Tuesday, July 9, 2013

Clayton Christensen: The Real Disruption for Higher Education

I found today, following a Tweet from my good friend Stephen Landry (@landryst), one of the more concise and powerful explanations from Clayton Christensen regarding the present challenges for higher education. These challenges have more to do with basic economic principles than disruptions posed by technologies and the Internet.

Historically there has never been competition on the basis of price. Colleges would compete by adding professors, enhancing programmes or building nicer facilities. So they competed by making institutions better. This initiates retribution [from other colleges] which make things better and better. And every step adds cost. So the cost of higher education has increased faster than healthcare. And there just isn't any more space in the budget to do this. So this year you are seeing, in a fixed cost environment, that colleges need to fill all their spaces. And there are fewer people applying. So this year for the first time there is real competition on price. For online universities, like Liverpool and the University of Phoenix, if prices drop by 60% they still make money. But for the vast majority of traditional universities, if the prices fall by 10% they are bankrupt; they have no wriggle room. So I'd be very surprised if in ten years we don't see hundreds of universities in bankruptcy

http://econ.st/15uesmN

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