Disrupting College

1. Disrupting College How Disruptive Innovation Can Deliver Quality and Affordability to Postsecondary Education Michael B. Horn | mhorn@christenseninstitute.org | Twitter: @christenseninst

2. The struggles facing colleges & universities

3. Chorus questioning higher ed’s quality What do students learn? • Study of 2,300 undergraduates at two dozen universities who took the Collegiate Learning Assessment • 45% demonstrated no gains in critical thinking, analytical reasoning, & written communications during first two years • 32% did not typically take courses with more than 40 pages of reading per week • 50% did not take a single course in which they wrote more than 20 pages

4. America’s degree edge is slipping Percentage of students with postsecondary degrees by age group 55-64 45-54 35-44 25-34 All (25-64)

5. Job mismatch paradox • 3.6 million job openings for which employers say they can’t find qualified employees • 49% of US employers struggle to fill vacant jobs because of lack of talent, compared to 34% globally

6. Traditional college business model is breaking E < T + G + I + C + M

7. What is disruptive innovation?

8. Sustaining vs. Disruptive Innovation Disruptive Innovations Time Incumbents dominate sustaining battles Pace of technological improvement Sustaining innovations 60% margin on $500,000 Customer ability to use improvements Performance 45% margin on $250,000 Time Performance 40% margin  20% margin on $2,000 Entrants typically win at disruption

9. Disruption = affordability, accessibility Past and present examples Yesterday GM Dept. Stores Digital Equipment Delta JP Morgan Xerox IBM Cullinet AT&T Sony DiskMan Today Toyota Wal-Mart Dell Southwest Airlines Fidelity Canon Microsoft Oracle Cingular Apple iPod

10. Disruption of Toyota From hyundaiusa.com May 5, 2013

11. Disruption = affordability, accessibility Past, present, and future examples Yesterday GM Dept. Stores Digital Equipment Delta JP Morgan Xerox IBM Cullinet AT&T Sony DiskMan Today Toyota Wal-Mart Dell Southwest Airlines Fidelity Canon Microsoft Oracle Cingular Apple iPod Tomorrow Chery Internet retail Smart phones Air taxis ETFs Zink Linux Salesforce.com Skype Smart phones

12. How to identify a disruptive innovation Disruption is a relative phenomenon Is the innovation targeting people who are nonconsumers or overserved by existing products? Is the innovation not as good as existing products as judged by historical measures of performance? Is the innovation simpler to use, more convenient, and more affordable? Is there a technology enabler that can carry the new value proposition up-market? Is the technology paired with a business model innovation that allows it to be sustainable? Are existing providers motivated to ignore the new innovation and not threatened at the outset?

13. How does disruptive innovation relate to education?

14. Where does disruption not apply? Industries without an upwardly scalable technology are not disrupted

15. Disruption in higher ed is just beginning

16. Substitution follows the S-curve pattern Linear S-curve logarithms indicate growing online learning adoption 50% all students take at least 1 course online by 2015 Percentage of college students taking at least one online course, divided by students who did not take an online course

17. What are online learning’s potential new value propositions?

18. Potential benefits of online learning Personalization

19. Learning environments modeled upon factories Current system was built to standardize

20. The “Swiss-cheese problem” in education Students develop holes in their learning

21. Different learning needs at different times

22. Benefits of online and blended learning Personalization through modularity

23. Sound learning design boosts student outcomes Student achievement in online courses when administered by focused online faculty 5.7 Student achievement in traditional classes taught by faculty in core Student achievement in online courses when administered by faculty in core 5.6 4.6

24. Potential benefits of online learning Personalization Data and Feedback

25. Fixed-time, variable learning Deliver content to students Testing & assessment Progress to next grade, subject, or body of material Receive results

26. Competency-based learning Learning is fixed and time is variable Offer learning experiences to students Receive real-time interactive feedback Testing & assessment Progress to next body of material

27. Potential benefits of online learning Individualization Teacher Effectiveness Data and Feedback

28. Disaggregated staffing models • New opportunities: • Teacher specialization • Extend the reach of best teachers • Career growth opportunities

29. Benefits of online and blended learning Individualization Teacher Effectiveness Cost Control Data and Feedback

30. How do existing organizations survive disruption?

31. Pocket radios Hearing aids Tabletop Radios, Floor-standing TVs Portable TVs Path taken by vacuum tube manufacturers Disruption is not a technology problem Performance Different Measure of Performance Time Time

32. RESOURCES: People, technology, products, facilities, equipment, brands, and cash that are required to deliver this value proposition to the targeted customers PROCESSES: Ways of working together to address recurrent tasks in a consistent way: training, development, manufacturing, budgeting, planning, etc. THE VALUE PROPOSITION: A product that helps customers do more effectively, conveniently & affordably a job they’ve been trying to do REVENUE FORMULA: Assets & fixed cost structure, and the margins & velocity required to cover them What is a business model? And why does it lock us in?

33. RESOURCES: People, technology, products, facilities, equipment, brands, and cash that are required to deliver this value proposition to the targeted customers PROCESSES: Ways of working together to address recurrent tasks in a consistent way: training, development, manufacturing, budgeting, planning, etc. THE VALUE PROPOSITION: A product that helps customers do more effectively, conveniently & affordably a job they’ve been trying to do REVENUE FORMULA: Assets & fixed cost structure, and the margins & velocity required to cover them Business units don’t evolve. Corporations do. What is a business model? And why does it lock us in?

34. Much amuck about MOOCs Are MOOCs a disruptive innovation? Is the innovation targeting people who are nonconsumers or overserved by existing products? Is the innovation not as good as existing products as judged by historical measures of performance? Is the innovation simpler to use, more convenient, and more affordable? Is there a technology enabler that can carry the new value proposition up-market? Is the technology paired with a business model innovation that allows it to be sustainable? Are existing providers motivated to ignore the new innovation and not threatened at the outset?

35. Disrupting College How Disruptive Innovation Can Deliver Quality and Affordability to Postsecondary Education Michael B. Horn mhorn@christenseninstitute.org Twitter: @christenseninst

36. How do existing organizations survive disruption?

37. Understanding how users experience life “The customer rarely buys what the company thinks it is selling him.” Peter Drucker

38. Three levels in the architecture of a Job What and how to integrate? What experiences in purchase & use must we provide to do the job perfectly? What’s the job-to-be-done? (Each job has functional, emotional & social dimensions)

39. Recommendations for existing institutions

40. The danger of trying to be all things to all people

41. 3 different kinds of business models Solution Shops Value-Adding Process Businesses Facilitated User Network • Diagnose and solve unstructured problems • Enable exchange among participants • Add value to something that is incomplete or broken • Fee for service • Fee for transaction or membership; ad-supported • Fee for outcome

42. Path taken by product A A starts here Path taken by product B B starts here Turning machines Polishing Dept. Hobbing department Tapping equipment Annealing furnace Shipping Department Storage Boring machines Cut-off saws

43. The Maysville plant

44. The danger of trying to be all things to all people

45. General purpose products disrupted job-by-job • Major Metropolitan Newspapers Help me: • Unload this stuff • Find the right car • Sell or buy a home • Find the right job, or the right employees • Kill commuting time productively • Become well-informed • Unwind at the end of the day Performance Craig’s List AutoTrader.com Realtor.com Monster.com Metro; Blackberry CNN.com Unwind at the end of the day Different Measure of Performance Time Time

46. Part-time MBA Online “Garbage” Harvard Business School is being disrupted $150,000 !! 2-year MBA Performance • Help me solve this problem • Teach me what I need to know to become a great manager • Give me the credentials I need to get the next, more lucrative job • Help me switch careers • Help me join a prestigious network • Brand • Connections Different Measure of Performance Time Corporate Universities: Competing against nonconsumption Time

47. The rise of unbundling

48. Proprietary, interdependent architectures Modular open architectures Compete by improving speed, responsiveness and customization The right product architecture? It depends… IBM Mainframes, Microsoft Windows Compete by improving functionality & reliability Performance Dell PCs, Linux Time

49. Integration: Rise of the corporate university

50. Modularity and targeted partnerships