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.
Hide this

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: disruption. college, distance learning
Companies: straighterline

Reader Comments

Subscribe: RSS

View by: Time | Thread

  1. icon
    Jim D (profile), 11 Sep 2009 @ 8:43am

    Re: Re: A view from inside higher ed

    The idea that the person who pays the bills is the customer is true, but only to a point, especially when many parents take the approach that it's the kid who has to live/work at the school, so they should go somewhere they're going to be comfortable. We encounter this issue every day, assisting transfer students, not parents, who weren't happy at their previous school. In truth, both students and their parents are customers, and we have to accommodate both.

    On the issue of behaving like a commercial enterprise you are also correct, but again it comes down to the fact that we are both commercial and an institution. Our goals may not come down to a bottom line of profit or loss, but we are sufficiently similar to companies in having to attract and retain users/customers/buyers/students that focusing exclusively on being an institution over the more business-like aspects will similarly cause us to fail, just as you observe that focusing exclusively on money making will cause us to fail. It's this balance that has been very hard for higher ed to find, or even recognize as necessary.

Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here

Subscribe to the Techdirt Daily newsletter

Comment Options:

  • Use markdown. Use plain text.
  • Make this the First Word or Last Word. No thanks. (get credits or sign in to see balance)    
  • Remember name/email/url (set a cookie)

Follow Techdirt
Special Affiliate Offer

Essential Reading
Techdirt Deals
Report this ad  |  Hide Techdirt ads
Techdirt Insider Chat
Recent Stories

This site, like most other sites on the web, uses cookies. For more information, see our privacy policy. Got it

Email This

This feature is only available to registered users. Register or sign in to use it.