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THE NEW U.

MOOCs’ disruption is only beginning

Journalists, as 2013 ended, were busy declaring the death of MOOCs, more formally known as massive open online courses. Silicon Valley startup Udacity, one of the first to offer the free Web-based college classes, had just announced its pivot to vocational training — a sure sign to some that this much-hyped revolution in higher education had failed. The collective sigh of relief from more traditional colleges and universities was audible.

The news, however, must have also had the companies that had enthusiastically jumped on the MOOC train feeling a bit like Mark Twain. When newspapers confused Twain for his ailing cousin, the writer famously quipped, “The report of my death was an exaggeration.” Undoubtedly pronouncements over MOOCs’ demise are likewise premature. And their potential to disrupt — on price, technology, even pedagogy — in a long-stagnant industry is only just beginning to be seen.

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How important is disruption in higher education? Tuition costs have been ballooning faster than general inflation and even faster than health care. And what do we get in return? Nearly half of all bachelor’s-degree holders do not find employment or are underemployed upon graduation. At the same time, employers have not been satisfied with degree candidates. Two recent Gallup polls showed that although 96 percent of chief academic officers believe they’re doing a good job of preparing students for employment, only 11 percent of business leaders agree that graduates have the requisite skills for success in the workforce. And this is all occurring while higher education leaders were convinced that they were innovating all along.

It was just the wrong kind of innovation.

Any industry has both sustaining and disruptive innovations. Most people are very familiar with the former, which are meant to drive up prices by delivering bigger, faster, stronger products and services for the best customers. Disruption, on the other hand, changes the nature of performance itself, usually driving down prices. Together, these two vectors keep costs in line.

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Higher education, however, has historically seen only sustaining innovations. To outpace fellow institutions in the game of college rankings, schools have improved classrooms, updated technology, sponsored faculty research, increased administrative overhead, and decked out residence halls and dining facilities. Costs have spiraled out of control.

To exacerbate matters, the US government has put a floor — not a ceiling — on prices. Through policy and increased Pell grants and other subsidized loans, the government has only enabled people to afford the costs rather than incentivizing institutions to make the cost of education more affordable to people.

‘Massive’ and ‘open’ are not particularly conducive to viable or sustainable business models.

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Fortunately, though, the mania around MOOCs jump-started several meaningful conversations in the opposite direction.

The online offerings have already had enormous power in revealing the kind of pricing the higher education market can actually bear. In a world where there has been no incentive to reduce costs, the mere existence and potential of alternatives has forced established institutions to move on price. In 2013, we witnessed aggressive discounting strategies as well as schools experimenting with lowering net — not sticker — prices in an effort to recruit students. Without even competing directly as true low-cost substitutes, MOOCs have managed to generate price competition previously unheard of among traditional campuses.

At the same time, MOOCs called into question our basic assumptions about college. Free access to content from prestigious institutions revealed that content didn’t need to be proprietary. Without having to waste time re-creating the same lectures and class materials, particularly for lower-division courses, many professors saw the opportunity to be even more connected and hands-on in order to make existing content come alive for students. Despite the intense trepidation that technology would somehow replace teachers, it became clear that MOOCs didn’t preempt interaction; instead, they forced more contact and accountability on both the student and the teacher.

Faculty have also been forced to reassess how and why they teach the way they do. Some professors began experimenting with alternative models, such as flipped classrooms and other blended-learning techniques by taking advantage of readily available, open, online materials.

Yet there is plenty of room for more change to come.

Udacity, for its part, should be applauded for not burning through all of its money in pursuit of the wrong strategy. The company realized — and publicly acknowledged — that its future lay on a different path than it had originally anticipated. Indeed, Udacity’s pivot may have even prevented a MOOC bubble from bursting.

Oddly, bubbles occur when too many people are too right about the potential of something like MOOCs. The personal computer bubble of 1984 and the dot-com bubble from 1999 to 2002 epitomize what’s known as “capital market myopia,” when investors ignore the logical implications of their individual investments in the same business category. MOOCs could have easily fallen into a similar trap — it’s difficult to imagine all the organizations receiving the enormous, collective investment in online learning ultimately succeeding.

In all likelihood, companies like Coursera and Udacity — Harvard and MIT’s offering, edX, operates as a nonprofit — that started out as MOOC providers will eventually move away from certain qualities of the unfortunate acronym. “Massive” and “open” are not particularly conducive to viable or sustainable business models. They may, in fact, become even more of a menace to traditional higher education as they pivot. It won’t be long before these companies find their emergent strategies. Traditional institutions certainly cannot afford to stand still.

Academics have historically separated teaching and scholarship as a distinct enterprise from vocational training. Utility was what graduate and professional schools were for, whereas college was the space and time for students to pursue their passions and gain a global perspective.

This approach, however, unwittingly ignores a very vital niche of students — non-consumers of traditional education. Or, in this case, the nearly 80 percent of college-goers in the United States who don’t have the residential-college experience we tend to glorify. Most commute, work part-time, have family commitments, or don’t have the luxury to major in a field with no direct relevance to their future career goals. The amenities, socialization, and services bundled together by most brick-and-mortar institutions have little relevance to these students.

Education technology companies and alternative learning providers — not just MOOCs — are finding disruptive footholds by targeting these non-consumers. They note that graduates from even well regarded colleges are struggling to launch their careers, make it into the workforce, or transition between jobs. Innovators are, therefore, beginning to address this widening gap by identifying what employers need and building those skill sets into their curricula.

Many colleges and universities resist the idea of training students for jobs. Yet it is employers who are truly the ultimate consumers of degree-holders. If alternative education providers, by partnering or collaborating with employers, are able to deliver prospective job candidates who are as just as qualified — and in some cases, better suited — for the opportunities at hand, companies will begin to validate these learning pathways.

In our research, we see over and over again that it is nearly impossible for established leaders to disrupt themselves. So what does that mean in practical terms for more traditional colleges? Some will have to accept they can’t be everything to everyone and scale back their course offerings. Academic leaders, no longer able to count on state or federal subsidies, will have to bear down on the inefficiencies built into how they now operate. Not every campus will be able to be a research institution. Tenure will be called into question.

Over time, colleges and universities will have to compete with providers who offer low-cost, direct paths to employment that do not necessarily end in degrees or certificates. Campuses will have to be clear about the value of a college degree. Students and families will demand a more precise understanding of what they can expect from their college degree. And that will benefit all learners.

Read more from The new U.

The numbers behind the employment gap

Bail out law schools – but with strings attached

The case for a liberal education

Clayton M. Christensen is a professor of business administration at Harvard Business School. Michelle R. Weise is a senior research fellow in higher education at the Clayton Christensen Institute for Disruptive Innovation.
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