Clayton Christensen |

In his first address to a joint session of Congress on Tuesday, President Obama made education a cornerstone of his remarks—and properly so given the urgent need to improve education in this country. Obama also made a point of saying that it isn’t enough just to give education more resources; schools also need more reform. This echoes a piece that Clay and I authored last week. Obama elaborated that offering preschool options isn’t enough, for example. We have to continue to improve them, he said, as well as cut “education programs that don’t work.”

We hope that concrete action follows this encouraging rhetoric. One thing we remain worried about is that the money in the stimulus package targeted for schools will be used to fund a continuation of the status quo. This is borrowed money. Charging education isn’t the same thing as changing it. Budgetary crises sometimes compel us to adopt disruption—which can lead to wholesale transformation of a system to something that serves many more people far better and far more affordably.

A point that Obama also touched upon in the speech is the fact that the price of tuition for post-secondary education is higher than ever. This is a big problem. But as we’ve pointed out in many posts on this site (here and here, just to give two examples), the solution isn’t to subsidize tuition to expensive colleges through scholarships or loans. If we do that, all we’re doing once again is charging education, not changing it. We haven’t made the system any less expensive; someone is still paying for it.

Industries only become more affordable through disruption. We need teaching universities and online universities to take more market share with a more affordable model to bless the lives of many more people. Subsidies will only delay the transformation to models like Andrew Jackson University and StraighterLine.

Fred Barnes interviewed Jeb Bush for the Wall Street Journal’s weekend interview, and in the article Barnes reveals what Florida’s former governor is reading at the moment on his Amazon Kindle—Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns.

This is yet again another flattering moment for us, but the whole interview is worth reading. As Barnes says it, “[Bush is] an unorthodox Republican who latches onto reform ideas wherever he finds them.”

Bush makes some thought-provoking points throughout the piece. He says rightly that education should move beyond Carnegie units to a mastery-based system. This is one of the most promising things online learning can bring, and it is something that should be embedded in policy for all online learning programs. He also recognizes the potential of online learning to move us toward a customized, student-centric system:

“‘It’s not based on seat time,’ he says. ‘It’s whether you accomplished the task. Now we’re like GM in its heyday of mass production. We don’t have a flourishing education system that’s customized. There’s a whole world out there that didn’t exist 10 years ago, which is online learning. We have the ability today to customize learning so we don’t cast young people aside.’”

Bush also praises Meg Whitman later in the piece as someone who would be a good governor because, among other things, she “lived and managed and led through the disruptive changes that are going on in our lives.”

As the governor during the initial growth of the biggest disruptive innovation in education policy in the form of the Florida Virtual School, he is probably in one of the better positions to know.

An interesting question in higher education is could a series of established colleges ever lose enough volume of students to go out of business? Tamar Lewin talked about the phenomenon in a New York Times article that we blogged about last week.

Turns out, we don’t really need to debate the question. It’s happened.

According to the MSNBC article, “Could independent colleges be the next bubble?”,  157-year old Antioch College decided to “suspend operations” at its flagship campus this past June. The article says, “Home builders and banks aren’t the only ones facing economic headwinds these days. America’s undercapitalized independent colleges are staring at a spiral of major threats to solvency as penny-pinching students and parents consider cheaper options, and funding sources dry up. As a result, they could be the next bubble industry to pop.”

When we cite disruptions in the higher education space—such as teaching universities, community colleges, and online universities—a big question is do they have the room to continue to move up-market given the aid in donations and federal dollars established universities tend to receive? It’s a good question. Federal loans and grants, for example, allow families and students to avoid making quality-cost tradeoff decisions they would make ordinarily in a normal marketplace. This has the effect of propping up high-cost higher education institutions that otherwise might lose market share—and stifling lower-cost options.

This example suggests, however, that disruptive players can ultimately overcome this market distortion. Interestingly, just as we suspect that budget crunches in the years ahead will accelerate the adoption of online learning in high schools, so too will these same pressures likely exert a similar effect in the higher education market.

In my last post, I wrote about an article by Tamar Lewin of the New York Times that talked about the escalating costs of traditional universities in the U.S.

Lewin has written a string of these articles. Another one, also highlighting the escalating costs of traditional universities in the U.S., points to a different solution from my previous post. This one, “Going Off to College for Less (Passport Required)” shows students making a rational tradeoff for a different experience for less money—by going overseas.

In a third article, Lewin writes about how many private colleges are worrying about a dip in enrollment. For those universities whose budgets are driven by tuition dollars, this will have a significant negative impact. As of December, according to a survey by the National Association of Independent Colleges and Universities, roughly two-thirds of 371 private institutions said “they were greatly concerned about preventing a decline in enrollment.”

At a time of tightening budgets, applications to the more affordable state universities are higher, but states like California and Florida are having to cap enrollment numbers. I wrote about this earlier here.

A key takeaway? Many existing institutions will be hurt, but in the long run, let disruption take its course so we can find better, lower cost arrangements for these students.

A fourth article by Lewin is equally fascinating—and provides a possible hint of how this could unfold. Titled Israeli Entrepreneur Plans a Free Global University That Will Be Online Only, it talks about Shai Reshef’s plans to start the University of the People and to leverage open courses and social networking to offer a robust online university experience. I’ve speculated about this before (here for example)–saying open courses weren’t by themselves disruptive as offered by MIT and Yale, for example, but if an entrepreneur came along and patched them together into a degree with some other services around it, they could be quite an enabler for a monumental disruption. What do you think about this?

For those from the College Board and the like who want to see 55 percent of Americans attaining postsecondary credentials and realize affordability is important (see the report Coming to Our Senses), note that subsidies from third parties likely won’t help us in the long term because they won’t address the fundamental cost structures at play; allowing disruption to work and having lower cost options move in will.

A report from the National Center for Public Policy and Higher Education highlights the spiraling cost increases of traditional four-year universities compared to the rise in family incomes over the period from 1982 to 2007. The New York Times writes about the report in the article, “College May Become Unaffordable for Most in U.S.”

The authors of the report are understandably concerned that if the cost of college keeps rising at this pace even when accounting for financial aid, it will become unaffordable for most Americans, which will hurt them and the overall country severely.

“If we go on this way for another 25 years, we won’t have an affordable system of higher education,” the reporter quotes Patrick M. Callan, president of the center, a nonpartisan organization that promotes access to higher education, as saying.

The natural implication is that we need more subsidies so people can afford these traditional schools and presumably pressure to get colleges to beat down these costs.

I’ve written about this on this blog before (see this post for example). History shows that trying to make a product or service affordable by beating down on high-cost competitors won’t do the trick. In essence, this was the philosophy the Department of Justice took when it broke up the IBM monopoly in the 1970s. It turns out though that costs for computing fell not when a high-cost organization was told to reduce costs and become more competitive, but instead when disruptive competitors—most notably in the form of personal computer companies—entered the market. Disruption brings affordability.

There is a much sounder strategy in trying to reduce costs of higher education. Rather than giving more subsidies to prop up traditional universities, allow students and families to make more rational tradeoffs in their education. Allow them to choose disruptive options for higher education—like teaching universities, community colleges, and online universities instead of the traditional research universities—that both meet their specific needs and are more affordable. If we allow for this process to occur, despite the continuing cost trajectories of our leading universities, education won’t be unaffordable in 25 years.

The Southern Regional Education Board (SREB) and its director for education technology, Bill Thomas, have issued three reports in the last couple of months that are must reads for those interested in the ongoing disruptive innovation of online learning.

The first one, titled “Making the Critical Transition to Stable Funding for Virtual Schools,” is a vital one for policymakers in particular to read. The report contains several insights about how state leaders can and should move beyond year-to-year appropriations for state schools that cap enrollments at arbitrary numbers to a sustainable and responsive funding model. Read it here.

The second one asks an audience that too few studies talk to in this field. Yes, that’s right, it <gasp> actually asks students what they think. Particularly as we think about the potential to use online learning to move toward a student-centric learning environment, the report “Do Online Courses Work for Middle Grades and High School Students? Online Students Have Their Say” is a good one to read.

For online courses to be effective, they need good, high-quality teachers. SREB addresses this question in the last of its three reports, titled “Online Teachers: What Can SREB States Do to Ensure Competence and Quality?” Again, for policymakers interested in making sure a pipeline exists for high quality teachers in this environment, this report is a must read.

And after having read them, we’d love to know what you think. Please write a response and give us your thoughts. It would be great to have a dialogue here about all of them.

One of the core findings from our studies of disruptive innovation is that in order for an incumbent to catch a disruption, an organization often must set up an autonomous unit complete with its own business model – its own resources, processes, priorities, and profit/revenue formula – with the mission to seize a nascent opportunity, grow, and be unencumbered by the parent organization. It’s not at all an easy thing to do; we don’t see it happen that often.

As disruption increasingly comes to higher education, on the surface anyway Tiffin University appears to be taking a page from the Innovator’s Solution as it sets up an autonomous online two-year degree program for an associate of arts degree in general studies. They’ve even branded it differently from the parent: Ivy Bridge College.

You can read about it on this Inside Higher Ed article. The online degree program will fill a gap in offerings in the space and target many who are overshot by existing offerings or are nonconsumers, including students who can’t afford a four-year college, those who would have to commute or leave a job to relocate or something to attend college, students who aren’t confident enough or ready to go to college yet, students with disabilities, and those who were home-schooled who might prefer to study at home initially.

They are partnering with some interesting players like InsideTrack, who provide student coaching services. The idea of the degree is to feed the students into bachelor programs at other institutions ultimately.

Are there other examples of this? This seems to be quite different from the MIT OpenCourseWare decision and Yale posting its lectures to iTunesU, for example.

Even as concerns mount that too many of our nation’s children are unprepared for and not attending college, thousands of students in California are clamoring each year for such a college experience in the state’s university system.

Unfortunately for them, the California State University system announced it will cut back its total enrollment by about 10,000 students next fall. That is 10,000 students to whom California is now saying in essence, “Maybe college isn’t that important for you after all.” Talk about a mixed message.

Increasingly, policymakers, foundations, academics, and educators are lining up behind the goal of students not just graduating from high school, but also graduating ready for a postsecondary education. The Gates Foundation places its muscle squarely behind this goal. Academics point out that now, more than ever before, a postsecondary education is necessary to command a reasonable wage in the workforce. And educators like Larry Rosenstock, CEO of High Tech High in San Diego, speak persuasively about the need for students to graduate well prepared for college.

Judging from attendance in the full-time and part-time programs at California State University campuses, many students are getting the message. Roughly 460,000 students are enrolled this year.  But if this number is capped at 450,000 for next year, realization of the college-ready goal will be an empty pledge.

Chancellor Charles Reed said the need to scale back enrollment was caused because of a strain on the university’s physical plant. Thanks to overcrowding and under-funding, he said, there are simply not enough classrooms and other resources available to provide students with a quality education that can promise them an on-time graduation (“CSU to turn away 10,000 students,” San Francisco Chronicle, 11/18/2008).

Although the State University’s predicament and actions are perhaps understandable given the economy and falling endowment, there is a better solution for California’s children: attend college online.  Embracing online education for many students addresses the challenges the system faces, both financially and in terms of physical space.

Online learning is an affordable option. Tuition at Capella University, an online, accredited university, for example, runs to $930 for a 3-credit Bachelor of Science course. That figure does not take into account any financial aid or scholarship grants. At UMassOnline, an online division of the University of Massachusetts, undergraduate courses range from $425 to $1,200 in cost regardless of a student’s residency. This often works out to be less costly than enrolling in and taking a full-time program at one of the University’s physical campuses.

North Carolina has come up with a different creative option. Its Learn and Earn Online program allows students to take college courses online when they are in high school and earn an associate degree or up to two years of college credits.

Online learning at the postsecondary level is booming as students find it to be a great option for their needs. The University of Phoenix is perhaps the best-known disruptor in the space. Its online enrollment has grown rapidly. According to the Babson Survey Research Group, the percentage of students at U.S. postsecondary institutions taking at least one online course doubled between 2002 and 2006. The rapid growth has continued as 3.9 million students took at least one online course during the fall 2007 term.

With California facing an increasingly gloomy fiscal future, it is time to figure out innovative ways to do more with less. The concerns of California’s children must be paramount as we consider different options. There are many opportunities that the introduction of online learning offers—not only for those being turned away from the system but also for those admitted currently to the CSU system. Online learning streamlines the delivery of learning, which can increase its quality and consistency. It is affordable. And it allows for customization for an individual’s needs.

Don’t slam the door in these would-be students’ faces. Open up a learning pathway for them that has no doors at all.