The closing of Ashford University’s Iowa campus clearly marks the end of one cycle of innovation in higher education. Ashford’s parent, Bridgepoint Education, bought a small Catholic college in eastern Iowa 2005 to get control of a regionally accredited institution. The financial benefit of marketing its broader online offerings under the accreditation banner was expected to more than offset any subsidy needed to prop up the traditional campus.
But Ashford has now found itself in the undertow of the end of a cycle of innovation. Clayton Christensen’s ground breaking 1997 book, The Innovator’s Dilemma, describes a sequence of innovation cycles that start strong but then run their course only to be displaced by a new cycle usually driven by new players in the sector. While Christensen has gone on to write specifically about innovation in higher education, his earlier book’s description of S-curves and the cyclical impact of technology innovation on markets is a better read for those wanting to understand the details of his theory of disruptive innovation.
Ashford’s market challenges, like most other first cycle online providers, go beyond its admitted inability to afford the $10 million annual subsidy needed to keep the Iowa campus afloat. Current enrollment of 50,000 students is down by almost half from its peak. Bridgepoint’s stock, which opened at $12 in 2009 and increased 250% to $30 in two years, is now $9.35 – not far above its historic low.
There are many factors behind the downward trend in the for-profit higher education sector. One of the sharpest observers of the higher education sector and also a member of the Bridgepoint board, Ryan Craig, states in his new book (College Disrupted: The Great Unbundling of Higher Education) that the early success of these publicly traded companies was based on the ability of lead aggregation contractors to pump prospective students into the enrollment pipeline of for-profit companies. As the lead aggregation market waned, enrollment dropped precipitously.
Perhaps MOOC’s exposed a weakness in the value proposition of high cost online providers (another Christensen S-curve?) or “word of mouth” from the first wave of students did not encourage enrollment by others in subsequent years. No matter what the actual cause of this sector-wide decline, I doubt it is a function of short term market forces. There will be no big rebound from today’s enrollment and stock price numbers if the for-profit online providers work from an incremental improvement playbook. And other market factors may prevent these companies from ever regaining their high flying status.
On the other hand, we may be at the front end of a new technology innovation S-curve driven by later arrivals to the online higher education market who are using technology to support face-to-face and digital interaction that goes beyond instruction and the classroom (virtual or otherwise). Arizona State University’s online programs (particularly its new partnership with Starbucks) and Southern New Hampshire University’s College for America are using technology to provide a variety of student supports. Both are also using employer relationships as a channel to acquire students. College for America is testing a partnership with Match Education, a Boston charter school network moving into the post-secondary success space, to provide a new level of technology-enabled, place-based supports to a deeply challenged returning adult population.
Just a few years ago, many supporters of the status quo in higher education could reasonably argue that the failed earliest efforts at online education (many from traditional institutions) were just a flash in the pan. But fifteen years later, there is a stronger case for the theory that we are in the middle of a series of innovation cycles (Christensen’s S-curves) and that the end of one cycle does not mean that the innovation has failed. No one knows exactly where all this will lead, but we’re not heading back to the status quo that ruled ten years ago when Ashford bought that small college in Iowa.
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