Next Up For Disruption? College
from the this-could-get-interesting dept
One of the reasons we spend so much time talking about the music and news industries, is because the disruption and upheaval happening in those industries right now are likely to impact nearly every industry you can think of in the near future. Understanding the mistakes being made by those in the industries that are further along the disruption curve should (hopefully, though, I’m not entirely optimistic on this) help keep those newer industries from making the same mistakes down the road.
Jake points us to an inkling of how the higher education market is beginning to be disrupted — and it goes beyond just cheaper textbooks or courses being offered online. By now, online distance learning is well-known and not all that big a deal. But, really, all the old school online university efforts, like University of Phoenix, did was to take the traditional college model and move it online. True disruptive innovation is never about just moving a legacy model to a new medium, but about embracing some aspect of that new medium to offer something in a different way that really wasn’t possible prior to that.
The article in Washington Monthly discusses a company called StraighterLine, which offers online college classes, but it totally disrupts the traditional business model of university learning. While the classic model is that you pay per class (or per semester as a fully matriculated student), StraighterLine has a simple model: you pay $99/month and get an all-you-can-eat offering. You go at your own pace — so if you have lots of time (and can complete the work) you can take multiple classes in that month. In the opening story of the article, a woman completes four full classes in just two months — for a grand total of $200. Taking those same classes at either local universities or online would have cost thousands, and would have taken much longer to complete. And, it’s not as if the StraighterLine courses skimp either. According to the article (and it would be great to hear from anyone who’s tried it to see if this is true), they use the same materials found in many college courses.
The reasoning behind all of this will sound familiar to those who read Techdirt on a regular basis:
Even as the cost of educating students fell, tuition rose at nearly three times the rate of inflation. Web-based courses weren’t providing the promised price competition–in fact, many traditional universities were charging extra for online classes, tacking a “technology fee” onto their standard (and rising) rates. Rather than trying to overturn the status quo, big, publicly traded companies like Phoenix were profiting from it by cutting costs, charging rates similar to those at traditional universities, and pocketing the difference.
This, Smith explained, was where StraighterLine came in. The cost of storing and communicating information over the Internet had fallen to almost nothing. Electronic course content in standard introductory classes had become a low-cost commodity. The only expensive thing left in higher education was the labor, the price of hiring a smart, knowledgeable person to help students when only a person would do. And the unique Smarthinking call-center model made that much cheaper, too. By putting these things together, Smith could offer introductory college courses a la carte, at a price that seemed to be missing a digit or two, or three: $99 per month, by subscription. Economics tells us that prices fall to marginal cost in the long run. Burck Smith simply decided to get there first.
Just like Craigslist. In fact, the article goes on to make that comparison, and highlight how similar the newspaper business and the University business are. It notes that freshman lectures are “higher education’s equivalent of the classified section” in that they’re insanely profitable and subsidize many other areas of the business.
And, just like Craigslist and newspapers, colleges started pushing back against StraighterLine, worrying about how it would impact them. In fact, it’s caused quite a bit of trouble for StraighterLine, causing it to be split off from its original parent company, Smarthinking. Meanwhile, other complaints have made it difficult for StraighterLine to follow through on its partnering strategy to deal with questions concerning accreditation. So, StraighterLine itself may never become a huge success, but it gives you a glimpse of how the world is changing and how the higher education system may be ripe for disruptive innovation as well.