“When we talk about disruption, we have to remember that it’s not just about technology,” said Michelle Weise, senior research fellow for higher education at the Clayton Christensen Institute.
Weise said it’s true that disruptive innovation needs a technological enabler, but that’s only one necessary condition. Another is that it needs a foothold in non-consumption. In other words, it starts out serving a set of consumers that were not previously being served and who consequently have different expectations for quality. “Disruptive innovations transform what used to be complicated and sophisticated and served only a few, making it affordable to a whole new set of people,” said Weise.
Another necessary condition for disruptive innovation is that it creates asymmetric motivation for the providers. There are the incumbents who have long been established in the market and are serving the sophisticated customers, and they are engaged in pursuing sustaining innovations that make their offerings better and better. And there are the entrants who pursue disruptive innovations that serve customers at the bottom of the market who are less demanding and will accept a lower quality product. Since the profit margins are higher with sustaining innovations, the incumbents are not motivated to compete directly with the entrants.
And a final necessary condition for disruptive innovation is that it requires business model innovation. There are too many embedded inefficiencies and inertias that fundamentally constrain the existing business models in responding to changes. “You can’t cram new technology into an existing organization,” said Weise.
As it applies to the higher education industry, disruptive innovation is already underway. “It’s a process, not an event,” said Weise. “And for higher ed, it started in 1989 when online universities were created.” The first wave offered flexibility and convenience, serving customers who had a different metric of performance. “It was just good enough,” said Weise. The second wave offered lower price, and now the newest wave is offering lower price plus competency-based education.
“Disruptive innovations take hold in a completely separate market and don’t compete with the incumbents at first,” noted Weise. “But over time, they intersect the needs of more demanding customers.”
Weise noted at least two ways the disruptive innovations are moving up-market. First, they are better targeting what more students are seeking in a college degree. “Customers don’t just buy products or services, they hire them to do jobs in their lives. So what they buy depends in the job they want done.” The widening skills gap (employers voicing their dissatisfaction with job candidates) has created a new job to be done by colleges, and students see the value in alternative learning pathways that are a fast track to landing them the eventual job they want.
Second, the disruptive technology is improving in quality and offering rich learning opportunities. And, for example, it allows for more accurate assessment of a student’s performance and mastery. A college’s brand reputation has been important to employers in distinguishing the quality of job applicants, but if the disruptive innovations measure learning outcomes more precisely, that will take over, predicted Weise.
Weise said that in the long term, a traditional college or university has a choice of either creating an autonomous unit with a business model that will allow it to compete with the entrants in disruptive technologies, or continuing with their sustaining technologies. But either way, they will need to ascertain “the job to be done” for their customers, versus trying to be all things to all people. “Institutions have to ask why students are hiring them,” said Weise. “You have to find the niche of consumers you want and understand the job they want you to do for them. Because what you think you offer and what you think differentiates you may not match what the students are actually hiring you to do.”