For “Part 1″, visit “Business Model Innovation in Higher Education, Part 1“.
Concerns about the financial sustainability of higher education have become louder and more acute in the last couple of years. Student loan debt levels have reached new highs; operating costs continue to rise. This, coupled with the near-universal belief in the importance of higher education, and the potential of technology in the 21st century, has stimulated sincere interest in identifying new ways of “doing higher education.”
Previous commitments by higher educational leaders and policy makers to “improve quality” and “drive innovation” are being transcended by a growing interest in the concept and practice of business model innovation.
The Value of Business Models
The process of defining a business model has two core benefits:
- It creates clarity about how the institution operates and determines success.
- It makes identifying new ways of operating more likely.
However, analysis of business models points to a difficult truth: it is extremely challenging and rare for an established organization − such as universities − to change its business model.
Although the need for change may be strong, and the organization may have the necessary resources to enact change, history suggests that few organizations are capable of making significant changes to the business model. (For a breakdown of the various elements of a business model, see “Business Model Innovation in Higher Education, Part 1”).
Consequently, new business models typically emerge from new entrants; those companies and institutions without entrenched practices.
Examples of Business Model Innovation in Online Higher Education
The higher education sector is structured so that it is next to impossible for new institutions to enter the market easily. This is due to high entry costs, accreditation delays, and deeply entrenched philosophies of education. As a result, there are few truly “new entrants” in the market.
Nevertheless, a few new enterprises have emerged. Below, are some of the enterprises that are employing new business models successfully in online higher education.
- Western Governors University. Launched in 1999, WGU offers competency-based, online programs, primarily for adult learners. Regularly cited as an example of institutional innovation.
- Southern New Hampshire University. Formerly New Hampshire College, SNHU reinvented itself as a primarily online, non-profit institution – using some of the tactics that drove growth among for-profit institutions over the past decade.
- Coursera. Founded by Stanford University computer science professors Andrew Ng and Daphne Koller, Coursera draws on the resources of elite institutions to offer MOOCs to self-directed learners for free or low cost.
- StraigherLine. Founded in 2009, StraigherLine offers online courses than earn credit for $99 a month. Courses are evaluated and recommended by the American Council on Education.
- Fullbridge XBA. An alternative to a traditional MBA, the program simulates the challenges of the 21st century workplace by providing a full time, lecture-free, immersive boot camp where collaborative learning is combined with fundamental business exercises and e-learning modules.
Measurement of Learning as the Driver of Innovation
If new business models represent one of the most promising ways to increase options for students, then the question becomes, “How can the sector go about enabling these new entrants?”
While some, like StraighterLine CEO Burck Smith, believe new entrants should be able to offer college-level credit, most administrators, faculty and policy-makers will likely prefer more moderate changes.
Any changes we choose to make need to be based on the measurement of learning. Let’s focus less on the source of learning – the input – and more on the impact and value that each provider of learning can generate.
If we use learning outcomes as the guide for shaping policy, we will move in the right direction, toward an educational landscape in which the best learning solutions rise to the top. And those that rely on surrogates of quality – such as high tuition and exclusivity – will be forced to adopt new and better tactics for serving their learners.