The quote highlights a stark difference between online universities like Liverpool and Phoenix and traditional brick-and-mortar institutions. It suggests that these online universities can significantly reduce their prices by up to sixty percent and still remain profitable, whereas conventional universities would face severe financial difficulties if they were to decrease their fees even slightly, say by ten percent.
This statement reveals a fundamental disparity in the business models of online and traditional educational institutions. Online universities often have lower operational costs due to reduced overhead expenses such as rent, utilities, and maintenance for physical facilities. This efficiency allows them to offer competitive pricing and still maintain profitability. In contrast, traditional universities are burdened with high fixed costs that make it challenging to reduce prices without compromising their financial stability. The quote underscores the importance of cost structures in determining how institutions can adapt to changing market conditions and remain sustainable.
The quote is attributed to Clayton M. Christensen, a renowned Harvard Business School professor known for his pioneering work on disruptive innovation theory. Christensen's insights have significantly influenced various industries, including education, by highlighting how new entrants with innovative business models can disrupt established markets. His observations often challenge conventional wisdom and encourage organizations to rethink their strategies in light of technological advancements and changing consumer expectations.
