Published on 2013/06/20

The Flying Carpet that Caused Higher Education's Commoditization

The Flying Carpet that Caused Commoditization in Higher Education
While some institutions chose to ride the flying carpet of government subsidies following the economic recession, others used the time to begin developing new and innovative programs to buoy them in the changing marketplace. Now that the rug has been pulled out, the institutions that committed to change early are the frontrunners to succeed in the commoditized marketplace.

For more than 200 years, public higher education institutions have been funded through a combination of government subsidies and student tuition dollars. For the majority of those 200 years, this shared approach to funding created a viable and affordable means for students to attain postsecondary education. However, recent changes to this funding structure have caused a ripple effect with implications reaching far past affordability and leading to the commoditization of higher education.

The ripple can be traced back to the 2009 recession that slashed state government budgets — although the effects were not felt right away:

  • Between 2009 and 2010, state funding for higher education decreased by 1.1 percent
  • Between 2010 and 2011, state funding decreased a further 0.7 percent
  • Most recently, 2013 state funding is down 28 percent from 2008 pre-recession levels.

This incongruence can be explained by a $9 billion federal stimulus package earmarked for state spending on higher education that ran out at the end of 2011. Think of the stimulus as a flying carpet that was pulled out from underneath colleges and universities mid-flight.

Throughout 2009, 2010 and even 2011, universities were able to continue on with business as usual, buoyed by the federal stimulus package. But once it dried up, the other shoe dropped. Neither a 12-percent increase in enrollment nor a 27-percent increase in tuition since the recession began has made up for the government funding shortfall. Instead, institutions have been forced to quickly balance their books and make cuts wherever possible. In doing so, many institutions have cut unnecessary or fringe programs and projects.

We all know that change, especially difficult change such as programming cuts, takes time. So what immediately followed at the most deeply affected schools was stagnation; schools trying to do more with less and not getting very far. As a result, many of the programs that were cut were innovative and unique. Similarly, many programs that were just getting off the ground were put back on the shelves. As many schools attempted to manage their change from within, their innovative efforts that could have made a difference were too little, too late.

As a result of this happening on a widespread basis, a highly homogenous higher education system resulted. This is one where most institutions across the nation offer the same standard programs and courses, with very little left to set any institution apart. The various forces on higher education over the past few years have accelerated commoditization — which occurs when there is no discernible difference between providers of a good or service — unnecessarily.

Now, it is important to note that not every institution rode the flying carpet. Some institutions course-corrected early, made the necessary investments in innovative programs, systems and delivery mechanisms and are now finding themselves in a lucrative position, somewhat isolated from this commoditizing effect.

So, is it too late? Can the forces of commoditization be reversed? No, but the solution comes through reimagining higher education. It will require strong leadership with the willingness to see the future for what it will become and the courage to make difficult changes early, while adopting new ways of doing business. Is it easy? No. Is it necessary? Most definitely.

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Readers Comments

Chuck Schwartz 2013/06/20 at 9:48 am

This “magic carpet ride” is what has been driving higher education down for the last 20 years – it’s just become evident in the last 3. Rather than focusing on innovation and creating the best possible product for students (programs that drive demand), institutions sat back and allowed government money to keep them flying.

Now the free ride is over, and while the most innovative institutions can keep flying on a carpet of their own design, the rest are walking. Sounds like higher education is starting to look like the business world… for once!

Ian Richardson 2013/06/20 at 11:46 am

Great article that accurately reflects the current climate of higher education. As the forward-thinking institutions pull further ahead of the pack, I worry that other institutions will never fully recover.

Kristine Harris 2013/06/20 at 1:10 pm

It’s unfortunate that many institutions are now finding themselves in the situation described. However, ever an optimist, may I venture that perhaps this is a blessing in disguise. All is not lost. Perhaps those projects now back on the shelves were meant to be there in the first place. Having institutions now tighten their belts and seriously re-evaluate what they will and won’t deliver can help them save costs in the long run, and also improve their existing programming.

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