Monday, February 18, 2013

A Leadership Dilemma for Branch Campuses and Online Programs

When I suggest that most institutions of higher education are in trouble, I am in good company.  Many people say the same thing, and most point to the remarkably rapid emergence of very low cost alternatives for earning credits, especially in the lucrative area of general education, as well as alternative ways of certifying learning that tie to the needs of employers.

For example, at StraighterLine, one can earn a full year of general education credits for about $1000, and those credits will transfer to many institutions.  Companies, community colleges and a few universities are breaking new ground by providing free non-credit options that can be turned into transferable credits, through exams that may cost less than $100.  In short, the higher education financial model is breaking down.

Moreover, because leaders are convinced that spending on “amenities,” (athletics, additional buildings, etc.) is necessary in order to compete for residential students, they are increasing the cost of operation, at the same time their traditional revenue sources are under pressure.  With the eighteen-year-old demographic declining in many parts of the country, we are bound to see winners and losers, whether we look at the public or private sphere.

Just at the time that leaders need to reframe their thinking, they are, instead, trapped by the need to save their “brand.”  (And this trap is real.  I do believe that the main campus residential program creates the institutional brand for most universities.  Leaving aside political issues, alumni, donors, and everyone else, it would be foolish in almost all situations to close the main campus.  Thus, presidents and boards are locked into a “loss leader” as the activity on which they concentrate their time.  That’s a classic example of why established institutions struggle in a disruptive environment.)

I hear presidents say they want growth at their branch campuses and in their online learning programs.  Unfortunately, for the most part, they invest very little of their personal time or their political capital to get the point across to vice presidents, deans, chairs, alumni, or others.  Revenue sharing models either do not exist or are ineffectively designed, and few traditional educators understand the audience that chooses to enroll online or at branches.

Bottom line:  We have the perfect context for the emergence of new providers.  If institutions lose general education students, just as one example, it will be tough to replace that revenue, without pricing in a way that makes the competitive situation just that much worse.

Given the rapid engagement of elite institutions in the online market, it makes sense to aggressively identify niche opportunities and to empower innovation teams.  Unfortunately, I don’t see much evidence that is happening.  On the contrary, most efforts at “innovation” are kept on a very short leash, for political reasons, as much as from a lack of understanding.  What we see are linear improvements and incremental change, slowed by complex governance processes, when we need something much more creative.

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