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
    Sean Carton, 14 Sep 2009 @ 7:41am

    Oh good grief! Four reasons why this model isn't disruptive...

    Sorry, but I think you're really stretching here. I've been involved for over 15 years with higher ed (doing marketing for colleges, teaching, and serving in the upper levels of college administration) and think that the idea that StraighterLine's model poses a serious threat to traditional colleges in a bit naive.

    1) The entertainment industry was about controlling the means of distribution. That's what got disrupted. The product (music, movies, etc.) is the same regardless of the means of distribution. That's why digitization is disruptive: it separates the product (music) from how it got distributed (shiny plastic discs). This is hardly the same thing.

    2) The content of a college course is more than what's contained within the book(s) and lecture content of the course. Learning happens during the interactions between the professor, the students, and the other students. Heck, that $99/month would buy anyone any number of used textbooks that they could learn from. The problem is that they won't.

    3) Similarly, the quality of the course is directly linked to the quality of the instructor. That's what sets one institution apart from another. They all have access to the same "content." Adjunct faculty get paid crap now (in my experience around $2,500-$3,500 per course). I can't imagine what kind of faculty a school's going to get with this pricing model.

    4) Finally (and this is a more philosophical point, I guess), college isn't about learning "skills." That's what technical schools are supposed to be for. It's about learning to think. No matter what you learn in school (skills-wise), after 4 years it's going to be obsolete, especially in technical professions. The model described by StraighterLine might be fine for teaching Photoshop or AJAX coding, but I seriously doubt that it would work for philosophy, literary criticism, or writing.

    Saying that a college class is just about its content is like saying that what a musician does is equivalent to the musical notes he or she plays. If that was the case we'd all be satisfied with free MIDI versions of songs. Obviously we're not. Or maybe you are. Find out here: .

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