In 2014, taxis had 76 percent of the ride-hailing market for business travelers. Just four years later, taxis have only 7 percent of that market, with Uber and Lyft taking the other 93 percent.

The forces of disruption can be fast and furious. They have attacked business verticals throughout the economy. Disruption displaces an existing market, industry, or technology and produces something new, more efficient, and worthwhile, according to Harvard Business School professor Clayton Christensen. Disruptors’ favorite targets are industries that are vulnerable on affordability and convenience. For higher education, that description strikes close to home.

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Disruption is simultaneously destructive and creative, and it is happening in higher education right now. Sixty-six percent of higher education leaders understand this and believe that the traditional business model in higher education is no longer sustainable, according to a Kaufman Hall survey.

These leaders don’t expect the current business model to remain viable for more than five to 10 years. Across all institution types and endowment levels, confidence in the strength of the current business model has dropped, with negative sentiment fueled by:
• Intense competition for a declining number of students
• The emergence of “free” or “nearly free” college programs offered by employers
• Endowments that return only slightly more than average spending rates
• Rising costs to provide education — including tuition discount rates approaching 50 percent

But it’s not too late for higher education institutions to adapt and thrive in this disruptive environment. Linking the institution’s strategic plan to its financial plan and capital planning processes is a significant step toward long-term viability and is a strategy that colleges and universities across the U.S. should prioritize.

About the Author:

Charles Kim is a Managing Director for Kaufman Hall and Director of the firm’s Higher Education division of the Financial Planning and Capital practice (ckim@kaufmanhall.com).

Jason H. Sussman is a Managing Director for Kaufman Hall and directs the firm’s Strategic Financial and Capital Planning practice (jsussman@kaufmanhall.com).

Kermit S. Randa is Chief Executive Officer of Kaufman Hall Software (kranda@kaufmanhall.com).


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