This article is by Bruce Guile, president and co-founder of Course Gateway, an online education consultancy, and David Teece, executive director of the Institute of Business Innovation at the University of California, Berkeley’s Haas School of Business.
A revolution is coming to U.S. higher education, one that will sweep away an archaic business model, erase the value of many venerable brands, and enhance the brands of new entrants and nimble incumbents. It will be a tough time for many U.S. colleges and universities but great news for the rest of the world.
In the 1960s the economists William Baumol and William Bowen identified the productivity problem at the root of the rising relative cost of higher education. They identified education as a profession where labor productivity was not amenable to improvement through technological advance. When it comes to teaching, the productivity of a professor in the Middle Ages and that of a professor today are not very different.
This longstanding productivity problem, also known as “Baumol’s cost disease,” is changing dramatically as a bundle of Internet-based technologies involving high-bandwidth communications, content management systems, online courses, e-mentoring platforms, and social and collaborative network software start to take hold in U.S. higher education.
The clearest example of the productivity effect of these technologies is the explosion of massive open online courses, or MOOCs. MOOCs offered by leading university faculty through platforms such as Coursera demonstrate that a single educator can deliver sophisticated content and high quality instruction to thousands if not tens of thousands of students worldwide simultaneously.
This tremendous jump in professional productivity is the most significant advance in the pedagogic part of higher education in a millennium. And therein lies the great news for countries with less developed higher education sectors than the United States.
Think of MOOCs as modules of knowledge or content packaged together with high-quality pedagogy, student-student interaction, and specialized tools for scalable faculty-student interaction. Students can join a course, which becomes a powerful active learning community, without enrolling in a degree program or paying tuition. They can do so simultaneously in New York City and in farming communities in California’s Central Valley. And, of course, in Mumbai, Munich, Seoul, and Tunis.
Institutions of higher education reflect the labor markets they serve, and in most countries there is tremendous pent-up demand among both students and private employers for a new kind of education. Both sides of the labor market, as well as national governments focused on long-term economic growth, want education that is less expensive, responsive to changing economic conditions, and delivered to students at their pace. That is the promise of, and the economic driving force behind, the restructuring of higher education.
Over the next decade, institutions in the U.S. and in other countries with mature higher education sectors will be struggling to justify the cost and value of a residential degree program when students get much of the same content and a good portion of the classroom experience from an online instructor in another city or across an ocean. They will be asking, what is the value added by our campus when demand can be aggregated either by bringing students to campus or, much less expensively, by reaching and teaching students online virtually anywhere in the world?
Following the history of technological change in other industries, educational services will likely be unbundled and rebundled in new forms. Many students from around the world will want to take instruction from the “best” statistics professor at Caltech, the best nuclear engineer at MIT, the best Shakespeare professor at Cambridge, and the best economist at the University of California, Berkeley. The “best” in the online world will turn out to be a complex amalgam of pedagogic skills and the fit between what an online professor teaches and what a student seeks for his or her certificate or degree program.
Online courses can be provided as part of regular degree programs or as discrete curriculum-independent products. Following the path of other industries such as telecommunications or computer services, this modularization of higher education into scalable online courses will allow a reintegration of modules with the needs of users, not of course providers, in the forefront.
For governments and universities in countries with weak higher education systems and severe shortages of quality faculty, the coming decade of industry restructuring in the U.S. and a small number of other advanced countries represents an unprecedented opportunity.
Both during and after this restructuring in U.S. higher education, universities, governments, and companies in emerging economies will be able to tap low cost, high-quality online education to leapfrog the slow and painstaking process of developing educational capacity to meet critical national needs. They will rebundle modules for their purposes and populations to create certificates and degrees that meet local demand.
The most agile and robust institutions in the emerging economies will jump to the next generation of educational technology the way Africa and much of China leaped over traditional wire-based telecommunications and into mobile phones and devices. The educational and business opportunities here are great. They are probably beyond the reach of the current crop of online platform providers.