Clouds, Bundles and Crisis, Oh My!Richard Katz | President, Richard N. Katz and Associates, Inc.
On March 10, 2015 Ryan Craig—Founding Managing Director of University Ventures—published College Disrupted: The Great Unbundling of Higher Education. In College Disrupted, Mr. Craig outlines the impending “shakeout” in higher education, an argument fortified by citing one survey’s findings that 38 percent of responding small private colleges and midsize state universities failed to meet their 2014-15 enrollment and net revenue budgets. He uses technology and contemporary business examples to argue that students will be better served at lower costs if the bundles of services that currently comprise “the college experience” were to be separated and then performed by specialized organizations.
Two days later (how’s that for internet speed?) University of California President Janet Napolitano’s opinion piece was published in the Washington Post, where she descried both Craig’s unbundling recommendation (as impractical, unworkable, or infeasible) and the “chorus of higher education doom” that Craig joins. She tells her readers, “Let’s be clear. Higher education in this country is not in crisis.”
What Are We To Think?
First, my friend and mentor Richard West (former executive vice chancellor of California State University) taught me that often “where one stands [on an issue] depends on where one sits” (in an organization, social class, etc.). This may account for some of the discord. Janet Napolitano presides over an institution with a future that likely includes rising enrollment demand, increasing selectivity and growing endowments. For elite institutions, the path ahead may offer occasional bumps, but overall, will provide a nice ride.
As Mel Brooks once said: “It’s good to be the King.”
Reading from the “chorus of doom” however, is sobering if you’re associated with one of the “other” 3,000 colleges and universities in the U.S. Whether it’s NACUBO’s tuition discounting data, our slippage in the OECD ranks on scores and graduation rates, or the dire warnings of bond raters like Moody’s, it’s safe to conclude that we’re in a pickle, if not an outright crisis.
Second, because of our quirky governance, complex accounting and accountability, and the noise cancelling effects of our endowments, colleges and universities rarely go supernova. Instead, we blink out. Our failures tend to resemble dry rot more than earthquake or fire. Quiet erosion insulates our trustees and administrators and keeps them from confronting possible existential threats. Tenure exerts an even more powerful calming effect on faculty.
It is likely true that both authors are right. Yes, higher education is in crisis, but no, this crisis is not widespread. Much of non-elite U.S. higher education will continue to suffer a long-term economic malaise, but relatively few institutions will risk extinction.
Complacency breeds risk. Our enrollment pipeline is challenged, cost disease is real, other countries are investing in order to keep their students, and in spite of our focus on student success, progress on degree attainment is very slow. While this malaise is likely not fatal to most, it leaves many of our institutions weakened and ripe for disruption.
As always, the future of higher education will be by economics, demographics, workforce considerations, global politics, etc. For 1,000 years we have adapted and prospered. Today, new forces join the club: information technology, tech-savvy disruptors and private capital. These forces—when unleashed on a weakened industry—could engulf many in crisis.
1. Key Technologies are Now Mature
The critical technologies in higher education remain computation, storage, network, search, display and security. These technologies are now robust and plentiful. Robust, secure, and plentiful network capacity means that any information system, data, media, service or transaction can be hosted and delivered anywhere.
This separation of IT provision from consumption is cloud computing. It means that you can source state-of-the-art services for your students that are hosted elsewhere. It means that your institution can extend its footprint everywhere. It also means that students can source academic and other services elsewhere. It also means that other providers can capture “your students” (and your faculty, etc.). It’s a game changer.
2. Entrepreneurship from Unbundling
The game changing nature of cloud computing has given rise to a new form of entrepreneurship premised on the idea that if one “deconstructs” a firm or even an industry—newspapers, publishing, television, music recording, cable television, taxis, etc—one can deploy technologies in the cloud in ways that disrupt that firm or industry. In many cases, philanthropists, trustees and policy makers are fostering this new form of entrepreneurship.
3. Higher Education is Being Transformed From Outside
Mature technologies, a weakened incumbent industry (us!), and a growing cadre of disrupters are making higher education a darling of private financiers. Many see our colleges and universities as ripe for technology-based reinvention. Hundreds of millions of dollars of very focused (and accountable) private equity capital is now going to “edupunks and edupreneurs” intent on transforming higher education from the outside—for a profit.
Business as Usual: At Your Peril
To some extent, we have seen the enemy and it is us. Are we that frog in the pot that is lulled to sleep by the warming water? Only rarely do we reflect on our industry’s performance over a long period of time to determine whether or not we are as healthy, young or vigorous as we once were. We’ve grown too good, perhaps, at passing the hat, at “satisficing” and muddling through. We tell ourselves the threat is not an existential one. And as Marshall McLuhan said, “the past dissolves before the future resolves.” Many of us see our students go online, but few of us can picture the world without alma mater.
It seems to me we have only one option in this nebulous, but threatening environment. We must become optimists and upstarts. Happily, this is part of our genetic make-up. Let us decide that higher education will change—dramatically—for at least some of our students or prospects. Let’s decide that we’d like to attend the party and become a vibrant part of the change that is coming. Do we have to abandon the past? Some of it, we will probably have to abandon, certainly not all of it, and maybe not a lot.
Maybe this threat gives us an excuse to ask ourselves, our faculty, staff, board and others, “What is it that makes us special and durable?” And when we uncover that, we need to be sure to protect, preserve and invest in whatever that is. Perhaps as we uncover what makes us special we can consider alternatives for sourcing those services we provide that do not make us special, that raise costs and may erode the student experience.
The time for muddling through is passing. Maybe the edupunks and their funders will never get it right. Or maybe they will. Do we have the luxury of time as the temperature of the water we’re in slowly rises? We probably do. But will we have the strength, agility, resolve and capacity to respond quickly enough? Can we anticipate, visualize a new future, and foster a new consensus?
And reach for the clouds.
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 Ryan Craig, College Disrupted: The Great Unbundling of Higher Education, (London: St. Martin’s Press), 2015
 Janet Napolitano. “Higher Education Isn’t in Crisis,” The Washington Post, March 12, 2015. Accessed at https://www.washingtonpost.com/opinions/higher-education-isnt-in-crisis/2015/03/12/f92b777e-bba2-11e4-bdfa-b8e8f594e6ee_story.html
Author Perspective: Analyst