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Title
Managing the university: Why “organized anarchy” is unacceptable in the age of massive
open online courses
Permalink
https://escholarship.org/uc/item/34j0r9kz
Journal
Strategic Organization, 16(1)
ISSN
1476-1270
Author
Teece, DJ
Publication Date
2018-02-01
DOI
10.1177/1476127017732760
Copyright Information
This work is made available under the terms of a Creative Commons Attribution-
NonCommercial-NoDerivatives License, availalbe at
https://creativecommons.org/licenses/by-nc-nd/4.0/
Peer reviewed
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Managing the University:
Why “organized anarchy” is unacceptable in the age of MOOCs
David J. Teece
Director, Tusher Center for the Management of Intellectual Capital
Institute for Business Innovation/Haas School of Business
University of California, Berkeley
August 23, 2017
This is a copy of the accepted manuscript for:
David J. Teece, Managing the university: Why “organized anarchy” is unacceptable in the age of massive
open online courses. Strategic Organization, vol. 16, issue 1, pp. 92-102.
Copyright © 2017 SAGE Publications. Reprinted by permission of SAGE Publications.
https://doi.org/10.1177/1476127017732760
From the special issue on Strategic Management Theory and Universities
Email: teece@haas.berkeley.edu
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1. Introduction
Managing a university is arguably more complicated and complex than managing a private for-
profit enterprise. There are not only more stakeholders to satisfy/keep in mind—including
students, faculty, alumni, parents, boards of trustees, state politicians (in the case of publicly
funded universities) and local communities—but there are also hot-button political issues such as
free speech, community involvement, and inclusion to deal with. Many societies expect the
university to perform complex social and political functions, too. Few private sector CEOs have
to manage such a plethora of challenges.
Yet there are also important similarities. Universities, like private firms, operate in an
environment subject to unforecastable shifts. Public universities, in particular, face deep
uncertainty driven in part by state budget changes, new governance requirements, and, on
occasion, political interference.
Moreover, many university presidents manage thousands of employees and budgets of hundreds
of millions (if not billions) of dollars.
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Universities are, in fact, big businesses. But, while they
need to be managed in a more businesslike manner, they cannot and should not be run in exactly
the same way as a business. To take one obvious example, university faculties have high levels
of autonomy and influence over many “workplace” decisions to a degree that has no clear
parallel in a corporate hierarchy.
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To take a few examples, in FY 2015, the budgets of the University of Illinois system, Stanford, and
Harvard were $4.5 billion, $5.1 billion, and $4.5 billion, respectively.
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This is not to say, however, that universities will not benefit from modern management tools and
frameworks. Given the complexity and scale of their operations, such tools are essential to help
guide their allocation of resources and attention. Neglect of any one major constituency can spell
disaster; but embracing them each with equal weight will likely also lead to failure.
Moreover, universities face a competitive environment that has become global (Slaughter and
Leslie, 1997). Not only is top talent (faculty and students) recruited worldwide, but new
technology allows education services to be delivered across borders.
It is critical that priorities be set. Otherwise, campus leaders will be drowned by non-strategic
issues. A university president should not settle for the “organized anarchy” that Cohen and
March (1974) saw as the norm for university management a generation ago. Perpetuating chaos
and crisis (however “organized”) is no longer acceptable, particularly when there is acute
resource scarcity. This applies even to leading universities with impressive histories. Old
accomplishments will not allow even great educational institutions to coast. As Oxford
University Vice Chancellor Sir John Hood (2004) put it, “reputations built on the memorable
success of the past do not of themselves provide a stable foundation for the future.” Strategic
management is now a necessity for campus leaders to look forward and get ahead of their
problems.
This essay explores the applicability of system theory-based framework called dynamic
capabilities (Teece, Pisano, and Shuen, 1997; Teece, 2007). Dynamic capabilities can help
campus leaders think about managing universities better. After presenting the capabilities
framework, I briefly discuss its applicability to the challenges and opportunities of the
digitization of education.
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2. The past is not prologue
The educational and research landscape has changed dramatically over the last half century.
Technological possibilities have exploded. Students are increasingly from older and previously
underrepresented demographics, bringing new expectations. Rising costs and tight budgets have
increased internal and external conflicts. Various forms of accountability are receiving greater
attention. Strong global competition for research dollars and top faculty and students has grown.
Forty years ago, Cohen and March referred to an American college presidency as “a reactive
job,” where the allocation of attention was “largely controlled by the desires of others” (Cohen
and March, 1974: 1). They went on to observe that this demand-driven style of decision making
“decouples problems and choices” (Cohen and March, 1974: 2).
They were writing right at the end of the period during which post-war economies were booming
and funds for operations and research were more readily available. As their book was being
published, an oil shock threw most developed countries into an economic crisis and aggravated
rising inflation that made university budgeting more complex.
There has not been much effort to measure the extent to which the reactive behavior that Cohen
and March described has persisted. Certainly, some university leaders have carved out forward-
looking positions in recent decades. But there is a real need for a systematic approach to the
proactive strategic management of today’s universities.
A strategic approach to management of the university must be cognizant of the campus
ecosystem writ large. A research university is embedded in a larger system that includes
supporting institutions (e.g., government agencies such as NSF and NIH in the U.S.) and a