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Introduction

The U.S. higher education system faces an unprecedented convergence of internal and external pressures that highlight the need for significant transformation.  Numerous factors motivate this appeal for change, including surging tuition rates, unfettered student debt, diminishing government funding, the changing demands of consumers, and rapid technological advances (Brewer & Tierney, 2012; Christensen, Horn, Caldera, & Soares, 2011).  Various scholars of higher education (e.g., Bleed, 2007; Christensen et al., 2011; Selingo, 2013; Zemsky, 2013) have noted increased demands on the higher education community and the necessity for institutions to embrace innovation.  These pressures have led some analysts to predict that significant financial concerns are on the horizon for many colleges and universities (Christensen et al., 2011; Denneen & Dretler, 2012; Suster, 2013).  Moreover, the current path of many institutions is unsustainable, particularly the finances of smaller, private institutions.

Despite the general observation that institutions of higher education are slow to change and adopt new strategies (Murray, 2008), these external pressures are forcing the sector to adapt.  Trainum (2015), who recently completed a dissertation on disruptive innovation, noted the need for traditional universities “to keep costs down, use resources better, compete in new ways, provide access to more students, and respond to for-profit competition” (pp. 5-6).  One such adaptation is competency-based education (CBE), which offers potential cost-effective and accessible programming for both the consumer and institution.

In a recent whitepaper for the American Enterprise Institute, Kelchen (2015) defined CBE as a higher education model, wherein students earn credits through student learning as opposed to the number of seat hours in a classroom.  Kelchen divided the CBE model into two forms: (a) prior learning assessments, which grants credit based on previously mastered content, and (b) emerging competency-based programs, wherein students demonstrate mastery of new content.  In recent years, the use of CBE by postsecondary institutions has expanded dramatically, with 34 institutions offering programs as of spring 2014 (Kelchen, 2015).  Of these 34 participating institutions, approximately 197,000 students in undergraduate and graduate programs were enrolled in the nine largest providers (Kelchen, 2015).

The adoption of CBE could represent a disruptive innovation in the higher education sector, meaning that this new model represents an innovation that meets an untapped need and potentially disrupts the operations of an entire sector (Christensen, 1997).  This study seeks to determine whether the CBE movement qualifies as a disruptive innovation in the higher education sector.

 

Statement of the Problem

The disruptive innovation theory (Bower & Christensen, 1995) originated in the literature as a technology management concept that was initially used to describe how new strategies or products (i.e., disruptive technologies) transformed industries.  Christensen (1997), an expert in innovation and growth, expanded the concept of disruptive technologies into the disruptive innovation theory, which describes why new products: (a) underperform mainstream expectations; (b) perform better in underserved market segments; (c) improve to the point of mainstream acceptance; and (d) ultimately disrupt the market by unseating incumbent organizations with an acceptable, lower-cost product or experience.  Christensen cited the advances of IBM in personal computing in the 1970s as an example of disruptive innovation.  Although originally undervalued, IBM’s innovations in personal computing destabilized the technology industry by weakening the relevance of the dominant mainframe computers, leading to the elimination of these systems.

Christensen, Johnson, and Rigby (2002) identified two primary consumers of such innovations: (a) the non-consumers, who do not participate in the mainstream market for a variety of reasons, and (b) the over-served consumers, who do not utilize all of the features of a particular market.  Within the academic community, the non-consumer might be represented by the students who do not participate due to financial constraints.  The over-served consumer would include the adult learners who do not utilize the variety of support services (e.g., academic advising and career coaching) due to having limited access and time restraints (Jensen, 2015).

Although the theory received widespread acceptance, its core concepts are often misinterpreted and its basic principles misused (Christensen, Raynor, & McDonald, 2015).  The most extensive research narrowly focuses on the theory’s predictive accuracy of potential innovations (Govindarajan & Kopalle, 2006a, 2006b; Hang, Chen, & Yu, 2011; Raynor, 2011; Yu & Hang, 2010), notably called the “Christensen effect” (Christensen, 2006, p. 42).  In addition, the theory has received extensive criticism from the research community (Brooks, 2012; Danneels, 2004; Lepore, 2014; Neem, 2012; Sood & Tellis, 2011), including concerns related to subjectivity, arbitrary definitions, and unsubstantiated claims.  Other concerns have been related to the theory’s perpetuation of corporatization and marketization in higher education (Bok, 2004; Kirp, 2003; Washburn, 2005); proponents of such concerns fear the replacement of the academic culture with a corporate, consumeristic mindset.

Despite opposition with the broader concept, Jensen (2015) posited that the disruptive innovation theory offers direction for future research in higher education in the follow ways: (a) addressing the needs of an expanding student population, (b) predicting innovations that reduce costs, and (c) offering a tool for analyzing innovation in higher education.  Jensen’s observations support the assertions of Christensen et al. (2011) that the theory is applicable to the higher education field.  In stating his case, Jensen (2015) argued that significant opportunities exist “to solidify the literature by both strengthening and refining the disruptive innovation theory as it applies to higher education” (p. 41-42).

Given the lack of clarity about the definition of disruptive innovation, as well as the applicability of the concept to higher education, this study will evaluate whether the alternative delivery model of competency-based education (CBE) qualifies as a disruptive innovation, according to Christensen’s (1997) definition.  Educational institutions initiated CBE in response to the separation between the educational system and the workplace, with applications as far back as 19th century Europe (Elatia & Ipperciel, 2015; Koenen, Dochy, & Berghmans, 2015).  The model evolved primarily into adult, professional, and vocational training programs with clear standards and competencies for industry workers (Elatia & Ipperciel, 2015).

In the 21st century, the expansion of CBE into higher education has related primarily to the increasing demands of accreditors and employers.  Accrediting agencies have required colleges and universities to measure and document student learning outcomes (Koenen et al., 2015).  Koenen et al. (2015) suggested that CBE has also become more popular due to the increased emphasis within higher education on employability; future employers seek ways to assess the competencies of prospective employees.

Weise (2014) contended that CBE is a disruptive innovation, in that this educational approach provides a true workforce solution by serving as the link between learning experiences and employer expectations.  By assessing mastery of learning through a modularized format, CBE offers an educational environment to quickly and efficiently prepare students for the labor market (Weise, 2014).  This environment is further enhanced through the deep integration between CBE programs and the employer.  Southern New Hampshire University’s (SNHU) corporate partnership program (Share, 2013; Weise, 2014) represents a leading example of such integration, given that students receive appropriate general education and workforce training with the endorsement of employers.

The CBE model also offers alternative education at a fraction of the price for the consumer (Ordonez, 2014), by reducing the fixed and variable cost drivers to deliver higher education.  For example, at SNHU, students may complete an associate degree for $5,000, and Western Governor’s University charges a $3,000 subscription over six months (Fain, 2013). However, it should be noted that the absence of a uniform federal financial aid system for CBE programs does expose students to significant out-of-pocket expenses.  The current federal financial aid system awards aid based on traditional metrics (e.g., credit hours and seat time), which does not integrate with the CBE model.  However, the U.S. Department of Education made recent steps to support this delivery model by establishing an experimental program to test financial processes within a CBE framework (Kelchen, 2015).

From an institutional perspective, the potential for cost savings is less certain due to the startup costs, including restructured curriculum and assessments, custom information systems, and various back-office procedures (Porter & Reilly, 2014).  Porter and Reilly (2014) documented that the work assigned to faculty within CBE, in contrast to traditional education programs, may provide significant efficiencies by reducing labor costs, but more longitudinal research is needed to support these conclusions.  Despite concern related to the startup costs, Hechinger (2013) and Weise (2014) observed that CBE programs provide surplus revenues that contribute to the traditional campus.

Very little research to date has been focused on the applicability of the disruptive innovation theory to higher education (Archer, Anderson, & Garrison, 1999; Christensen, 1997; Kamenetz, 2010).  Although, this literature is cited as anecdotal (Jensen, 2015).  To address the gap in the literature of applying the disruptive innovation theory to higher education, three dissertations have focused on areas related to the gap that my research intends to address.  First, Jensen (2015) analyzed the formation and development of a disruptive innovation within an institution through a case study of the College Unbound organization, which sought to educate underrepresented students through highly individualized and student-centered curriculum.  Second, Trainum (2015) researched the concept of disruptive innovation and institutional (change) theory in relation to Massive Online Open Courses (MOOCs). Last, deClercq (2015) conducted a qualitative multiple-case study of how educational institutions responded to disruptive innovations, particularly online learning. In summary, a gap in the literature exists; no existing doctoral dissertations or scholarly journal articles have researched whether the disruptive innovation theory applies to CBE.

Purpose of the Study

Given the gap in the literature, the purpose of this study is to determine whether the CBE movement is a disruptive innovation in the higher education sector.  Guidance on the qualities of a disruptive innovation originates in Yu and Hang’s (2010) review of existing literature.  The authors observed the following factors related to successful disruptive innovations: (a) the organizational environment, including human resources, culture, resource allocation, and structure; (b) the contextual environment wherein the organization operates; (c) the understanding of consumer expectations; and (d) the role of technological strategies.

In addition, Schmidt and Druehl’s (2008) complementary encroachment model will serve as a framework for determining the disruptiveness of a particular innovation. The research question that will guide this study is: To what extent does CBE reflect the qualities of a disruptive innovation in the higher education sector?

Significance of the Study

This study has significance for practitioners and scholars.  First, from a practical standpoint, the higher education sector faces significant challenges that require new and disruptive approaches to delivering postsecondary education (Christensen et al., 2011).  Financial analysts relate the higher education industry to the housing bubble of the mid-2000s.  For example, Denneen and Dretler (2012) noted the following financial metrics as evidence: (a) annual tuition rate increases have surpassed the rate of inflation several times over; (b) student loan debt surpassed $1 trillion and exceeded credit card debt; (c) the expense ratio (expenses as a percentage of revenue) of institutions increases year-over-year; and (d) institutional endowments are on the decline.  Denneen and Dretler summarized these metrics as: “Institutions have more liabilities, higher debt service, and increasing expenses without the revenues or cash reserves to back them up” (p. 1).  In summary, the current path of many institutions is unsustainable, particularly the finances of smaller, private colleges and universities.

In addition to various financial sustainability strategies (e.g., reducing costs and freeing capital), many analysts have urged institutions to invest in innovative models (Christensen & Eyring, 2011; Christensen et al., 2011; Denneen & Dretler, 2012).  The findings of this study may be beneficial in encouraging faculty and administrators to investigate the CBE model as a possible alternative or supplement to address the rising costs of traditional education.

Second, institutions of higher education must acknowledge the importance of workplace readiness.  In a recent survey of 318 employers, the majority of respondents noted that institutions should prioritize learning outcomes to enhance graduates’ ability to perform in the workplace (Hart Research Associates, 2013).  Weise (2014) has argued that CBE serves as a true workforce solution by bridging the gap between educational experiences and employers.  This study might challenge faculty and administrators to consider (a) the role of employers in curriculum development and (b) the potential role of CBE in ensuring workplace readiness of college graduates.

Last, this study should contribute to the literature by further analyzing the disruptive innovation theory and its application to higher education.  Particularly, the research will assess the accuracy of dominant, recurring qualities of disruptive innovations, thus permitting further analysis of future innovations.  An opportunity exists to contribute to the higher education field with significant practical and scholastic implications.

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