Yes, University of Phoenix is Disruptive; No, That Doesn’t Make It the End-All

Many of my friends in the education world are fond of talking about how the University of Phoenix is not in fact a disruptive innovation.

They don’t just stop this statement with the University of Phoenix of course. I’m using the University of Phoenix as shorthand. What they mean are many of the distinctly online universities that have emerged over the last couple of decades—everyone from Kaplan University to DeVry to Bridgepoint.

They are wrong. These online universities are disruptive innovations relative to traditional universities. They are now on their own sustaining innovation track, which every disruptive innovation moves to as it grows, expands, improves, and marches up market. It’s also true that not all of them will succeed in these endeavors.

The fact that I’m saying they are disruptive innovations in the face of many saying they aren’t strikes me as ironic, given that I often find my job is to correct people who want to declare nearly everything disruptive and misapply the term. I also readily admit that online learning isn’t inherently disruptive; when it’s used in a hybrid format to complement or extend traditional brick-and-mortar learning, chances are it’s being used as a sustaining innovation. No technology is inherently a disruptive innovation, as all technologies can be applied to sustain or disrupt the industry’s incumbents.

I’ll explain though why online universities are disruptive in a moment, but one more word. Just because these universities are disruptive relative to the traditional universities doesn’t mean that what they do is for the common good per se. For a variety of reasons, I personally tend to think that is often the case, but disruptive innovation isn’t a normative term; it doesn’t imply that something is morally good or bad.

Nor does the term imply that these universities are the end-all be-all of disruption in the higher education space. Over the last couple of years—and in a flurry in the last few months—we’ve seen another wave of disruptive innovations launched in higher education that I suspect may disrupt the first disruptors. Combined with continued up-market movement by some in the first wave, I suspect this new wave will have far reaching consequences for the higher education sector over the next decade.

But let me first explain why the University of Phoenix and its peers are disruptive relative to traditional institutions.

A disruptive innovation is one that transforms a sector by introducing a product or service that is more convenient, simple to use, and/or affordable than the existing products or services in a market. Disruptions tend to start as not as good as the existing products or services as judged by their historical measures of performance, and then, over time, they are able to march up market such that they are able to handle more complicated tasks. Many people flock to the disruptive innovation over time as it becomes good enough, as the customers are delighted by something that carries this new value proposition around convenience, simplicity, and/or affordability. As a result of these dynamics, disruptive innovations first serve nonconsumers (people who previously could not participate in the market) or people who have been overshot by the incumbents in the market. A critical thing to keep in mind is that this process does not occur over night; sometimes it occurs over several decades. And not every incumbent or traditional institution will be wiped away. Some will continue to perform important jobs for which a, relatively speaking, small set of customers are willing to pay.

Lastly, for something to be a disruptive innovation, it has to have two components: a technology enabler and a business model that together allow it to extend a low-cost value proposition up market.

In Disrupting College, we discussed that this is why land-grant universities and community colleges have not in fact been disruptive innovations. Although they have many of the characteristics of disruptive innovations—entities more affordable than their higher education predecessors that extended access to populations previously unable to participate in higher education—they didn’t have a technology core that allowed them to take a low-cost value proposition up-market. To move up market and serve students at the higher end, these institutions instead had to replicate the costs of the existing institutions—research faculty, buildings, and so forth—which meant they ended up taking on the same business model as the incumbents and, as they went up market, ultimately offered the same value proposition.

We asserted that online universities, however, had this technological core that allowed them to extend their new value proposition around, in this case, the disruptive attributes of convenience and accessibility, up-market.

Many have been quick to take a swipe at this assertion. Kevin Carey, who authored an insightful piece in the New Republic recently about the next wave of disruptive innovation, said that because these online universities were still offering degrees, they were ultimately offering the same value proposition.

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