If you sketched a portrait of a college in a dicey economic spot, it might look like Southern New Hampshire University.
The private nonprofit university is little known nationally, not selective, and depends on tuition. It sits in a state whose population of public high-school graduates is projected to decline for years.
But rather than limping along, this obscure institution is becoming a regional powerhouse—online.
With 7,000 online students, the university has grown into the second-largest online education provider in college-saturated New England, aiming to blow the University of Massachusetts out of the top spot. It recently began testing TV advertisements in national markets like Milwaukee and Oklahoma City, too, sensing that scandals tarring for-profit colleges have opened an opportunity for nonprofit competitors.
Academe is abuzz with talk of "disruptive innovation"—the idea, described by Harvard's Clayton M. Christensen, that the prestige-chasing, tuition-raising business model of higher education is broken, and that something new and cheaper, rooted in online learning, promises to displace it.
Southern New Hampshire, which is showcased in Mr. Christensen's new book, The Innovative University, offers a case study of what happens when a college leader adopts some of the Harvard Business School professor's strategies for managing disruptive change. Southern New Hampshire's deep dive into Web teaching raises many questions facing colleges migrating online: How big will e-learning get? What will that mean for campuses? How will it break apart the role of traditional professors?
"They're one of the first private nonprofit institutions, with a traditional campus and traditional student body, that has really committed to scaling online," says Richard Garrett, managing director at the consulting company Eduventures.
Southern New Hampshire's Web-learning wager hinges on marrying elements of for-profit and nonprofit education.
In a former textile mill in downtown Manchester, the university's president, Paul J. LeBlanc, has installed a team of for-profit veterans who help run a highly autonomous online outfit that caters to older students, with classes taught mostly by low-paid adjuncts. Their online operation is the institution's economic engine, subsidizing its money-losing undergraduate campus, known as University College, whose 2,350 students enjoy a new dining hall, Olympic-size pool, and small classes taught largely by full-time professors.
"The traditional campus, in some ways, now has the resources to be even more traditional," Mr. LeBlanc says in his office on the suburban main campus, four miles from the online college. "And the nontraditional, with this split, has the ability to be even more nontraditional."
But even as that nontraditional college rakes in money, the president plans to hire an "innovation team" with an unusual charge in online learning: "Work out the business model that puts our current model out of business."
That idea was embraced by Mr. Christensen, who serves on Southern New Hampshire's Board of Trustees. (The president and the professor are friends who first met 30 years ago, when Mr. LeBlanc was doing a master's in English at Boston College and Mr. Christensen was in the M.B.A. program at Harvard; the relationship sprang from a mutual love of basketball.)
With so much online growth in the past five years, the changes have chafed some professors. There has been friction over control of faculty hiring and content in Web-based courses, as well as over which programs get put online. Some full-time professors have felt disconnected from the online operation, known as the College of Online and Continuing Education, or COCE. Some have worried about the quality of online courses, which are meant to mirror campus counterparts. And some professors worry about the future of their traditional campus, even as Mr. LeBlanc has made clear that it won't close.
"People see COCE as the big blob—and it's going to take over," says Pamela B. Cohen, an associate professor of mathematics and a 28-year veteran, who supports the Web push but has expressed concern about the quality of some online classes. "And what's going to happen to University College? Are we going to go away?"
Outside skeptics argue that Mr. Christensen misses the mark in diagnosing universities' ills through the prism of business-school theories geared toward corporations. Another criticism is that some of the supposedly cutting-edge colleges highlighted in his book fall short of the broader rethinking of education that may be possible with technology. Low-paid adjuncts? Online replicas of existing curricula?
"It doesn't seem to me to be the 'disruptive innovation' that's going to transform things," says Richard Arum, a professor of sociology and education at New York University and one of the authors of Academically Adrift, a harsh critique of undergraduate learning. "It seems to me like just business as usual."
The Next General Motors?
Mr. Christensen, dubbed "one of the most influential business theorists of the last 50 years" by Forbes, gained fame with The Innovator's Dilemma. The 1997 best seller showed how mighty firms, focused on selling better products to mainstream customers, were crushed by low-end innovations that opened new markets for simpler goods that got better over time.
A similar force is at work in academe, Mr. Christensen argues in The Innovative University, co-written with Henry J. Eyring, and in an earlier report, "Disrupting College." As universities strain budgets, emulating elite research institutions, a disruptive innovation is rising in part from bottom-feeding, for-profit colleges: online learning.
The threat isn't to top-brand universities, Mr. Christensen says in an interview. He likens those exclusive places to Gucci handbags, whose purpose "isn't the functionality as much as it is the prestige."
"But the ones that I think are in real danger are the public universities, like the University of Iowa and so on," he says. "Because what happens in their world is exactly what happened to General Motors."
General Motors cut deals with unions to pay all of their health care and pension costs. As costs mounted, he says, the company lost its flexibility to invest in the future. The result: It got "disrupted" by Toyota. "And they fell off the cliff," he says.
Similarly, states and cities face rising health-care costs. "There just is not going to be money for things like higher education," Mr. Christensen says.
But can a mainstream organization harness a disruptive innovation? "With few exceptions," he writes in The Innovator's Dilemma, that approach has succeeded only when managers "set up an autonomous organization charged with building a new and independent business around the disruptive technology."
Which is largely what Mr. LeBlanc has done in New Hampshire.
The Disrupted University
Southern New Hampshire's online business feels nothing like the traditional undergraduate campus up the road. Physically, its office is a quirky mix of high tech and retro, with an open layout, scuffed wooden floors, and vintage neon signs advertising products like radios, refrigerators, and beer. Culturally, a visitor from conventional academe might be jarred by the sense that its staff members are selling beverages, at least judging by the office jargon: Professors are "procured." Programs are "flavored" with concentrations like "social media." The education is called "a good product."
A lucrative one, too. With 7,000 online students, up from 1,700 four years ago, the College of Online and Continuing Education is on track to generate $73-million in revenues this year and more than $100-million next year. It posted a 41-percent "profit" margin in the 2011 fiscal year. The university plows the surplus into new buildings, employee salaries, financial aid at the traditional campus, and improvements in the online program.
Stephen Hodownes, senior vice president for marketing and student recruiting, is one reason why the product has sold so well. The marketing pro used to run Embanet, a company that helps start online education programs. Working from the inside at Southern New Hampshire, he manages an admissions shop that has become more urgent and data-driven.
In the past, a prospective student's expression of interest might have yielded a packet of information in the mail a week later. Then the university would hope for a phone call. Now it has an in-house call center. A would-be applicant might get a call from an admissions rep within minutes. The university strives to provide a financial-aid estimate within 24 hours.
To bring in more students, Mr. Hodownes pushed to give the M.B.A. program a makeover, with a slightly shorter core and lots of concentrations. When a prospective student Googles "M.B.A.," he reasons, little Southern New Hampshire won't pop up in the results. But now, if they search for, say, "M.B.A. social media," it might.
A more fundamental change is how the university's model splits up—and displaces—the role of traditional full-time professors.
Start with courses. As online grows, classes are becoming standardized. Their developers, called "course authors," aren't necessarily the same people who teach them.
Some institutions, like the University of Central Florida, have chosen to integrate online learning by relying on full-time faculty members to teach Web-based courses. At Southern New Hampshire, front-line instructors tend to be folks like Tony Baldasaro, an adjunct who teaches a graduate-level education course. It doesn't pay much—just $2,300—and he performs the job in addition to his full-time gig as an administrator for an online high school. His course came ready-built with readings, assignments, and assessments. The rest is up to him: responding to e-mails, participating in the discussion board, and evaluating assignments.
"The skeleton is there," he says. "I just go in there and put meat on the bones. What I can do is really focus on the relationship that I have with the students."
Mr. LeBlanc negotiated a governance structure that gives the online outfit "elbow room" in its operations. The default is that any face-to-face program can be offered online. Faculty may object, but there is a deadline by which they must do so.
When those objections come up—and Mr. LeBlanc provided a handful of examples, ranging from game design to writing—online-college officials typically slow down, deal with the concerns, and move forward. But a couple of programs did not proceed online: a proposed M.F.A. in fiction and nonfiction writing, and a B.S. in sports management, which had triggered objections about specialized accreditation and internships. In one case, forensic accounting, no objections were raised, but enrollments shifted from face-to-face to online, and now the classroom program will no longer be offered.
"We ensured substantial faculty voice, but we removed faculty veto power," Mr. LeBlanc says. At other institutions, he adds, "when faculty raise their voices vociferously, the initiative stops. And here, it can't stop. It can't be bogged down."
Marketing pressures? Standardized courses? Removing faculty power? Many professors praise the responsiveness of the online officials, but as you'd expect, some have reservations about the changes.
J. Stephanie Collins, a professor in the university's School of Business and a former president of the Faculty Senate, says she would like more control over the content and delivery of Web-based courses. "I would like to know more about what happens in online," she says.
Ms. Cohen, the math professor, has felt that some online courses failed to match those offered face to face. She is in a unique position to judge, as a full-time professor who teaches both in classrooms and online, and who also serves on the Web college's curriculum committee. Visiting online classes in past years, she found personal interaction with students lacking. Online faculty were teaching without any tests, only assignments and discussion. "That's not teaching a math course," she says.
But Ms. Cohen is much more comfortable now that several associate deans have been hired to improve quality and provide academic oversight. "As these courses are being standardized, the full-time faculty are losing their skepticism," she says. "They're understanding that there is this meaningful, sincere commitment to mirroring the content."
Standardized courses might put off some professors accustomed to more freedom, but they're useful for busy adult students who don't want the hassle of figuring out how to navigate new structures in each class. A typical example: Dan Fiore, who works in sales for a wood-products company while studying toward a bachelor's in business and raising a 9-month-old son.
The 34-year-old was "nervous as heck" going back to college. So much had changed in the 16 years he had been away from education. He didn't know the lingo. But he manages in large part thanks to his adviser, who suggests classes, registers him, sends him encouraging notes, reminds him of exams, and calms his anxiety. "She has just been like my guardian angel," he says, praising her "customer service."
He hopes that the degree will open doors, but it's also personal: "If I could just tell my son that Dad went to college, that means the world to me."
Will It Draw 18-Year-olds?
Online programs have soared among older students like Mr. Fiore. But one question is how big this "disruptive" force will get. How much will it draw 18- to 22-year-olds?
At Southern New Hampshire, the registration system gives undergraduates the "last seats on the airplane" when it comes to online classes, Mr. LeBlanc says. The university doesn't want to see an adult learner closed out of a section because a sophomore on the main campus has taken a spot. A continuing debate has been how much to open the online enrollment to traditional undergrads.
"It's a little threatening," Mr. LeBlanc says, because classroom professors might find that their face-to-face students prefer to study online. "You could find yourself overstaffed in your traditional program."
Nationally, undergraduates complement their educations with online classes, but little evidence exists that students under 23 are actively pursuing all or the majority of their study online, says Mr. Garrett, of Eduventures. Yet Mr. Christensen's writing, as the Eduventures analyst interprets it, suggests that the United States will see an online majority of all courses over the next few years.
Mr. Garrett isn't so sure: "Right now I don't see online as having enough internal innovation around student experience and student outcomes to push that kind of projected growth."
Others attack the framework that Mr. Christensen uses to reach his predictions. His core misunderstanding is the idea of a "business model," argues Siva Vaidhyanathan, chair of the department of media studies at University of Virginia and author of a recent book about Google. Mr. Christensen says universities meld "fundamentally different and incompatible business models" involving research, teaching, and preparing students for life. "From a business-school perspective, these models seem to conflict or compete," Mr. Vaidhyanathan says. "What he doesn't understand is that colleges and universities don't have business models. They have missions. These missions complement, rather than conflict with, each other."
"Remember—most businesses fail," Mr. Vaidhyanathan adds.
Mr. Christensen is unruffled by the skepticism. He points out another pattern. In every industry where disruption occurred, he says, the incumbents thought they were different.