A closure highlights the challenges of adopting a disruptive strategy

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Aug 1, 2019

In early 2017, we wrote about the potentially disruptive trajectory of Level, a bootcamp built by Northeastern University. Northeastern created Level as an “autonomous unit”: a separate division with the ability to create its own unique business model. Building autonomous units is a critically important strategy for incumbents—the traditional providers in an industry—looking to adopt disruptive innovations—but building is only the first step. Autonomous units are often difficult to sustain. That seems to have been the case for Northeastern: while the bootcamp business is booming, Northeastern recently announced that it is shuttering Level

Building an autonomous unit is only half the battle

Northeastern initially built Level as part of an effort to “future-proof” the university. The university’s leadership was eager to get into the booming lifelong learning market. As President Aoun said at the time, “It’s time to stop thinking of higher education as an experience people take part in once during their young lives—or even several times as they advance up the professional ladder—and begin thinking of it as a platform for life-long learning,” Northeastern identified bootcamps as a potentially disruptive opportunity, and was an early mover in the space, starting Level in 2015. 

We first wrote about Level as part of a larger research paper that illuminated key elements of innovation theory for institutional leaders. We highlighted Level because, in many ways, Northeastern had done everything right. Northeastern had identified bootcamps as a potentially disruptive opportunity. Northeastern had given Level the space and autonomy to build its own business model. Level operated in a separate office space, went after a new student population, and provided an entirely different offering. 

Even though the bootcamp market has only picked up steam since then, Level isn’t the only bootcamp to close. Other recent high-profile closures include Dev Bootcamp (owned by Kaplan) and The Iron Yard (owned by Apollo). The bootcamp space is becoming more competitive and the stronger players remaining seem to be pursuing one of two strategies: working directly with employers or partnering with universities. Both of these strategies lower costs because they take bootcamps out of the dog-eat-dog direct competition for students. 

Those closing also seem to have something in common: they are owned by someone else. 

Incumbents face a dilemma in reacting to disruption. Their own existing business models routinely reject Disruptive Innovations because they don’t match the profit formulas and value propositions that helped the organization prosper in the first place. Instead, they must build or buy autonomous units in order to adopt disruptive strategies. But maintaining the autonomy of those units, and continuing to invest in them, is often a challenge—especially when the core business is demanding reinvestment as well. We anticipated the hurdles Level might face, given similar dynamics in the early days of disruption in the steel market decades before:

Looking ahead, Northeastern will face strategic choices if the bootcamp model doesn’t scale upmarket—but it may face greater challenges if it does. Level’s first year saw over 100 graduates, but over the course of the next year, the team expects to see hundreds of students complete the program. As Level scales, however, Northeastern may find that maintaining its investments in disruptive innovation has inherent difficulties: integrated [steel] mills could successfully operate minimills, but they ultimately divested of them in order to focus on high-end specialty products. Over time, Northeastern will have to allow itself to be changed by Level, rather than importing Northeastern’s processes and priorities to Level. The experience of integrated steel companies holds a lesson here. These incumbent companies also experimented with Disruptive Innovation, but ultimately walked away from minimills for “strategic” reasons. Although attracted to the promise of minimills, they failed to understand the strategic shifts that Disruptive Innovation was wreaking on their industry. College Transformed, Christensen Institute

The disruptors march on

We recently released a report on the landscape of the bootcamps industry today. Our takeaway? Bootcamps do have disruptive potential and there are multiple promising paths to scale. One strategy is to move into corporate training and further down the path of lifelong learning. The other is to move into more disciplines and industries beyond just training software engineers. Some, like General Assembly, are doing both. Critical to these bootcamps’ success, however, is their ability to pursue a business model that bucks traditional higher education’s entrenched—and broken—one.

Traditional higher education is facing a shrinking market: enrollment is falling across college and universities due to shifting demographics and a strong economy. But the demand for human capital investment continues to grow. The business for learning is booming. Bootcamps have positioned themselves to take advantage of this growing market, thanks to a business model that tightly aligns with workforce needs. Bootcamps focus on industry-aligned skills taught over a matter of weeks or months. The business model of traditional institutions, which focuses on academically-driven, degree-based offerings, constrains colleges from taking advantage of this growing market.

Bootcamps have found a foothold. While the space appears to be consolidating into fewer players, it is also growing as the market for lifelong learning expands. In other words, the question is not whether the bootcamp market is viable, but who will be able to dominate it. Colleges have immense resources—space, technology, intellectual property, and people—that could be organized to take advantage of the growing opportunity in upskilling and reskilling America’s workforce. But to do so, they will have to build new business models like Level—and even more challenging, sustain them. 

Alana leads the Institute’s higher education research and works to find solutions for a more affordable system that better serves both students and employers. In this role, Alana analyzes disruptive forces changing the higher education landscape.