Unlike Clayton Christensen who writes about innovative companies as a Professor of Business Administration at Harvard Business School (thus making his transition to writing about innovative universities less surprising), DeMillo’s background is in engineering and computer science.  His observations, however, stem from his background as a professor at a traditional “brick and mortar” school.  From his position inside the hallowed halls of academia, he notes that the institutions in the middle, those between the elite institutions (top 75) and institutions that admit everyone, are the ones that are in trouble with a value proposition squeeze coming from above (elite) as well as below (business model to serve anyone or everyone at a lower price point).  DeMillo stresses that modern universities are businesses (contrary to some of the myopic ideologues who insist that non-profit institutions don’t have a business model) and are competitive organizations run by smart people.  Similar to Christensen, DeMillo argues that the class-oriented society and culture of higher education creates a faculty-centered model that is difficult to break out of for institutions undergoing competition for enrolled students.  (For a review of Christensen’s book, Disrupting Class: How Disruptive Innovation Will Change the Way to World Learns, see my August 2008 blog article.  To see my review of Christensen’s book, The Innovative University: Changing the DNA of Higher Education from the Inside Out, see my August 2011 blog article.)

DeMillo states that in any market, the winners are those with competitive brands, price, or value.  Brand is difficult to build for all but the elite colleges and universities, price continues to increase for almost all institutions and in most cases is becoming uncompetitive, and value is a concept seldom understood by the faculty at most institutions.  Because most college presidents are promoted from the ranks of academics, they are ill-equipped to understand the importance of strategic planning and understanding competitive threats from business disruptors like creative proprietary institutions.

DeMillo states that his book is “ultimately an essay about value.”  Most of the world does not understand the traditional American business model for higher education that is faculty-centered and resource inefficient, not to mention costly.  If American universities want to “survive” (DeMillo’s choice of words) over the next generation, they must apply the following three lessons of our global economy to their operations:

1. Focus on value and deliver a degree that is priced reasonably and that is of reasonable quality.
2. Focus on costs by controlling them in ways that are unthinkable by faculty-centric institutions to include:
a. Deskilling (greater use of adjuncts)
b. Better use of physical plants
c. Better use of materials
3. Establish an individual institutional reputation versus continuing to chase the elite institutions at the top.

DeMillo takes the time to review and report on activities of proprietary or for-profit institutions that he credits for being student-centered because students provide their main source of income.  DeMillo states that enrollment growth is a good thing at a for-profit in that it increases revenues and profits and allows the institution to reinvest those profits in additional services and programs.  Traditional institutions determine their charges from a fixed cost model designed to measure the cost of hours of instruction in the classroom with little consideration for the appropriateness of the charge or the specific relevance of matching labor delivered to competitive market costs.  Online programs run by proprietary institutions price based on services consumed or delivered and unencumbered by a high fixed cost structure; because of this, they are able to provide a competitively priced product with a value recognized by the students they serve.

Institutions in the middle are subsidized by public funds, sponsored research, endowments, or church support.  Tuition fluctuations at these institutions create revenue gaps that have to be covered by increases in one or more of the relevant subsidies.  Those subsidies are shrinking.  DeMillo states that it is not clear how much disruption institutions in the middle can tolerate, but for many, resources are stretched and stressed beyond the breaking point.  DeMillo argues that all institutions in the middle have to pay attention to price sensitive customers.

DeMillo spends some time talking about non-profit and proprietary institutions that are process centered and provides examples about efficiencies that lower the production cost for those institutions.  Another topic that he spends a little time discussing is “hacking degrees.”  Hacking is a topic that continues to be discussed by many writers including Anya Kamenentz, author of DIY U: Edupunks, Edupreneurs, and the Coming Transformation of Higher Education.  It is a controversial topic for those focused on traditional education but more strategic for those focused on the capabilities of technology and the learning that the internet and employers provide many adults.  In my opinion, it is a topic that is not covered enough in this book given its potential for impact on the higher education sector.

Like any good researcher, DeMillo provides recommendations for institutions in the middle to “survive” and thrive in the 21st century.  Broadly speaking, institutions should define their value and become “architects” for new business models.  As it applies to the definition of value, institutions should forget about who is above them, focus on what differentiates them, establish their own brand, not romanticize their weaknesses, and be open.  From an architecture perspective, institutions should balance faculty-centrism and student-centrism, use technology, cut costs in half, focus on their own measures of success, and adopt the New Wisconsin idea which is to be truthful to the community that you serve.  His recommendations are sound and grounded.  Because of the entrenched culture at many of the institutions in the middle, I doubt that few will be able to follow DeMillo’s recommended path to improving their performance and financial stability.  Those that are able to follow the path, should see improvements in reputation, enrollments, and be able to distinguish themselves from their competition.

The Economist presents data that may back the case that it’s not just the economy.  In examining data accumulated in their annual ranking of the top 100 MBA programs, they note that in 2010, the average cost of an MBA for the 85 schools outside of the top 15 was $81,911 while the average starting salary for the graduates of those schools was $81,178.  Five years earlier, the two year cost for the same 85 schools was $60,247 while the starting salary average was $78,442.  The attached graph shows that the disparity was greater ten years ago when the average starting salary was over $80,000 and the average cost was slightly less than $50,000.  The comparison could hardly be more dramatic; increasing costs of tuition have cut the noticeable advantage of attending a residential MBA program outside of the top 15. 

Elite schools like Harvard still have an advantage according to The Economist’s survey data.  Additionally, the article mentions a recent event at Harvard hosted by a large consulting firm where a member of that firm’s senior management noted while speaking to the faculty that the most valuable player on the Harvard Business School team was the Director of Admissions, a not so subtle reference to the elite students recruited to the school and subsequently recruited by that consulting firm.

While the purpose of the article is to compare costs of high end MBA programs, the comparison can easily be made across the entire continuum of accredited business programs.  The Association of Advance Collegiate Schools of Business (AACSB), one of the accrediting bodies for U.S. business schools, estimates that there are 13,670 institutions world wide that offer a business degree.  Being able to distinguish your program and your graduates from the masses is more than likely the only way that you can command a premier price going forward.  In more recent commentaries on the general state of global higher education, books like The Global Auction: The Broken Promises of Education, Jobs, and Incomes and The Innovative University: Changing the DNA of Higher Education from the Inside Out also stress the need for differentiation, tuition reductions, or both in order for institutions to maintain their competitive edge.  My theory is that regardless of your business program’s relative ranking, competing on price and product differentiation is the only safe way to ensure long term success.

In the September issue of Fast Company Magazine, Anya Kamenetz writes an interesting article entitled “How Web-Savvy Edupunks are Transforming American Higher Education.”  She begins the article by discussing how the internet and various applications or sites such as Google, YouTube Edu, iTunesU, Wikipedia, and Facebook have changed the way all of us share information.

Yet while colleges like MIT have placed all of their coursework online for free, an MIT degree costs about $189,000.  She cites Jim Groom, an “instructional technologist” at the University of Mary Washington as stating, “Colleges have become outrageously expensive, yet there remains a general refusal to acknowledge the implications of new technologies.”  According to Kamenetz, Groom coined the term “edupunk” to describe the high-tech do-it-yourself education.

Open CourseWare has grown tremendously, but students who use it don’t earn degrees.  Kamenetz profiles David Wiley, Associate Professor of Instructional Psychology and Technology at Brigham Young University, who has cofounded a free, not-for-profit, online public charter high school in Utah called Open High School of Utah that uses open courseware.  Wiley is also an officer of Flat World Knowledge that commissions professors to write open-source textbooks that are free online.

The article also mentions Peer2Peer University founded by Neeru Paharia, a PhD student at Harvard Business School.  Peer2Peer’s website is used to convene and schedule classes, meetings, and tutoring sessions.  Its founders are trying to offer something priced somewhere between free and cheap.  Kamenetz compares it to the University of the People, founded by Shai Reshef, which offers an online business degree for a total of approximately $4,000.  The University of the People is unaccredited at this point in time.

Kamenetz discusses the growing movement toward open-education, both from a foundation perspective (Hewlett Foundation initially) and also from new sources of funding like the federal government and entrepreneurs.  She concludes by stating that we’ve gone from a scarcity of knowledge to unimaginable abundance and that new technologies will evolve new communities of scholars.

I enjoyed reading the article and believe that Kamenetz is on the right track.  The availability of free information could be a dislodging event in higher education.  We’ll see if some of the startups mentioned in Kamenetz’s article are the survivors or just the dislodgers.

Chronicle Research Services released the first of a three part report last month that describes the characteristics they predict that we will see in college graduates of the class of 2020.  The fundamental themes of the report are that as the class of 2020 (today’s first graders) enter their college years, their demands on colleges and universities will be drastically different from what students have previously expected, forcing higher educational institutions to reconsider their curriculums, formats, and basic characteristics.

Even today’s youngest students have integrated technologies into their everyday lives.  The authors, Martin Van Der Werf and Grant Sabatier, note that approximately 50 percent of middle and high school students surveyed indicated that they would use mobile devices and online technologies to communicate with classmates outside of the classroom, conduct research for projects, and engage in proactive learning strategies if provided the opportunity.  This gives credence to the notion that these students feel hindered by school systems that have not yet embraced such technologies as supplemental learning and teaching tools.

As colleges and universities struggle under burdensome economic conditions, they will be forced to find new ways of attracting students.  In addition, if these institutions are to increase enrollments, middle and high schools must address the rising drop-out rates among students at an early age.  Citing the report, “Diplomas Count: School to College: Can State P-16 Councils Ease the Transition?” the authors note that “’nearly 1.23 million members of the public high-school class of 2008 will fail to graduate with a diploma.  That amounts to a loss of 6,829 students from the U.S. graduation pipeline per day.’”  In addition to addressing the issues associated with increasing high school dropout rates, colleges and universities will be faced with the task of educating students and their parents about the means by which students can achieve college educations, both academically and financially.

The demographic makeup of the student population in the United States is continuing to change in dramatic ways.  The growing number of minority students enrolling in public middle and high schools in the United States means that colleges and universities must find more creative and compelling ways of drawing them to their institutions.  The report notes that income differences between the various minority groups will impact the college choices of students from those groups. 

Interestingly, the report contends that many students are inadequately prepared for college curriculums.  One solution to this particular problem that the report provides is developing a five year curriculum in colleges and universities with the first year being remedial and providing students with the skills to be able to successfully complete subsequent college courses.  This seems somewhat contradictory; if students are forced by tough economic times to strongly consider college costs in making their choices, adding an additional year would mean adding additional costs.  Ideally, our college schools of education should work more with local K-12 systems to provide guidance on what works best to prepare students for college while in high school.

Our definition of traditional college students is that they fall in the 18 to 24-year-old age range.  The authors note that is changing and institutions of higher education must develop ways of attracting older students if they are to succeed in the decades to come.  Van Der Werf and Sabatier write that “in 2000, 60 percent of college students were ages 18 to 24, and 21.1 percent were ages 25 to 34.  In 2016, 58.8 percent will be 18 to 24, and 24 percent will be 25 to 34.” 

The authors have provided substantial support for their claim that for-profit educational institutions are leading the charge in revamping the world of higher education to suit the needs of today’s students.  For example, they contend that “computers will be even more central to the educations of younger students now rising through elementary and high schools.”  They cite the findings of the “Speak Up 2008” report published by Project Tomorrow which conclude that today’s K-12 students are “’in fact a ‘Digital Advance Team’ illuminating the path for how to leverage emerging technologies effectively for teaching and learning.’”  According to the report, for-profit institutions are far more likely to provide distance education courses to students, allowing flexibility for students to pursue careers, families, and other opportunities while continuing their educations.  Thanks to this flexibility, for-profit institutions are able to attract students older than the traditional college student, benefitting from the fact that more adults are returning to college to supplement their skills in order to advance their careers in an increasingly competitive job market. 

Data cited in the report indicates that between 2000 and 2007, “enrollment in distance-education courses nearly quadrupled, from 3,077,000 to 12,153,000.”  Arguably more “nimble” than their non-profit counterparts, for-profit institutions have managed to develop a market niche in the higher education industry that has allowed for their overwhelming growth in enrollments.  Whereas more traditional institutions struggle to integrate new and existing technologies in the classroom, technologies that students are already and will increasingly expect and demand, the for-profit educational sector has responded more quickly with the implementation of innovative and modern technology in the classroom.  Citing a 2008 paper published by Harvard Business School professor (and, author of Disrupting Class), Clayton M. Christensen, the report states that “by 2019 half of courses in Grades 9 to 12 will be delivered online.” 

K-12 students in many states are already enjoying the benefits afforded by online education.  The Florida Virtual School, for example, enrolled some 63,000 Florida students for the 2007-08 school year.  According to Van Der Werf and Sabatier, “all 16 states represented by the Southern Regional Education Board now have a virtual public school at some stage of development.” 

Undoubtedly, the most elite schools in America will continue to attract significant numbers of applicants; they have successfully developed a brand and reputation that will allow them to weather the current financial storm.  For-profit colleges will also remain strong in the face of economic uncertainty and will surely gain in popularity.  Other colleges and universities, however, particularly those without well-known names and brand recognition, will struggle to attract students who will continue to make demands for innovative uses of technologies and flexibility in learning formats as they make their choices in which colleges to attend. 

While some of these publications are available to the public, the report was a worthwhile purchase in that it provided greater focus to the issue of what to do to prepare for future college students.  Indeed, as described in a May 31 article in The Boston Globe, the “traditional” college path is no longer the norm.  Four-year graduation rates are mythical, according to Neil Swidley, author of the article.  At the most elite private schools, four-year degree completion rates remain steady.  At other schools, however, the four-year degree is quickly turning into six years or even longer.  According to Swidley’s article, the number of adults who took the “’traditional’” path through college, receiving their bachelors degrees within four years, is less than ten percent, based on data from 2005.  In short, the definition of “traditional” is changing both in the way we characterize students and in the path we expect them to take to earning their degrees.  If higher education is to meet President Obama’s goal of bringing America back to its preeminent position as a global leader in college graduation rates, the industry as a whole must realize that fact.

I don’t know if the omnipresent nature of the media has drawn more attention to ethical lapses of our political, corporate, governmental, and sports figures or if the frequency has, as I suspect, increased.  However, a recent article in the New York Times spurred me to write this piece.  Written by Leslie Wayne, the article mentions that nearly 20 percent of this year’s graduating MBA class at the Harvard Business School have signed a voluntary student oath that pledges to “serve the greater good” and to “act responsibly and ethically.”  MBA programs have not stopped teaching ethics.  In fact, Harvard, Wharton, and Columbia have several ethics classes and Wharton and Columbia have ethics centers.  I think it is good that these students created this pledge.   However, ethics is not just business ethics.  Ethics is ethics.   Good ethics is good for business.  Good ethics should be good for all of our leaders and followers, no matter what their chosen field.

I clicked on the link and found an interesting post where Dr. Strong shares his teaching philosophy.  He originally wrote the piece for his application for a tenure-track position at the university where he works as a full-time visiting professor.  You can read his post yourself or my synopsis below.  Either way, I think it is worth sharing.

Dr. Strong has a unique and varied teaching background.  His first teaching opportunities were with the Army where the teaching philosophy focused on the notion that only three teaching points could be absorbed and retained by students in an hour-long class.  From the Army, Dr. Strong went to INSEAD in Fontainebleau, France which uses a teaching style similar to that found at the Harvard Business School:  individual instructors are required to undertake extensive preparation, often in conjunction with other professors teaching the same or similar classes.  His time at Tulane, as he explains, brought a very different teaching experience.  Dr. Strong writes, “…I spent 34 years at Tulane, a school whose culture held that the instructor was – once the classroom doors were closed – answerable to no one for what went on in the classroom.”  From these experiences, Dr. Strong’s teaching philosophy has settled into a somewhat eclectic and, by his own admission, ever-evolving one.

Dr. Strong notes that “students are the raw material that we work with and making sure that the ‘student can learn’ means understanding the capabilities and the backgrounds of the students in a course.”  He blames the cliché of dwindling student attention spans for convincing students over the last 15 years that they do in fact have shorter attention spans; according to Dr. Strong, this cliché has provided a convenient excuse for students who perhaps really only lack motivation or direction in their academic pursuits.  This point was of particular interest to me considering the online nature of APUS degrees. 

I would argue that online courses require an added level of motivation and dedication from the student.  Since there are no physical classrooms or face-to-face interactions with professors and other students, APUS students must be that much more mindful of their time management and information retention.  Perhaps online courses even provide an advantage for those who feel that they do in fact have a dwindling attention span: if an APUS student finds that they are losing focus on a reading assignment or online lecture, for example, he or she can simply put down the assignment, refocus and continue at his or her own pace.  I recently viewed a news report about Blackberry users and the issue regarding attention span interruptions.  The reporter interviewed researchers who stated that the interruptions caused by messages being received to the Blackberry are disruptive and distracting.  At the same time, the reporter quoted the researchers as stating that eventually, the Blackberry user becomes acclimated to the disruptions and learns to work through them.  Based on this research, I am not sure that I agree with Ed Strong that student attention rates are dwindling as much as I believe that there are many more things to keep them distracted inside the classroom.  However, I believe that the combination of a motivated student with a motivated instructor will lead to a satisfactory outcome every time.

Dr. Strong also discusses his approach to identifying the most relevant and worthwhile course information, a point I also found quite interesting.  According to his post, over the past couple of decades, textbooks have taken on an all-inclusive nature that often leaves them overflowing with information, much of which is not directly relevant to a particular professor’s course content or objective.  With this in mind, Dr. Strong has developed his own supplemental course materials that focus on the topics he finds most relevant.  This obviously puts an additional burden on the professor who must glean the most worthwhile pieces of content while being mindful of the (actual or perceived) shortened attention spans of today’s students.  Given that the world’s intellectual and printed material is doubling every year to year and a half, this seems like a better practice than relying on a textbook that may be outdated shortly after it has been published.

The section of Dr. Strong’s statement on his teaching philosophy that is most interesting to me is his discussion of grading systems and why he feels that they are largely irrelevant. Dr. Strong explains that in 1971 while at INSEAD, he took part in a comprehensive review of the school’s grading rubric.  Dr. Strong writes, “As a result of that experience, I became and remain an advocate of classifying people into three groups: The upper sixth [who will become candidates for honors], the middle two-thirds [who are in no danger of failing], and the lower sixth [who become candidates for probation or termination].”  Based on such a rubric, specific grades (A, B, etc.) do seem largely irrelevant.  He does concede, however, that grades and graded exercises are significant motivators for students.  Perhaps for this reason alone, it is worthwhile to maintain a traditional grading system.  When one considers the issues of dwindling (whether truly or simply perceived) attention span and overwhelming levels of information available in textbooks and various other sources, a traditional grading system seems to be somewhat necessary.

The final section of Dr. Strong’s statement discusses the evolution of his teaching philosophy vis-à-vis the rapidly accelerating development of new technologies which can be utilized in (and, often instead of) the classroom.  He notes that he has been integrating the use of technologies in his classrooms for some time now and expresses some disappointment that he will likely miss the exciting opportunities that technological advances are sure to bring to education in the coming decades.  Technology in the classroom is the cornerstone of the APUS model and I applaud Dr. Strong for his use of such technologies in his brick and mortar classroom.  There can be little doubt that he is correct that for all the advances we’ve seen in recent decades, technological advances will continue at an accelerating pace.  I believe that students and the higher education community as a whole will surely benefit from such advances even if they do require us to tweak our teaching philosophies a bit.  That said, if Ed wants to tape a few of his lectures, I would be glad to post them on iTunes University.  Technology may enable better learning for distance learning programs as well as traditional programs, but I would rather combine those technologies with a proven professor like Ed anytime.  Thanks for the memories and the lesson, Ed!