Half of Unis BK in 15 Yrs.

[Harrison J Bounel]

That "BK" would be as in "bankrupt," not "Burger Kings." The failure of the fat cartel cats to effectively embrace the online revolution will be their undoing, says "disruption guru" Clayton Christensen.

Feb 7, 2013, 8:55am PST Updated: Feb 11, 2013, 2:28pm PST

Disruption guru Christensen: Why Apple, Tesla, VCs, academia may die

Harvard business professor Clayton Christensen literally wrote the book on technology disruption, and he thinks Apple, Tesla Motors, venture capitalists and most of the nation’s colleges and universities should be afraid.

The author of The Innovator’s Dilemma said Wednesday that all of them could be killed by less advanced competitors in the same way that many once dominant technology companies have been in the past.

Christensen shared his theories about how innovative giants are felled and replaced by relatively less sophisticated rivals, speaking to an attentive crowd of young entrepreneurs and funders at the Startup Grind conference in Mountain View on Wednesday.

Basically, his theory of disruption centers around how dominant industry leaders will react to a newcomer: “It allows you to predict whether you will kill the incumbents or whether the incumbents will kill you.”

If a newcomer thinks it can win by competing at the high end, “the incumbents will always kill you.”

If they come in at the bottom of the market and offer something that at first is not as good, the legacy companies won’t feel threatened until too late, after the newcomers have gained a foothold in the market.

He offered as an example the introduction of cheap transistor radios. High fidelity, vacuum-tube powered incumbents felt no threat from the poor quality audio the transistors produced and missed the technological shift that eventually killed many of them.

Here is what Christensen said threatens Apple, Tesla, VCs and academia.

Apple too good for its own good?

Apple could be on path for a classic disruption in Christensen’s view. Successful innovative products like the iPhone are usually based on proprietary technology because that is how the dominant business carves out, protects and builds its top market position.

But at some point as they get better and better, they start to exceed what people actually need or are willing to pay extra for.

“When that happens the people who have the proprietary architecture are pushed to the ceiling and the volume goes to the open players. So in smartphones the Android operating system has consummate modularity that now allows hundreds of people in Vietnam and China to assemble these things.

“Just like I pray for Harvard Business School, I pray for Apple.

“They always have won with their proprietary architecture and because of their advantage. If you ask them what is the core of the company, they will say it is design and the interaction with the customer. Manufacturing really is not our core competence.

“So you just give that to the Chinese. But then what happens to them? As the dominant architecture becomes open and modular, the value of their proprietary design becomes commoditized itself. It may not be as good, but almost good enough is often good enough.”

The real value in making the iPhone, Christensen argues, is in the sophisticated manufacturing that is being done on it overseas, something that can no longer be done competitively in the U.S. He believes that and the commoditization of smartphones threaten Apple in the long run.

Tesla goes down the wrong road

Instead of coming in at the low end of the market with a cheap electric vehicle, Tesla Motors competes with premium offerings from legacy automakers.

“Who knows whether they will be successful or not,” he said. “They have come up with cars that in fact compete reasonably well and they cost $100,000 and god bless them.”

“But if you really want to make a big product market instead of a niche product market, the kind of question you want to ask for electric vehicles is, I wonder if there is a market out there for customers who would just love to have a product that won’t go very far or go very fast. The answer is obvious.

“The parents of teenagers would love to have a car that won’t go very far or go very fast. They could just cruise around the neighborhood, drive it to school, see their friends, plug it in overnight.”

Because that kind of electric car offers something that doesn’t threaten incumbents and provides a low-end solution, Christensen says that has a greater chance of surviving and ultimately upending the auto market than Tesla’s flashy Roadsters and sedans.

VCs aiming too high

Christensen said he thinks the venture capital world needs to be disrupted because it is focused too much on making big killings on big investments at a time when there are plenty of good smaller investments to be made on companies that will be disruptive.

He offered as an example his friend, former Massachusetts Gov. Mitt Romney. Before teaching, Christensen ran a small company in Massachusetts at the same time Romney started Bain Capital, and the firm invested $1 million in Staples when it was just starting out.

Romney actually took the time to call and to ask him to buy his supplies from Staples, even though he was just a small business. But when Christensen some years later sent another friend who was raising $1 million for a good idea, Romney told the man that Bain didn’t make those kinds of investments any more. They only wanted to invest $10 million or more.

“Venture capital is always wanting to go up market. It’s like the Rime of the Ancient Mariner. 'Water, water everywhere and not a drop to drink.' People in private equity complain that they have so much capital and so few places to invest. But you have lots of entrepreneurs trying to raise money at the low end and find that they can’t get funding because of this mismatch. I think that there is an opportunity there.”

A new course for academia

Christensen wrote his first opinions on why Harvard Business School and other higher-ed institutions were in line to be disrupted back in 1999. Much of what he predicted then is coming true, and the disruption is accelerating.

“For 300 years, higher education was not disruptable because there was no technological core. If San Jose State wants to become a globally known research institution, they have to emulate UC Berkeley and Cal Tech. They can’t disrupt,” he said on Wednesday.

“But now online learning brings to higher education this technological core, and people who are very complacent are in deep trouble. The fact that everybody was trying to move upmarket and make their university better and better and better drove prices of education up to where they are today.

“Right now, Harvard Business School is investing millions of dollars in online learning, but it is being developed to be used in our existing business model, and we’ll sell it to other universities to use in their existing business models.

“But there is a different business model that is disrupting this in addition to online learning. It’s on-the-job education. This model of learning is you come in for a week and we’ll teach you about strategy and you go off and develop a strategy. Come back later for two weeks on product development. You learn it and you use it. These are very different business models and that’s what’s killing us.”

“Fifteen years from now more than half of the universities will be in bankruptcy, including the state schools. In the end, I am excited to see that happen.”

[ham]

Honestly, I cannot see how some small accredited university in China or Algeria couldn't teach accredited courses based upon alleged first-rate pre-packaged products from itunesu or academicearth.
That they are not doing that on a mass basis already startles me.
Oh yes, Chong, Farooq and Rajeev as teachers or markers may seem intimidating.
Guess again...look at the phone directory of most departments' personnel, and it will look like a WHO intervention list, or no-fly list...now.
When it's not the case, the vast bulk of your experience at premium universities costing you a fortune will be entrusted to the likes of Muffy the bulldyke, Leroy the rasta and Dov the aspiring neo-con who are just students like you from those "...studies " programs.
If YOU consider that a DECISIVE improvement over Rajeev, Chong and Farooq...

[Albert Hidel]

Higher Education, R.I.P.
Paul Greenberg
Feb 23, 2013

. . . An item in the January issue of the [New Criterion] magazine caught my sorrowful eye, for I'm of an age at which the obituaries are the first thing I check out in the morning paper. Just to know who's gone today. The dear departed in this case: Higher Ed.

The cause of death was the usual in modern, bureaucratized, obese and increasingly ossified academia: administrative bloat aggravated by diluted standards and the erosion of the core curriculum, the basis of liberal education.

Tenured faculty now teach less and less as the "drudge work" of dealing with undergraduates is shifted to a corps of slave laborers styled adjunct professors or TAs, teaching assistants. In both ill-paid categories, I learned mainly how little I knew. I had to conquer my embarrassment at that continuing revelation every time I stepped into a classroom in place of the real teacher who should have been there.

Now, one by one, the disciplines that were once the basis of a liberal education are eliminated as not worth the trouble. Literature, foreign languages, real history as opposed to current ideology, and the arts and sciences in general give way to simulacra with the telling label Studies after their name. As in Queer Studies or African Studies. (The other day I ran across a twofer: Queer African Studies.)

Consider the sad example offered by the University of Arkansas at Little Rock, where German is out and Movies are still in. Excuse me, Film Studies.

In this ever-encroaching bog called Higher Education, which keeps getting lower, administrators prosper while scholars grow scarcer. Matthew Arnold, who defined liberal education as the study of "the best that has been thought and said," is dismissed as another dead white male -- if he is remembered at all.

Deconstructionism, post-structuralism, or whatever ism may be in vogue today, is all the rage, sometimes literally.

Cardinal Newman's serene guide to the perplexed, "The Idea of a University," is as forgotten as Ortega y Gasset. Who now cares what such have to say? They're old -- that damning pejorative -- much as Greek and Latin and the King James Bible and Shakespeare are old. It's new that counts, just as tinkling brass and clashing cymbals impress every new generation of suckers under the impression they're music.

While the cost of a university education grows ever higher, higher education grows ever lower, forever ceding ground to popular fashion. All that tuition and all those contributions by well-meaning donors tend to be eaten up by all those overpaid administrators.

An eye-opening survey of college administrative costs in the Wall Street Journal not long ago noted that, when "Eric Kaler became president of the University of Minnesota last year, he pledged to curb soaring tuition by cutting administrative overhead. But he hit a snag: No one could tell him exactly what it cost to manage the school.

Like so many institutions of "higher" education, only its tuition grew higher as the University of Minnesota went on a spending spree over the past decade, paid for by a steady stream of state money and rising tuition. Officials didn't keep close tabs on their payroll as it swelled beyond 19,000 employees, nearly one for every 3 1D2 students.

That ratio is all too typical of the Higher Learning in America, which hasn't changed all that much since the acerbic Thorstein Veblen wrote his scathing study of it by that name in 1918 -- except to grow a lot more expensive and a lot less substantial.

According to the U.S. Department of Education, the number of administrators, managers, "directors," clerks and factotums high and low at American colleges and universities has increased 50 percent during the past decade -- easily outpacing the number of actual teachers on the payroll. It's part of the reason that college tuition in this country, according to the Bureau of Labor Statistics, has risen even faster than health-care costs.

Case in point: the University of Arkansas at Fayetteville, whose fund-raising arm (excuse me, Advancement Division) employed 139 at last count in November and had an annual budget of $10 million last year -- and still managed to overspend it by some $3.3 million. And it's not an outlier in the academic herd, but part of a whole swarm of colleges and universities moving ever deeper into the ever broader expanses of ever higher-priced mediocrity.

Soon education itself is reduced to an appendage of administration. Its purpose becomes to support the economy by supplying the requisite number of graduates to fill the slots that need filling. This is called economic growth. No one ever seems to ask what the purpose of economic growth is. That's the kind of question the humanities used to address, but they seem to have disappeared from college curricula, or at least been "downsized" -- out of economic necessity, we're told.

Some days I think the only hope lies in those small liberal arts colleges scattered here and there, like Hendrix and Lyon here in Arkansas, but they're becoming as rare in higher education as the New Criterion in the shrunken world of little magazines.