Clay Christensen, Doubling Down

AUSTIN, Tex. -- Clayton Christensen is the father of the theory of "disruptive innovation," which posits that certain kinds of cheaper, usually inferior innovations change an industry not by serving current consumers better, but by greatly broadening the audience willing and able to consume that product or service.

After nearly two decades of growing prominence, which has made the Harvard Business School professor one of the best known management gurus in the world, the idea has had a rough couple of years in which scholars have challenged the theory's legitimacy in such prominent venues as The New Yorker and Sloan Review.

Christensen has applied his theory to higher education, most prominently in a 2011 book called The Innovative University and more explosively in predictions in a variety of venues several years ago that as many as half of American universities would close or go bankrupt within 10 to 15 years. The gist of his argument was that online education would undermine traditional institutions' business models to the point that many won't survive.

Higher education is facing significant financial and other pressures, and digital technology is enabling an alternative set of providers of postsecondary credentials, challenging traditional colleges and universities. But while the number of institutions closing and merging appears to be on the upswing, judging by recent developments, the pace would not seem rapid enough to support Christensen's prediction.

He is not, however, backing down.

In a speech Thursday at Salesforce.org's Higher Education Summit here, Christensen spoke at length about disruption theory broadly and discussed its application to colleges and universities. Higher education, he explained, was among the industries that "for several centuries was not disrupted," but "online learning has put a kink in that."

Technology itself is never the disruptor, Christensen said; a new business model is. But "it is technology that enables the new business model to coalesce, and that's what is happening in higher ed now.

Or at least it is in the segment of higher education that Christensen knows best: business schools.

A degree from Christensen's institution, Harvard Business School, costs nearly $400,000, he said, and that price point has made it such that the only people who can afford it are would-be McKinsey consultants, hedge fund managers and the like. "Our customers need so much money in opening salary to pay off their debt that we have overshot the salaries" that most companies can pay.

The number of prospective students taking the business school entrance exam is "going off the cliff," and the men and women who might have gone to business school are now turning to corporations' own "universities" and other alternative providers.

These alternative providers are doing what too few traditional institutions, as the legacy providers trying to protect their existing business models, are willing to do, Christensen said: "let the students learn when they're ready and how they want to learn, not when and how we're ready to teach them." 

Millions of would-be students are in the "periphery," people who "have never been able to get the education they need" -- a certification or other experience to succeed in the work force.

Another Model Needed

Like many legacy providers, colleges and universities are better off if they can "create a second business model over here that we manage independently of the first," Christensen said. But that is easier to say than do.

For "you guys" that do, though, Christensen said, "there is tremendous potential," and there should be "lots of excitement" -- if the colleges "don't force them to get what we want them to learn."

That language seemed designed to encourage rather than discourage the higher education administrators in the audience. But when a reporter asked Christensen during the question and answer period, "Do you still believe, as you've said before, that as many as half of colleges and universities will be bankrupt or close within a decade?," he answered with a stark "Yes."

He explained his thinking only briefly. At this point, online and hybrid learning account for nearly half of the classroom hours that colleges and universities are delivering, Christensen said. As that pace accelerates, many institutions will fail to keep up.

"If you're asking whether the providers get disrupted within a decade -- I might bet that it takes nine years rather than 10," he said, to a smattering of gasps among the nearly 1,500 attendees.

Christensen's only other statement on this topic acknowledged at least a smidge of doubt on his part, based on his primary insight into the topic being drawn from the world in which he works..

"Maybe I’m too scared about [the future of] Harvard Business School," he said, "to be rational about it."