California should double down on Calbright College—by leaving it alone

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Mar 24, 2020

As the COVID-19 outbreak increasingly prompts universities to move instruction online, California lawmakers may want to reconsider their deep skepticism of the state’s first fully online community college—the young institution is proving itself more vital than ever.

Initiated in 2018, Calbright College is California’s public, state-funded response to online giants like Western Governors University (WGU) and Southern New Hampshire University (SNHU), targeting underemployed, non-degreed adult learners with competency-based, career-oriented programs and employer partnerships. Calbright enrolled its first cohort just five months ago and is ahead of schedule on key milestones set by the legislature when they authorized the program.

But last month, State Senators called for an audit of Calbright’s finances, student progress, and overlap of offerings with those of the California Community College System (CCCS), of which Calbright is a member. Their concerns echo pushback from CCCS faculty associations and a 2018 report by the Legislative Analyst’s Office (LAO) citing a lack of clarity and evidence around the need for Calbright. The general critique is that instead of funding a new college with duplicative courses, those resources should be distributed among existing community colleges.

The historically observable pattern of disruptive innovation across industries suggests not only that creating Calbright as its own school is worth a shot, but also that it should be given even more autonomy from CCCS than originally stipulated.

Making the case for a separate, autonomous entity

In the Innovator’s Dilemma, Clayton Christensen made an unsettling observation—CEOs of established companies that fell to disruptive entrants often did everything right, and for that very reason failed to save their companies.

That’s because disruptive innovations don’t whet the appetites of established companies’ best consumers. Rather, they are simpler—crummier, some might say—than competing products and services, and they work better for those that can’t access existing offerings (nonconsumers) and those that would gladly give up unnecessary functionality if it means paying less (overserved consumers). When organizations’ decision-makers allocate resources among different initiatives, the innovations that appeal to a clearly-defined, familiar market consistently beat out those that cater to a murky, unknown one.

Within an established organization, a disruptive innovation needs a separate, autonomous business unit in order to successfully operate with a different customer pool, different cost and revenue structures, and different priorities. Without autonomy, the parent organization’s business model—with its established processes and priorities—will undermine the innovation’s disruptive potential, even if managers or administrators see promise in and try to foster the idea.

This is why in the 1980’s, when IBM saw that personal computers could disrupt the minicomputer market in which it competed, the company opened a PC-focused autonomous business unit in Florida, far from its New York state headquarters. IBM not only survived, but thrived. 

In the meantime, Digital Equipment Corporation (DEC), a formidable innovator and household name in its day—and IBM’s main competitor—saw potential in personal computers and tried to build a PC business within its existing structure. The effort floundered, as did the company, and eBay now seems to be the best place to buy a vintage DEC computer.

What this means for California

CCCS is vast and complex. Its 115 institutions (including Calbright) serve over 2 million students, accounting for roughly a fifth of the entire country’s community college population.

As with any community college system, CCCS is juggling several missions—degree provider, transfer pipeline, workforce training provider, and more. CCCS also serves a broad range of age groups, with roughly 60% age 24 or younger, 27% age 25 to 39, and 15% age 40 and up. 

CCCS has been strikingly effective, contributing to a state higher education network that pumps $4.50 into taxpayers’ pockets for every invested dollar. However, there is even more value to unlock by serving Calbright’s target demographic (underemployed, non-degreed adult learners), and traditional community colleges’ business models have too many competing priorities for them to do so effectively.

Consider CCCS’s Online Education Initiative (OEI), a course exchange program, which Calbright critics point to as obviating the need for a separate, online college. In theory, students can enroll in online courses offered by other state community colleges. In reality, CCCS’s enrollment-based funding model discourages school participation, since only the college that offers the course earns enrollment revenue. This has limited course offerings and engagement overall.

Here is an example of how Calbright, operating under a different business model, could be an asset to CCCS as an autonomous institution. Free from the constraints of the funding model that has proven incongruent with expanding online course options, Calbright could work towards revenue and course enrollment models that best serve large numbers of job-seeking adult learners. And concerns that Calbright’s courses may duplicate existing OEI offerings fail to acknowledge that competency-based, self-paced courses differ fundamentally from seat-time based courses covering the same material, and better serve time-constrained adult learners.

A call for actual autonomy

The LAO report makes a stunning observation towards the end of its section on Calbright:

Although the college initially may be more nimble, [it] eventually would face many of the same constraints that existing community colleges face…the college eventually would be expected to collectively bargain and…to spend 50 percent of its budget on instructional salaries…In the long run, these restrictions could result in the online college having the same types of constraints as existing community colleges…

In other words, Calbright being embedded in CCCS subjects it to strictures that will eventually hamstring the school in its efforts to innovate for adult learners. The LAO report ironically makes the argument that even as an independent school, Calbright isn’t autonomous enough.

If the goal is to reach nonconsumers, helping underemployed and non-degreed adults capture the benefits of participating in California’s economy, then Disruption Theory agrees: Calbright should be more autonomous. If Calbright doesn’t reach this population, innovative institutions like WGU and SNHU will. Any of these options would serve learners well, but CCCS will have ceded, rather than seized, the future of learning. 

Unlike with IBM, it wouldn’t make sense to open Calbright in, say, Florida. But Calbright will need fuller autonomy than even its initial mandate suggested if it’s to fulfill its potential.

As a research fellow on the Christensen Institute's higher education team, Richard helps investigate novel business models in postsecondary education, professional development, and lifelong learning.