Massively Open Online Courses (MOOC) have been around in their current form for about six years. They continue their march to democratize education. If you are not familiar with these free online courses taught by some of the best professors in the business, please see my post from 18 months ago here.

I still believe MOOCs have the potential to completely disrupt higher education, especially for the 3rd and 4th quartile institutions; they just will not be able to charge $40K per year for a mediocre higher-education, when there are free (all be it), different learning opportunities online. This logo is to enroll in an online course from John Hopkins on Data Science.  Big think.

Coursea course John Hopkins

MOOC momentum. This article notes a few big, startling statistics.  MOOCs continue to scale, drive quality, and disrupt education. My commentary shown in (red color).

  1. $60 million invested by Harvard and MIT to launch edX (real money)
  2. $21.1 million in venture capital funding that Udacity has raised (real money)
  3. 1.7 million students who have registered for a Coursera class (scale)
  4. 150,000:1 student-to-professor ratio in a fall 2011 Udacity class (scale)
  5. 98% of professors are rejected by Udacity (quality)
  6. 33 universities that have partnered with Coursera (social proof)
  7. 6%–15% of revenue is paid to partner university from Coursera (business model)
  8. 5% pass rate in MITX’s only massive open online course (quality)

Not a new thing. In many respects, distance learning has been around for a while.

Why is this better? Why is this so revolutionary?

1. Online education scales well. Some of the largest classes, can have 100-200K concurrent students. Listen to the interview of Daphne Koeller (one of the founders of Coursera) here. Coursera currently has 9 million students enrolled in more than 100 courses, provided by 40+ institutions. Scale, scale, scale.

2. Currently, it is mostly free. Not clear how long this will last.  Coursera and Udacity are both for-profit, while edX is non-profit. Certainly, there are potential freemium models (e.g., charging for lecture notes, study guides etc), but nothing has really been proposed. The big three MOOCs have deep pockets. There many potential revenue streams from certificate programs, recruitment centers, study guides, feeder programs for other learning institutions.

3. It will democratize higher education. Thomas Friedman – writer of The Lexus and the Olive Tree, and The World is Flat, wrote a bullish article in the NY Times in January 2013 where he imagines how this can really uplift people who do not have access for 1st class education here. In many ways, it is the exact opposite of the recent US online education meltdown where 2/3 of American students – unprepared for both the financial burden and responsibility – signed up for classes and degrees that they did not complete or benefit from. The average US kid (yes, kid) has $26,000 in student debt.

4. What’s the best way to think through this problem? Professor Morten Hansen, UC Berkeley, posted a fascinating post on the potential that online courses has to disrupt Executive education. He mentions 2 things:

4.1 Application of Christensen’s disruption theory from Innovator’s Dilemma to education.This clearly applies. Less for less. Lower quality services for dramatically lower price. Have traditional universities overshot (too high a spec, and too high a price) customer’s expectations? Are they serving a need that the customer’s don’t value (e.g., Intel building more powerful chips, when people wanted energy saving ones)

4.2 Two types of knowledge – codified and tacit. This is from a 1990 HBR article entitled – What is your Strategy for Managing Knowledge. This is the first time I heard of this, but it makes sense. Some codified knowledge can be recorded easily (commoditized) without it losing its meaning and value. Other knowledge requires some personal or tacit understanding. The main thrust of the argument seems to be that a lost of Executive Education is codified knowledge, therefore, easier to commoditize.

Top-tier universities will be fine. There are probably more than 20+ reasons why established, reputable, and branded, top-tier universities will continue to be successful. In fact, they will be able to flourish and extend their brands.

3rd and 4th quartile schools will hurt. It is really the 3rd and 4th quartile universities who are at risk. Namely, how much value are they providing to their graduates – in learning, job placement, alumni network, skills – compared to motivated students who take the opportunity cost money (sometimes $hundreds of thousands), and educate themselves. This would make Joseph Schumpeter proud.  Creative destruction.

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