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Business Officer Magazine

Free to Be Innovative

What's it take to craft a creative future for higher education? Clayton Christensen, coauthor of The Innovative University, claims that dismantling the org chart, applying a new teaching architecture, and thinking up other out-of-the-silo ideas are part of the answer.

By Margaret F. Plympton

*"A disruptive innovation transforms something that is complicated and expensive into something that is affordable and simple," said Clayton Christensen, speaking to the primary representatives at the NACUBO 2011 Annual Meeting last July in Tampa.

Christensen coined the term disruptive innovation to describe a phenomenon he observed in the business world. According to this theory, an inexpensive and easy-to-use product or service appearing at the low end of the market is ignored by traditional providers, but eventually, after rapid improvements, moves up-market to become a threat to them. Online learning, says Christensen, is just such a phenomenon in higher education—and institutions must adapt or be overtaken by it.

Christensen, who is the Kim B. Clark Professor of Business Administration at the Harvard Business School, Cambridge, Massachusetts, is the bestselling author of five books on innovation and growth. His most recent book, The Innovative University: Changing the DNA of Higher Ed from the Inside Out (Jossey-Bass, 2011), coauthored with Henry J. Eyring, applies the concept of disruptive innovation to higher education.

"Seen through the lens of disruptive innovation theory, universities are at a critical crossroad," say Christensen and Eyring in the book. "They are both at great risk of competitive disruption and potentially poised for an innovation-fueled renaissance."

How, then, should institutions go about fostering the needed innovation? That needs to happen at the very core of an institution's "DNA," or fundamental organizational traits and tradition, say the book authors. Likely, that stuff of the college or university's life may need a bit of genetic reengineering.

"Today the traditional university's challenge is to change in ways that decrease its price premium and increase its contributions to students and society," Christensen and Eyring write. "Its expensive campus and professoriate must be deployed innovatively against the jobs of discovery, memory, and mentoring. It won't be enough to change superficially, such as by cutting budgets or working faculty harder. Tough choices about students, subjects, and scholarship must be made. These changes must be reflected in the university's institutional DNA and in its success measures."

As a follow-on, Business Officer surveyed a sampling of chief business officers—those who had heard Christensen's earlier presentation and subsequently had read The Innovative University—to see if they had specific questions for Christensen about how they could help lead their institutions in adapting to new organizational realities, both for academics and for efficient operations. The following conversation with Christensen is based on the questions submitted by members.

PLYMPTON: Drawing on the basic thesis of your book—the importance of "institutional DNA" in approaching these times of significant change—how can colleges and universities clarify just what that means for them?

*CHRISTENSEN: Organizational DNA is embedded in the organization charts and the processes by which decisions are made within a unit or department, as well as between units. Crucial to understanding what kinds of changes are possible, and what parts of each institution represent the many distinct portions of that DNA, is to view the organization as being made up of those component parts.

As an example, if you just pull up the hood of your car and study it for about an hour, you would be able to describe the org chart of Chevrolet that made that car. It is the organizational structure of Chevrolet that's caused the engine to be structured the way it is. That is, there is a department in the company responsible for every component. That's the causality, from the product back to the org chart that produced it. But, the reverse is also true—what kind of innovations an organization can create are determined by the org chart, as well.

Thus there is a mapping, one to one, between the organizational structure and the kinds of innovations that are possible at that institution. And the only way an organization can escape such causality is if you take the individuals involved out of their departments—their silos—and put them in another place, and make it explicit that they are not there as representatives of each department but because of each individual's expertise. And, we want them to rethink the fundamental structure of our teaching and learning.

PLYMPTON: Are there other ways educational institutions could adapt effectively that would not require pulling people out of their silos and putting them in a different place to be innovative? Or is it your sense that organizations must have that discipline in order to get truly innovative views of what a new future might include?

CHRISTENSEN: The evidence is just overwhelming that, if you want to have an innovation that fundamentally changes the architecture of how we teach, in the case of universities, it cannot be done from within the existing organization. In other words, when individuals are sitting in their own departments, what they conceive of is bounded by their departmental view. And, how they interact with each other is determined by that view.

Given current institutional structures, addressing an issue such as whether we truly should teach history independently of teaching statistics would be extremely difficult. But think what could be explored, imagine what could be accomplished if we really taught those two things together. Students would learn so much more about history if they knew where statistics come from, and vice versa. Or, can you really teach literature without studying history? No, you really can't.

That's what I mean by architectural change; it is the boundaries between departments that act as obstacles to innovation and change. Those departmental boundaries weren't brought down from on high, they were created by institutions—and can be changed by institutions as well.

PLYMPTON: In considering innovation in higher education, one might think that not-for-profit institutions could learn significantly from the for-profit sector. And yet, although there is much innovation in the for-profit sector in many aspects of the higher education business, the educational structure itself is actually quite like traditional campuses, in terms of how curriculum is built.

CHRISTENSEN: That's exactly right. When Dell entered the computer industry, its corporate architecture was exactly a replica of IBM's architecture. Not that Dell did not provide innovation to reduce its overhead in order to be able to sell a lower-priced product, but its production approach was not innovative—as opposed to Apple, which essentially just rethought what the entire production function of technology products should be.

In college, students are taught calculus independent of how it is used in "the real world." But, the minute students graduate, they are called upon to integrate all that they have been taught in order to create a synthesized set of tools to use. A university that could teach students how to do that integration—it would be the equivalent of Apple.

PLYMPTON: Are there any higher education institutions you know of that are trying to bring this level of innovation into the higher education space?

CHRISTENSEN: I know a fair amount about what Brigham Young University-Idaho has been experimenting with, since that's where my coauthor, Henry J. Eyring, is advancement vice president and former Harvard Business School dean, Kim Clark, is president.For example, they have tried to take advantage of scale opportunities. In the traditional higher education model, if you're a 2,000-student college and you double your enrollment, basically you have to replicate the fixed costs, so costs per student don't go down much. BYU-Idaho is saying, if we double our number of students, we can actually drive costs per student down a lot, if we do online learning and a lot of things like that.

This will matter more and more as institutions have to compete on price in order to enroll students, which in the future, they will have to do. The online universities—Phoenix, Laureate, Kaplan—are making tons of money now. And, that's because they've designed a delivery system that lets them distribute the costs over a huge number of enrollments, so the cost to them per student goes down significantly. Although they make a significant investment in the development of each course, they are then able to replicate it and sell it millions of times. Their scale curve is very steep indeed, and more traditional organizations are going to have to compete in that environment in the future.

PLYMPTON: As business officers, we are always thinking about ways of innovating within the full spectrum of university functions. We've been talking about innovation specifically around the teaching and learning areas, but are there ways to think creatively about other parts of the institutional portfolio of activities?

CHRISTENSEN: That's a great question. My view is that, in the past, it was really critical that research and teaching were all interdependently linked. As the world of knowledge has evolved, there is so much information available to be taught that you don't have to be in the business of creating knowledge in order to teach it.

Thus the reality is that the university that now integrates teaching with research will be able in the future to be cut into its component pieces. Teaching can exist independently of research, which will reduce the complexity and the resulting overhead costs of each type of institution, no longer having to integrate such different activities into a single entity.

In a hospital, there are three fundamentally different business models. There is research, which we call intuitive medicine. There is the process in which once you decide what the medical problem is, you fix it. And then, there is a network-type of business model, where patients teach each other. Because of the complexity of having three fundamentally different business models under the same roof, in a typical hospital about 85 percent of all cost is overhead and only 15 percent is actually helping the patients.

The very same thing exists in the university: three fundamentally different business models. These are generating knowledge; distributing knowledge; and the networking of students, alumni, and faculty together. All three of these business models have different resources, processes, and priorities, which makes it very difficult and costly to integrate operations together.

PLYMPTON: So, one might hypothesize that, in teasing those things apart so that a fewer number of institutions are really focusing on research and other places are just focusing on instruction, the costs in each case could go down?

CHRISTENSEN: Yes, and all of my work on innovation would suggest that the universities that end up focusing on just research will be much more productive than the "research university of today," as they will be able to focus just on the scholarly endeavor—a very different one from teaching.

PLYMPTON: Then the administrative piece, such as how we do the billing or how we support the students outside of the classroom, can't really be separate, because it would still include the overhead for either of the other models?

CHRISTENSEN: That's right. And, the administration becomes much simpler if the challenges the institution is facing are simpler.

Since we wrote the book, I've thought a lot more about another angle, and that is the advent of modularity versus interdependent architectures in building a college. Currently, in almost all of our traditional colleges there is an instructional architecture that is interdependent-meaning, you can't take this class yet, unless you take this prerequisite from that teacher and we only offer it in the fall, and so on. If that prerequisite requirement is changed, you've got to change lots of other things; that's an interdependent architecture. In such an interdependent world, the accreditation environment will require that you do everything in order to do anything.

In a modular world, the way the pieces fit together is standardized. So, if we want to start a new university, and we need to offer an introductory physics class, we could hire a physics professor ... or maybe, we should just ask our students to take it all online from Walter Lewin at MIT, who already has had 5 million students take his course. We'll say, that class is as good as we could ever offer from an instructor here, so we'll just accept that. The very acceptance of that class at the third tier starts to define the modularity, and that becomes the standard.

And as these individual building-block courses are put together, very quickly it's a university. And in that environment, then, accreditation occurs at the level of the course, not the entire university. Thus what used to be a very high barrier for new colleges—the need to provide a comprehensive four-year integrated educational experience in one setting—is gone and anybody can do it. And, that's going to change the world a lot.

PLYMPTON: And in that case, the "product" of that new university isn't actually the instruction, since that is being provided by other entities. The institutional differentiation really is the certification, the diploma.

CHRISTENSEN: The institution is now an assembler of components provided from a variety of other sources. As in the computer example, a Dell computer is no different from a Hewlett-Packard computer, because the components all came from the same sources. And, for universities, over time, each of their components will be the best in the world. It's truly exciting.

And for students in the future, why would one ever go to Current U—where they have a few good teachers, a bunch of average teachers, and a few really bad teachers—when there's the option of going to this New U, getting instruction from the best people in the world?

MARGARET F. "PEGGY" PLYMPTON is vice president for finance and administration at Lehigh University, Bethlehem, Pennsylvania.