College accreditors block innovation, so bypass them

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Oct 3, 2013

The recent actions of the Higher Learning Commission (HLC), the accrediting body for the North Central United States region, essentially shut down Tiffin College’s partnership with Altius Education, known as Ivy Bridge College, and have flung the challenge accrediting agencies pose for innovation in higher education into prime view.

Because accreditation is a form of self-governance that the higher education institutions run themselves, there is little incentive for a panel of institutional peers to enable the entrance of a new, innovative outside provider.

This is not because the accreditors are malicious per se. It is because they are rationally following their incentives in regulating the sector. This happens in nearly every industry.

Although regulations tend to be put in place to protect consumers initially, over time they become ways for existing institutions to protect themselves, often at the expense of consumers. This is what happened to Ivy Bridge College, which, according to its data, was serving its students better than the average community college, but as a result, threatened the status quo.

To address this problem, in his State of the Union, President Obama endorsed an alternative accreditation system. A few years ago we proposed that the Department of Education create a new mechanism to gain access to federal funding based on delivering real value to students—called the QV Index—and bypass the accreditation system entirely. More recently, former Senator and Minerva Institute for Research and Scholarship executive chairman Bob Kerrey circulated a proposal on Capitol Hill that would have directed accreditors to develop an expedited process for new institutions to earn accreditation (although not to gain access to Title IV dollars).

Yet these ideas have scant chance of passing. President Obama appears to have taken some of our recommendations into account in his higher education proposal, but 97 percent of Whiteboard Advisors’ panel of Education Insiders say those measures that require Congressional approval have no chance of approval. Kerrey’s recommendations seem only to have earned him the ire of the accrediting agencies.

So is there no hope?

Despite the recent shameful and—for the largely adult student population at Ivy Bridge, many of whom are members of minority groups, have low incomes, and are primary givers for children or independents—unfair turn of events with real life consequences, I am turning more hopeful than I have been. Two developments explain why.

First, thanks to the combination of online learning and competency-based learning, more education programs are emerging that do not need and will not accept the federal government’s Title IV loan dollars. UniversityNow’s Patten University and New Charter University are perhaps the most conspicuous examples, but more, including the Minerva Project, are emerging.

As this has occurred, I’ve wondered aloud why Patten, New Charter, and Minerva have all continued to feel the need to gain traditional accreditation. The answer seems to be twofold. Having accreditation means gaining trust of students, which is the difference, as one person put it to me, of being able to charge $50 per credit versus $500 per credit (although that is a number far higher than programs that seek to be disruptive should be charging, the perceived value is still there). And so long as there are accredited programs subsidized by the U.S. government for low-income students, although UniversityNow’s programs may be inexpensive, they aren’t free.

This force seems to have preserved accreditation. But I think that may be changing, as lower stakes, informal programs are emerging at the margins that have value for the ones who ultimately need convincing—employers. I have long wondered aloud why employers would not create their own form of “accreditation” for these innovative forms of higher education to signal to students that enrolling in and completing a program would be viewed as a legitimate path to employment.

That may now be happening.

The MOOC provider Udacity announced recently a partnership with Google, AT&T and other employers called the Open Education Alliance. It will offer students the opportunity to earn a certificate based on a series of courses developed based on input from these employers. Companies have said that they will view the Alliance as a way to find employees with the skills they need. edX and Coursera are engaged in somewhat similar moves.

Critics have been quick to dismiss this from a variety of angles: it is a niche thing likely to work only in tech-heavy industries; these online courses are still primitive with low completion rates; and we shouldn’t see this as solving the bigger problem accreditation poses.

I wouldn’t be so sure.

We have observed again and again that regulations rarely change first to allow for disruptive innovations. Disruptive innovations never succeed through a head-on attack against regulations and the network effects that constitute the power of the status quo. Instead, disruptive innovations tend to plant themselves outside of the reach of the regulations. Then they grow, and, over time, the regulations cave ex-post facto as a new reality emerges.

Southwest Airlines, for example, didn’t disrupt the airline industry by seeking approval in the early 1970s from the federal Civil Aeronautics Board for discount prices on long, interstate routes. Instead, it began flying short routes within the state of Texas, where the federal regulators lacked jurisdiction.

Merrill Lynch was able to topple the prevailing regulation around bank interest rates because it was not a bank and therefore operated only on the periphery of the bank regulators’ vision when it introduced its interest-bearing cash management accounts.

There are dozens of comparable examples. In each case, markets that were dominated by entrenched competitors surrounded by powerful network effects and protected by regulation ultimately gave way to the fait accompli of a new network, and to efficient, safe markets that emerged by circumventing regulation.

But what if today this is only useful for technology-based businesses? And what if it is still primitive?

People would be wise to heed the story of the minimills that disrupted the integrated steel mills. Industry experts discounted the quality of the steel the minimills made, as well as assumed repeatedly that their technology would never be able to make steel that had far more demanding requirements. But what the technical experts did not count on was how desperately motivated the minimills would be to solve that problem so they could improve, make more money and serve more demanding customers.

So now we’ll see how desperate new online disruptive innovators are. I suspect only the time frame in which our current system of accreditation will remain intact is in question.

Michael is a co-founder and distinguished fellow at the Clayton Christensen Institute. He currently works as a principal consultant for Entangled Solutions.