How Disruption Can Help Colleges Thrive

Illustrations by Randy Lyhus for The Chronicle

September 30, 2013

As disruptive innovation has crept into higher education in the form of online learning, traditional colleges are beginning to feel the pinch.

Disruptive innovations have transformed many industries—computers, cars, accounting—by taking a sector so expensive, inconvenient, and complicated that it served only a limited number of people and turning it into one much more affordable, convenient, and simple.

This describes exactly what has happened with online higher education, as it has enabled far greater access to higher education. And the pace of innovation is heating up.

Although this is good news for most people, the challenge historically has been that disruptive innovations typically trip up longtime leaders. Disruption has savaged many organizations that were formerly thought of as unassailable, including General Motors and the now-defunct Digital Equipment Corporation.

From our research on disruptive innovation, it does appear, though, that there are two ways for an organization to survive and thrive when disruption happens.

The first, for an industry leader, is to establish an autonomous organization that has the freedom to reinvent itself and pioneer the disruption. This is what the full-service department store Dayton Hudson did when discount retailers emerged. It started a separate business, called Target, that allowed the retailer to reinvent its business model and live to tell about it.

A select few colleges, like Southern New Hampshire University, have taken this path, but it is not easy because it requires strong leadership and the ability to navigate the tricky world of accreditation.

The second path for surviving disruption is more speculative. But if an entity can organize solely around a critical "job to be done"—that is, the reason people "hire" products or services in a given situation—then it might be able to obviate disruption entirely.

There are two reasons for this. First, organizing around a job reduces overhead costs significantly. As an organization delivers on a job, processes emerge, and if the organization focuses on just one job, then the processes become very efficient. If you try to do lots of jobs for lots of people, however, then organizational processes become complicated, much like what has happened in hospitals. If a college, for example, tries to do four jobs instead of one, our research shows that its overhead per student will be roughly 70 percent higher. Overhead is the biggest driver of costs, and overhead is driven by complexity.

Second, if an organization focuses on an important job in the lives of customers and does it well, it can charge premium prices that customers are willing to pay.

A story about the retail giant IKEA illustrates the opportunity. Some 50 years ago, Ikea sold low-cost furniture. Today it still sells low-cost furniture, and it has not been disrupted in any way. It has not gone "upmarket," as most businesses and colleges seeking to be "better" do naturally, and no one has come underneath IKEA to push it that way.

So what gives? It's not that there hasn't been disruption in retail. There has been plenty, from discount retail to online retail.

Why hasn't IKEA done the same? It appears that it has avoided the upmarket allure by remaining focused singularly on nailing that one job to be done. That job isn't to sell low-cost furniture. If that is all it was doing, surely low-cost entrants from China could have disrupted it from below.

The job that IKEA has focused on, rather, is the idea that "We need to furnish this apartment today."

IKEA engages its own designers to create furniture kits that customers can retrieve from the warehouse, take home, and assemble themselves, without having to wait for delivery. IKEA designs furniture that is explicitly meant to be temporary, not to become heirlooms. IKEA offers child care because unfettered concentration on furniture purchases is an important experience. And it positions an affordable cafeteria in the store so customers can refuel.

Although IKEA has been slowly rolling out across America for 30 years, even though its "formula" is open for all to inspect, and despite the fact that its owner is one of the wealthiest people in the world, nobody has copied it. Nobody. The reason? We believe that because other furniture retailers think about their market through the lenses of product category and price point, they don't even see the need to integrate differently, and they therefore rarely are hired to do IKEA's job.

As a result, IKEA just sits there, neither disrupted nor disrupting. Were it to someday decide that it wanted to diversify and optimize itself for other jobs, it would need to set up separate business units in order to achieve the integrated structure required to provide the experiences appropriate to those jobs.

The evidence appears to be that if an organization aligns itself around a specific job to be done, then it obviates the need to disrupt others, and it causes others not to be able to disrupt it.

There appears to be a good lesson here for colleges challenged by would-be disrupters: Take whatever technology and tools are available and use them to organize tightly around a job to be done, to forestall—or prevent—disruption. With the mind-set of focusing on a specific job, it doesn't matter what new technologies emerge. If a technology can help a college do the job that it has chosen, then it should be able to make changes accordingly and seamlessly. If the technology is not useful to doing the job, then a college can ignore it.

The challenge today is that most colleges are seeking—often unknowingly—to do several jobs. Indeed, in their march upmarket to build prestige, many seek to be all things to all people. This has left them quite vulnerable to disruption.

Yet there are examples of colleges that are arguably identifying a job and doing everything in service of it. The Franklin W. Olin College of Engineering seems to have done this for engineering, and Babson College seems to have done it within the field of entrepreneurship. Some newer, competency-based institutions seem to be doing this for job training as well.

The question, then, is how would institutions that have historically been doing multiple jobs make the shift to focus on nailing just one job?

The options here seem to be twofold. Both are challenging, but possible.

One option would be the same as IKEA's were the furniture giant to decide to focus on a different job: Create an autonomous division that focused solely on the new job at hand, to create the properly integrated structure required to provide the experiences appropriate to that job.

For example, comprehensive state universities were founded with a vocational orientation geared toward specific regional economies, but they have drifted considerably from that mission, to take on many jobs. They could establish autonomous divisions that allowed them to return to their original missions, take advantage of their regional positions, and help local employers fill skill gaps that exist in would-be employees.

The second option is for a strong leader to establish a clear job for an institution to do and then literally discard—or sell off—everything that doesn't help the institution do that job. One key is to recognize all the losses in the first year so that the institution can rebuild from a very low base, such that no matter what happens, Year 2 will look better. Given the significant power of faculty members and other constituencies at many colleges, this would not be easy. But if a college can truly organize around a single important job that students and potential employers prioritize, then the likely result will be that its competition—even of the disruptive sort—will be much easier to handle than imagined.

Clayton M. Christensen is a professor of business administration at Harvard Business School. Michael B. Horn is co-founder and executive director for education at the Clayton Christensen Institute, a think tank focused on innovation. They are co-authors, with Curtis W. Johnson, of Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns (McGraw-Hill, 2008).