mellon Foundation president, is one of the academy’s invaluable citizen-sages. This short, incisive book is built around Bowen’s lectures at Stanford University in 2012, mostly about what we know and don’t know about online learning, with responses from Stanford’s president John Hennessy, Harvard’s Howard Gardner, Columbia University’s Andrew Delbanco, and Coursera’s Daphne Kollar…with responses in turn from Bowen.

What we seem to know (so far) is that online instruction can work with reasonably prepared and motivated students taking carefully crafted courses with adequate support structures on topics with right or best answers (like statistics). But there’s a lot we don’t know yet, and it will take time and money to get this right; when we do, IT-based approaches may eventually help rein in costs. In short: a succinct treatment of a crucial topic for (at least) board members on an academic affairs committee.

College: What It Was, Is, and Should Be

by Andrew Delbanco (Princeton University Press, 2012, with a new preface 2013).

Delbanco, a gifted teacher at Columbia University, is well aware of the academy’s competitive challenges but offers a conservative counter argument: “The biggest innovation we could make would be to retrieve [our] fundamental values and renew our commitment to them.” Jobs are important, but a college education should help a student find self-knowledge, become a reflective citizen, connect disparate knowledge, imagine perspectives other than one’s own, and take ethical responsibility. This is said in 177 eloquent pages that might be valuable reading for any trustee, but especially for those who oversee academic affairs. —T.J.M.

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