Why Clayton Christensen Is Wrong (And Michael Porter Is Right)

A polite squabble has broken out at Harvard Business School over the HBS strategy for online education. The intellectual brawl pits two of the world’s most famous business school professors against each other: Strategy guru Michael Porter and innovation sage Clay Christensen.

Christensen, who famously coined the term disruptive innovation, is not too fond of his school’s new online learning venture, HBX, which was announced in March. The venture’s first offering is a $1,500 online program of three fundamental business courses for undergraduates and recent graduates of liberal arts programs.

Christensen, who has predicted that half of the universities in the U.S. could face bankruptcy within 15 years due to technology, questions whether HBX is radical enough to allow HBS to survive the threat posed by online education.

In some cases, Christensen allows, companies have “survived disruption, but in every case they set up an independent business unit that let people learn how to play ball in the new game,” he told The New York Times, which disclosed the disagreement in an article on Sunday (June 1). HBX, he argues, is too closely tied to the business school and not disruptive enough as an HBS strategy for online education. “What they’re doing is, in my language, a sustaining innovation. It’s not truly disruptive.”

CHRISTENSEN THINKS HBX IS NOT DISRUPTIVE ENOUGH

The only way for a market leader like HBS to survive disruptive innovation, believes the professor, is by disrupting their existing businesses themselves with an offering that is inexpensive, open, and simple. But Harvard consciously decided not to do that with HBX. Instead, it is beginning its foray into online education with a proprietary platform and a new product that does not cannibalize its existing programs. “I think that we’ve way overshot the needs of customers,” Christensen said. “I worry that we’re a little too technologically ambitious.” The school will eventually offer executive education programs online, including a course on disruptive innovation by Christensen, author of The Innovator’s Dilemma.

Essentially, HBS is relying on the strength of its core business and changing incrementally, rather than casting away what it does best and trying to start something truly new and disruptive. In dismissing HBX as a pricey system that could be upended by a cheeper technology solution, in the same way that made Polaroid and Kodak kaput, mere irrelevant victims to disruptive innovations, Christensen finds himself directly in opposition to Michael Porter, the school’s most famous professor.

Porter has argued that “a company must stay the course, even in times of upheaval, while constantly improving and extending its distinctive positioning.” By seeking to replicate the case-study method online while not competing with its own MBA program, HBX achieves that goal. “I think the big risk in any new technology is to believe the technology is the strategy,” Porter retorted. “Just because 200,000 people sign up, doesn’t mean it’s a good idea.”

GIVING AWAY YOUR MOST VALUABLE ASSET FOR FREE IS NOT A STRATEGY

Especially, it should be added, if there is no revenue from the 200,000 people who sign up for a MOOC (Massive Open Online Courses). It’s not that MOOCs hurt a school’s existing business. In fact, just today (June 3) several professors at Wharton published their findings that business MOOCs do not appear to be cannibalizing existing programs but are reaching at least three new student populations: those from outside the United States, especially those in developing countries; foreign-born Americans; and under-represented American minorities.

The academics surveyed more than 875,000 students enrolled in nine MOOCs offered by Wharton. Seventy-eight percent of individuals who registered for the Wharton MOOCs came from outside the U.S., with about 45 percent hailing from developing countries. By comparison, 45 percent of two-year M.B.A. students and 14 percent of executive MBA students are foreign. Thirty-five percent of all U.S. individuals enrolled in the Wharton business MOOCs are foreign-born. By comparison, only 12.9 percent of the U.S. population is foreign-born. Nineteen percent of Wharton’s American MOOC students are under-represented minorities compared to 11 percent of students enrolled in traditional M.B.A. programs at nine of the top U.S. business schools.

That’s all very fine. But none of them paid money to Wharton’s professors for those courses which took some of the school’s best faculty out of the classroom for paying students. And there is no proof that any of it will ever lead to new business opportunity for Wharton.

What Porter clearly understands is that giving away your most valuable asset for free–the best professors teaching the most desired classes in front of cameras to tens of thousands of people who often drop out of these courses–is no business model for the future. Just ask any media company about giving away their content for free and training a generation of users not to pay for information. Yet, many other business schools and universities have rushed into the MOOC market on the basis that it is giving them valuable brand exposure the world over.

Who’s right regarding HBS strategy for online education? Porter, for sure. Harvard Business School is the gold standard of MBA education. It is a luxury brand based on scarcity: Very few people can get into the school in the first place and very few people in the world can have the most valuable imprimatur in the world. The power and influence of that brand is indisputable and pretty much impossible to completely disrupt or dislodge. The school’s resources make HBS invincible in a way that Kodak or Polaroid never were.