I teach at a business school, so I hate to sound like the guy who bites the hand that feeds it. But of late, I have become deeply uncomfortable with the exorbitant cost of B-school education, whether it is degree education or executive courses. To put it simply, B-schools are pricing themselves out of the market. We use antiquated models of content creation and delivery and we teach the same number of students in a classroom that professors in ancient India or Greece would teach! No wonder the cost of education is out of control. Meanwhile, cloud technology is transforming how we work, play and connect.
The conclusion is inescapable to me – when the Cloud meets Education, it can produce some very disruptive business models. We are starting to see glimmers of this with Udacity, the Khan Academy and other experiments. This is just the tip of the iceberg.
There are several core assumptions in B-school education that need to be questioned:
- Content creation is bundled with content delivery
- Education is delivered face to face in a classroom
- Faculty are paid more or less the same amount to teach a course
- B-schools make money from tuition fees
- B-school students care about credentialing
Imagine the following disruptive business model:
A “rock star” faculty member partners with a cloud-based learning management systems (LMS) provider to offer an online course on a vocationally relevant topic (e.g., entrepreneurship, social media marketing, leading teams, etc.) to a global audience at no cost to the students. The course features live video lectures, online course materials, self-guided exercises, team projects and self-guided assessments. The course is offered over 10 weeks with one or two “classes” per week. Students who cannot attend a live class can view archived materials online. The LMS includes deep collaboration and community features, so that the instructor can see how the content is “landing” and get real-time analytics on how students are performing in the course. The course offers no credentialing – its only goal is to provide job-relevant skills that students can “take to the bank”.
How would you make money? Well, there’s a serious shortage of qualified talent in many areas like Product Management. What if we were able to pick the top 5% of the 10,000 students in a course and were able to generate leads for recruiters from companies looking for talent? Could the course and the elaborate screening process that is implicit in their performance on the course be used as a talent screening and vetting scheme? Would companies be willing to pay $1,000 for a qualified lead for a high-potential employee? Think of the course as an elaborate HR screening tool!
An alternative model is to sell “seats” for the course to corporate customers, who might be willing to pay $250 for a 10-week course, which, by my calculations, is less than a tenth of what a company would pay for a 3-day executive program. You could sell “site licenses” for customized courses to companies.
Let’s look at the economics of the referral model. Let’s say you manage to get 50,000 students in a course. Let’s assume that 5% of these students are referred successfully to companies for employment and that each employer pays $1,000 for a qualified referral (which is lower than the referral bounties many companies pay today). That’s a potential revenue stream of $2.5 million from a course! Now, my math may be off, but even if its off by an order of magnitude, this is a fascinating business model.
If you do corporate “seats” as an alternative, and you sell 2,000 seats for a course at $250 per person, that’s $500,000 in revenues. Also nothing to sneeze at.
So that’s the “back of an envelope” model that is disruptive in a lot of ways:
- The sports star analogy – A few “star” faculty members can make a lot of money because they reach 100x to 1,000x the size of the audience.
- No tuition fees charged – when you have massive scale, you can create innovative advertising/referral based monetization mechanisms
- Education that you can put to use – vocational/job-relevant knowledge where credentialing is not important.
- Collaboration and social networking hardwired into education
- Global reach – imagine the potential of this model in emerging markets
As you can imagine, this isn’t something I’m just speculating about. As the Dean of Stanford’s engineering school commented recently – “A tsunami is coming, and we intend to surf the wave rather than be hit with it head-on”. I’m putting on my wet suit and dusting off my surfboard. Stay tuned!!