Then there are the strategic marketing possibilities. The secondary school students who have come to value and rely on Carnegie Learning's math tutorials are future college students. They might not think now of the University of Phoenix for college. But Sony discovered something interesting about the teenagers who bought its inexpensive pocket-size transistor radios and Walkman cassette tape players: they grew up to be faithful consumers of its larger stereos and television sets. Initially, Magnavox and RCA didn't worry about the low-profit-margin products for kids. In hindsight, they should have.

WHY IS COLLEGE SO HARD TO CHANGE?

In other high tech industries, the market leaders would be scrambling to put together similar deals. But don't expect to see that happening immediately in higher education. Part of the problem is a cash crunch. One hundred million dollars is hard to come by in higher education these days, when some state governments are cutting appropriations to their flagship institutions by that amount, and when risk-free interest rates of next to nothing deflate the cushion of even a multi-billion-dollar endowment.

Yet lack of funding isn't the only reason that the traditional universities and colleges aren't responding with their own strategic acquisitions. In all industries it's hard to convince successful incumbents that innovations at the low end of the market really matter. That was true even for Sony's Akio Morita, whose top executives didn't like his Walkman, which had no recording capability; it seemed smarter to focus on more-sophisticated products for the high end of the consumer electronics market. Regard for tradition and academic freedom make it particularly hard to undertake apparently low-quality innovations in higher education. But that's true to varying degrees in all industries. Whether the business is computers chips or steel, successful incumbents have difficulty responding to disruptive technologies, often until it's too late.

Meanwhile, for-profit educators will continue to invest in and improve upon disruptive technologies such as computer-adaptive tutorials. Attempts to stop them through regulation them will be no more fruitful than were trade sanctions against the Japanese electronics and automobile manufacturers. Regulation will slow the for-profits for a time, but they'll adapt. They'll invest even more in innovations that hold the potential to re-level the competitive playing field.

Physical campuses and prestige will always matter at the top end of the higher education market, so the most elite traditional institutions will survive competitive disruption. Many of them are developing their own sophisticated online education capabilities. MIT, with its OpenCourseWare initiative, and Cornell, with its profitable e-Cornell subsidiary, are only two of the most visible examples. Harvard, Stanford, and other elite institutions have been investing millions in online learning technology and curriculum for years.