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Generic Education? Headed for Bankruptcy.

By Gabriel Martinez on Sunday, Jul 31 2011

High-school students spend most of their waking hours trying to fit in, to blend, to be one of the crowd.  And yet this is the end of the season in which students try to "differentiate" themselves - the college application season.

Interestingly, universities and colleges also have the same inner conflict.  They bend over backwards to fit in, to blend, to match what everyone else is doing.  And then they turn around and say to potential students,  "we're exceptional, look at us ... but don't freak out, we're like every other school ... except that we're special ... but in a very normal sort of way."   We're bold yet bland.

It turns out that "doing what everyone else is doing" is bad business. (It's also bad for your health, it turns out).  Not long ago, the Chronicle of Higher Education ran an article that concluded: "you've got to differentiate yourself. [If everyone follows] the solution everyone has come up with, and at some point the market's going to get saturated "

From a business standpoint, a university cannot survive if its strategy is to imitate what everyone else is doing (check out this classic article on business strategy by Michael Porter).  Big, medium, and small, colleges across the country offer an increasingly shapeless, generic education.  The same classes, the same bland content, the same weak requirements, the same emphasis on entertainment.  Why go someplace and spend $30K-$40K when you can get exactly the same product from home, online, at a fraction of the cost?

This is good news for schools that are already very differentiated.  I’m thinking particularly of schools with a strong commitment to liberal education and where faith is lived intensely.  Does your school have a product that other colleges cannot imitate (without tremendous cost)?  Do you have a high-quality package that cannot be copied by an online program?  Then you have a competitive advantage precisely because you are targeting an under-served market and not an over-crowded one.

That’s for the supply side.  On the demand side: over the next 10 years or so, there will be fewer US residents who are of college age.  Not only the fraction of college-age people in the United States will fall: the US will actually lose over a million 18-22 year-olds by 2020.  The situation is particularly bad in the Midwest and the Northeast.

The picture is brighter in the West and in the South, and even more so in Florida (you can find the data here).  The share of the population that is college-age is relatively low in those regions (which explains why, historically, there have been fewer college graduates per capita in those states than elsewhere).  But unlike the country as a whole, they are expected to gain 18-22 year olds over 2010-2020.  Between 2020 and 2030, the college-age population in Florida is projected to grow by nearly 30%.

The market for generic education is not only over-crowded (and increasingly so), but shrinking.  The market for the specialized product that many schools (including mine) offer, in the location in which we offer it, is under-served and expanding.