Learning to Flourish in a Disruptive Environment

Originally published in the The Chair Academy Journal, LEADERSHIP, Winter Edition, 2014 - Volume 19.3

Just a few years ago, the neighborhood Blockbuster store was a major center of activity. By providing people with easy access to new and classic movies below the movie theater cost, Blockbuster dominated the market in the distribution of movies and electronic games. Patrons enjoyed the convenience of viewing movies in their homes; however, they had to select their movies during set business hours, wait in line to pay, and return the movies to the store location after viewing. Blockbuster successfully built a network of over 9,000 locations, but recently the last 300 stores were closed in America (Selingo, 2013a).

The originally innovative Blockbuster model was replaced by Netflix, a web-based model, and Redbox, which still required the customer to pick up and return their movies but at a much lower cost and at convenient times. The rise and fall of Blockbuster might easily be characterized by Harvard Professor Clay Christensen's definition of "disruptive change". He defines disruptive change as a transformative event that changes or alters a product or service. Disruption occurs to industries in a manner which changes the landscape of their market and the product or service is replaced by a lower cost and more effective model (Christensen & Eyring, 2011).

The advent of the community college system serves as another good example of disruptive change. Community colleges were established as territorial monopolies to provide higher education to those who could not easily attend traditional residential colleges and universities. By affording a larger population access to higher education at a lower cost and within a short commute of their homes, community colleges caused a massive change to higher education.

Are there lessons to learn from the recent changes in the home movie delivery business that will benefit? What are some of the potentially disruptive waves that may impact the way community colleges deliver education and how could this influence our basic business model? From a college business officer's perspective, there are a number of potentially disruptive waves to consider.

The Cost Shift

In his book COLLEGE (UN)BOUND, Jeffery J. Selingo (2013b) indicated that, across the country, the state disinvestment in higher education has been swift and has largely gone unnoticed by the public. At the institutional level, Valencia College has seen the state's portion of its operating budget decrease from more than 60% to less than 40% in 10 years. Tuition is now the primary funding source for the college's operations.

For individuals, the move to a "user fee" mentality has placed a major burden on students and the financial aid system. Articles like "Is College Still Worth the Price?" (Wang, 2009) point out the amount families pay for college has skyrocketed more than 400% from 1982 to 2008. About half of Americans think that the higher education system is doing a poor or only fair job in providing value for the money spent (Wang & Parker, 2011).

President Barack Obama in his January 24, 2012 State of the Union address stated, "It's not enough for us to increase student aid. We can't just keep subsidizing skyrocketing tuition: we'll run out of money" (Obama, 2012). He goes on to implore states to make higher education a higher priority in their budgets and encourages colleges and universities to do their part in keeping costs down.

However, even with the President's coaxing, it might be too wishful to expect that state legislatures will ever return to earlier funding formulas. Businesses learned long ago that you cannot increase costs more than the annual cost of living without providing more value or service or customers become frustrated and seek alternatives. Colleges should be cognizant that the public is not fully aware of the shift in funding from state to individuals. The public may be more likely to focus their attention and frustration toward the colleges. Therefore, the burden will most likely fall on the colleges to develop new and innovative ways to provide quality education at a lower cost to students.

Increased Emphasis on Enrollment Planning

With the majority of community college operating funds generated from students, increased emphasis will be placed on enrollment planning. Good enrollment planning systems will be critical to the financial health and well-being of the organization. According to National Student Clearinghouse Research Center (2013), in the spring of 2013 the total headcount of community colleges dropped 3.6% from the previous year, the third straight annual decline. Many colleges dealing with three years of double-digit growth just a few years ago cannot begin to think about declines, but that is the reality. The questions of how long will these declines continue and how to adapt to the financial impact must be addressed.

Resource Allocation and Performance

Greater emphasis on tuition increases accompanied with pressure to increase graduation rates will require colleges to carefully evaluate the manner in which resources are distributed and utilized. Auguste, Cota, Jayaram, & Laboissiere (2010) identified that two-year institutions in the top-performing quartile attained a 22% lower cost per graduate than their group average. There was no correlation between dollars per student and success rates. Some of the better performing colleges had much less money per student full-time equivalent (FTE) than their peer group.

Therefore, it is incumbent on colleges to carefully scrutinize how resources are utilized to maximize the impact on each student's experience and overall outcomes. Ed DesPlas, Executive Vice Chancellor of the Dallas County Community College District, challenged business officers to identify the core activities that have the biggest impact on learning and treat them as priorities (DesPlas, 2013).

College Readiness and the Front Door

Community colleges have long served underprepared college students by providing developmental classes. Despite helping millions of students prepare for more rigorous college courses, many states are considering eliminating these developmental courses. In Florida, students are no longer required to take assessment tests to determine class placement. Appropriate placement enhances students' likelihood of successfully completing their desired academic programs. Students can now enroll directly into college algebra and college English, whether they are academically prepared or not. The Florida legislature also wants to reduce state funding of developmental courses. How will this ultimately affect persistence rates and graduation rates?

Reduced persistence rates would have a negative impact on enrollment and could further impact the college's financial operating model which is enrollment driven. Also, since developmental classes are more likely to be taught by adjunct faculty that are paid significantly less than full-time faculty, the reduction of these course offerings may raise the average instructional cost per section college-wide.

No Cost Instruction

Massive Open Online Courses (MOOCs) are gaining a large degree of attention. A New York Times article, "Instruction for Masses Knocked Down Campus Walls," by Tamar Lewin (2012) stated, "in the past few months hundreds of thousands of motivated students around the world who lack access to elite universities have been embracing them as a path toward sophisticated skills and high-paying jobs, without paying tuition or collecting a college degree." While the jury is still out on MOOCs, institutions are considering the impact and possible ramification of this very low-cost method of instruction. An abundance of free or nearly free instruction is likely to impact consumer perceptions of education. As people reflect on their learning experiences with these free services, will there be comparisons made to determine the value of the quality of instruction delivered by colleges and universities and the related costs?

How may this impact pricing decisions in future years? Will colleges move away from traditional tuition models, and move to variable tuitions based on the cost of delivery and/or demand for courses? Will free MOOCs replace the traditional development courses some legislatures no longer want to fund?

Technology's Impact on Bricks and Mortar

In the last two decades, community colleges have moved from traditional brick and mortar institutions with classroom instruction to institutions with significant amounts of online instruction. Some community colleges are developing separate institutions dedicated to providing only online instruction. How far the pendulum will swing in this direction is yet to be determined, but the demand for fully online or hybrid instruction continues to grow. Students, not institutions, will be the major driver for the change to fully online or hybrid instruction (Levine, 2000).

The continued shift in instructional delivery methods will have a major impact on the amount and design of facilities. The old measures of student FTE per square foot and instruction space per square foot of campus will become irrelevant. Determining what community college campuses will look like in the future and how many students can be supported will be an interesting journey. Will community colleges take a lesson from the for-profit institutions and develop storefront operations or, perhaps, single stand-alone buildings that are more widely dispersed throughout their service communities?

Theoretically, the instructional space required for students receiving all instruction face-to-face could serve twice the number of students if the college's offerings were 25% online, 50% hybrid, and 25% face-to-face. Technology-enhanced instruction can be customized and more individualized to better meet a student's specific needs and interests. Rich, engaging technology infused throughout the curriculum is in high demand by students and can help trigger each student's passion for learning. Add to the technology wave the impact of aging buildings, many of them built when the chalk board was the major classroom visual, community colleges will have major changes in the way capital funds are invested in the future.

More Competition

Community colleges, originally created as territorial monopolies to meet local community needs, now find themselves in a more competitive environment. A myriad of other institutions are now aggressively reaching out to serve the same population. Many of these institutions provide a major portion of their instruction over the Internet. Students pay significantly more money for this instruction compared to community college costs, but gain a larger degree of flexibility to meet their time and schedule constraints. In a competitive market, community colleges must invest more time and resources to gain a better understanding of what students want and require for success.

Auxiliary Services

Auxiliary services offered by the college impact not only the overall student experience but the college's financial bottom line. Services such as bookstores and food services may be affected by a number of changes. With the aggressive move to reduce the cost of course materials to students, what happens to the traditional bookstore business model? The revenue currently contributed to the college's operating budget by these auxiliary services could easily diminish and possibly disappear. Additionally, how will a potentially larger percentage of students choosing to enroll in online or hybrid courses impact the ability to provide good economical food services for those who come to the campus? Will cafeterias be replaced by a combination of coffee shops with grab and go food and vending machines?

Bottom Line

In order to create extraordinary learning environments where students are engaged and energized to succeed, already efficient community college systems must become even more efficient and more effective. This is highly unlikely without making drastic changes in the way community colleges approach instructional delivery.

In the midst of disruptions caused by technological advances in the home movie industry, Blockbuster built a successful business. Eventually, however, Blockbuster failed to adapt to new technological changes and customer demands. In order to meet the current and future needs of stakeholders, community colleges must remain willing to adapt to potentially disruptive changes.

Higher education's long history and deeply embedded traditions should not be impediments to our ability to change and better serve our students. Critical not only to survive but to flourish in the future, community colleges must develop and maintain cultures of adaptability in response to disruptive changes.

Keith W. Houck

Keith W. Houck is the vice president for operations and finance for Valencia College. He also serves on the CCBO Board of Directors as the American Association of Community Colleges Liaison. Prior to joining higher education, he served as Florida's lay representative on the Commission on Colleges for the Southern Association of Colleges and Schools and has served as an appointed Trustee for the college.

References

Auguste, B. G., Cota, A., Jayaram, K., & Laboissiere, M.C.A. (November, 2010). Winning by degrees: the strategies of highly productive higher-education institutions. Retrieved from http://knowledgecenter.completionbydesign.org/sites/default/files/510%20Auguste%20Cota%20FULL%202010.pdf

Christensen, C. M. & Eyring, H. J. (2011). The innovative university: Changing the DNA of higher education from the inside out. San Francisco, CA: Jossey-Bass.

DesPlas, E. M. (2013). Get to the core of the operational onion. Business Officer Magazine, 47. Retrieved from http://www. nacubo.org/Business_Officer_Magazine/Magazine_Archives/JulyAugust_2013/Business_Intel.html

Levine, A. (2000, October 27). The future of colleges: 9 Inevitable changes. The Chronicle of Higher Education. Retrieved from http://chronicle.com/article/The-Future-of-Colleges-9--I/10560/

Lewin, T. (2012, March 4). Instruction for the masses knocks down campus walls. New York Times. Retrieved from http:// www.nytimes.com/2012/03/05/education/moocs-large-courses? open-to-all-topple-campus-walls.html?pagewanted=2&_r=0

National Student Clearinghouse Research Center (2013, May 16). Spring college enrollment drops 2.3 percent. Retrieved from http://www.studentclearinghouse.org/about/media_center/press_releases/files/release_2013-05-16.pdf

Obama, B. H. (2012, January). State of the Union Address. Retrieved from http://www.whitehouse.gov/the-press- office/2012/01/24/remarks-president-state-union-address

Selingo, J. J. (2013a, December 2). Colleges can still save themselves. Here's how. The Chronicle of Higher Education. Retrieved from http://chronicle.com/article/Colleges-Can-Still? Save/143305/

Selingo, J. J. (2013b). College (un)bound: The future of higher education and what it means for students. New York, NY: New Harvest.

Wang, P. (2009). Is college still worth the price? Money Magazine. Retrieved from http://money.cnn.com/2008/08/20/pf/college/ college_price.moneymag/

Wang, W. & Parker, K. (2011, August 17). Women see value and benefits of college; Men lag on both fronts, survey finds. Retrieved from http://www.pewsocialtrends.org/:files/2011/08/Gender-and? higher-ed-FNL-RPT.pdf