Why Leaders Should Care About Strategic Inflection Points

Have you ever heard of strategic inflection points? They are times in the life of a person, business, or industry when almost all the rules change and to survive, you must substantially change, quickly. To the uninformed and unprepared, they come as a surprise.

Strategic inflection points in industries are caused when changing external forces meet viable, disruptive innovations and then a completely new industry structure forms. Like a line of dominoes, once one falls, it’s just a matter of time until everyone is affected.

The Internet as a Catalyst

Today, the most significant external force impacting all industries is the Internet and it is acting as a catalyst to speed-up strategic inflection points. Its greatest impact on virtually all industries is not just how it connects buyers and sellers directly and virtually wipes-out businesses that used to add value along the distribution channel, it is how the internet is replacing human interaction altogether. And it is this last point that should get our attention. If this is still a little unclear, let me give you a current example.

Colleges and Universities

When I first taught college students about “strategic inflexion points,” their eyes glazed over. But in one class in 2002 I remember saying, “I believe the industry of college education is quickly heading toward a strategic inflection point and you are part of it. Let’s talk about it.” Because these students were in the business school and were also student consumers, it was a lively discussion. Later, when I served on the Strategic Planning Steering Committee at Southern New Hampshire University, I learned even more about the forces impacting college education and how the Internet was going to impact that industry.

Four External Forces Affecting Colleges and Universities

1. Cost of attending college is rising much faster than inflation and becoming unaffordable for most families. Living on campus is becoming too expensive.
2. Increasing numbers of college students will need to work their way through college. Conventional class schedules will be inconvenient for this group – they will need more flexibility.
3. Size of applicant pools, especially in some geographic regions, will decline as population ages so area colleges will be competing to attract fewer and fewer local students.
4. The well-developed Internet is now an effective communication mechanism that connects a student to the information s/he needs to learn, when they want to learn, in a learning style format that best suits the student.

Enter the MOOC

In recent years with advances in Internet technology, a great deal of attention has been directed toward the MOOC, which stands for Massive Open Online Course. These are Internet-based courses that contain information, which the student can process at whatever rate they wish. They usually include quizzes or knowledge surveys or exams to measure a student’s progress. And, usually, there is no direct instructor interaction.

One of the more visible experts in this area is Sebastian Thrun, a Stanford Professor and Google VP, who has developed an online education space called Udacity. To describe how a MOOC dramatically affects the scale of education, here is what Thrun said in the print version of his recent Fortune Magazine interview:

“In 2011…I was about to teach an artificial intelligence course at Stanford that would reach 200 students. I suggested to Peter Norvig (his fellow teacher) we should take it online. We sent a message to 1,000 individuals about an AI class. We expected 500 to respond: 160,000 signed up.”

MOOC courses cost from $10 to $50, which is very appealing in third world countries, especially India, which provided many of the MOOC students.

But, guess what? All this is about to change college education in this country. When Southern New Hampshire University announced and launched College for America, which gives students an opportunity to earn a degree for $10,000 at their own pace on line with little human interaction, it is clear that the college landscape is about to change dramatically. And, once again, the Internet is speeding-up a strategic inflection point and also reducing or replacing human interaction altogether.

I wonder if your industry is next?