The Promise and Perils of Innovation

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1 Academic Affairs Forum The Promise and Perils of Innovation Competitive Challenges to the Traditional Higher Education Model Indiana University August 14, 2013 eab.com

2 Road Map for Discussion 2 1 Unpacking the Disruption Argument 2 New Business Models Threats and Opportunities 3 Setting the Academic Agenda Road Map for Discussion

3 Disruption Fatigue Who Knew that Innovation Could Sound So Familiar? 3 Required Reading at Board Mee0ngs and Planning Retreats The Conven0onal Litany of the Broken University Business Model Uncontrolled cost increases Graduates lack cri2cal skills Resistance to pedagogical innova2on Irrelevant scholarship Tenure protects faculty from accountability Undergraduate tui2on subsidizing faculty research Tradi2onal universi2es cap2ve to the pres2ge arms race real change will come from radical, low- cost models

4 The Disruption Debate A Familiar Story Information and Media Industries Transformed by Technology 4 Traditional Model Unbundles Digital Marketplace Matures Resist or Evolve? Consumer Demand Consumers Lured by convenience of no-frills web services Competitors Free from incumbents high fixed costs and inertia Value Chain Unbundles as cost to compete rises Digitization of Distribution Source: EAB interviews and analysis

5 The Incumbent s Dilemma Certain Downside, Speculative Upside for Exiting Prestige Arms Race 5 Clayton Christensen in a Nutshell: Be More Like BYU Idaho End tenure Dismantle departments Refocus research on pedagogy Switch to fully online degrees Enroll the marginally qualified Reduce number of programs Scale back merit- based aid Cut back big- 2me sports I m Certainly Not Going First I understand that as an organiza2on we could be a lot more efficient. But if I tried to make some of the changes that are being recommended, the accreditors would be all over me, I d have a faculty revolt, and preny quickly, I d be out of a job. Provost Public Research University

6 The New New Thing Dramatic Ramp-Up in Partnerships to Support Online Activity 6 (10 systems) April 2012 April 2013 May 2013 State Institutions Global Partners 2 May 2012 May 2013 Partner Institutions April 2012 April 2013 May 2013 Semester Online Master's Programs Source: Company websites and press releases; Education Advisory Board interviews and analysis.

7 Reading Between the Lines What s Motivating the Rush to Online Offerings? 7 Brand Enhancement "They will in no way diminish the value of a UVA degree, but rather enhance our brand and allow others to experience the learning environment of [Thomas] Jefferson's Academical Village." Teresa Sullivan President, University of Virginia Public Service The missions of Harvard and MIT are to provide access to learning and educa2on and improve the general quality of life of humankind. What we re doing is simply a con2nua2on of that mission. Anant Agarwal President, EdX Improving Pedagogy Through this partnership, we will not only make knowledge more available, but we will learn more about learning. We will refine proven teaching methods and develop new approaches that take full advantage of established and emerging technology Drew Faust President, Harvard University Fear of Missing Out You re known by your partners, and this is the College of Cardinals. It s some of the best universi2es in the country We re doing this in the hope and expecta2on that we ll be able to build a financial model, but I don t know what it is. But we can t be too far behind in an area that s growing and changing as fast as this one. E. Gordon Gee President, Ohio State University

8 Academic Quality MOOCs a Symptom of Larger Industry Tensions Emerging Models Indicate Potentially Dramatic Shifts in Higher Education 8 New Educa0onal Models Large- Scale Learning Plaaorms Differen2ated Instruc2onal Roles Automated Assessment Adap2ve Learning Easy Credit Transfer Employer- Relevant Competencies Industry Disrup0on Consolida0on A handful of plaaorms anract the majority of students Commodi0za0on Free content and courses make it impossible to sell expensive versions Unbundling Content crea2on, content delivery, assessment, and creden2aling performed by different people and different organiza2ons Disintermedia0on Students no longer see universi2es as an essen2al path to learning and career success. Instructors can reach students directly without need for universi2es

9 A Battle on Two Fronts Disruption from Above, Then Below New Models Will Threaten Incumbents from Both Ends of the Spectrum 9 SelecEve InsEtuEons Growth of High- Quality Online- Only Curriculum Squeezed in the Middle Pressure on Graduate & Professional Revenue Uncoupling Quality from Price and Exclusivity Celebrity Faculty Open Courses Hot Employer Partnerships Top Global Brands Crowd Out Mid- Tier Ins2tu2ons Access- Focused InsEtuEons Eroding Margins on Lower Division Expensive and Undifferen2ated Unbundling of General Educa0on Gathering Legi0macy of Low- Cost Models Legislator and Parental Support for No Frills Programs Flipped Classrooms and Technology- Assisted Instruc2on Employer Acceptance of Non- Tradi2onal Educators and Creden2als

10 Hitting the Trough of Disillusionment Another Confirmation of the Technology Hype Cycle 10 Jan 2013 San Jose State partners with Udacity on for-credit MOOC Nov 2012 Gates announces $3M in MOOC grants Feb 2013 ACE recommends 5 MOOCs for credit Sept 2012 Colorado State Global Campus accepts Udacity MOOC for credit Feb 2013 Georgia Tech MOOC is first to be canceled due to technical problems April 2013 San Jose State philosophy department formally protests edx partnership April 2013 Amherst faculty reject edx partnership There is no pedagogical problem in our department that JusticeX solves. We regard such courses as a serious compromise of quality of education, and, ironically for a social justice course, a case of social injustice. Philosophy Department San Jose State University Spring 2012 Udacity, Coursera and edx founded Fall 2011 Stanford faculty launch open courses May Harvard faculty demand greater administrative oversight over university s edx program Source: Press releases and news outlets; Education Advisory Board interviews and analysis.

11 Access The Illusion of Scale Vast Majority of MOOC Registrants Drop Out By First Assignment 11 Typical MOOC Enrollment Pattern Start Date Half of registrants are no-shows Registered Case in Point Bioelectricity, Fall 2012 Duke University 12,725 Watched a video 7,761 Enrollment First Assignment Casual lurkers move on Took any quiz Took Week 1 Quiz Took Week 4 Quiz 1, ,658 Attempted Final 346 Certificate 313 Self-Motivated Completers Time Source: Duke University Report, February 2013

12 12 Let s Not Kid Ourselves They re mostly taken by educational technologists, already-qualified individuals, and Tom Friedman. Kevin Bell Northeastern University College of Professional Studies Source: Kevin Bell, The Hijacking of MOOCs, Inside Higher Ed, May 6, 2013

13 Access The Indelible Middle Man Even MOOCs Resorting to Coaching Model to Get Results 13 4,356 A Herculean Task Number of forum posts by Penn professor Al Filreis in first MOOC Never Again The time demands, logistics, and politics of developing a MOOC will bury you. Karen Head Assistant Professor, Georgia Tech The Necessity of Course Assistants Harvard professor asks alumni to help moderate upcoming MOOC Udacity hires dozens of tutors to support new partnerships New startup, Course Pods, brings live tutoring to Udacity online courses Study finds offline help biggest predictor of success in MOOC Source: Breslow, DeBoer, Ho, Pritchard, Seaton, & Stump, Studying Learning in the Worldwide Classroom: Research into EdX s First MOOC, Research & Practice in Assessment, June 2013

14 The Unfulfilled Promise of MOOCs Little of What We Hoped or Feared Has Come to Pass 14 The Promise The Reality Free Credits Students will take free courses from top universities for credit No institution grants credit to students not enrolled and not paying tuition Job Placement Employers will hire people based on performance in MOOCs Outside of computer programming, few students are being placed in jobs Educational Access The poor and uneducated around the world will have access to the best instructors Vast majority of MOOC students already have baccalaureate degree, reside in wealthy countries Free Agent Faculty Superstar faculty make millions offering courses directly to students Apart from Sebastian Thrun, no faculty have left their university Elite University Domination Lower-ranked institutions will disappear as elites scale up free education MOOC providers rapidly expanding partnerships with less elite institutions Source: Education Advisory Board interviews and analysis.

15 The Taming of the MOOC What Universities Are Really Doing with MOOCs 15 MOOC 1.0 For the good of humanity MOOC 2.0 Achieving Institutional Goals Brand Enhancement Flipping the Classroom Scaling Up Masters Programs Lead Generation Investing in global publicity Improving the quality, cost, and capacity of on campus instruction Enabling large-scale, lowcost revenue generating degree programs Recruiting students into existing academic programs Source: Education Advisory Board interviews and analysis.

16 The Question Behind the Question MOOC Questions Highlight Uncomfortable Issues for Higher Education 16 Why People Love MOOCs What s Wrong with Higher Education Open How can we improve racial and socio-economic diversity? Large-Scale How can we overcome capacity bottlenecks? Free to Students Are we becoming unaffordable to most students? Low Cost to Provide Is it possible to bring down cost per student? Global Audience Are we trapped by regional demographics? Elite How will we ever compete with wealthier, higher ranked universities? Source: Education Advisory Board interviews and analysis.

17 Road Map for Discussion 17 1 Unpacking the Disruption Argument 2 New Business Models Threats and Opportunities 3 Setting the Academic Agenda Road Map for Discussion

18 Breaking the Iron Triangle Proponents Argue Online Learning Avoids Traditional Trade-Offs 18 Bill Bowen, Then and Now Access 2000 All the talk of using technology to save money by increasing productivity has a hollow ring in the ears of the budget officer who has to pay for the salaries of a cadre of support staff, more and more equipment, and new software licenses and who sees few offsetting savings. Cost Quality 2012 I am today a convert online learning, in many of its manifestations, can lead to at least comparable learning outcomes relative to face-to-face instruction at lower cost. Bill Bowen President Emeritus, Princeton University Source: William G. Bowen, At a Slight Angle to the Universe: The University in a Digitized, Commercialized Age, Romanes Lecture for 2000, University of Oxford, Oct. 17, 2000; Ibid., Higher Education in the Digital Age, Princeton University Press, 2013, p. 45

19 Winning on All Fronts with Course Redesign Alternative Model Expands Capacity, Improves Quality, and Costs Less 19 Faculty TAs and Peer Mentors ü ü ü Concept 1 Concept 2 Concept 3 Pre- Reading Pre- Quiz Lecture Prac0ces Problem Solving Homework Embedded Videos Pre- Lecture Prep e- Tutor Mini- Tests e- Tutor Reduc2on in Increase in 12% DFW rate 45% enrollment cap 31% Cost savings per student Source: Physics Large Course Redesign Project Report, UNC Charlotte, Center for Teaching & Learning, Sept. 8, 2011.

20 Building Assessment In Dashboards Provide Real-Time Outcome Data, Predictive Analytics 20 Source: Candace Thille, Changing the Production Function in Higher Education, American Council on Education, March 2012.

21 A Governor s Dream Competency-Based Alternative Helps Meet Completion Goals 21 Online. Accelerated. Affordable. Accredited. A Radically New Instruc0onal Model No courses or credits, just competency exams No tradi2onal instructors; 800+ faculty a mix of assessment designers, subject maner experts, and student mentors 32,000 students na2onwide Average age = 36 70% work full 2me 30% annual growth An Appealing Alterna0ve to For- Profits Founded by 19 governors in 1997 Tui2on: $5,780 per year; hasn t been increased since 2007 Online, self- paced instruc2on expands access to non- tradi2onal students New subsidiaries in Indiana, Washington, Missouri, Tennessee, and Texas Indiana s 8 th State University Governor Mitch Daniels commissioned Western Governors University Indiana in 2010 No state alloca2on; ini2al funding from Gates & Lumina Founda2ons WGU students are eligible for state aid Cri2cal in mee2ng comple2on goals Source: Education Advisory Board interviews and analysis.

22 Quality Radically Different Approaches to Success Inverted Delivery Model Emerging Challenge to Tradition 22 Typical University Program Faculty Design Course, Lecture, Mentor, and Assess Students Physical Interaction 3-4 Hours per Week in Class Experts Determine Competency Requirements Physical Interaction Limited to Clinical Placements Rigid Course Structure Coaching Possible from Graduate Assistants, Tutoring Center Flexible Content (No Courses) and Modular Curriculum Dedicated Student Mentors Conduct Regular Check-Ins Midterm and Final Exams Hand- Graded by Faculty, TAs Option to Test Out of Limited Introductory Courses Assessments Automated or Conducted Through Web Proctoring Extensive Recognition of Prior Learning Through Competency Assessment Source: EAB interviews and analysis

23 Competency Model Gaining Momentum Incumbents Increasingly Embracing Alternatives to the Credit Hour 23 Learn On Demand program based on modular competency components as alterna2ve to semester- long course Online competency- based courses and degrees in Fall 2013 Partnering with Pearson on content/ course development Plans for UW Flexible Degree announced in July 2012 Homegrown alterna2ve to Western Governors subsidiary Launching $5,000 online, competency- based associate degree The first degree to officially sever link to credit hour Source: Steve Kolowich, Competency Loves Company, Inside Higher Ed, July 11, 2012; Elise Young, Another State to Assess Skills, Inside Higher Ed, July 9, 2012; Paul Fain, Competing With Competency, Inside Higher Ed, August 6, 2012.

24 Competing on Price with High-Demand Courses An Experiment in Outsourced General Education 24 Few Official Partners StraighterLine At a Glance Business Model Most affordable provider of online general educa2on courses courses account for 1/3 of all higher ed Pricing $99 a month + $39 course registra2on fee $999 a year for 10 courses But Some Early Incumbent Adopters And 250+ Have Accepted Credits Enrollment 1,000 students in 2010; 3,000 students in 2011 Next Steps ETS iskills and CLA assessments for a fee ACE Recommended Credit for free Saylor.org courses + StraighterLine assessment

25 Do You Know Where Those Credits Came From? Growing Opportunities for Credit Laundering 25 Swirling Students Bringing Ques0onable Credits Public Research University Less Selec2ve Private Masters University Highly Selec2ve Research University

26 Unbundling the Degree The Emergence of Course-by-Course Competition 26 Through Forced Ar0cula0on Agreements, a Market for Credits Is Beginning to Appear Summer Program at Private College Local College Winter Intersession at School in Hometown Home Ins0tu0on: Research University For- Profit Online Program Semester Abroad at Foreign Ins0tu0on Regional Public University MOOC Online Competency Based Program itunes U Source: Education Advisory Board interviews and analysis.

27 The $10,000 Degree Early Attempts at Drastic Price Reduction Will Affect Few Students 27 Targeted Merit Aid for High- Achieving STEM Majors Accelerated 2+2 Program Starts in High School University of Texas of the Permian Basin Accepted into selec2ve Texas Science Scholar program Texas A&M University - San Antonio Qualifies for dual- enrollment program in high school No remedial courses Majoring in IT and Security Majoring in STEM field 27 credits at a community college 4- year comple2on 36 credits at Texas A&M - SA $10,000 $10,000

28 Competing in the Age of Venture Philanthropy CDOs Face Major Critiques of Higher Ed as Big Gift Destination 28 Stewardship Can t Quantify Impact Big donors are now demanding business plans we ll sustain funding after the initial gift is used up and report on progress against goals on a quarterly basis. CDO, Selective Private University Less Attractive the Closer We Look We did a survey of trustees trying to find out what drove their giving behavior. We were discouraged to learn that several were less inclined to give after becoming a trustee, because they saw up close the vision and efficiency challenges. CDO, Tuition-Dependent Private University Academic Vision Funding Transformations, Not Operations You won t get an eight-figure gift for financial aid or deferred maintenance. Venture philanthropists want to seed transformational ideas. CDO, Private Research University Disciplines Rule, Not Problems Social entrepreneurs want to solve big problems that are inherently interdisciplinary, like public health or sustainable energy. It s a struggle to get all our disciplines synchronized, and we re starting to lose out to NGOs who have more integrated marketing pitches. CDO, Flagship Public University

29 Road Map for Discussion 29 1 Unpacking the Disruption Argument 2 New Business Models Threats and Opportunities 3 Setting the Academic Agenda Road Map for Discussion

30 The Bigger Issues Behind MOOC Mania Critical Strategic Concerns for Institutional Leadership 30 The Current MOOC Debate Governors Can we use MOOCs as low cost alternatives? Administrators Will we fall behind if we don t do a MOOC? Boards Will students abandon us for MOOCs? Faculty Will MOOCs make us expendable? The True Agenda 1 Sustaining Tuition Revenue 2 Building an Online Strategy Declining public funding New student markets Evolving student preferences Challenges to affordability New types of competitors Student success challenges Innovative program designs Improved instructional quality Economies of scale Regulatory risk Faculty development Student support services

31 Sustainable Enrollment Strategy The Flip Side of Enrollment Growth An Unprecedented Jump in Tuition Dependence 31 Tuition as a Percentage of Instructional Revenues for Public Universities, % 46.8% 40% Tuition dependence increases after recessions But fails to return to base levels after recovery 30% 29.3% 35.5% Historic 11-point increase in 3 years following recent recession 26.1% 20% ) Shaded areas indicate recessions Source: SHEEO, State Higher Education Finance FY 2012 ; Education Advisory Board interviews and analysis.

32 Sustainable Enrollment Strategy What Got Us Here Won t Get Us There Revenue Tailwinds Can t Be Relied On Going Forward 32 Revenue State Funding Federal Funding Tuition Philanthropy Auxiliary Revenue Enrollment Volume Net Tuition Revenue Demographics Retention Price Financial Aid Decline in high school graduates At-risk populations growing in share Family finances under stress Merit aid competition escalating Source: Education Advisory Board interviews and analysis.

33 Sustainable Enrollment Strategy Seeking Sustainable Frontiers Diversifying Today to Reach Students of Tomorrow 33 Sustainable Frontiers? Low-Income, High-Ability English Language Learners Net Tuition Revenue Running To Stay in Place Transfers Degree Completers Professional Master s Critical Attributes ü Fast-Growing ü High Net Revenue ü Strong Student Success ü Low Competition Ruinous Competition Today Five Years Hence A Decade and Beyond Source: Education Advisory Board interviews and analysis.

34 Suddenly at the Top of the Agenda Online Learning Moving From the Periphery to the Core 34 Is Online Education Critical to Your Long-Term Strategy? Meet the Newest Member of Your Cabinet Survey of Chief Academic Officers 69% Sanjay Sarma Director of Digital Learning MIT John Mitchell VP for Online Learning Stanford University Deborah Gearhart Vice Provost for elearning Ohio University 49% 38% 20% 13% 11% Paul Berman VP for Online Learning George Washington University Sree Sreenivasan Chief Digital Officer Columbia University Get Me a Task Force, Stat! Jennifer Chesney AVP of Digital Strategy University of Alberta Agree Neutral Disagree Source: I. Elaine Allen and Jeff Seaman, Changing Course: Ten Years of Tracking Online Education in the United States, Babson Survey Research Group, 2013

35 Online Infrastructure From Whether to How We Will Go Online Rising Above Misconceptions and Semantic Debates 35 Modality Debate Misses Important Distinctions Online is not a market Online is neither more nor less effective Online is neither more nor less profitable Online will not replace your campus Online is not a strategy Key Lessons in Starting a Productive Conversation Different populations require different programmatic strategies Wrap-around services and design standards critical to student success Costs and revenues driven primarily by instructional model and class size Instruction and services will be delivered in multiple modalities Institutional priorities and goals should drive decisions about technology Source: EAB interviews and analysis

36 Online Infrastructure Serving the Multi-Modal Student Flexible Formats Critical to Growth and Access 36 Multi-Modality at the University of Central Florida Head Count by Location, Fall 2010 Growth in Student Credit Hours Main Campus Students (47,926) 60% Secondary Campus Students (2,472) 3% 1% 1% 18% 1% 1% 4% 1% 2% Web Students (17,172) 7% Regional Campus Students (5,251) 4% Classroom 32% Online Classifying a student as main campus or extended campus or distance becomes meaningless in an environment where students take whatever courses they need in whatever location or modality best suits their requirements at the time. Thomas Cavanagh AVP of Distributed Learning University of Central Florida Source: Thomas Cavanagh, The Postmodality Era: How Online Learning is Becoming Learning, EDUCAUSE Game Changers, May 2, 2012

37 Access Toward a Blended Future Multi-Modal Delivery Both More Popular and More Effective 37 Within Your Reach About 80% of online students live within 100 miles of a campus or service center of the institution they attend, and the large majority live within 50 miles. Geographic proximity is a major advantage in attracting online students. Online College Students 2012 Aslanian Market Research Bullish on Hybrid Anecdotal Evidence Backs Statistics on Role of Region Even online students want to come to campus and be part of our community Students value our connections with local employers and industry Known regional brands hold signal value for nontraditional students leery of slick for-profit marketing pitches A blended approach helps mitigate the common persistence gap we see in fully online programs Instruction combining online and face-to-face elements had a larger advantage relative to purely face-to-face instruction than did purely online instruction. US Department of Education Evaluation of Evidence-Based Practices in Online Learning, 2010 Source: Online College Students 2012, Aslanian Market Research and The Learning House, Inc, 2012; EAB interviews and analysis

38 Online Infrastructure Managing in Two Worlds Preparing for Online Growth in the Core and on the Frontier 38 Untethering from the Academic Calendar New Online Markets Establishing Instructional Standards Bringing Rigor to Program Launch Target Students Build, Buy, or Partner? Multimodal Undergraduates Incentivizing Faculty Participation Supporting Online Students Testing the Waters Getting to Scale Addressing Risk

39 No Longer a Monopoly Market Incumbents Losing Control Over Previously Exclusive Territory 39 Open courseware from elite schools Outsourced general educa2on units Elite MOOC cer2ficates Community Value in Higher Educa2on User- curated encyclopedias Niche blogs, podcasts, and portals Digital media distribu2on Content 2+2 transfer agreements Credit banks Credit Creden0als Accelerated comple2on providers Digital badges Robust online collabora2on tools Virtual labs Integra2on with employers Project- based instruc2on Online Course Consor2a Employer- defined competencies Problem- based research

40 Colin Koproske Consultant eab.com 2445 M Street NW I Washington DC P I F

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