A Research Paper on Online Education Industry, big players in EdTech sector,

MOOCs and their possible business model and how Harvard Business School can

become a market leader in online education space.

HBS has a legacy of energy and innovation, in its own words- “everyday HBS strives to redefine the

nature of management education and invent the future of business”. With Harvard’s reputation as

world’s most elite institution, everyone around the world echoes the similar sentiments for this 100+

year old business school. Among all the wonderful offerings, HBS primary focus has been on offering

following academic programs:

Program Description

MBA An intensive, two-year residential program leading to an MBA degree

Executive Education More than 80 programs preparing talented professionals from all over the world for new levels of leadership in their careers and within their organizations (in class)

Doctoral Program Eight full-time programs leading to a PhD or DBA degree (residential)

Yet, over all these years there have been significant technological developments that have paved the

way for the disruption in the education industry, and one such significant disruptive model that has

emerged is- the online learning methodologies.

Online Education Industry – What is really happening there?

Let’s look a little deeply into the online education industry. Here are some insightful industry updates-

The Sloan Consortium an organization dedicated to furthering online education, releases annual reports on the quality and growth of online education in the United States. Their first report, entitled ""Sizing Opportunity", was released after the 2002 - 2003 academic year. The report touted the then-impressive number of 1.6 million students taking at least one online course in the Fall 2002 semester. This was one in every ten students.

Sloan's latest report, "Class Differences", covers the 2010 school year and the results are amazing. The report states that now 5.6 million students took at least one online course in the Fall. This is a 350% increase from Sloan's first report and a 21% growth rate from the prior year's 4.6 million students. In just one year, one million more students got online. This is a record increase according to Sloan's reports. In 2002, the number of students taking at least one online course was roughly one in ten. Today, it's almost one in three. Just as the Internet has supplemented industries like banking, travel and real estate, it has contributed massively to education.

Now focusing specifically on Business Education, you will again notice a massive upward trend of online

education. From the data collected by online learning platform, Eduson, and reports from Financial

times 2012, it shows that the top online MBA programs already attract 3 times more students than the

top traditional MBA programs.

Teachers' Opinions

The question many ask is, "is online learning effective?" When polled by Sloan, 66% of academic leaders rated online education's learning outcomes at the same as or even better than face-to-face, traditional classes. This number is higher when only public institutions are polled. This can be attributed to the fact that public learning institutions have been quicker to integrate online learning into their curriculums

than their private counterparts have been. The opinion of public university leaders' is that, over 75% of the time, online learning is just as good at educating students as traditional courses if not better.

Opinions are changing across the board, as 63% of academic leaders said they believe online education is integral to their institutions' long-term academic strategy. This is the highest positive response to this question in Sloan's eight years of conducting this survey. In contrast, only 12% of academics disagreed with online education as a crucial part of their strategy - the lowest response yet. Online education is growing and it is here to stay. (Source- http://www.wwwmetrics.com/education.htm)

More recent data and why online education is important?

A 2012 Babson Survey of online learning revealed that over 6.7 million students were taking at least

one online course during the 2011 fall term, an increase of 570,000 students over the previous year.

Based on responses from over 2,800 academic leaders, the survey, "Changing Course: Ten Years of

Tracking Online Education in the United States," also found that online learning was critical to the long-

term strategies of 69% of chief academic leaders.

77% of academic leaders rate the learning outcomes in online education as the same or superior to those in face-to-face.

Source: http://sloanconsortium.org/publications/survey/changing_course_2012

Affordability of Online Education

One of main reasons for the upcoming of online education is low cost availability. Generally, the way

online education has been offered it’s clear that online courses are more affordable than offline

counterparts. From the data collected by online learning platform, Eduson, and reports from Financial

times 2012, it shows that the top online MBA programs are way cheaper than the top traditional MBA

programs.

Big Industry Players Other Than Traditional Education Providers

Here is an interesting research on the Education industry, where we will be focusing on the players

other than the traditional education providers such as Universities and Colleges those are extensively

using online learning as a model of knowledge transfer. Looking at the research will give us an idea of

how the online education industry has blossomed beyond the typical service providers and how this is

such a huge market with the potential of accommodating both traditional and non-traditional online

education providers.

The top 5 revenue earners of the 2011: Pearson ($7bn), Apollo Group ($4.5bn), Benesse Education

($3.7bn), Laureate ($3.2bn) and Kaplan ($2.5bn) clearly show that there can be many successful players

worldwide in the education industry. One common prominent aspect of each of them is that they all

have adopted the online learning methodologies quite well and still working to enhance the learning

experience using new technologies. The writing on the wall is- “Online education is their key area for

future growth”.

Harvard Business School Offer Online Learning?

Given the current market environment and the opportunities in the online education world, it would be

naïve to say that HBS should not offer an online learning program. There is certainly a growing

popularity for online education around the world, especially in the developing markets due to its

accessibility and affordability.

Online education is a significant “disruptive technology.” It gives an exciting opportunity to HBS to

provide a mixed-model, combining in-residence and online programs. This could result in the ability to

reach more students. It could, potentially, result in higher facilities utilization. The online element of

such mixed-model offerings could result in higher flexibility for the students, again making such offerings

more attractive.

Exclusively online offerings take the education model further, virtually eliminating the need for physical

locations and making the course or program offerings almost totally flexible. It should enable providers

the ability to reach large numbers of students without the need for expensive physical plants, making

the education much cheaper for the student customer. The MOOC model, in theory, could reach a

virtually unlimited number of students, around the world, on their individual schedules, at very low unit

cost.

The major challenges have to do with the quality of the course offerings, accreditation issues, the monetization of the model (how do the suppliers get paid by the users), the guarantee that the students purportedly taking the courses/programs are, in fact, doing so, testing procedures, and, finally, the offering and recognition of online degrees.

Online-learning SWOT analysis for HBS:

Strengths Weaknesses

HBS brand image and elite business education provider status

Harvard university already offers online non-business courses as part of its non-profit collaboration with MIT on EDX, HBS can have faculty development program with Harvard university to build online offerings from its professors

EDX’s experience and platform technology can be great help to HBS to launch business program online

For HBS, it would be easier to attract venture funding for development of the online technology infrastructure because if its brand image

HBS have a world class faculty to offer the courses

HBS’s vast alumni network could be of great help for setting the technology infrastructure as well as online lecture offerings

Setting up online technical infrastructure will involve a lot of investment

HBS’s in-experience in the online learning space will pose a challenge in designing the online program

HBS could face internal resistance, not all staff within may be fully engaged and supportive of e-learning

Lack of online-content will lead to a lot of time consumption of the professors’ extra time and will cost to HBS

Availability of faculty, beyond their research and teaching schedules

Could cannibalize traditional class room offerings

Opportunities Threats

Ability to reach more students worldwide

Could evolve more engagement of students with the subject matter experts and vast peer group using the technology

Effective experience for the students, as they could pause the videos anytime and see multiple times until they understand

Possibility of providing a mixed-model, combining in-residence and online programs

Collection of massive online learning data, which could be used for research of the learning behaviors of the students

Upcoming market offers, higher growth opportunities

More flexibility, eliminating the need for physical locations

Could become a pioneer for online education and may be create global standards for education and sell it to other universities

E-learning being seen as ineffective

Organizational change e.g. departmental restructuring, work pressure may cause faculty dissatisfaction

Monetization of the model

Competition from other elite business schools such as Wharton, Stanford and independent service providers such as Coursera etc.

Verification of students taking the online courses, making sure they haven’t cheated

Online education not seen of value by potential employers

Assessment and evaluation of so many online participants

We will look into key weaknesses and threats in detail, but before that look into few of the options using

which HBS can go into the online learning space.

Possibilities for HBS in Online Learning

These are following possibilities of entering the online learning space for HBS-

1. Using it for the students on the campus

2. Using it for the students not on the campus

3. Share/Sell it to other universities and colleges

4. Open Source alternatives: MOOCs

1.Using it for the students on the campus

Online learning provides a wide possibility of providing a mixed-model, combining in-residence and online programs especially for the full time students at HBS in order to enhance their learning experience. One of the most famous concepts, which is finding huge acceptance among the full time university students is the “Flipped Classroom” concept. Flipped classroom is shifting some course content online to free up classroom time for discussion. The expectation is students watch the videos before coming to class and have useful learning discussions during the lectures, which saves a lot of time doing more relevant stuff during the class time.

The “flipped classroom,” as the idea is commonly known, is a relatively new approach. Texas A&M’s Mays Business School has experimented with it. Some faculty members at UNC’s Kenan-Flagler Business School now require students to watch an online lecture before class and Dartmouth’s Tuck School of Business is employing the flipped classroom for economics, statistics, finance, and operations courses.

Columbia Business School is already using it good effect for its residential MBA program (Source:

http://www.businessweek.com/articles/2013-08-28/columbia-launches-revamped-mba-curriculum) and Stanford is another prominent school doing so, Stanford calls this an approach where students do

their class work at home and home work in the class (Youtube video: http://youtu.be/Gm9NxzgoOQo)

2.Using it for the students not on the campus

HBS could purely adopt online learning for students not on the campus, the biggest flaw for such an approach comes from the MOOCs (Massive Open Online Courses), because they are offered on pretty much no cost at all and to run an online program when there is already substitutes available at no cost, it doesn’t make a sense to go for such a delivery model. For instance, Wharton’s first-Year MBA courses

are already online for free on Coursera (Source: http://www.businessweek.com/articles/2013-09-

13/wharton-puts-first-year-mba-courses-online-for-free).This model certainly won’t be possible in the given market environment.

3. Share/Sell it to other universities and colleges

This approach hands in a great opportunity to the HBS. Like the HBS Case Study, with its elite brand image and standards, HBS could become a pioneer for online education and sell/share its online education content with other universities. We possibly could see an online version of Harvard Publication Press, selling online learning content. It would certainly take some time, but there is no other business school in better shape than HBS to take advantage of such an opportunity with its current legacy, network and trust all around the world.

4.MOOC- Massive Open Online Courses

Online courses, like MOOCs, are challenging the foundations of traditional education institutions. With the cost of college prohibitively high in the U.S. and nearly half of our nation’s youth unsure that their college education has improved their chances of finding a job (McKinsey), access to free online courses provides another avenue for students and the unemployed to acquire and/or upgrade their skills as they look for employment.

The second advantage is adaptability. The very nature of online education allows it to quickly adjust to the ever-changing needs of industry. Online-education companies like Udacity, have formed partnerships not only with traditional education institutions, but also with businesses. For example, Udacity recently formed a partnership with AT&T and Georgia Tech for a master’s degree in computer science—for only $7,000. This ability to quickly bring new courses to students can help ensure that they are being trained in the latest technologies that are required in the workplace.

Though, the bigger issue in MOOCs is how to make money? Till now there is no sustainable revenue generation model that could be adopted into MOOCs offerings. Due to the fact that most of the MOOCs

courses are offered for free, there is not much money that could be made out of it to sustain the operating costs alone.

The accreditation of MOOCs courses is another problem, which means the credits achieved online are irrelevant to the universities. This puts a question mark on moocs credibility in general.

MOOCs really work?

A market research shows that 90% of the participants don’t complete the course. A survey of students by the market-research company Qualtrics and the education technology provider Instructure seem to confirm that trend. Seventy-five percent said the main reason they signed up for a MOOC was that it didn’t cost them anything, while 29 percent of those who dropped out said they got too busy to continue, and 20 percent said they lost interest (Source: http://nation.time.com/2013/09/12/all-hail-moocs-just-dont-ask-if-they-actually-work/#ixzz2i0Z0RpYA).

Another important aspect is- Are MOOCs of any Help in Job Hunt? The answer isn’t the one many students want to hear. Companies including Intel (INTC) and Dell (DELL) say they probably wouldn’t hire someone who holds an online certificate rather than a degree. “Intel focuses on candidates with traditional degrees,” Gail Dundas, spokeswoman for the Santa Clara (Calif.)-based company, writes in an e-mail. A certificate could sweeten an applicant’s résumé, but only for those who already hold a four-year degree, says Lisa Soto Hegner, a recruiter for Round Rock (Tex.)-based Dell. (Source:

http://www.businessweek.com/articles/2012-08-10/free-online-classes-are-little-help-in-job-hunt)

More challenges emerge from problems of plagiarism and cheating, how to make sure students don’t copy. Also, the assessment and evaluation of so many students is also a big problem. Yet, there have been solution found to these problems, which will be discussed further.

Possible Business Models For MOOCs:

Selling Certificates: To add value to its certificate of completion, the company, Coursera, checks

the identities of its students and offer “verified certificates” of completion, for a fee. A key part

of that validation process will involve what Coursera officials call “keystroke biometrics”—

analyzing each user’s pattern and rhythm of typing to serve as a kind of fingerprint. (Source:

http://chronicle.com/blogs/wiredcampus/coursera-announces-details-for-selling-certificates-

and-verifying-identities)

Collaboration with Employers for Hiring: Moocs collaboration with Employers, because they

have the data how well the candidate acted in the discussions can also help in assessing the

candidate in terms of company’s environment. Partnership with employers could be a new

opening for online education. (Source: http://www.evolllution.com/friday-links/finally-a-

business-model-for-moocs/). This would also mean more seriousness for MOOCs and will drive

higher completion rates. This could be a new partnership between moocs and hiring firms.

Selling learning data to researchers: Since MOOCs have a lot of learning data for their online

users, it’s sold to the researchers in the field of online (education) learning.

Partnership with private companies for Corporate education: . For example, Udacity recently

formed a partnership with AT&T and Georgia Tech for a master’s degree in computer science—

for only $7,000. This ability to quickly bring new courses to students can help ensure that they

are being trained in the latest technologies that are required in the workplace.

Key weaknesses and threats for HBS & their possible solutions:

Till now there has been an alarming signal of people who opted for traditional residential MBA program

showing deep desire for the online learning. It seems for the elite business schools such as HBS, Stanford

etc. the whole experience of on campus studies is more prominent than studying online completely. It’s

still a matter of choice for the candidates and what type of experience they want, like it was earlier for

all those years. There are still no significant signs of cannibalizing traditional class room offerings by

online learning.

Verification of students taking the online courses, making sure they haven’t cheated: From the beginning, online learning struggles with the issue of cheating. There are two solutions to given problem-

1. Keystroke biometrics and typing pattern technology- Coursera, along with its partners such as Duke, Wharton, checks the identities of its students using “keystroke biometrics”—analyzing each user’s pattern and rhythm of typing to serve as a kind of fingerprint. It seems it’s working fine for the Coursera. (Source: http://chronicle.com/blogs/wiredcampus/coursera-announces-details-for-selling-certificates-and-verifying-identities)

2. Proctor based evaluation: Proctor based evaluation adopted by EdX, both edX and Udacity have partnered with Pearson to offer proctored final exams. But although Pearson has more than 450 test centers in 110 countries, making students in an online class, many of whom live in rural areas, go to a testing center for the final exam is an old-school solution. Yet, it’s something which can be build upon.

Assessment and evaluation of so many online participants: Peer-to-peer evaluation seem to the option of handling the problem of assessment of thousands of participants in the online learning programs. Stanford adopted the same and received an overwhelming response from their online learning students. (Source: http://youtu.be/Gm9NxzgoOQo) Availability of faculty, beyond their research and teaching schedules: The constraint of availability of faculty is a big challenge. One way of countering the problem would be to utilize the global network of HBS’s partners. For example: Reaping the benefits of CPCL- the HBS sponsored Colloquium on Participant-Centered Learning, which is a 10 day program targeted at top business schools in emerging economies that trained faculty in case method teaching. HBS can introduce online learning training as part of it, and engage the qualifying candidates in the online learning delivery as HBS Partners. Conclusion: HBS should adopt the online learning

HBS should adopt the online learning, using the EdX platform. Edx is a moocs platform of Harvard

University in collaboration with MIT. It should also adopt the flipped classroom approach for its

residential class using the same material at EdX. HBS should focus on the employment credibility of the

MOOCs and partner with corporate for employability of online users (Collaboration with Employers for

Hiring as mentioned above). HBS would charge those hiring corporate for the services. In the long term,

HBS should try to publish and sell video content via Harvard Press as it would open new revenue stream.