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

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  1. identicon
    Richard, 11 Sep 2009 @ 9:18am

    Re: Re: Re: A view from inside higher ed

    I believe that as an academic institution, we are not the same kind of thing as an ordinary commercial - but of course this doesn't exempt us from the basic rules of finance or sound organisation nor to the need to form good working relationships with our students.

    Traditional Universities would regard Government and parents as sponsors or benefactors, students as of junior members of staff and the customer as knowledge (well in the middle ages the customer would have been God).

    The problem with treating students as customers is that the outcome depends on their efforts as much as (if not more than) the institution's. This is a real big difference from almost all (other) businesses. This difference really strikes home when it comes to assessment.

    The techdirt article and the linked articles concentrate on the delivery of learning materials and regard assessment - and the inevitable associated accreditation as somehow an inconvenient side issue.

    Unfortunately that is not a valid approach. Assessment is key to the whole process. A purely commercial organisation can allow its customers to be the ultimate arbiter. A University cannot. The customers of a hotel, restaurant or manufacturing company may get more or less out of their experience but they don't "FAIL" like the "customers" of a University do. The immediate pressure on a for profit educational organisation is to "pass" all the students. I myself have a couple of "certificates" from commercial training organisations (acquired during my time in industry). All they assert is that I attended the course. The moment you have to "fail" some of the students then someone else has to check up on you to make sure that you are maintaining a consistent standard. Hence there is a need for accreditation. Inevitably the accreditation body prevents true commercial competition in the market - because under pure competition the price would inevitably be driven towards the marginal cost of.....

    printing a degree certificate.

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