Economics Education Society Strategy

The Next Generation Higher Education Is Already Here

The difficulty lies not so much in developing new ideas as in escaping from old ones.

– John Maynard Keynes

As we prepare to enter a new decade, and with COVID upon us, I thought it a good moment to share my perspectives on the past and future of the higher education. I have shared these thoughts with university faculty members and administrators privately, with some interesting reactions, so I decided to do so again with the wider LinkedIn community.

The Evolution and Disintermediation of Higher Education

Ten years ago, I became a research fellow at the Robert H. Smith School of Business at the University of Maryland. In the ensuring decade, I contributed time and research to Smith, and two years ago I taught my first full-term MBA classes. In that time, I have seen up close the evolution of higher education, especially at the MBA level. Early in 2019, I founded KATALYST, whose goal is to change how thought leaders connect to business through new types of virtual expert learning networks.

My experiences as consultant, educator and now would-be disruptor has led me to conclude that today’s higher education model is already being dismantled on the four dimensions that make up today’s educational value creation system:

  1. Content transfer (a.k.a., “teaching”)
  2. User experience (a.k.a., “student life”)
  3. Badging (a.k.a., “accreditation”)
  4. Network (a.k.a., “alumni relations”)

Each of these value creation dimensions can, and should be, considered independently when thinking about the revolution in higher education that started pre-COVID and is accelerating every day.

Content Transfer

The traditional content transfer model has been under attack for quite some time now, and the effects of that challenge are evident around the country. Even before COVID, students, especially those in MBA programs, were embracing online education, and there is a tremendous amount of investment and experimentation occurring in this area. My own company focuses on connecting the best academics to business in continuous learning networks that work virtually and are custom built for the research goals of the professors and the content goals of the companies that connect to them. However, we are one of many startups looking to change profoundly how higher education works.

The early days of Kahn Academy and YouTube instructional videos have given way to increasingly sophisticated online educational models (see MIT’s “micro-master” experiment, for example) and to major schools closing physical programs to focus on their online-only degree programs. Whatever happens with COVID, we are the start of a massive migration online that will radically transform and democratize higher education. This is not to say that in-person teaching will disappear. Indeed, I often refer colleagues to a book by Paul Elie called Reinventing Bach. Elie charts the evolution of sound recording technology through the 20th century, noting that early-on skeptics thought it would be impossible to reproduce Bach in recorded media, much the way many professors still think it’s impossible to teach well online. Elie notes that half-way through the century new technical developments made Bach recordings good and eventually almost flawless. There is a lesson here for all educators, because today great Bach playing is heard by more people than ever before; however, great Bach playing in person has become a luxury for the elite. I predict that the same thing will happen with teaching, i.e., more people will hear great lectures on Dante and astronomy, but they will hear them online, with only the elite taught those subjects by people standing in the same physical space. In this future world, great teachers will thrive and become famous, and mediocre ones will go the same way as mediocre Bach musicians.

The process noted above has already started, and Harvard’s David Milan is a great example. He teaches the CS50 class, which is both an in person and digital experience. Milan took over the class in 2007 and, by breaking down many of the rules of the college, turned it into the most famous and influential single class in the entire college. As a recent New Yorker article noted:

Not unlike a tech entrepreneur “disrupting” industry regulations, Malan has a habit of flouting academic norms to facilitate CS50’s expansion. In 2014, he successfully lobbied Harvard to grant CS50 the sole exemption from a policy prohibiting students from enrolling in two classes scheduled at the same time; double-booked students, he argued, could just watch his lectures later… According to the Crimson, Malan and Harvard at one point filed competing applications to trademark the name CS50 and “This is CS50,” the course’s tag line. (Malan, who withdrew his applications after Harvard moved to block them, told me that the newspaper misconstrued the incident, adding, “I was long in communication with Harvard’s Office of General Counsel.”)

In some ways, Milan’s vision of the future of higher-ed is more drastic than mine, since he can imagine a world where there is only one version of an introductory course, which is a composite of all the best ideas across different schools:

It is wasteful, he [Milan] said, to have thousands of teachers, in computer science or other fields, all doing the work of devising similar curricula. Good programmers spend much of their time “refactoring” software—editing it to reduce inefficiencies, or “code bloat.” Malan’s teaching method pursues a similar objective. “I don’t think we want just one introduction to computer science and one introduction to psychology or any such field,” he said. “But there’s probably a number around dozens—hundreds—that makes more sense?” Rather than threaten the livelihoods of professors or the independence of institutions, such consolidation would, Malan believes, free teachers to do their best work. And holding online courses to the same standards as in-person ones would allow students beyond the small, predominantly privileged groups who enroll in places like Harvard to access the highest-quality instruction.

I believe Milan is wrong, if he thinks such an evolution won’t put many teachers out of a job, but it will. More importantly, such an evolution will mean drastic changes at the institutional level. For example, in part because of CS50, Harvard now graduates more people in computer science than in liberal arts, something unthinkable just one generation ago.

The bottom line is that any school that wants to thrive in the future must either develop unique and outstanding teaching that justifies in-person costs or become adept at teaching online at a far lower price point than today.

User Experience

I spent most of my business career in management consulting, and we used to say that you can compete on offering (you have a unique service or product unavailable from anyone else) or execution (you do a common thing in a uniquely good way). As everyone knows, there used to be very little difference in the experience a student had in one big state school from another, or one small liberal arts college from another. Yes, the details were different, but four years at Ohio State looked a lot like four years at Michigan State, much as four years at Oberlin looked a lot like four years at Grinnell. With teaching commoditized, and prices soaring, most colleges compete primarily in user experience, a.k.a., student life. Overnight (in higher-education years), rich (and some poor) schools have become academic resorts, focused as much on new buildings as new ideas. Large school systems have become real estate companies as much as educational institutions, and a cadre of managers has been recruited to offer new non-educational services and amenities to students. Students’ favorite fast-food food brands are now available on campus, and schools are willing to accept (just about) any personal accommodation requested to get students to enroll or to avoid litigation.

This race to turn campuses into “spas with mascots” (as one VC I know put it) was, in my opinion, was a mistake, because of my point about online education above. As the COO of one large university told me recently: “What’s the value of extensive and expensive campus real estate in an increasingly online world?” More worryingly, what is to stop a private company from setting up a campus that caters to students taking online classes from multiple schools? Indeed, new and innovative educational are emerging in many places, and in the not too distant future heretofore unthinkable models will capture the imagination of students and the pocketbooks of parents. If that sounds farfetched, consider the case of 42 Silicon Valley, which is a computer science school that boasts the following statement on its web site: “42 Silicon Valley is a college-level, tuition-free, computer programming school with a peer-to-peer learning environment. Learn the skills you need here to begin your career as a Software Engineer, for free.” 42 SV has a campus, job-placement office, student housing and dining, and is open to anyone between the ages of 18 and 30 with no academic degree, high school diploma or even coding knowledge required. The school was founded by a $100M gift from French entrepreneur Xavier Niel, much as Draper University was kick-started by VC billionaire Tim Draper. Such schools are still rare, but traditional players are also entering this mix, with programs such as Purdue University’s “Purdue Global” initiative offering undergraduate and graduate programs completely online. Again, COVID will encourage/force many more incumbents to go this route in order to gain competitive advantage or merely to survive.

In the end, whether 42 SV or Draper are around 5 years from now, the point to be taken by their existence is that the old higher education system is being challenged by new student experience models, which in many cases point the way to a future where higher education is digital, dispersed, available to a wider age range and, even in some cases, free.

Badging

If there is one dimension of the higher education system that (used to) let college leaders sleep at night is the strangle-hold they have on “white-collar” educational badging. Accreditation systems jealously guard their privilege to provide schools with the power to grant degrees, and it may seem that this power is safe and secure. In the US, the most widely recognized form of university accreditation comes from the six major regional accreditation boards that accredit every school and university of note. These accreditation bodies are supervised by the U.S. Department of Education but, crucially, are not part of the government in anyway. In other words, they are like fiat currency in the sense that their accreditation has value only so long as (a) the market believes the intrinsic value of their badge and (b) no better badge exists. If a new accreditation body emerges whose badge is a more accurate of academic performance and more valuable, these seemingly untouchable accreditation organisms will be challenged.

I propose that this evolution is already underway, and it’s being driven by everything from the attacks on standardized testing, to the insider dealing the recent admissions scandals brought to light, to the rampant grade inflation that has afflicted higher education for decades. In other words, accreditation bodies are weaker than they look from the outside, and both big and small companies are starting to offer alternatives to the traditional badging model.

Consider, as just one example, The Power MBA, a European startup that offers an “unaccredited, real-world curriculum, delivered in easily digestible 15 minute doses, backed by the world’s most passionate and fastest growing business community.” For about $1,000 you get, in theory, the Content of a traditional MBA and the Network, while giving up the campus UX and Badge prestige. Are those lost dimensions worth 99% of the cost? Tens of thousands of students have apparently decided “no.” A similar evolution is Google’s famous recruiting process that eliminates the need for a college degree and asks only that an applicant pass a series of challenges. Much like musicians who never went to a conservatory yet can be great, the white-collar world is discovering that there are better ways to assess someone’s value and intellect than the school seal on a piece paper.

Yet another driver of the evolution in badging is that the accreditation system has itself not been up to the task. As a recent study noted:

The accreditation process also incentivizes accreditors to make standards that favor incumbent institutions while excluding higher-education startups and innovation in general. As a result, current accreditation standards favor evaluating colleges based on inputs such as library size, disciplinary codes, mission statements, and faculty hour caps—metrics that traditional institutions easily meet yet that nontraditional ones often struggle to achieve. These standards are not the best indicators of the quality of the degrees provided by a specific institution and make it difficult for innovative practices and newcomers to enter the market. Accreditation therefore serves as a barrier to entry in higher education, stifling innovation and competition.

As a result of this conflict of interest, there are over 4,000 degree granting post-secondary institutions in the United States for the 2017-2018 academic year. About 600 four-year universities have gained accreditation since 2000 but only 18 have lost accreditation either through closing or poor performance. Conversely, about 150 two-year institutions have lost accreditation since 2000. [5][6][7] The current system continues to grant accreditation to demonstrably poor-performing institutions: Some institutions, for example, have 6-year graduation rates as low as eight percent and continue to operate as accredited colleges and universities.[8][9][10]

New programs, such as FAME (Federation for Advanced Manufacturing Education) hints as how things may evolve:

In 2005, FAME started its first program in Kentucky. What began as a partnership between Toyota and a single local community has spread across 12 states, currently serves nearly 750 students, and has engaged over 280 companies. FAME boasts an impressive 85 percent graduation rate, making it competitive with some of the best 4-year colleges in the nation. [13],[14]

The basic structure has students in community college courses some days of the week and working for sponsoring employers when they aren’t in class. Working not only lets students practically apply skills learned in the classroom but allows them to earn $25,000 to $30,000 over the course of the program. Of that 85 percent who graduate, 85 to 90 percent are employed by the company that sponsors them during their apprenticeship.[15]

The strength of the FAME model comes from its flexibility: The private sector runs FAME, which means companies can directly and immediately implement changes to individual courses and the local program depending on their hiring needs. This flexibility ensures that the program is mutually beneficial for both students and firms. This model has other benefits, too. The community college partnership model allows for specific credentials to meet labor market needs, provides the community college with additional funds, and gives students the option to earn a certificate in their respective program as well as bachelor’s and master’s degrees.

For the reasons noted above, I believe that the traditional oligopoly around white collar badging will crack or even crumble completely. It will take time, but anyone leading an institution of higher education in the U.S. should not take this threat lightly.

Network

I have spent the last decade working inside some of the best executive networks in the world. In that time, I learned the difference between a list, a group and a network. This difference, and the huge value leap from group to network, is something that too many higher education institutions fail to grasp.

For a network to exist, three conditions must be true:

  • Identity, i.e., network members identify themselves as part of the network
  • Information, i.e., members know who other members are and all the key dimensions of their network such as size, location, scope, code of conduct, etc.
  • Power, i.e., the network can collectively effect change (help you get a job, elect a politician, enact a law, fund a business, etc.)

In my experience, most schools think they have a network but have, at worst, a list of alumni, or, at best, a group that can, not without some effort, find each other but has little to no collective power. Time and again, I have sat with business school leaders who admit that they have little understanding of their alumni (demographics, jobs, income levels, professional interests, etc.) yet continue to talk about their “great alumni network.” It’s as if I had many rich and famous offspring, with whom I had not spoken in decades (other than when I needed money) but considered them my “great family.”

It’s amazing to come across effective alumni networks (such as Duke’s undergraduate venture alumni or Stanford’s graduate venture alumni), because one would think that this would be a major focus for any college or business school. A badge from a good school is a great thing to have but a powerful private network, in the true sense of the term, is an even better thing to have. I have hired many Harvard and Wharton MBA alumni in my career, and to a person the thing they value most ten years out of school is the alumni network. Indeed, this network was, in almost every case, the principal driver in their school selection.

As we all know, most schools leave their alumni alone except when it’s time to ask for money, and this is a strategic mistake of the highest order. Not only should it be a top priority to turn a list of alumni into an active alumni network, it should be, as in the case of Wharton and HBS, one of the top two reasons (along with the actual education) students chose to attend a given institution.

Conclusions

I wrote this article before COVID, but it has only accelerate the changes noted above. Seeing the impact that the pandemic has had on higher ed is both exhilarating and sad. I hope that, in the end, today’s higher education leaders look beyond COVID and understand that their model was a fragile one before the pandemic, which has only served to expose those weaknesses to the wider world. I urge them to look carefully and critically at their models, because I am convinced that the best schools, as the CS50 example show, will innovate and evolve much more rapidly than people imagine. It would be a shame if only the richest incumbents, and the most clever new arrivals, survive in the future. Nevertheless, the race to reinvent higher ed is definitely on, and the best schools will go through painful transformations to be as much a part of our future as they were a part of our past. The schools who refuse to change will, with or without COVID, find themselves increasingly irrelevant, trying to keep alive a 20th century strategy to serve the educational needs of a 21st world.

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