May 12, 2013

THEODORA KALIKOW: A monopoly no more, education is now a commodity, with competition

Theodora J. Kalikow

Last time, when I wrote about disruptive change, I told you about Clayton Christensen's example of the steel industry and how the big traditional steel companies lost out to new ones with cheaper manufacturing processes.

As I thought about it some more, I realized that I skipped over the most interesting part: What do you do when they start making your rebar?

Here are some possibilities:

* You don't notice. It's so small a change, so innocuous, that you totally miss it. And then, pow. The Internet began this change for many aspects of our current life. Who in 1980 cared about a bunch of geeks sending each other little messages typed on black screens with green letters? I mean, come on.

* You do notice, but you reassure yourself that your customers would never choose this new way. Once upon a time, not so many years ago, I heard an interview on NPR with an established airline company executive at the Philadelphia airport, the day before a new low-cost company such as Jet Blue or Southwest Airlines was going to start service. He said, no worries, we have always treated our customers well, and we think they will be loyal. The next day, half his business disappeared.

* You do notice, and you just give the "low end" of your market to the innovators. That's what we saw in the Parable of Steel. And here's another example: Four-year colleges that stopped offering associate degrees with the rise of the community colleges. Sure enough, after a few years, the community colleges are planning and offering bachelor degrees. The colleges that thought they owned this market are amazed and annoyed.

* You do notice, and you surf on the wave of change instead of being swamped by it. You can start by keeping your basic business model and doing a lot of cutting and streamlining to meet the competition's price. This can be very helpful to give you time, but time itself is not enough. What else is needed?

Here's what I think any business caught in the cycle of disruptive innovation needs to do: Cut and streamline enough to give your enterprise time to answer the question: What do we do that is "meaningfully unique?"

As our friends in innovation engineering tell us, "meaningfully unique" can mean: It's the service or product at the core of our business, it provides excellent value and it matters to someone so much that they will choose it or buy it over the competition's. They may be making our rebar, but here is our extra-special product or experience or service that they will never match.

You can be wrong about which option you choose. We have seen all-too-many companies, whether in broadcasting, news, retail, airlines or other sectors, make the wrong choices. You can read about them in the business pages every day. Not choosing, however, is as bad or worse than choosing incorrectly.

Suppose, then, that you make a choice. Guess what happens next? You get another problem! You have to turn your enterprise to do the new thing. Easy to say, and darned hard to do.

To go back to the Parable of Steel, what were those big steel companies supposed to do with huge production facilities, a large well-paid work force, a network of sales outlets, bond obligations, stockholders, communities that depended on their industry, suppliers and distributors, and so on? And their biggest problem of all? Everybody had a picture in their minds about how the world was supposed to go, and they clung to that picture even as the world was not going there any more.

Today, we in higher education, indeed, in K-12 as well, are living through our own Parable of Steel. Our reality has been altered by demographic changes; national, state, local and personal finances; new competitive models; and the rise of the Internet.

A simple way to put it is this: Higher education has turned into a commodity when it used to be a monopoly. Used to be, if you wanted to go to college, you went to college. Same thing for K-12. There was limited choice on price, location, time and quality. No more.

They are making our rebar! What will we do to respond? The institutions that allow experiments, search for solutions, make some good choices and contain costs to get through the changing times, will have a good chance of prevailing.

Theodora J. Kalikow is president of the University of Southern Maine. She can be reached at kalikow@usm.maine.edu

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