Political pressure is building to lower the cost of college, as seen in efforts in many states to make college tuition-free. But the expenses involved in running a college aren’t going anywhere but up, according to data from the National Center for Educational Statistics. Big tuition increases are getting tougher to sell — and they are translating to smaller increases in revenue, because of rising tuition-discount rates. The business model of higher education is being stretched thin, and administrators are scrambling to find pennies to pinch in order to balance budgets for another fiscal year.
But some leaders are taking a bolder path. Five institutions profiled in “Colleges Transformed,” my recent paper for the Clayton Christensen Institute, are searching for new business models that can help them serve more students, improve work-force outcomes, and strengthen their own fiscal sustainability.
While these institutions are diverse — small and large; public and private; some in financial straits, others hoping to broaden their missions — all of them are willing to look beyond incremental solutions and rethink the role of higher education.
Each of the programs brought new students, and new types of students, into the institution. Some of those arrivals were adult learners looking to start or finish bachelor’s degrees. Others were looking to retrain for new careers. Regardless, the programs allowed colleges to reach untapped pools of students with the goal of raising their bottom line.
Simmons College, a Boston-based institution with a traditionally regional draw, has attracted students from across the country and even globally to its online graduate nursing, social-work, and management programs. Simmons has seen revenues from its online programs rise to almost 40 percent of the total, from nothing three years ago. Other programs, like Northeastern University’s Level boot camp for data analytics, haven’t yet increased total institutional revenues but represent a move into a new and fast-growing market aimed at defining success through student outcomes in the work force — a model that could eventually compete with traditional degrees.
Arizona State University’s president, Michael M. Crow, has pressured the institution to redefine itself by whom it accepts, not whom it excludes. That thinking, which cuts against the prestige-oriented grain of higher education, inspired the Global Freshman Academy and other efforts there to build a more inclusive culture and pedagogy.
The academy is a set of online courses, free and open to anyone. What sets them apart from MOOCs, or massive open online courses, is that students who complete them can pay to convert them into Arizona State credits, thus completing their freshman year. That removes some of the risk of attempting a college degree, given that many students do not complete their first year.
In all cases, institutional leadership was crucial to inspiring and creating these new pathways to innovation. Northeastern University’s president, Joseph E. Aoun, has said, “It’s time to stop thinking of higher education as an experience people take part in once during their young lives … and begin thinking of it as a platform for lifelong learning.” Under his leadership, Northeastern has built a team assigned to future-proof the university.
For many institutions, challenging the status quo has been driven by necessity: an understanding that the current system of higher education can’t tweak its way into financial sustainability, or into meeting the work-force needs of the 21st century. That was the case for the University of Wisconsin, which realized that as the state diversifies out of a manufacturing-intensive economy, the need for retraining exceeds the system’s capacity. In response, the university developed an online competency-based program called UW Flex, designed especially to meet the needs of adult learners.
What makes these programs so noteworthy is their relationship to disruptive innovation, which makes products cheaper, simpler, and more accessible. Over time, such innovations compete head-to-head with the traditional players in a market. Think of AirBnB in the hospitality industry: Originally a platform to allow travelers to book a spot on a stranger’s couch, it now offers luxury experiences all over the world and has a valuation comparable to those of major hotel companies.
Disruptive innovations come in on the low end of a market and provide a product or service that isn’t as good, at least by traditional standards. But they open access to those who were previously shut out of the market by a lack of wealth or experience.
Disruptive innovations hold the potential to break the relentless cost growth in higher education. Take College for America, at Southern New Hampshire University, which offers self-paced, competency-based bachelor’s degree programs for only $3,000 a year. The program operates on a business model different from that of traditional institutions: It joins with employers to help identify students for admittance, and in many cases to help them cover the cost of attendance. Designed explicitly to meet the needs of adult learners, the program has seen rapid growth.
Many administrators have met steady cost increases with a symmetrical response: building on the same, traditional offerings to help them compete for students. But this often has the unintended effect of continuing the cycle of cost increases.
Instead, leaders should reassess and recalibrate their business models to include truly innovative measures that hold the promise of bending — and perhaps someday breaking — the unsustainable cost curve in higher education.
Alana Dunagan is a higher-education researcher at the Clayton Christensen Institute.
