SALT LAKE CITY — What does the demise of Geneva Steel have to do with the future of Harvard University — or for that matter, Utah's system of higher education?
According to Harvard business professor and Utah native Clayton Christensen, all but one of the nation's large, integrated steel mills, such as Geneva, were driven from the business by smaller, more adaptable "mini-mills," such as Nucor Steel in Tremonton.
That drastic change in the steel industry was due to a new, lower-cost technology — the electric furnace embraced by newer steel manufacturers, Christensen told the Higher Education Appropriations Committee Tuesday.
Only one traditional, integrated steel mill company survived the market changes, he added.
Today, the technology of online courses threatens a similar change in higher education. And unless mainstream, traditional universities learn to adapt, they will go the way of the dinosaur, Christensen said.
For about an hour, the business guru, whose books and research on "disruptive innovation" have made him influential in the business world, explained to the committee how his ideas relate to the future of higher education.
"Online learning changes the whole equation," he said. "In the past, higher education was exempt from disruption, but that's not going to be the case in the future."
Christensen's ideas may greatly influence the future of higher education in Utah.
Committee chairman Sen. Stephen Urquhart, R-St. George, said Christensen's theories as outlined in the book "The Innovative University: Changing the DNA of Higher Education from Within," form the basis for changes the Utah Legislature hopes to make.
"These are game-changing ideas," Urquhart said. "It's the text for what we hope to do this year."
The book has been required reading not only for the committee, Urquhart said, but for the faculty of Dixie State College as well, which is in his district. And University of Utah President David Pershing, whose appointment was announced on Monday, attended Christensen's presentation.
Afterward, Pershing said he has also been influenced by the book's ideas. However, he said coursework is not the only product that the U. offers, but experiences provided by programs such as the Hinckley Institute of Politics and others.
Disruptive innovation happens in a market when a new core technology makes cheaper, more useful products for customers who cannot afford the higher quality, more expensive, but older products, Christensen said.
Initially, those cheaper products get sold to the low end of a market by new companies whose lower costs make them willing to compete for lower profit margins, Christensen said.
He gave the example of computers, initially manufactured as large mainframes that only a few customers could afford. But innovative, less expensive technologies gradually made computers available to more and more customers who could afford it.
That led the computer industry from the mainframe to minicomputers to desktops and laptops and to smartphones, he said. Many larger, traditional companies that previously dominated the computing market failed to adapt to the changes and went out of business or lost market share.
Christensen explained that the older companies making higher-end, quality products willingly cede the lower, less lucrative end of the market to the new competitors.
In the automotive business, a company like Toyota started with inexpensive cars like the subcompact Corona, which companies like General Motors had little interest in. But with its lower costs, Toyota gradually increased the quality of its offerings and is now a larger automotive manufacturer than GM, he said. Now, Hyundai and Kia are following in Toyota's path.
Christensen told legislators how such "disruptive innovation" applies to higher education with the example of the University of Phoenix, which started by offering courses to non-traditional students whose needs for convenience over quality were not being adequately met by the market.
But at a center in San Francisco, the University of Phoenix is investing $200 million per year to improve teaching and develop online learning. By contrast, Harvard spends almost no money to improve teaching, he said.
The University of Phoenix benefits from vast economies of scale, he added. For example, it teaches 135,000 full-time MBA students compared to Harvard's 900.
The Massachusetts Institute of Technology is a example of a mainstream institution adapting to the changing education market, he said. MIT, the premier engineering and technology university, recently opened up its online courses to all comers.
More than 5 million students worldwide have taken the MIT introductory physics courses, which are taught by Walter Lewin, one of the best physics teachers in the world, he added.
Christensen also noted that technology evolves products from those that are proprietary, such as mainframes completely made by IBM, to "modular" products such as a Dell computer, which has standardized parts made by many manufacturers.
Higher education will go in the same direction, he said. Increasingly, courses that students take will come from many sources, not just a single institution.
As an example, Senate Majority Leader Scott Jenkins, R-Plain City, said he's recently talked to many college students who use online courses from Khan Academy to better understand what they're taught in traditional courses.
Traditional, mainstream institutions will struggle to change from within, Christensen said. Old bureaucracies too strongly resist new ideas, he said. To survive changing markets, older institutions have to create new, separate entities with the charge of "killing the parent," he said.
In America's conversion from traditional department stores like Macy's to discounters like Kmart, "Only one department store caught the new business wave — Dayton-Hudson," he said. "And they only did it by setting up Target."
Traditional universities may have to do the same as they try to compete in the growing online market.
Pershing noted that 10 percent of credits University of Utah students earn are now coming from online courses. However, those are only offered to the university's students, not others across the world, he said. Pershing added that he's not yet prepared to discuss other innovations that may be in the university's future because they're still in the works.
Christensen grew up in the Rose Park neighborhood of Salt Lake City. He received the prestigious Rhodes Scholarship as an undergraduate student at BYU. He is also a member of the Deseret News Editorial Advisory Board.
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