Foundations of Consequence: For Universities and their Foundations, Innovation and Leadership Are Inseparable

By Jeff D. Standridge    //    Volume 29,  Number 5   //    September/October 2021

For just a brief moment, let us suspend our focus on the global pandemic brought about by COVID-19. Even prior to this life-altering event, the world is changing around us at such a rapid pace that attempting to keep up often proves fruitless. New innovations are disrupting the status quo in multiple industries, from health care to education, to manufacturing, transportation, and beyond. Global competition is bringing new players into our backyards, causing us to rethink how we do things to grow more quickly and perform more profitably. Universal access to low-cost digital marketing has arguably levelled the playing field between the “blue-chips” and smaller organizations. Drastically reduced product life cycles are forcing established companies to outsource their research and development (R&D) functions to entrepreneurial start-ups to more effectively manage their R&D investments. If you are an innovator, rapid change creates opportunity. If you are not, it causes heartache.

Take the recent decline of America’s prototypical blue-chip company, for instance. General Electric (GE), the $120-billion behemoth was once the paragon of innovation. At one point around the late 1990s to early 2000s, it was reported that GE was completing one acquisition per day on average. Most recently, the failure to maintain their innovation engine, among a few other things, has yielded significant negative consequences for the company. A couple of years ago, GE slashed its dividend in half. A few months following, GE stock fell to a nine-year low. A short time later, they fired their CEO. Make no mistake about it—failure to innovate is also a failure in leadership.

One may ask what these observations have to do with universities or their foundations. A few years ago, Harvard Business School professor Clayton Christensen and his team predicted that “50 percent of colleges and universities will close, or go bankrupt, in the next decade.”1

Christensen attributed his prediction to two major trends:

  1. The business model of higher education is broken as many institutions have proved unable to bring costs in line with revenues. Complicating that fact is that the pool of traditional revenue-producing prospects (18-year-old entering freshmen) is starting to decline (with precipitous declines forecasted to begin in 2026).2
  2. Online learning will likely prove disruptive to traditional on-campus enrollments, which further compromises the traditional university business model.

These predictions were made, and the trends articulated, well before and independent of the current global pandemic.

As it relates to the pandemic, Michael Poliakoff, the president of the American Council of Trustees and Alumni, wrote:

The coronavirus pandemic has imposed grave, urgent financial pressure on colleges and universities. Campuses had to move courses online in a matter of days, students and parents are demanding housing and meal plan refunds, and the spring enrollment cycle has been thrown into flux, state education appropriations will be cut to offset plummeting tax revenues, university endowments will yield smaller returns, and philanthropic giving will slow markedly (at least until equity markets recover).3

Combine Christensen’s pre-COVID constraining forces with Poliakoff’s post-COVID predictions, and you have a perfect storm of constraints conspiring to destroy higher education as we know it today.

In my work, I have repeatedly written and said, “the only thing required for innovation to occur is the presence of constraints.” Never has America’s higher education system faced such potentially debilitating constraints than today. If higher education were any other industry, any one of these constraining forces, let alone all of them, would lead to massive, preemptive cost reductions, new and more efficient ways of distributing goods and services, innovative business models, resource sharing, and a host of other measures.

Currently, I have the privilege of serving as the board chair of the University of Central Arkansas (UCA) Foundation. At our institution, President Houston Davis had the foresight to address some of these pre- COVID constraints in 2017 by launching a “Resource Optimization Initiative (ROI).”4 This initiative is an ongoing, data-informed, campus-wide effort to optimize the university’s budget, in light of the unpredictable enrollment trends and limited state funding. ROI is designed to do just what any other industry would do when facing similar financial constraints—align existing resources to support the strategic imperatives of the organization. For UCA, those strategic imperatives include supporting student success, investing in specific strategic initiatives, building financial reserves, and retaining employees at competitive market salaries. Fortunately, President Davis began this initiative well before the onset of the global pandemic, which further constrained the university’s sources of operating income. As a result, significant gains in the financial position of the university enabled the institution to continue operating from a position of strength, as opposed to constantly struggling to chase down moving financial targets.

Institutions across the country are engaged in similar exercises of incremental innovation. However, with the conspiring constraints previously described, incremental improvements in an institution’s budget or cost structure will likely leave the institution at considerable risk in the months and years to come. This means universities and colleges must deeply explore more extensive forms of innovation. President Davis and UCA are in that process now.

It also means that college and university foundations, must get into the game of innovation, or face the potential failure of the institutions they support. How must these foundations approach this concept of innovation? The answer to that question, diligently executed, might prove to be the difference between those institutions that fail, those that barely survive, and those that thrive in the coming decade.

For the purposes of this discussion, I’ll define innovation as “planned change (ideation, invention, and/or creativity) normally directed toward more pleasant, more effective, and/or more efficient ways of doing things, or that substantially reduces the transaction cost of doing business.” Now, it is one thing to disrupt the status quo, but “planned change” implies that one has taken the critical steps to disrupt the right things—those that will make a real difference in the organization or the market. Even so, disrupting the status quo with innovative new solutions in only half the battle. One must also implement those innovations in a way that creates sustained value. In other words, one must make them stick. That requires effective leadership.

Innovation, generally speaking, is described in three different variations: incremental, breakthrough, and disruptive.

  1. Incremental innovation enables small, but important improvements or extensions to existing products, services, or processes (i.e., Gillette, Coca-Cola, the ROI initiative at Central Arkansas).
  2. Breakthrough innovation uses a new technology to create new product, service, or process variations within an existing business model (i.e., iPhone, Uber), or a new business model with existing technology (Dollar Shave Club).
  3. Disruptive innovation results in an entirely new product, service, or process to address the unmet needs in the market or organization (web-based video such as Netflix, YouTube TV, Hulu or Roku replacing traditional Cable TV).

A few years ago, a McKinsey study found that 70 percent of senior executives pinpointed innovation as one of the top three drivers of growth in the succeeding years to come.5 And these innovations didn’t just involve traditional products and services. They involved rethinking their business models, their business processes, their value chains, management functions, and more.

That research went on to also expose a major gap between the aspirations of these executives to drive innovations and their abilities to execute or implement those changes effectively. Many executives instinctively default to creating disruptive change programs, or organizational structure realignments or “innovation strike teams.” All of these strategies, in isolation, usually fail to produce the intended outcomes. In my experience, the successful innovation that delivers long-term results is a cultural issue and has two main components: innovative leadership and innovation leadership.

Innovative leadership can be defined as the ability to think and lead differently than traditional practices would have. Innovative leaders are more personally agile. They embrace failure but learn to fail faster. They find ways to move beyond obstacles and excuses that favor the status quo. Innovative leaders challenge conventional thinking by continually asking the question, “What if?”

Innovative leadership requires that leaders develop the wisdom to recognize when and where a particular improvement will be a game-changer. It requires that they work within the constraints that would otherwise stop them. Innovative leaders are willing to fail, and they dare to attempt potentially crazy things in pursuit of game-changing ways of doing something that might have been done in a particular way for years—or perhaps something that has never been done before! Innovative leadership is bold and courageous, yet calculated.

Innovation leadership, on the other hand, is about replicating personal innovation efforts by cultivating a climate, as well as the skills and disciplines, that encourage and reward disruptive thinking across one’s team. It is about making any resulting improvements last. Innovation leaders create a culture where people are encouraged and empowered to think and act innovatively in their work. And, finally, innovation leaders create the necessary leadership climate such that people are not only willing to, but also feel safe in challenging the status quo and embracing new ways of doing things.

Innovation leadership brings together three distinct disciplines: innovation, organizational change management, and personal leadership. These three disciplines dovetail into a set of principles and practices that all contribute to disrupting the status quo and making that disruption stick. Sometimes that can be done with existing leadership talent. Sometimes it requires bringing in fresh perspectives to the organization by hiring new talent. In other instances, the engagement of an outside expert can be transformational. At the end of the day, it is the leader’s job to make that determination and to take the necessary steps.

A few years ago, Tony Jeary introduced the concept of strategic acceleration in his book of the same name.6 Accelerating the achievement of any goals, plans, or strategies effectively, requires three predicates. While I have found this construct to be very useful in my own practice, I have adapted Jeary’s definitions, based on my experience:

  • Clarity: the ability to get crystal clear about the purpose and direction of your organization, as well as clarity about the desired outcomes your organization wishes to achieve.
  • Focus: the development of a laser-like guidance system in order to avoid distraction, and to concentrate on the high-leverage activities that will produce the greatest results.
  • Execution: the ability to effectively deploy and direct resources in order to achieve the desired outcomes.

At the end of the day, strong, sustainable growth does not happen by accident. It happens because the right actions are taken at the right time, in the right way, to produce the desired, sustainable outcomes. This requires leadership. Leaders are responsible for ensuring that clarity, focus, and impeccable execution exist in any organization they have been entrusted to lead. Failure to do so is an abdication of their responsibilities as leaders. When leaders ensure there is clarity of vision, purpose, and direction, when they remove distractions by saying “no” to certain possible actions or courses of action, and when they properly allocate resources toward the desired outcomes that have been identified, they have drastically increased their organization’s probability of success. That is the essence of a high-quality transformation initiative, and it is the leader’s responsibility to ensure it exists.

Below are four things university leaders and foundation leaders can collaboratively do to position their institutions for the future:

  1. Create a cross-functional “innovation team” composed of key institutional and foundation leadership/expertise to identify the game-changers for the institution and for the foundation. We often help institutions do this via an “innovation print”—a full-day group exercise designed to identify and crystallize these institutional game-changers.
  2. Identify the initial funding requirements to effectively implement these game-changers.
  3. Launch a branded organizational transformation program based on these initiatives and engage the entire institution in the program.
  4. Cast the vision and launch a parallel funding campaign to provide the seed money for the transformation program.
  5. Monitor the results and look for opportunities to generate and celebrate the “quick wins” in order to fuel additional forward momentum.

Steve Jobs once said, “Innovation distinguishes between a leader and a follower.” In my experience, it is much more binary than that. I maintain that true innovation and true leadership are inseparable. In these days and times, especially for institutions of higher education and their foundations, one simply cannot exist without the other.

Jeff D. Standridge, EdD, is the current board chair of the University of Central Arkansas Foundation. He serves as the managing director of Innovation Junkie (www.InnovationJunkie.com) and Conductor (www.ARConductor.org).

Endnotes

1. Abigail Johnson Hess, “Harvard Business School professor: Half of American colleges will be bankrupt in 10 to 15 years,” CNBC, August 30, 2018, https://www.cnbc.com/2018/08/30/hbs-prof-says-half-of-us-colleges-will-be-bankrupt-in-10-to-15-years.html.

2. Jill Barshay, “College students predicted to fall by more than 15% after the year 2025,” The Hechinger Report, September 10, 2018, https://hechingerreport.org/college-students-predicted-to-fall-by-more-than-15-after-the-year-2025/.

3. Michael Poliakoff, “How Higher Education Leaders Should Respond to the Coronavirus Financial Crisis,” Forbes, April 14, 2020, https://www.forbes.com/sites/michaelpoliakoff/2020/04/14/how-higher-education-leaders-should-respond-to-the-coronavirus-financial-crisis/?sh=1cb55d518d48.

4. “Resource Optimization Initiative (ROI),” University of Central Arkansas, accessed August 13, 2021, https://uca.edu/roi/.

5. “Business Functions,” McKinsey & Company, accessed August 13, 2021, https://www.mckinsey.com/business-functions.

6. Tony Jeary, Strategic Acceleration: Succeed at the Speed of Life (New York: Vanguard Press, 2009)

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