Your Turn: Disrupting the Value Chain

JOHN IS A typical recent graduate—articulate, well-groomed, and eager to work.

After spending four years at a large public institution ranked within the top 200 by U.S. News & World Report, he has graduated with an enviable GPA. Yet, like many of his peers confronting the current challenging economic environment, John is ill-equipped to translate the content of his college classes into gainful employment. Therefore, four months removed from the euphoria of graduation day, he remains unemployed.

While John is not a real person, he unfortunately represents a very real problem: the crisis facing American higher education. Rising tuition costs have led to increased loads of student debt, which are exacerbated by underwhelming returns on investment. More and more skeptics are questioning the actual utility of any degree—and that includes a degree from a business school.

When experts debate how to “fix” traditional higher education, they often focus on how to revamp content delivery and how to stem the tide of increased costs. For instance, because MOOCs and other delivery methods promise to increase accessibility to course materials, many university administrators have diverted resources to pursue these strategies. However, we believe they should do exactly the opposite. Increasing access to inexpensive content simply increases the supply of students—like John—with undifferentiated skills. The university’s advantage lies in increasing the value of the educational experience. To prove our point, let’s analyze the value chain in higher education.


For decades, firms have used Michael Porter’s value chain to understand the intrinsic value of the series of activities they undertake to provide their services. They might consider inbound logistics, operations, outbound logistics, marketing and sales, and service—as well as supporting activities such as technology and human resource management.

Douglas E. Thomas
B. Tom Hunsaker

An organization can use the value chain analysis to identify its unique source of competitive advantage and value proposition. For example, Nike’s competitive advantage is in marketing and sales, not in operations. Arguably the most important strategic move Nike made in its history was to focus on its strengths in those two areas and to hire other organizations to take care of operations.

In any industry, if powerful environmental pressures drive toward standardization in a particular aspect of the value chain, commoditization is a common result. Recognizing this cycle, the best organizations don’t follow the trap of investing more resources in the areas of their value chain that are becoming commoditized. Instead, they redirect their resources into important services that develop new, unique sources of value. These organizations emerge from commoditization cycles renewed and stronger than before, while those that misdiagnose disruptive pressures cease to exist altogether.

Now let’s look at higher education’s value chain, which includes student recruitment, student support, student placement, content delivery, and knowledge creation. Many college and university leaders believe that the value proposition of higher education lies solely in content delivery—that is, giving students access to formal knowledge in the classroom or online. But we believe those academic leaders are mistaken.

Content delivery is becoming rapidly commoditized due to uniform accreditation requirements and professional standards dictating that fundamental course content be more alike than different. At the same time, MOOCs and other online programs deliver generalized, low-cost content to as many people as possible. By producing commoditized content at a greater rate, universities increase not only access to that content, but also the number of students educated by that content. Ultimately, this abundant supply of students simply increases competition among them without giving them any way to distinguish themselves.

Fortunately, the value proposition that higher education offers to society is much richer than simple content creation, dissemination, and delivery. The value proposition of higher education has always been this: It fosters a well-informed and well-prepared citizenry to function in the world. Colleges and universities deliver their value not only through classroom experiences, but also through an entire chain of offerings. These include student-related services such as advising and mentoring; educational opportunities such as internships, study abroad programs, experiential learning, and undergraduate research; and job-related services such as career development and placement centers. Higher education institutions also help students develop the social capital that matters at least as much as technical knowledge.

Some colleges and universities have de-emphasized these student-centered activities due to financial pressures. However, this is a risky strategy that misdiagnoses the disruptive pressures facing universities. Rather than competing with these pressures and falling into the commoditization trap, universities should reinvigorate the aspects of their value chain that are difficult to generalize or outsource to technology, but that represent real value to those they serve.

MOOCs cannot easily replicate or improve upon the traditional classroom experience, particularly in upperlevel undergraduate and graduate courses. MOOCs also face real challenges in providing advising, mentoring, placement, and other personalized services. That’s why we think that, in the foreseeable future, the added value of traditional higher education lies in unique, personalized services.

We’re not saying that administrators should ignore the potential of MOOCs and other alternate sources of content delivery. These programs have a purpose—they can free resources that can be redirected to other areas of the university’s value chain. For instance, faculty can flip the classroom by asking students to view high-quality MOOC lectures on their own time, reserving class time for discussions and more interactive experiences. This approach allows universities to put more of their resources into their core source of value: the personalized experience they deliver to students.


In today’s economic climate, higher education appears to be losing much of its vitality. This is partly because academic leaders misunderstand where their institutions offer the most value. We believe university leaders should embrace MOOCs and similar programs for the time and cost savings they offer, but they shouldn’t stop there. Once they’ve used MOOCs to free up staff and budgetary resources, they should refocus those resources on what they do best—providing the individualized attention that prepares students for the working world. Students like John are depending on them.

Douglas E. Thomas is the Anderson Alumni Endowed Professor at the University of New Mexico’s Anderson School of Management in Albuquerque. B. Tom Hunsaker is Clinical Associate Professor of Management at the Thunderbird School of Global Management in Glendale, Arizona.