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Debt, Disruptive Innovation and EaaS in the Academy

Alan Garfield, University of Dubuque, U.S.A.

Abstract: It has become an article of faith in higher education worldwide that substantial change is just around the corner. Reasons for this vary but involve a mixture of problems in three general areas: (1) debt and financial exigency; (2) frustration caused by a lack of innovation; and (3) failure to incorporate challenges brought on by the age-of-the-internet. Once there becomes an overwhelming urgency, price point in origin, to change the economic model of higher education, entrepreneurs, entering the low end with disruptive innovation, will use technology-based EaaS so that universities will be able better to address their vision and mission. In this, universities will follow the path of knowledge management in business. No more paying for bloated education, much of it never wanted or used.

Keywords: University, Debt, Disruptive Innovation, Isomorphism, SaaS, EaaS, Management Education

Introduction

t has become an article of faith in higher education worldwide that substantial change is just around the corner. Reasons for this vary but can be summarized to involve a mixture of three general elements: (1) cost of education and the resulting student debt load; (2) frustration

caused by minimal creativity and innovation; and (3) failure to incorporate the age-of-the-internet into the curriculum.1 Bush and others have consistently argued that the quality of leadership makes a significant difference to school and student outcomes in times of change. Yet, Yukl suggests that the managerial job is too complex and unpredictable to rely on a set of standardized responses to events. Using methodology developed in the field of knowledge management, it is suggested that that business performance features will point the way to radical change to the academy.2 New toolsets will be used in dealing with these opportunities, so that a hierarchy of benefits - better information and knowledge processing – will contribute to organizational efficiency and effectiveness, resulting in better outcomes for stakeholders.

Cost of Education = Student Debt

While the details surely differ, the message is essentially the same. See Figure 1. Universities cost too much, are probably not great value for money, and in many cases provide a double whammy by awarding students huge debt while taking them out of the employment pool for too long. For many, the academy seems unaffordable at the worst possible time, when parents are either unemployed or under-employed. In the last five years, tuition has

1 A version of this paper, “Mentoring, Isomorphism and Knowledge Management in the University: Universities of Mediocrity”, was originally presented at the Fourteenth International Conference on Knowledge, Culture and Change in Organizations, Oxford University, 4-5 August, 2014. Research for the paper was funded in part by a grant from the University of Dubuque Faculty Development Committee. 2 All reference to the academy points to university in the U.K and to college and university in the U.S.

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Figure 1: College Costs

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significantly increased in certain regions of the U.S. There has been a 77 percent increase in tuition at Arizona’s public universities, In Georgia, it's 75 percent, and in Washington state, 70 percent. Costs, debt and stress are regular subjects in the popular press. (As an example, see The Wall Street Journal, October 13, 2013; The Chronicle of Higher Education, August 1, 2014; and The Economist, April 5, 2014).3 If there is to be a soft revolution in the academy, the stimulus for change should be come from a number of areas. Exorbitant student debt load is just one of the factors.

This is a most interesting turn of events from the traditional supply and demand side of the ledger. Demand is constant and growing. Supply, however, is seemingly without end. Thus we find the consistent rise in numbers of students and rise in tuition costs associated with post-secondary education in the United States.4 See Figure 2. According to the US Department of Education projections for Fall 2014, a record 22 million students are expected to attend American colleges and universities, constituting an

increase of about 6.5 million since Fall 2000.5

How much does a degree cost?6 See Figure 3. On the Save the Student website, the editors estimate the average tuition-only cost at American four-year undergraduate universities at $22,000 per year. The (Daily) Mail Online website estimates costs in the U.K. averaging £52,000 (for a three-year degree).7 Comparing real U.S.

3 For the Wall Street Journal, see: http://online.wsj.com/news/articles/SB10001424052702304561004579135293814151928 For the Chronicle of Higher Education, see: http://chronicle.com/article/Think-College-Costs-Too-Much-/146641/ For The Economist, see: http://www.economist.com/news/united-states/21600131-too-many-degrees-are-waste-money-return-higher-education-would-be-much-better 4 Alchian, Armen. “Costs and Outputs.” In Choice and Costs under Uncertainty. Vol. 2 of The Collected Works of Armen A. Alchian. Indianapolis: Liberty Fund, 2006. Pp. 161–179. 5 U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education Data System (IPEDS), “Fall Enrollment Survey” (IPEDS-EF:96–99); IPEDS Spring 2001 through Spring 2011, Enrollment component; and Enrollment in Degree-Granting Institutions Model, 1980–2010. (This table was prepared January 2012.) http://nces.ed.gov/programs/projections/projections2021/tables/table_20.asp 6 This is very simple question results in a very complex, and by its very nature, inaccurate answer. For the sake of this study, we have established the figures based upon these two sources. 7 For American 4 year undergraduate costs, see: http://www.savethestudent.org/study-abroad/america/how-much-are-american-university-fees.html For UK 3 year undergraduate costs, see: http://www.dailymail.co.uk/news/article-1379364/University-tuition-fees-Degree-cost-52k.html

Figure 2: Higher Ed Statistics, U.S. Department of Education. Source: National Center for Education Statistics, Fall 2012

Figure 3: Cost of a Degree.

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and U.K. costs (tuition plus accommodation), we see specifically the total cost and therefore the amount of debt students will carry starting in their career. See Figure 4.

Misinformation abounds on this subject, unfortunately, even from governmental and semi-governmental bodies as in this E.U. infographic from the OneEurope website.8 See Figure 5.

Minimal Creativity and Innovation are both the cause and effect of Isomorphism in the Academy

It’s a sad irony that while creative problem solving is at the core of the mission of every academy, that creative reflection is rarely self-generative. Rigby notes that service organizations themselves are often internally in need of service.

DiMaggio and Powell in examining the “sameness” of organizations used the term isomorphism, a term from biology.9 Previous organizational studies focused on differences. DiMaggio and Powell took Weber’s Iron Cage theory and applied it to organizations instead of individuals to examine similarities. The authors concluded that over time all organizations were subject to coercive, normative and mimetic forces, and that organizations would seek to get what their competitor had, but no more. By the isomorphic organization’s very nature, it is a crushing force that diminishes innovation for the sake of “sameness”.

The academy is a stereotypical isomorphic organization in many ways. Even a cursory view of a dozen university catalogs reveals the extent of this “sameness”. What are the differences in student outcomes from university a or university b? In fact, universities claim to offer similar basic programs and experience with little differentiation (except in specialty studies such as gaming or animation or in marketing adjectives like global or entrepreneurial). In isomorphic education, a leader in that community drives everything, with little room for innovation and no

8 As can be seen on this infographic map from OneEurope, the price of getting a university education varies greatly from country to country throughout Europe. The problem is that the so-called facts are inaccurate. For example, while the most expensive years at university seem to be found in England and Cyprus, the figure now is nearly twice that which is stated in the graphic. Also, some countries have complex tuition systems. In Germany, state universities are free (e.g. Humboldt State University) while private ones, like the Frankfurt School of Finance and Management, are quite expensive. OneEurope is a new (2011) grass roots European organization crowd sourced by volunteers from all over Europe (though headquartered in Germany). http://one-europe.info/in-brief/how-much-does-your-education-cost 9 Isomorphism derives from the Greek, iso (equal or same) and morphos (body or object). See: DiMaggio, Paul and Walter Powell. 1983. "The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields", American Sociological Review. Volume 48 Issue 2 April 1983), 147-60. .https://docs.google.com/document/preview?hgd=1&id=1Ss5ppROwPkrrQHQMvKo5td6KxBRoaKOZK_iDbn99l7I&pli=1 An interesting application of those isomorphic forces with respect to distance education can be found in Kristi Caravella 2012 dissertation: Mimetic, Coercive, and Normative Influences in Institutionalization of Organizational Practices: The Case of Distance Learning in Higher Education at sis. July, 2012 at http://www.amazon.com/normative-influences-institutionalization-organizational-practices/dp/1249035899/ref=sr_1_1?s=books&ie=UTF8&qid=1406971448&sr=1-1

Figure 4: Cost of a Degree. Source: Garfield, August 2014

Figure 5: Inaccurate Infographic of the Cost of a Degree in the E.U.

Source: Website, July 2014.

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interest in adapting to changes.10 Examined in this light, isomorphic academic environments see knowledge as mere content, devoid of personality and sociality. When the academy is isomorphic in thinking, its job is to replicate other institutions. Universities set their sites on universities that are offering the same services, occasionally adding a particular stamp or a “grow-it-at-home” course. Creativity morphs to branding; innovation gives way to marketing.

Filling this void of creativity in the academy is Clayton Christensen’s notion of disruptive innovation.11 Christensen (Harvard Business School) in his 1997 book, The Innovator’s Dilemma, suggested that established companies, acting only in the most rational and careful way to stay on, actually left themselves vulnerable to upstarts who would find ways to do things more cheaply and always with new technology. According to this notion applied to an isomorphic academy, change (dramatic change) could result with the use of new technology and new models. See Figure 6 for examples of recent past examples of this disruptive innovative process. In each case, the “disruptor” presented a product or service that was qualitatively inferior (and often more expensive and limited) to the established market item. Yet over time, this new product (with the help of new technology) would have a cheaper price with improved quality. Thus the established models were threatened or in some cases were made redundant. The change came slowly from the bottom until the “disruptor” affected the “disrupted”. According to Christensen, the change always creeps in from the bottom. In Figure 6, the electric radio is displaced by a radio of poorer audio quality which is also significantly more expensive. Yet that transistor radio was portable and could go to the beach (as seen in this ad). The message of disruptive innovation hit a sympathetic note in business studies almost immediately upon publication. However when in 2008, the same message and methodology was followed by Christensen (and co-authors Horn and Johnson) in Disrupting Class (focusing on issues in education), the business community was less enthusiastic.12

10 Breaking out of an isomorphic organization carries associative risks and rewards. While he didn’t intend to, that is exactly what the jazz pianist Keith Jarrett did. By creatively reacting to a series of missteps and adversities, Jarrett broke out of an isomorphic jazz tradition and recorded the best selling solo jazz album of all time. Jarrett’s live concert was scheduled to start at midnight on that cold January night in 1975 at Köln’s Opera house. Jarrett was planning on playing his Bösendorfer concert grand (with 97 keys); instead he got the baby grand with the standard 88 keys. Not only were there 9 fewer notes, but the piano’s lower registers were weak and that forced the musician to concentrate on the middle registers. And all the while, Jarrett was suffering back pain. Yet, in spite of these factors, he went on to create an album that has attracted legions of followers like no other album in Jarrett’s career. While one never chooses to start a concert or a business in any but the most advantageous circumstances, life happens. Jarrett’s reaction to his situation made him the jazzman of innovation. Obviously, breaking through does carry with it rewards. 11 One only needs to be reminded of two earlier business leaders. Henry Ford said that if he had asked his customers what they wanted, they would have said a faster horse. Steve Jobs was more succinct when he stated that it was not the consumers’ job to know what they wanted. Innovation is rare and disrupting. See Christensen, Clayton. (1997), The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail, Boston: Harvard Business School Press, 1997. 12 According to the author, legacy university education is going to change drastically, in spite of formidable roadblocks. Christensen, Clayton, and Michael Horn. Disrupting Class: How Disruptive Innovation will Change the Way the World Learns. New York: McGraw-Hill, 2008.

Figure 6: Examples of Christensen’s Disruptive Innovation

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SaaS as a Model for EaaS

For over a decade, medium and large-scale companies have used enterprise software. Companies like Oracle, Adobe, Salesforce, Sage, SAP, IBM, HP, Red Hat, and Microsoft created a suite of generic tools involving billing, ordering, customer information/relationship management, resource planning, human resource management, manufacturing, and sales management for a rather steep price. And because of the nature of the need for individual configuration, these massive applications required even more resources to be functional.13 Strictly speaking, enterprise software is an over-arching term for any software used in large organizations, often considered to be an essential part of a computer-based information system. The main goal behind enterprise software was to improve productivity, efficiency and therefore profit. But as enterprise software was designed to be a ‘one-size fits all’, what it has meant is that one size really fits no one. Large amounts of configuration are usually required, i.e. teams of developers were needed to tune the already mega-expensive software to work.14

Rather than requiring companies to buy, build, and maintain their IT infrastructures despite exponential costs, SaaS (software as a service) entered to become a new standard to give companies an alternative. SaaS software solutions have become advantageous because of their high adoption (available online any time and anywhere), lower initial costs (subscription based and the company is not responsible for IT provider costs), painless upgrades (no customer patches and all upgrades are managed directly by the main server, and relatively painless integration. In the business world, the popularity of SaaS has steadily increased because it simplified deployment and reduced customer acquisition costs while provided what the older, bloated enterprise software did. With SaaS, developers could support many customers with a single version of a product (called multitenancy) allowing companies to scale as fast and as much as needed without replacing costly infrastructure or adding IT staff. This agility has proven not both popular and financially beneficial, as seen in the number who have switched to offer SaaS only now. See Figure 7.

Using the Cloud as a platform to host customers’ data and records, many formerly enterprise-based services are now being served up in more efficient modules. This has broadly produced more users (ie, more profit), more satisfaction amongst those users (ie, more profit), and more satisfied SaaS technology designers in those companies that produce SaaS (ie, more 13 Enterprise software, often referred to as EAS (enterprise application software), is a bit difficult to explain. In c. 398 CE, St. Augustine of Hippo tried to explain ‘time’ in similar fashion. If you asked him to define it, he said he could not. But if you didn’t ask the what-is-time question, he believed he could tell you what it was via its characteristics and useful metaphors. See Confessions of St. Augustine, book XI: “What then is time? If no one asks me, I know: if I wish to explain it to one that asketh, I know not”, translated by Edward Bouverie Pusey, c. 1850. http://www.sacred-texts.com/chr/augconf/aug11.htm 14 There is no shortage of IT jokes regarding enterprise solutions; if it costs 6 figures, as the joke goes, it’s not software, it’s enterprise.

Figure 7: Companies who have switched from enterprise to SaaS.

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profit). Gartner projects the worldwide market for SaaS services (including advertising and infrastructure improvements) will reach $150 billion in 2014, up $25 billion from 2013.15 See Figure 8.

For example, Adobe Systems had long been the market leader in the digital design field with single and bundled enterprise packages of 2D, 3D, animation, web, print and audio products. On average, each single product was priced at $700 but Adobe’s most popular and lucrative products – a series of various bundled design softwares - were priced at $2600. In spite of their products’ popularity and the ubiquitous branding (ie, ‘to photoshop’), sales were flat over 3 consecutive quarters. So Adobe launched the Adobe Creative Cloud, a lower priced by-the-month bundled package. Now instead of $600 per product, it is $10 per month; instead of $2600, it is $50 per month. Fourth quarter 2013 results showed an increase of 400,000 customers over the previous quarter with 1.4 million customers signing up for the Creative Cloud. Now Adobe no longer sells single packages or bundled packages, everything is SaaS on the Cloud.16 See Figure 9.

The analogy here between enterprise software and academic offerings is intentional. In many respects, the academy is still providing the educational equivalent of bloated enterprise software. Current offerings, in many instances not significantly updated for decades, are huge ticket items. Many are bulky, requiring years of work to complete, and compulsory in spite of the fact that they may not be what the student really needs or wants.

Following enterprise-to-SaaS business models, the challenge will be to assist the academy in transitioning to a similar model. Instead of SaaS, the academy will use an EaaS model - education as a service – where once again the focus will be on service. While this won’t happen with the speed or urgency of business, there will be a tipping point. And when it comes, the business model will serve education particularly well.

EaaS is not the use of distance education within normative curricula. To be fair, by 2010 most universities had been experimenting in this direction already. However invoking the odd

15 This Gartner graph appeared in Forbes Magazine, February 2013. The graph projects market growth in SaaS (and its components) from 2010-2016. http://www.forbes.com/sites/louiscolumbus/2013/02/19/gartner-predicts-infrastructure-services-will-accelerate-cloud-computing-growth/ 16 See http://www.talkincloud.com/saas-software-service/adobe-drives-creative-cloud-subscriptions-14-million

Figure 8: SaaS has Eclipsed Enterprise Software. Source: Gartner, February 2013.

Figure 9: Adobe’s Switch from Enterprise to SaaS. Source: Talkincloud.com Website, December 2013.

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online course is not EaaS usage.17 Creating a handful of distance learning, hybrid, or flipped classes with virtually no administrative nor institutional/curricular change can hardly make for EaaS. In spite of the richness of content available on the Internet, the academy has not yet adopted a conceptual methodology for folding it into existing curricula and pedagogy. Others have addressed the need for such entrepreneurial agility in the curriculum, focused on rich content from the Internet.18 EaaS will require agile pedagogy that combines traditional-style education with technology in order to provide education that is relevant today and will be relevant in dealing with unforeseen events in the future.

Conclusion Once there becomes an overwhelming urgency, price point in origin, to change the economic model of higher education, entrepreneurs, entering the low end with disruptive innovation, will use technology-based EaaS so that universities will be able to better address their vision and mission. No more paying for bloated education, much of it never wanted or used.

The role of accreditation will be paramount in the nature of this radical change. Since funding always follows accreditation standards (in the E.U. and U.S.), this will be an important component in the transformation. When we think of accreditation, we mostly think of a process that takes place on a university campus. Rarely is accreditation’s political role considered as a key intermediary in the increasingly complex legal and regulatory terrain between the academy and the government.19

The implications for the academy of these three factors coming together are indeed complex. At least seven over-arching principles will need to be addressed.

!! Vision. The academy will need to revisit its vision. Whom will it be serving? What value will it be providing? Who is paying the bill? How will that bill be adjusted?

!! Internet. In order to take advantage of the medium of the Internet, we will need to rethink education.

!! Component parts. Portions will need to be developed to better serve students and potential employers of those students.

!! Value. Focus on delivering value to students translates to lifelong learning, i.e. being students for life (lifelong learners).

!! Product Development. Faculty should no longer be allowed to develop and teach a course the same way over time/decades.

!! Student Preparation. The academy will provide specific skill sets for students and assist them in connecting with employers directly.

!! Governance. Accreditation and academic governance/infrastructure will need to be adjusted to accommodate these changes.

It is certainly not difficult to see how a renascence in the academy - infused with new

content, new delivery models, and a new pricing structure - will produce a more engaged university and student population.

17 According to Stevens (fellow of Keble College, Oxford), there appears to be little consensus on what universities are for, the function of online courses, and an irrational aversion to diversity in university roles. See unpublished paper: Stevens, Robert. “What Not to Learn from England.” https://net.educause.edu/ir/library/pdf/ffp0505s.pdf 18 See Gupta, Nakul and Sangeeta Bharadwaj. 2013. "Agility in business school education through richness and reach: a conceptual model", Education + Training. 55, 4/5. 370 – 384. http://www.emeraldinsight.com/journals.htm?articleid=17090873 19 For a summary discussion of accreditation and its fundamental purpose of quality assurance and quality improvement in higher education, see Easton, Judith. 2012. “The Future of Accreditation”. Planning for Higher Education. 40, 3. 8-15. http://www.chea.org/pdf/The%20Future%20of%20Accreditation_Planning_HE_JE.pdf

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ABOUT THE AUTHOR

Alan Garfield: Alan Garfield is Professor and Chair of the Computer Graphics and Interactive Media Department at the University of Dubuque, in Dubuque, Iowa USA. His formal education is eclectic: BA, University of Iowa; MA, State University of New York-Binghamton; Postgraduate work Wadham College, Oxford. His interests, as measured by recent publications, included 2D and 3D animation algorithms, images in contemporary politics, 19th century French philosophies, Holocaust studies, and Beat Generation poetry. He teaches in Iowa; he lives in Ireland.