UVA Board's Lazy Business Sense

They've called for a leap into online learning, but demonstrate no understanding of that field. They use the popular language of disruption theory without understanding any of its mechanisms.This would make a good comedy if we were viewing it in the distant past. Instead it's a tragedy.
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The University of Virginia scandal is ongoing. Yesterday saw the resignation of Vice Rector Mark Kington and University Professor Bill Wulf. Newly-released emails among the Board of Visitors now provide a slightly clearer answer to the question on everyone's mind: "What the hell were they thinking?" The answer should leave you with even less confidence in them, if that was possible.

Much has been made of the strategic mumblespeak offered by Rector Helen Dragas. After two years on the job, President Sullivan had not demonstrated enough "strategic dynamism." She apparently was forging an incremental path for moving Mr. Jefferson's University into the future. The big donors on the Board of Visitors wanted her to run UVA more like a business.

Looking through the emails, however, it becomes clear that the donors weren't even offering good business sense. They've called for a leap into online learning, but demonstrate no understanding of that field. They use the popular language of disruption theory without understanding any of its mechanisms.

This would make a good comedy if we were viewing it in the distant past. Instead it's a tragedy.

Let's start with online learning. Recently released e-mails among the Board of Visitors detail their excitement about online classes. Jeffrey C. Walker, a Board Member of UVA's McIntire School, wrote to Kington:

"Check out the video that Berklee College of Music is having its board (of which I am a member) watch with regard to the hugely successful online course at Stanford that is being used by Stanford, Harvard, MIT, Southern New Hampshire University ... and many other universities,"

It's true, online learning is all the rage now. David Brooks likes it, and he's a reliable indicator of what the chattering class is exposed to these days. MIT does indeed offer free online courses. Stanford and Harvard are following suit. Motivated students can now watch lectures from famous professors from the comfort of their own home. It's like a TED talk, but with uglier PowerPoint.

None of the top schools are replacing their existing curriculum, though. That's because they're working their way through two major hurdles. At the classroom level, online courses are only an acceptable substitute for a small set of learning objectives. Lectures and multiple choice work great online. Socratic Method, not so much. Online learning also magnifies cheating problems. Jeffrey R. Young describes the current state of affairs as "the gamification of education, and students are winning."

The second hurdle is a market problem. Did you notice that Jeffrey Walker was describing one online course, being used at many universities? If Stanford and MIT are offering free online classes to everyone, what value is there in UVA creating its own content? The market for online intro-to-biology lectures simply isn't that big. If the top 10 private universities in the country offer these lectures for free, there is actually no market share for the top 10 public universities to exploit on their own. That would be a bit like launching a new company in 2012 that sells books through the Internet. Fantastic idea, but a bigger player already has that covered.

This isn't to say that universities shouldn't explore online learning. Properly rolled out, online classes can cost-effectively reach underserved communities. But the proper strategic position is to move slowly into this new space. Before you start massively slashing programs, you probably want to know what online learning can and cannot effectively replace. You also probably want a pilot program that tests key assumptions about how your students/customers will react to it.

Large, well-run organizations don't make a habit of jumping on every new fad. Yet this is exactly what led to the abrupt firing of President Sullivan -- she apparently wasn't ready to chase headfirst after David Brooks's latest fancy.

The larger point is that the Board of Visitors has misread their business textbooks. Brooks writes, "What happened to the newspaper and magazine business is about to happen to higher education: a rescrambling around the Web." Rector Dragas, Vice Rector Kington and the rest of their cabal took him too literally. To put it bluntly, they're just plain wrong.

This is a common misunderstanding of disruption theory. Clayton Christensen coined the term in his 1997 book, The Innovator's Dilemma. He has written a series of popular business titles on the topic ever since. Disruptive innovations are ones that undermine existing markets, leveling unsuspecting market leaders. The Internet is often treated as One Big Disruption. That's fine shorthand if you're writing a pithy op-ed, but it misses some important nuance: what drives disruptive innovation is the collapse of revenue streams, not the appearance of competition.

Let's take the newspapers as an example. Blogs haven't undermined the newspapers. NYTimes.com and CNN.com get more traffic than any single blog. More people are reading the Times than ever before, in fact. Direct competition from citizen journalists hasn't been a problem for the news industry. It turns out that most of us prefer our news from journalists. Newspapers don't have a readership problem, they have a revenue problem. The plague on the newspaper business has come from Craigslist and Google AdWords. Craigslist fundamentally changed the classified advertising business, while Google revolutionized the rest of the advertising market. And once revenues collapsed, news conglomerates could no longer pay off the debts they accrued through a decade of leveraged buyouts and consolidations. Hence, we're left with newspaper disruption. The same is true with books and even (as my own research shows) with political advocacy organizations. It isn't direct competition that undermines market leaders. It's the decline of revenue streams, making it impossible to pay for your old infrastructure.

Revenue problems for public universities are not originating in competition from online learning programs. They're coming through systematic defunding by state legislatures. Higher education in America faces its share of problems, to be sure. Tuition soars and students are racking up mountains of debt. But the underlying revenue model faces no direct threat. A modern-day Good Will Hunting might gain his education through MIT's online lectures rather than a Boston public library card, but the great mass of privileged 18-year-olds will keep heading off to college. Neither the University of Phoenix nor MIT's online courses offer a replacement for the college experience that students are currently paying for. And competition does not equal disruption.

Behind all the silly jargon about "strategic dynamism," it appears the great tragedy of the UVA Board of Visitors is not that they've brought effective business sense into the Ivory Tower. It is that their business acumen proves stunningly lackluster.

This is governance through second-hand op-ed clippings. It is governance through rah-rah PowerPoint presentations. It is governance through Cliff's Notes and Wikipedia pages. It bears no resemblance to an effectively-run company, much less an effectively-run university.

The University of Virginia deserves better than this, in so many ways.

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