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ANOTHER PRESENTATION ON POST-SECONDARY DISRUPTION
Burck Smith, CEO, StraighterLine, October, 2011
Or“Benevolent Collusion”
Topics
Introduction The Big Question and Disruption Theory Higher Education Today Higher Education Tomorrow StraighterLine as Case Study Should government have a role in online
education? Policy Recommendations
About Me…
Background in non-profits and public policy.
Masters “thesis” helping a consortium of MA community colleges develop an online learning financial model.
Founded SMARTHINKING in 1999 Founded StraighterLine in 2008 Kept asking the question…
Despite massive investments in technology
in post-secondary education and K-12, why have costs gone up and
quality gone down?
Existing providers compete on features Some new technologies change entire
industries Disruptive technologies are attractive to
markets ignored by existing providers
Eventually new technologies compete with existing providers.
New technologies require a new business model
Disruption Theory 101
Why Were Colleges Created?
Scarcity of Labor and Content
Centralization
Network effects attract more teachers and students
Necessary facilities require high fixed costs
“Credentialing” is difficult to separate from “delivery”
Higher Education in 2011
Abundance of Labor
and Content
De- Centralizat
ion
Pricing Continues To Assume High Fixed Costs
Credentialing Still Tied to Delivery
Antiquated Regulatory and Financial Policies
Course Delivery Is Really Cheap
Institution/Course Cost Per Student
Non-Resident Tuition and Fees
Frostburg State University/Intro. Psych
$25 $1,688
University of Alabama/Intermediate Math
$82 $2,680
Average NCAT Institutions/Gen Ed Course
$111 $1,854
Typical Adjunct Taught ($3K/30 student)
$100 $1,000 - $2,000
Online Learning Business Models
For-Profit Accredited Colleges
Turn-Key Private Labeled Programs
In-House Online Offerings Subsidize Other Units
Everyone looking to starting online programs
The Iron Triangle
Subsidy
• State allocation• Federal student grants/subsidized loans• Favorable tax status
Accredited College
s
• Only degrees can be accredited, not courses• Accreditation measures inputs, not outcomes• Colleges set own, subjective articulation policies
Competitive Barrier
s
• Colleges cannot easily be “disaggregated”• Colleges must look similar to each other• Standards set and enforced by those that would be
undermined by changes
Internet enables dramatically more competition at the course level.
Student debt load is becoming unsustainable.
Tuition growth is more rapid than ever. Sources of student support are drying up Online courses are cheaper to deliver
and more scalable.
Barriers are Eroding
Trends: Growth of dual enrollment, co-enrollment, AP, CLEP, StraighterLine, community college enrollment growth.
Current StraighterLine CoursesDevelopment
al Writing
English Composition
1
English Composition
II
Developmental Math
College Algebra Pre-Calculus
Accounting 1 Accounting II Macroeconomics
Microeconomics
Business Statistics Calculus
Chemistry Biology Business Comm. A&P I A&P II Calculus II
Managerial Accounting
General Psychology
Medical Terminology Physics I Intro.
SociologyIntro.
Business
Western Civilization Nutrition
Physical Education
and Wellness
Student Success U.S. History Personal
Finance
Intro. Criminal Justice
Pharmacology I
Pharmacology II
How does StraighterLine
Help STUDENTS?
• Courses by McGraw HillHigh Quality
Courses
• Start/Stop Whenver• No Set Due DatesTotal Flexibility
• On-demand educational support• Personal Course Advisor
Individualized Support
• Cost for students: $99 /month + $39 /course • eBooks reduce the textbook cost by 45%Affordability
• Credit by Regionally Accredited Partner• ACE Approved
Real College Credit
How does StraighterLine Help PARTNER
Colleges?
• After StraighterLine, a student will need to complete the majority of his or her degree.
More Students
• These students are very likely to persist.
• They will likely be out-of-state and using distance education delivery.
More Valuable Students
• A place to refer students that they can’t serve.
• Revenue stream
Referral Destinati
on
Credit Delivery
Partner College Network — Almost 20 regionally accredited partner colleges.
“Shadow Partners” – Over 180 non-partners have awarded credit for SL courses.
ACE — StraighterLine’s courses have been reviewed and recommended for credit by the American Council on Education’s (ACE) College Credit Recommendation Service.
Independent Survey Results – SL Courses as rigorous as other options, more convenient, more affordable, students persist at greater rates.
“Good Housekeeping Seals of Approval” – DETC, College Board
General Research – Students that start college with credit are more likely to complete.
Potomac College
Arguments Against
“Fine Wine” Fallacy
“Platonic Form” Fallacy
Institutional Control of Credit Acceptance
Competes With the Public Sector
Susceptible Segments
What does this mean for colleges? Erosion of most-profitable courses Need to re-think pricing models Need to re-think business models New marketing and student recruitment
opportunities Controversy around new partnerships 3 year Ivy’s?
Predictions
Selective, high-priced colleges will be unaffected. Non-selective colleges will loosen transfer
restrictions. Course prices will be variable and will reflect the
cost to deliver the course. Subscriptions may become more common that flat tuition.
Residential will cost a lot more than online courses. Highly efficient specialty course providers will
emerge. College marketing strategies will begin to resemble
retail marketing strategies. The rising cost of college will become a non-issue.
Policy Suggestions
Create minimum outcomes where possible, let the market set the rest.
Create course-level accreditation. Require any college accredited by a DoE
recognized agency to accept any other similarly recognized college’s credits.
Create a more level economic playing field. Let private sector fund online learning. Let student loans be dischargeable at
bankruptcy
Thought Exercise… Deregulate Online
Consumer Protection?
• Grade Inflation
• Student Debt
• Re-regulation of For-Profit
• Academically Adrift
• Overpriced online courses
Correct Market Failure?
• Thousands of online course providers
• Overpriced online courses
Local Industry
Protection?• Weigh
benefits against student and taxpayer costs
Wealth Transfer?
• Lower prices would have more positive effect.
• Can still subsidize certain social segments
Foster Informed Citizenry?
• Access is currently limited only by price
“Appropriate” Reasons for Market Intervention
Thought Exercise… Online Institution?
Accumulation of
Assets?• Very
limited fixed costs.
Credentialing?
• Ambiguous Value.
• Much cheaper alternatives.
Market making?
• Professors get a pretty bad deal.
More Reading…
Public Policy Barriers to Post-Secondary Cost Control – Book chapter in Accountability in Higher Education published by Palgrave Macmillan. January, 2011.
Price Competition and Course-Level Choice in K-12 Education: Lessons from Higher Ed – Book chapter in Customized Schooling published by Harvard Educational Press, January, 2011.
College by Subscription -- AEI, September, 2009.
Disrupting College, Lessons from iTunes – Pope Center for Public Policy, April 2011.
