Higher Education is confronting digital disruption. This is happening because digital technologies are combining with online business models to deliver learning to students with massive leverage of speed, scale, reach and cost. While this is not news, a tipping point has been reached in Australia as broadband internet approaches ubiquity, and digital technologies improve whilst costs reduce. As a result, incumbent Australian universities face unprecedented challenges regarding increased competition from new digital entrants and traditional competitors partnering with technology providers to respond.

Incumbent universities in highly reputable markets such as Australia, that attract a large base of foreign students face the highest risk of digital disruption. This is because the high profits enjoyed in these markets are what attracts digitally disruptive entrants to launch their more affordable, accessible and convenient options.

Drawing upon broad perspectives, substantiated with specific examples in Australia, this article outlines the imperative Australian universities face to respond to digital disruption and the tough strategic choices they need to make. It recommends disaggregating the challenge into three steps. The first is to reimagine and transform today’s online degree offering into a world-class digital experience that maintains or grows market share in the legacy degree business. The second is to create a separate new growth engine by disaggregating degrees to meet the rising demand for credit-bearing skill-based bite-sized online education. The third is to intelligently link these dual efforts around critical capabilities to create competitive advantage today and tomorrow.

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It takes courage for an executive and Council to respond to digital disruption and commit to undertake these transformations. In Australia, incumbents have generated healthy surpluses for years. The temptation is to keep investment modest, conduct bounded experiments and make only incremental improvements. However, every higher education incumbent must create a world-class online degree offering, there is no choice if they wish to remain relevant and thriving.

When it comes to disaggregating degrees for skill-based bite-sized online education this is more of a strategic choice for niche teaching institutions or prestigious research-centric institutions. However, scale incumbents with large student bases, middle rankings and teaching centric missions simply cannot afford to miss fast mover advantages in this space. It is going to have scale characteristics that make it, perhaps not ‘winner takes all’ but potentially ‘winner takes most’. This means scale players have an opportunity to build the enabling platform business to serve everyone everywhere at scale.

COVID-19: The Great Digital Disruption Accelerant and Amplifier

 

At the time of writing this article the global pandemic COVID-19, more widely known as the coronavirus, continues to increasingly impact the world and the daily lives of billions of people. Its impact on higher  education has been particularly profound as foreign students head home and hundreds of millions of students of all ages are forced into online learning models. In response to the increasing levels of unemployment the pandemic is causing, the Australian government has announced generous funding to slash the fees of six-month short courses in high demand disciplines such as nursing. Given the social restrictions in place these short courses must be fully online leaving universities no choice but to scramble and get it done. The Chief Marketing Officer of one Australian university described this situation with the words, “After twenty years of inertia every Australian university transitioned the majority of their courses to fully online mode in a matter of weeks. The quality will be marginal, but they are all online.”

It would be remiss not to reflect on the accelerant nature this pandemic is having on the digital disruption of higher education and the permanence of the changes it will leave behind. This article therefore also offers step-back reflections on COVID-19.

Finally, while COVID-19 is acting as an incredible accelerant and amplifier of the digital disruption of Australian higher education, the dual transformation response this article advises incumbent universities take holds true. Time to act, however, just ran out.

The Imperative: Digital Disruption

 

How, where and what students learn is changing. This is the result of ever-improving digital technologies and the scaling of local and global alternative online offerings. Let’s take a trip to 2030. Our research and fieldwork suggest we will find a radically reconfigured education landscape. Here’s a snapshot of the change that awaits us:

  • MACRO: People are shifting from once-in-a-lifetime learning to lifelong upskilling due to increasing life expectancy, longer career spans and the changing nature of work.
  • WHAT students will study: Curricula will be fully modularised, and customisable, with greater work/curriculum integration. Students will be able to earn micro-credentials that can be verified through a blockchain-based system.
  • WHERE students will study: Students will evaluate courses through metrics that provide them a clear indication of a potential return on investment. They will also increasingly turn to alternative education providers as they offer affordability, accessibility, and convenience that incumbents cannot match.
  • HOW students will study: Technology will make remote and in-person learning equal experiences. In addition, courses will adopt learning techniques that adapt to each student’s progress and preferences.

The stark differences between this world and the present reality for most institutions means leaders need to act quickly to futureproof their ability to serve students. Several incumbent universities are acting by aggressively investing to improve their online offerings. Those not acting, or more likely taking only limited action to experiment at the edges, will lose market share in traditional online degrees then become irrelevant as demand explodes for flexible, smaller and modularised alternatives.

The investments being made, in most cases, take the form of partnerships with one or more of the established Online Program Management (OPM) providers. OPMs provide needed capabilities to create online learning experiences and enroll students in them, thus scaling faster. The number of OPMs has tripled the last decade and their revenues have grown at 30% over the past three years.1 An example in Australia is RMIT Online which is in year four of a relationship with OPM Keypath Education that is seeing impressive growth in online degrees and industry integrated short courses.

In addition, and more profoundly in terms of disruptive threats, non-traditional competitors continue to enter the market with an intent to offer simpler and lower-cost access to skills-based learning online (see Case Study: Inspiration From Global Peers). These entrants are creating learning pathways for people that need new or upgraded skills to remain employable as economies like Australia’s transition from manufacturing to knowledge and services.

Well known global examples include the providers of massive open online courses (MOOCs) such as Coursera and Udemy, both members of the EdTech unicorn club.2 Local players are also making moves. SEEK, the employment platform is a prominent example in Australia. SEEK is investing hundreds of millions of dollars to offer end-to-end online education and careers services over the top of its core offering to match job seekers with jobs. In 2019 SEEK made an AUD $92 million investment to buy 50% of the online learning platform FutureLearn, founded by the Open University in the UK and an AUD $103M investment in Coursera. SEEK CEO, Andrew Bassat, said at the time “The investment reflects our commitment to online education, which is enabling the upskilling and reskilling of people and is aligned to our purpose of helping people live fulfilling working lives.”3

Australian universities should be worried about SEEK and keep a close eye on their next moves. Forward thinking incumbents are responding to skill-based demand. RMIT are again an example with their RMIT’s Creds initiative and Future Skills offering, which aims to help students “build a bank of career-ready skills and capabilities that are stackable, transferable and relevant to the changing world of work.”4

In summary, changing student expectations, exacerbated by the disruptive forces of digital technologies and online learning models forms the imperative for incumbent universities to respond, and to be bold in response. Those that do not will see legacy online offerings become uncompetitive as students migrate to reimagined experiences. They will also miss fast follower advantages in creating skill-based learning pathways. If this happens, they face irrelevance as the game shifts from once in a lifetime classroom learning to digitally enabled lifelong learning.

The Incumbents’ Response: Confronting Disruption Through Dual Transformation

 

Innosight’s Dual Transformation framework provides a practical guide to create and manage a response, as follows:

  1. Transformation A (Repositioning Today): Deliver a world class digital experience to all students whether on-campus, purely online or anywhere between the two
  2. Transformation B (Creating Tomorrow): Disaggregate degrees to innovate skills-based credit-bearing bite sized offerings delivered fully online
  3. The Capabilities Link: Ensure Transformation B can compete unfairly through access to critical capabilities, namely curriculum, outcomes and assessments from Transformation A in an efficient and effective manner

The basic concept of Dual Transformation emerged from the Harvard Business School doctoral research and personal experiences of Clark Gilbert. Clark used his doctoral findings to lead successful Dual Transformation efforts first at a US media organisation then in higher education as the President of BYU-Idaho, and most recently as President of BYU-Pathway. His experiences, combined with those of Innosight consultants serving clients, form the foundations of the 2017 book, Dual Transformation: How to Reposition Today’s Business While Creating the Future.

Transformation A: Reimagining the delivery of online degrees

What exactly is a world class digital experience? In our view it is:

  • Oriented around the job to be done and designed for an online only learning experience
  • Customised to the student and their individual circumstances. For example, through tailored options and modularity of rich media content
  • Able to give the student complete control to acquire market-relevant knowledge and skills in ways that work around their busy daily lives. For example, it allows them to start anytime and is optimised for mobile
  • Truly supportive and caring of the student at each step toward their learning and career goals. This includes lecturers, tutors, success coaches and career mentors
  • 24/7 access to technical support

Delivering this experience requires incumbent universities to break free of the notion incremental improvements to existing online or blended offerings will get them there. It won’t because a world-class digital experience necessitates a different design and pedagogy. This is what is driving the OPMs partnerships as the alternative is to go it alone in-house. Each of these approaches has trade-offs to weigh.

Going in-house takes considerable time as talent must be hired, digital capabilities must be developed, and a portfolio of digitally re-imagined courses needs creating and scaling. However, the reward for success is significant as all revenue is retained. Partnering to access at least some of the talent and capabilities required reduces the time to market and scale. This is attractive because creating commercial grade digital experiences is beyond the core competencies of incumbent universities. The reward for success is therefore muted, as revenue is shared with the OPM, often as much as half, or more if the OPM is performing most of the value chain steps.

Weighing up the ‘in-house versus OPM’ dilemma

These trade-offs present executive teams with a dilemma, as neither choice is seemingly a perfect solution. There is some good news. The economics of partnering with OPMs are improving in universities favour as fee-for-service models have emerged to compete with full-service models. However, even if more attractive OPM deals can be struck the upside is still offset by revenue being shared for the long term. And while revenue share is a critical factor, we argue a more critical factor is the reliance an OPM approach creates on a third-party for digital capabilities we assert are future core competencies for higher education. This reliance therefore undermines long-term competitive advantages. It is worth considering that the delivery of a world-class experience in any industry almost always requires owning that experience end-to-end. Imagine Netflix outsourcing ownership of their user experience. For sure they leverage Amazon Web Services to deliver their experience, but they tightly control the fundamental design of that user experience.

Dealing with market specific factors

Market specific factors further complicate this choice. An example in Australia is the teaching model applied to the delivery of education purely online. Australian universities operate under an Enterprise Agreement with their relevant state government authority. This agreement outlines the hours academic staff can allocate to teaching, research and administration. While specific allocations vary, they do not allow a full allocation to teaching, which constrains flexibility and increases the costs of delivering education purely online. This furthers the appeal of OPMs who, as different legal entities, can operate pure teaching models by directly undertaking the hiring and deployment of teaching staff themselves.

Making the right choice

Given these broad and market specific factors, what is the right choice for an incumbent university executive to make? The answer is it depends. It depends on:

  • The university’s positioning and ranking. A prestigious research driven institute will argue its priority is research and therefore an OPM should bring needed energy to reimagining its online education, whereas a teaching centric institution should want to own the capabilities required for quality online teaching.
  • Course portfolio breadth. A broad portfolio supports an argument for in-house given digital re-design can be leveraged for scale across many curriculums, reducing costs.
  • Calibre of existing digital innovation capabilities. If capabilities are truly nascent the argument sways towards partnering with an OPM.
  • Cash reserves. If healthy cash reserves exist, these can fund the longer in-house journey. If not, the economics of an OPM are more attractive.
  • Council conviction. If the Council is convinced digital capabilities are necessary future core competences and significant capital expenditure to build them is justified, the in-house approach makes sense.

Ultimately, every university wants to own the experience it provides its students. However, this needs to be weighed against consideration of each factor outlined above with recognition the clock continues to tick in the race to offer high quality digital experiences. For this reason, unless the executive dialogue around these factors proves conclusively otherwise, we believe ambitious teaching centric universities should pursue an in-house approach.

Therefore, an admittedly bold, yet logical, move is to acquire an OPM, or at least the critical components of an OPM. After all, universities regularly invest millions of dollars in new buildings for their campuses, justified as necessary infrastructure to deliver on their mission. They should invest in digital capabilities with the same mindset. Digital infrastructure is as critical to their future, as building lecture halls has been to their past. Whether a quality OPM can be found at a viable price point is a pertinent question. The imperative for a bold response justifies looking.

Transformation B: Creating a Growth Engine Through Skills-Based Innovation

Transformation B is about serving students in ways that meet the demands of tomorrow, not today. It should follow a disruptive approach by competing against the non-consumption of expensive traditional degrees. This requires disaggregating degrees to enable innovation against a growing global job-skills gap. The jobs of tomorrow will not be the jobs of today. In Australia it is estimated 40% of jobs could be replaced by technology by 2025.5 This explains why 62% of executives believe they will need to retrain or replace more than a quarter of their workforce between now and 2023 due to advancing automation and digitisation.6 This presents an opportunity to create a market for skills-based bite-sized ‘chunks’ of education.

These chunks might be equivalent to a half or a quarter of a traditional degree unit. Education in this form allows learners to dip in and out, building their skillset on their own terms. Efforts in this space are underway with an increasing array of, what are termed, micro-credentials available to address specific soft skills or technical disciplines. A recent industry scan found over 450 MOOC based micro credentials available in the market.7 This is the formation of a powerful wave of reinvention for higher education. Transformation B is about ensuring incumbent universities catch this wave as fast followers through a focused separate entity unencumbered by legacy ways of thinking.

Credit-bearing or non-credit bearing

A strategic choice incumbents face is whether to offer these skills-based chunks as credit-bearing, in the same way traditional degrees are accredited. Assessment and accreditation of education outcomes are comparative advantages for incumbents to compete against new entrants, given they are already bestowed with this ability.

The argument for credit-bearing is it reassures the customer their learning outcomes hold ‘currency’ they can spend throughout their professional careers. It also enables these individual chunks to stack on top of each other toward certificates, diplomas and degrees, thus creating new and diverse pathways for learners to acquire accredited skills. Further innovation should break these pathways free of traditional discipline area constraints, allowing learners to pick and choose from many discipline areas. This means a learner in Canberra re-skilling around cyber security to get a job in government IT can supplement their technical skills with an understanding of the basics of international relations.

A trade-off with credit-bearing offerings is an increase in regulatory costs and therefore prices. In our experience this trade-off is worth it. During research interviews in Australia we spent time with an employee of an Australian ticketing company who had enrolled in a credit-bearing cyber security short course. His rationale for enrolling was to help his employer protect their product against increasing levels of fraudulent behavior. He told us a pricing premium for accreditation was justified despite having no idea if he would go further. The optionality it afforded to stack further skills on top and perhaps one day down the track achieve a fully accredited diploma, graduate certificate or degree was appealing enough to part with more money.

Dealing with inevitable cannibalisation

Digging further into the economics, an issue with disaggregating degrees is the healthy margins baked into a bundled multi-year degree are exposed as the component pieces are broken out and reassembled into smaller solutions. This is a necessary requirement to create affordable access to education. The good news is a disruptive intent means these solutions will initially address non-consumption of traditional higher education. The bad news is that, over time there be inevitable ‘cannibalisation’ of traditional degrees as customers increasingly opt for good enough short-form solutions instead of degrees that overshoot their needs. It is, however, better to do this to your own legacy institution than wait for others to do it to you. This is especially the case if early mover advantages result in rapid scaling that is hard to catch, as it has with digital disruptions in entertainment and social media, among others.

Another potential benefit of Transformation B, beyond its growth offsetting a decline in legacy domestic online degrees is the optionality it affords to create price competitive offerings for price sensitive international markets.

Creating strategic and structural autonomy

To successfully innovate for the customer, unencumbered by legacy thinking, Transformation B requires strategic and operational autonomy. The reason is this team needs to innovate and operate at speeds the legacy organisation is simply not accustomed to, rapidly responding to market demand and iterating solutions. It must create the learning outcomes students want, not the ones faculty want to teach. This ‘market-pull’ approach is the antithesis of the traditional higher education ‘product-push’ approach, where academic experts are hired to further knowledge through research then create curriculums to impart this knowledge.

This structural choice is segmented by legal structure and accreditation. Legal structure can be a separate division under the existing institution or a fully separate legal entity. Accreditation can be the existing campus accreditation or separate accreditation. Each choice has trade-offs to consider, as outlined below:

This is a contextual choice. If an executive and Council are fully aligned on a bold Transformation B mandate a separate division makes sense. If alignment is lacking, a separate legal entity is worth considering in order to negate the constraining influence of misalignment. As for the choice to be separately accredited, whilst it is tempting to get total control in our view this willingly gives up competitive advantages in leveraging an established accreditation. Accreditation is an asset that new entrants find hard to replicate and therefore increases the odds of incumbent success if connected between Transformation’s A and B in the Capabilities Link.

The Capabilities Link: Connecting Unique Assets

 

Repositioning today (Transformation A) and creating tomorrow (Transformation B) sounds simple enough. Making it work, however, requires mastering the “C” in the Dual Transformation ABC equation: the capabilities link. This link intelligently connects these dual transformations, avoiding the “sucking sound” of the core and helping Transformation B succeed. The text below describes the problems the capabilities link solves, and how to think through tricky issues such as access rights, incentives and metrics.

Benefits of a capabilities link

Transformation A and Transformation B are materially different. Failing to create a clear and thoughtful link between the two risks one of two bad outcomes:

  1. Transformation B falls prey to the “sucking sound of the core.” We imagine this is audible as new growth efforts valiantly trying to innovate new solutions are ‘sucked back’ by unnecessarily complex core processes or cumbersome governance. Examples include trying to reconfigure the core student record system or adherence to calendar driven budgeting and approval cycles to access resources.
  2. Transformation B can’t compete against upstarts. Core assets like curriculum, assessment outcomes and accreditation can provide an unfair (but completely legal) advantage against upstarts, if they are thoughtfully shared.

Link too tightly, you replicate today. Link too loosely you lose competitive advantage. Strike the right balance and you drive growth by combining unique, difficult-to-replicate assets with just enough entrepreneurism.

How to build and manage the capabilities link

There are three critical issues that incumbent universities need to think through: access rights, incentives and metrics.

Access rights

It is important to think about three different types of capabilities. The first is non-strategic capabilities that remain in the core institution and are accessed by Transformation B using basic service level agreements. These include supporting functions such as human resources, legal services and pricing management.

The second is replicable strategic capabilities that must be owned by Transformation B, such as data analytics, course design, student admission processes or student support services. These capabilities may exist in the existing organisation but are easy to duplicate and are used in such different ways for Transformation B that sharing them will hurt both efforts. For example, the student acquisition approach for a seventeen-year-old considering a multi-year degree is very different to a single parent that needs to re-skill to keep their job.

The third is non-replicable strategic capabilities. These are critical assets or capabilities that reside in Transformation A, cannot be duplicated, yet truly create competitive advantage for Transformation B. In higher education these are the core competencies of a university: curriculum development, assessment outcomes, accreditation and academic governance. The capabilities link should be designed around these assets.

How best to provide access to these shared capabilities without compromise or interference? This is a challenging question. Consider, for example the requirement to create faculty capacity to develop usable curriculum for Transformation B. This is not as simple as emailing over a unit or two’s worth of content and assessment outcomes. It takes time and expertise to provide curriculum in a format Transformation B can disaggregate to innovate skills-based chunks with assessable and accreditable learning outcomes. One answer is faculty secondment models, often in combination with back-fill sessional staff mechanisms, supported with a standardised course development cycle that ensures new Transformation A and B offerings get to market in a timely fashion.

Keep in mind the following principles to avoid compromise or interference around shared capabilities:

  1. Application of a consistent data-driven criterion-based approach to new course development whereby the market is the primary driving force for innovation, not faculty
  2. Appoint a leader within Transformation B with academic credentials that can meet Transformation A faculty as a peer to create a greater sense of mutual understanding
  3. Encourage the right behaviours through careful design of incentives, which brings us to the next issue

Incentives

It is critical for schools and faculty to have appropriate economic incentives. In our view, the principle each entity and offering needs to be profitable should not be compromised. Beyond this principle, how the exact economic incentives are designed is a contextual choice for the university executive. We suggest thinking through two things:

  1. Types of incentives. Consider both financial incentives such as one-time course development fees, potentially in combination with a curriculum licensing fee or constructs to share the revenues the new offerings earn, and intangible incentives, such as offering faculty increased research time in exchange for their involvement.
  2. Revenue sharing. There is a spectrum of ways in which to share revenue. One extreme is centralising revenue from Transformation A and B and allocating both revenues and costs via a pre-determined formula or at the discretion of the Vice Chancellor. The other extreme features treating Transformation A and B as direct competitors. This approach clearly puts more political and cultural pressure on the capabilities link, but also could enable more aggressive growth strategies on the part of Transformation B.

Metrics

Transformation A and B should both strive to create high quality solutions for the markets they are targeting. Sharing academic governance in the capabilities link ensures quality teaching standards across both Transformation A and B. However, Transformation A and B need to be tracked and measured using metrics specific to their markets, students and strategy. Transformation A should measure students’ online interactions and engagement; Transformation B should emphasise measuring employment outcomes and customer satisfaction. In addition to metrics for the two transformation efforts, the Capabilities Link should also have metrics aligned to success. This includes measuring the development efficiency of new courses and quality of output.

Global Implications

 

This article has focused on incumbent universities in Australia. However, student expectations and how, where and what they learn is changing everywhere. The implication is that every global higher education incumbent must respond by adopting the dual transformation approach outlined in this article.

The broad strategies for Transformation A and Transformation B translate to all markets with nuanced differences. For example, in the US online delivery of degrees is targeted predominantly at adult learners. Most of these adult-learners never come to a campus or perhaps come only for graduation. They do not need the campus facilities targeted at 18-22-year old’s, but they do need high-touch personal coaching throughout their learning journey, given they tend to be what the Southern New Hampshire University President, Paul Leblanc, terms ‘fragile learners’.

This US specific context has seen several successful Transformation B models emerge to deliver online education pathways to underserved adult learners. For example, BYU-Worldwide Pathway8, led by President Clark Gilbert, was created out of BYU-Idaho to provide hope and confidence for the “hidden many” who were previously not served at BYU or BYU-Idaho campuses. It has grown to more than 40,000 annually enrolled students since its launch in 2007, surpassing the headcounts of both the BYU and BYU-Idaho campuses. Contrast this to Australia where students overwhelmingly attend universities in their local State. This means there has long been students of all ages that rarely, if ever, go to campus and adult learners have long been part of the student base on campus and online.

Given Transformation A and Transformation B efforts translate around the world, incumbents around the world should study the successful efforts of their global peers for inspiration. We recommend two widely known US examples, Arizona State University Online and Southern New Hampshire University Online (see sidebar).

It is important to state however, that the Capabilities Link design is subject to local complexities. As noted previously, a clear example in Australia is the Enterprise Agreement structure and union influence that constrains the flexibility of online teaching models in ways US structures do not. This means that whilst every incumbent should take inspiration from global success stories, they must remain vigilant in overcoming the complexities of execution in their specific market.

Case Study: Inspiration from global peers

SNHU Online: Southern New Hampshire University, under the visionary leadership of President Paul LeBlanc, reoriented itself from traditional campus university to focus efforts on serving non-traditional students, namely adult learners, online. To succeed, SNHU online focused on developing a deep understanding of these learners’ specific needs. For example, they have likely hit a ceiling in their careers whereby they need a college degree, they need to balance learning around jobs and families and above all else they seek convenience, affordability and completion speed. With these insights, SNHU online re-designed the learning journey and experience around needs, requiring significant investments in technology and student support. The outcomes are outstanding. SNHU online today offers over 200 programs and has grown from 2,800 online students enrolled in 2003 to over 135,000 enrolled in 2019, with a 2023 target of 300,000.

ASU Online: ASU Online is Arizona State University’s online division. Its offers include fully online asynchronous courses that allow learners to receive the exact same degree as they would attending ASU on campus. ASU Online has successfully differentiated its offering as learner-centric by providing flexible scheduling, stackable course units, quality faculty and virtual career services. In addition, ASU Online students are supported through 24/7 tech support, coaching and are encouraged to provide feedback constantly to ensure quality thresholds are maintained. When launching in 2010, ASU Online initially partnered with Pearson to enhance and rapidly expand its online learning services and resources. After gaining early traction, ASU has since moved many functions in-house, although it still partners with Pearson for enrolment and marketing. In terms of outcomes, ASU Online offers over 200 programs and has 30,000 enrolled students. It is experiencing around 30% year on year enrolment growth.

In parallel incumbent institutions must monitor and learn from digital entrants. Most of us are familiar with the likes of 2U and Coursera and the impact they are having in the market, but we recommend you also keep an eye on the “disruptors behind the disruptors”. To get you started we have identified seven emerging digital disruptors with potential to shake things up further and therefore are worth keeping an eye on.

COVID-19 as Accelerant and Amplifier of Digital Disruption: Three Step-Back Reflections

 

We noted in the introduction it is striking to observe the impact COVID-19 is having on higher education at the time of writing this article. The pandemic and its second-order implications are acting as both an accelerant and amplifier of digital disruption in higher education. After all, necessity is the mother of invention and the problem of wide-spread student population lockdowns has necessitated creative efforts by educators around the world to ensure students still learn. This is what we term a job-to-be-done dislocation, where adoption of a new solution is forced on people who then realise their previous perceptions of inferior quality were false, or at least overstated. COVID-19 has changed priorities and forced a system-level response around adoption of online learning, which in turn is changing perceptions.

Here are three step-back reflections regarding COVID-19 and the arguments being made in this article:

 

  1. Underlying trends and disruptive warning signs of changes to where, how and what students learn will be pulled forward five years; what was being talked about as a 2030 environment becomes 2025 as incumbents go through an accelerated learning journey about what works and doesn’t, and new entrants see a chance to seize opportunity and double down efforts around new online products
  2. Increased realisation of high quality online education is a paradigm shift from taking what exists today and putting it online. As schools scramble to upload curriculums and teach virtually the difference between this and modern designed for online only education will become apparent to the masses
  3. Understanding that online education creates new opportunities to engage students. During a recent interaction with a teacher at a Chinese University we were told they are seeing their students get more engaged and be more responsive online than they were previously in physical classrooms. It appears students growing up in a digital world feel more comfortable expressing themselves and responding to feedback through online medium, resulting in a greater level of student engagement

Unsurprisingly, those institutions further along their online transformation journeys are adapting most effectively to this new reality. However, they should note those institutions behind them on the journey have just been given a monumental motivating purpose to step-change their online offerings.

Conclusion: Having the Courage to Really Choose

 

Chapter five of Innosight’s book Dual Transformation carries the title The Courage to Choose. It states that the best time to start dual transformation is when times are good, because leaders have the capacity to handle the twists and turns that naturally accompany a transformation journey. In contrast, by the time an organisation faces a burning platform (such as the one COVID-19 has created), it is often too late. How good times are in higher education differs by the type of institution and the market it operates in. In the US, Innosight’s co-founder Professor Clayton Christensen and his colleague Michael Horn predicted institutions making up the bottom 25% of each tier in the US will fail within fifteen years.9 For these institutions it is arguably too late, whereas for those in the middle tiers it is time to act, if they have not already.

In Australia most incumbents have experienced not just good times for many years, but truly great times. It therefore takes courage to choose to undertake two fundamental transformations to respond to digital disruption even as weak signals are now accelerated and amplified by COVID-19. The temptation is to keep investment modest and focused on incremental upgrades of the legacy online portfolio, with an OPM partner. It takes courage to instead significantly invest in Transformation A to reimagine the online offer, especially if enrolments continued to show some growth. What should help find the courage is that every higher education incumbent must do Transformation A, there is simply no choice if they wish to remain relevant and thriving.

If it’s tempting to delay Transformation A, then Transformation B is easily seen as ‘nice but not essential’ to future-proof incumbent universities. It might be the right strategy for niche teaching institutions or prestigious research centric institutions to maintain a ‘nice but not essential’ view of Transformation B as it is described in these pages. However, the scale incumbents with large student bases, middle rankings and teaching centric missions simply cannot afford to miss fast mover advantages in Transformation B. Transformation B is going to have scale characteristics that make it, perhaps not ‘winner takes all’ but potentially ‘winner takes most’. Using a retail analogy given the digital disruption this industry has seen, whilst Monash might operate as a digital farmer’s market based on a prestigious positioning and focus, a scale player like Deakin has an opportunity to build the enabling platform business to serve everyone everywhere at scale, like an Amazon.

Higher education is now definitively at a tipping point where the previously weak signals of digital disruption had gained strength before COVID-19 turned them full force. Choosing to transform is not an ‘or’ it’s an ‘and’. Many universities in the US and Australia, and indeed around the world, have shown courage to get started through in-house or OPM partnered experiments. Very few, however, have really, truly, chosen to transform. It requires courage to really choose to commit a game-changing amount of resources to create a world class digital experience for all students whether on-campus, purely online or anywhere between the two, and to do this in-house. It requires courage to really choose to form a separate entity to disaggregate degrees and innovate skills-based online offerings to meet future demand.

The word disruption often invokes fear, but those higher education institutions that embrace possibility can turn the innovator’s dilemma into the innovator’s opportunity. They can do this by offering high quality lifelong online education pathways, that will become the future core of their institution, as traditional degrees undertaken at eighteen years old become a distant memory.

 


About the Authors

 

Andy ParkerAndy Parker is a Partner at Innosight, the innovation and strategy consulting firm co-founded by Professor Clayton Christensen, where he is based in their Singapore offices. Andy spent the majority of 2019 in Australia advising on the response to digital disruption of higher education. aparker@innosight.com

 

Scott D. Anthony is a Senior Partner at Innosight and former Managing Partner of the firm. Based in the firm’s Singapore offices since 2010, he has led Innosight’s expansion into the Asia-Pacific region. He is co-author of Dual Transformation: How to Reposition Today’s Business While Creating the Future (HBR Press). santhony@innosight.com

About Innosight

Innosight is a strategy and innovation consulting firm that helps organisations navigate disruptive change and manage strategic transformation. Now a member of the Huron Consulting Group, we work with leaders to create new growth strategies, accelerate critical innovation initiatives, and build innovation capabilities. Discover how we can help your organisation navigate disruption at www.innosight.com.

Endnotes

  1. https://www.insidehighered.com/digital-learning/article/2018/06/04/shakeout-coming-online-program-management-companies
  2. A unicorn is a private company with a valuation of over a billion US dollars. This EdTech unicorn club’s membership stands at 14 companies, who have collectively raised $6.6 billion of funding the past decade: https://www.holoniq.com/edtech-unicorns/
  3. https://www.businessinsider.com.au/seek-makes-big-investment-in-global-online-learning-platforms-coursera-and-futurelearn-2019-4
  4. https://www.rmit.edu.au/creds
  5. https://www.abc.net.au/news/2015-06-16/technology-could-make-almost-40pc-of-jobs-redundant-report/6548560
  6. https://www.mckinsey.com/featured-insights/future-of-work/retraining-and-reskilling-workers-in-the-age-of-automation
  7. https://www.classcentral.com/report/moocs-microcredentials-analysis-2018/
  8. https://www.byupathway.org/
  9. https://www.nytimes.com/2013/11/03/education/edlife/online-education-as-an-agent-of-transformation.html