Changing Higher Education

Market-leaders can adapt to disruptive innovation!

One of the more striking - and disturbing - findings of Clayton Christensen's original work on disruptive innovation was that market-leaders were almost never able to cope with the attack of a disruptive innovator (see my earlier post). Even in cases in which leadership understood the danger posed by the disruptor, inertia and short-term economic constraints and incentives almost always led the market leaders to maintain their original trajectories. Over time, the disruptors produced better and cheaper products than the market leaders, and correspondingly the customers switched allegiances. The disruptors became the new market leaders, and the former market leaders often simply disappeared.

Since many have suggested that higher education shows all the characteristics of an industry that is ripe for disruptive innovation, this inability of market leaders to adapt in the face of disruption is rather disturbing.  However, there is good news from more recent research by Christensen and his group.

Why manufacturing may be important to innovation

The January/February issue of technology review (TR) and the March issue of the Harvard Business Review  (HBR) both contain fascinating  articles on the relationship between innovation and manufacturing that point out significant problems with the generally accepted view of globalization.  Since both globalization and innovation are important for higher education, this new discussion provides additional background for some of the major issues discussed in this blog.

Globalization, as generally defined, involves modularization of product creation, production and sales, with individual modules being carried out wherever on the globe they can "best" be performed - where "best" will be defined according to different criteria by different companies (see post Globalization and Internationalization). However, in many industries a typical result has been to offshore the manufacturing component of the process in search of production that is cheaper than domestic production.

Too many American companies base decisions about how to source manufacturing largely on narrow financial criteria, never taking into account the potential strategic value of domestic locations. Proposals for plants are treated like any other investment proposal and subjected to strict return hurdles. Tax, regulatory, intellectual property, and political considerations may also figure heavily in the conversation. But executives, viewing manufacturing mainly as a cost center, give short shrift to the impact that outsourcing or offshoring it may have on a company’s capacity to innovate. Indeed, most don’t consider manufacturing to be part of a company’s innovation system at all.

Totally unrelated new data on household income and student loans

Sentier Research recently published a report on Household Income Trends: January 2012. This is regular series that looks at trends in real (inflation corrected) median annual household income in the US. I had discussed an earlier report in my post A bad 4 years for family income, a good 4 years for college prices.

There is a lot of interesting data in this recent report, but one paragraph jumped out at me:

The median annual household income in January 2012 can be  put into broader perspective by a comparison with previous levels of household income dating back to the start of the last decade. The January 2012 median annual household income of $50,020 was 5.4 percent lower than the median of $52,852 in June 2009, the end of the recent recession and beginning of the “economic recovery.” The January 2012 median was 7.8 percent lower than the median of $54,242 in December 2007, the beginning month of the recession that occurred just over four years ago.  And the January 2012 median was 8.7 percent lower than the median of $54,790 in January 2000, the beginning of this statistical series. These comparisons demonstrate how significantly real median annual household income has fallen over the past decade, and how much ground needs to be recovered to return to income levels that existed in earlier years. 

An 8.7 % drop in median family income since 2000 is huge and suggests a pretty significant change in life-style.