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from September 2013
There’s one easy answer: probably no one (except, perhaps the for-profits) is getting rich with online courses.
On the one-hand, there’s the five-dollar-bill-on-the-sidewalk logic: if it were easy to get rich with online courses, then everyone would already be doing it.
On the other, there are some straightforward practical considerations (these from my very preliminary notes with a few quick brainstormy ideas at the end)
- The technology here is not plug-and-play. Gigantic amount of human capital necessary to get the infrastructure to work (and keep it working)
- Real problems of scalability.
- First of all, the fixed costs are very high and the marginal revenue is modest. This means you have to have a shitload of capital that you can invest and not expect an immediate return on
- Secondly, the human side may not scale well – running an online class for 25 students is one thing, doing it for 250 is a whole other ball game. Unless you have been rocket-scientist smart in terms of structuring division of labor and really understanding the supply process you will outstrip and overtax your staff capacity.
- At the moment there are dozens of players trying to “crack” this opportunity. Nobody, as far as I can tell, has hit on the iPad idea.
- Many of these players have literally millions and millions of dollars behind them
- Many of these players have technical base equivalent to a moderate sized software company
- Many of these players have really serious academic brand going into the game (e.g., Harvard, Stanford, MIT)
- In other words, massive competition among players we just are not in the same class as
- True, lots and lots of down-market institutions are grabbing onto selling credits online, but look closely at the quality and examine closely their financials and how they are treating instructors and students and such and I’d predict it’s really not a business we’d be proud to be in.
- The dominant players on the horizon at the moment (outside the for-profits) are offering learning for free. There is a real potential for the marginal revenue for these things to be zero in not too many years.
- The tools that are coming out of this revolution offer tremendous opportunity for places like Mills to address one of their most fundamental challenges: pedagogical productivity. But the secret is the assessment and adoption of tools to do more and better and more easily what we are already good at, NOT of branching the operation off in directions that further remove us from our core competencies. This is really business 101: never imagine you are going to save the company by going into a line of business that is a distraction from your core.
- We should see the activity around online education as one that is producing tools and ideas and bits of infrastructure that are just waiting to be assembled into the iPad of small liberal arts colleges. We need to think like innovators, not bandwagoneers. There are oodles of kids out there who’d like to have a Mills education. Trouble is, most cannot afford it and we cannot afford under present circumstances to give it away. What we need to do is think innovatively about how we can use the new tools that are emerging daily to equip ourselves to offer even better product more cheaply. Remember the net revenue question, but this time think about it more like a restaurant: how many covers do you need to get in the restaurant every night to be successful.
- So the long term model goes maybe like this: enhance the human capital in your existing staff in such a way that you can serve more students better and more easily without “speeding up the line” (e.g., increasing class size, making staff work longer hours) and then target improved quality and lower prices as the draw to get more students (the trick being to do this ahead of the curve of other institutions).
Note that much of the push is from textbook publishers
Sources to Look at
- Catalanello, Rebecca Florida Virtual School's revenues falling short of expectations Tampa Bay Times Tuesday, February 14, 2012
- Cuban, Mark. 2012. "The Coming Meltdown in College Education & Why The Economy Won’t Get Better Any Time Soon," BlogMaverick May 13th 2012
- Fain, Paul. “Making It Count,” Insider Higher Education June 15, 2012.
- Kingkade, Tyler. "MOOC Skepticism Persists Among University Presidents, Despite Rapid Growth Of Online Courses In 2012." Huffington Post 11/26/2012
- Kolowich, Steve. 2012. How Will MOOCs Make Money?. Inside Higher Ed June 11, 2012 - 3:00am
- Noyes, Jesse. 2009. Revenue chase sends colleges to Web Boston Business Journal 2/06/09
- Oremus, Will. 2012. The New Public Ivies: Will online education startups like Coursera end the era of expensive higher education? Slate Wednesday, July 18, 2012, at 2:00 PM ET
- Smith, Tovia. 2012. "Online Classes Cut Costs, But Do They Dilute Brands?. National Public Radio, 2 July 2012.
- Young, Jeffrey R. 2012. Inside the Coursera Contract: How an Upstart Company Might Profit From Free Courses. Chronicle of Higher Education July 19, 2012
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