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ANOTHER PRESENTATION ON POST-SECONDARY DISRUPTION Burck Smith, CEO, StraighterLine, October, 2011 Or “Benevolent Collusion”

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Presentation on theme: "ANOTHER PRESENTATION ON POST-SECONDARY DISRUPTION Burck Smith, CEO, StraighterLine, October, 2011 Or “Benevolent Collusion”"— Presentation transcript:

1 ANOTHER PRESENTATION ON POST-SECONDARY DISRUPTION Burck Smith, CEO, StraighterLine, October, 2011 Or “Benevolent Collusion”

2 Topics  Introduction  The Big Question and Disruption Theory  Higher Education Today  Higher Education Tomorrow  StraighterLine as Case Study  Should government have a role in online education?  Policy Recommendations

3 About Me…  Background in non-profits and public policy.  Masters “thesis” helping a consortium of MA community colleges develop an online learning financial model.  Founded SMARTHINKING in 1999  Founded StraighterLine in 2008  Kept asking the question…

4 Despite massive investments in technology in post-secondary education and K-12, why have costs gone up and quality gone down?

5  Existing providers compete on features  Some new technologies change entire industries  Disruptive technologies are attractive to markets ignored by existing providers  Eventually new technologies compete with existing providers.  New technologies require a new business model Disruption Theory 101

6 Why Were Colleges Created? Scarcity of Labor and Content Centralization Network effects attract more teachers and studentsNecessary facilities require high fixed costs“Credentialing” is difficult to separate from “delivery”

7 Higher Education in 2011 Abundance of Labor and Content De- Centralization Pricing Continues To Assume High Fixed CostsCredentialing Still Tied to DeliveryAntiquated Regulatory and Financial Policies

8 Course Delivery Is Really Cheap Institution/CourseCost Per StudentNon-Resident Tuition and Fees Frostburg State University/Intro. Psych$25$1,688 University of Alabama/Intermediate Math$82$2,680 Average NCAT Institutions/Gen Ed Course$111$1,854 Typical Adjunct Taught ($3K/30 student)$100$1,000 - $2,000

9 Online Learning Business Models  For-Profit Accredited Colleges  Turn-Key Private Labeled Programs  In-House Online Offerings Subsidize Other Units  Everyone looking to starting online programs

10 The Iron Triangle Subsidy State allocation Federal student grants/subsidized loans Favorable tax status Accredited Colleges Only degrees can be accredited, not courses Accreditation measures inputs, not outcomes Colleges set own, subjective articulation policies Competitive Barriers Colleges cannot easily be “disaggregated” Colleges must look similar to each other Standards set and enforced by those that would be undermined by changes

11  Internet enables dramatically more competition at the course level.  Student debt load is becoming unsustainable.  Tuition growth is more rapid than ever.  Sources of student support are drying up  Online courses are cheaper to deliver and more scalable. Barriers are Eroding Trends: Growth of dual enrollment, co-enrollment, AP, CLEP, StraighterLine, community college enrollment growth.

12 Current StraighterLine Courses Developmental Writing English Composition 1 English Composition II Developmental Math College AlgebraPre-Calculus Accounting 1Accounting IIMacroeconomicsMicroeconomics Business Statistics Calculus ChemistryBiologyBusiness Comm.A&P IA&P IICalculus II Managerial Accounting General Psychology Medical Terminology Physics IIntro. SociologyIntro. Business Western Civilization Nutrition Physical Education and Wellness Student SuccessU.S. HistoryPersonal Finance Intro. Criminal Justice Pharmacology IPharmacology II

13 How does StraighterLine Help STUDENTS? Courses by McGraw Hill High Quality Courses Start/Stop Whenver No Set Due Dates Total Flexibility On-demand educational support Personal Course Advisor Individualized Support Cost for students: $99 /month + $39 /course eBooks reduce the textbook cost by 45% Affordability Credit by Regionally Accredited Partner ACE Approved Real College Credit

14 How does StraighterLine Help PARTNER Colleges? After StraighterLine, a student will need to complete the majority of his or her degree. More Students These students are very likely to persist. They will likely be out-of-state and using distance education delivery. More Valuable Students A place to refer students that they can’t serve. Revenue stream Referral Destination

15 Credit Delivery  Partner College Network — Almost 20 regionally accredited partner colleges.  “Shadow Partners” – Over 180 non-partners have awarded credit for SL courses.  ACE — StraighterLine’s courses have been reviewed and recommended for credit by the American Council on Education’s (ACE) College Credit Recommendation Service.  Independent Survey Results – SL Courses as rigorous as other options, more convenient, more affordable, students persist at greater rates.  “Good Housekeeping Seals of Approval” – DETC, College Board  General Research – Students that start college with credit are more likely to complete.

16 Potomac College

17 Arguments Against  “Fine Wine” Fallacy  “Platonic Form” Fallacy  Institutional Control of Credit Acceptance  Competes With the Public Sector

18 Susceptible Segments

19 What does this mean for colleges?  Erosion of most-profitable courses  Need to re-think pricing models  Need to re-think business models  New marketing and student recruitment opportunities  Controversy around new partnerships  3 year Ivy’s?

20 Predictions  Selective, high-priced colleges will be unaffected.  Non-selective colleges will loosen transfer restrictions.  Course prices will be variable and will reflect the cost to deliver the course. Subscriptions may become more common that flat tuition.  Residential will cost a lot more than online courses.  Highly efficient specialty course providers will emerge.  College marketing strategies will begin to resemble retail marketing strategies.  The rising cost of college will become a non-issue.

21 Policy Suggestions  Create minimum outcomes where possible, let the market set the rest.  Create course-level accreditation.  Require any college accredited by a DoE recognized agency to accept any other similarly recognized college’s credits.  Create a more level economic playing field.  Let private sector fund online learning.  Let student loans be dischargeable at bankruptcy

22 Thought Exercise… Deregulate Online Consumer Protection? Grade Inflation Student Debt Re-regulation of For-Profit Academically Adrift Overpriced online courses Correct Market Failure? Thousands of online course providers Overpriced online courses Local Industry Protection? Weigh benefits against student and taxpayer costs Wealth Transfer? Lower prices would have more positive effect. Can still subsidize certain social segments Foster Informed Citizenry? Access is currently limited only by price “Appropriate” Reasons for Market Intervention

23 Thought Exercise… Online Institution? Accumulation of Assets? Very limited fixed costs. Credentialing? Ambiguous Value. Much cheaper alternatives. Market making? Professors get a pretty bad deal.

24 More Reading… Public Policy Barriers to Post-Secondary Cost Control – Book chapter in Accountability in Higher Education published by Palgrave Macmillan. January, Price Competition and Course-Level Choice in K-12 Education: Lessons from Higher Ed – Book chapter in Customized Schooling published by Harvard Educational Press, January, College by Subscription -- AEI, September, Disrupting College, Lessons from iTunes – Pope Center for Public Policy, April 2011.

25 Contact Info Burck Smith


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