Moocs, education from service to product and back.

At this moment, all kinds of enterprises experiment with the change of “Product Dominant Logic” towards Service Dominant Logic”.  Value creation is seen in the usage of a product, which implies that the interaction between supplier and consumer becomes more important. We don’t sell simple products anymore, but the product is part of a consumer-experience and the firm accommodates this experience. Products become services and customers co-creators, interaction becoming a major competitive force.

In education, however, we see an opposite movement. Distance learning, whether open or not, involves the translation of the didactical interaction, the presentation of the content and the experiences of the teacher into an electronic product, which could be uses independent of the individuals who made the online course. Again, because of the required quality and completeness of the course materials, a good online distance course will be much more expensive to develop than a face-to-face course. The quality and completeness are requirements which follow from the fact that the student should be allowed to study most of this material independently from tutors or peers.

By packaging the teacher into an electronic self-sufficient educational product, education moves from a service orientated sector towards a product orientated sector. In a sense it is showing a shift seen before in the performing arts. Baumol showed that labor productivity did not rise for a long time in performing arts; a performance of King Lear did require a standard amount of actors and the amount of spectators was constrained by the physical possibilities (space and time); leaving the ration spectators/actors roughly constant. However, through movies, television and –later- internet made it possible that the same performance was seen by millions of people, over and over again. So this altered the ratio spectators/actors largely, reducing the costs per spectator to almost nil.

The same applies for ODL: whereas production costs are above the development of face-to-face education, once the product is available, the delivery costs depend largely on the amount of students interested in the course. So if the course becomes Massive in usage, the delivery costs will go towards zero, justifying a free and open supply of online courses. In this sense, ODL is the answer to stagnating marginal labor costs in education and the logical  way to increase total factor productivity through capital intensive innovations.

The declining marginal costs do not solve the problem of covering the initial cost of development. At this moment there are three models developed to cover these costs:

  • Institutions bear the costs themselves for different reasons: for example marketing motives, the universities as MIT and the OU-UK who were frontrunners in OER reported on the rise in new students; others invest in potential future earnings by selling the program to third parties.
  • Institutions and the participating individuals use materials which are developed in a different context(regular programs) for which is paid by students and the government thereby reducing   the investment in ODL or Mooc.
  • Several governments and private foundations funded initiatives in the OER-movement; for example the Hewitt foundation, the Gates foundation and at present the Obama administration.

Of course, institutions do combine the three sources of funding to reach an optimal solution. The shift from education as interaction towards education as a product does not only provide the possibilities for a commercialization of education, this shift is expected to generate new sources of income, as described by different authors [ 1, 2].

In line with the Bottom of the pyramid –approach of Prahalad and the Blue-Red Ocean approach Kim and Mauborgne Moocs are the ultimate version of this development: strip your product of every unnecessary feature, leaving the bare supply which meets the demands of the customer. The decline in costs (and price) will make the product widely available, reaching customer segments comparable products will not.

This commoditization of products results in a downward spiral, were competition brings down prices and quality in a shark infested ocean, coloring the water red as only “the strongest survive”. Yet, several thinkers have suggested a way out of this situation. By moving from the commodity towards an experience, seeing a service instead of a product, firms can add unique features to their product offerings.

It is interesting to notice that what took the private sectors decennia to develop, is adapted by the educational sector within two years. Fred Mulder, the Unesco-chair on open educational resources,  proposed a system in which the content was separated from other educational features as tutoring, assessment and  certificates; describing a kind of Mooc before it really existed, but also foreseeing that independent sustainability requires additional sources of income. Thomas Friedman implicitly describes the flipped class room:

Therefore, we have to get beyond the current system of information and delivery — the professorial “sage on the stage” and students taking notes, followed by a superficial assessment, to one in which students are asked and empowered to master more basic material online at their own pace, and the classroom becomes a place where the application of that knowledge can be honed through lab experiments and discussions with the professor. There seemed to be a strong consensus that this “blended model” combining online lectures with a teacher-led classroom experience was the ideal.

In these approaches Moocs become a kind of electronic text book, used by others in their education. It will become a matter of time for the suppliers of the Moocs to ask a contribution of either the students or the institutions which make use of their materials. Yet, if this is the only contribution of Moocs to education, this is hardly to be called disruptive.

In several publications, we can see that Coursera, edX and Udacity are thinking about alternative earning models. These models all involve some kind of service to accompany the electronic lessons within the Mooc.  So in this sense, Moocs are no disruptive innovation, nor a treat to traditional education. However, Moocs can be a change agent in the sense that they facilitate educational innovations as flipping the classroom, integrating learning and working or stimulating quality (why sit through a boring class when you can take the content from a first degree university or teacher).

Also do Moocs open up education for people who otherwise would not be in a position to attend classes. This will, however, depend on two factors:

  1. The attitude of employers to free online courses; will they have a civil effect or will employers still hold onto official degrees?
  2. Openness in Moocs should be redefined not only in terms of barriers of entry, but also in the availability of the course over the year.

Within two years, Moocs become full circle. From a publicly founded service related activity (education) towards to a free product orientated electronic course, a commodity; towards a privately funded experience by adding exclusive services to the free commodity.

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Are Moocs disruptive, interesting or just marketing?

Van der Bosch poses an interesting question as he states that Moocs are an interesting development, but as he says that Moocs are the wrong revolution.  Bonnie Stewart writes about the supposedly disruptive character of (x) MOOCS, pointing to the many publications using this term. She sees a trend in the power relations to shift, however preserving and consolidating the power relations of the traditional universities. xMOOCs are, in her view, just an opening of new markets based on the reputation and brand of the elite universities. Rolin Moe in Reviewing Christensen’s Disruptive Technologies (Harvard Business Review, 1995) in MOOC Terms gives an historical interpretation of Christensen’s original definition of disruptive innovation, using it to analyse xMoocs.

Thrift in de Chronicle is even more cynical, listing four main reasons why MOOCS are called a disruptive innovation and became a hype over the past months: 1. Moocs do appeal to economic elites, which see opportunities for profit in an economic environment where pretty well everyone is chasing limited opportunities for high returns. 2. because it taps into a vein of middle-class anger over tuition costs (a subject also mentioned by van der Bosch). 3. Moocs could reduce costs of higher education for governments, providing an attractive excuse to reduce spending. 4. because all that said, as higher-education systems continue to grow in scale, it makes sense to look at ways of teaching more people more efficiently, and MOOCs may well be a part of the answer.

Concluding that, no elite universities will be caught up in a more general industrialization of higher education

Meanwhile, edX announced the new members in February. In this announcement, they described their selves as “the not for profit online learning enterprise [..] building an open source educational platform and a network of the world’s top universities to improve education both online and on campus while conducting research on how students learn”.

Promising: “Courses offered by institutions on the edX platform provide the same rigor as on-campus classes but are designed to take advantage of the unique features and benefits of online learning environments, including game-like experiences, instant feedback and cutting-edge virtual laboratories”.

However, the Chronicle poses the question How can a non-profit organization that gives away courses bring in enough revenue to at least cover its costs?  Agarwal (president of edX) states that edX is non-profit, but self sustained. EdX expects income from several sources. Firstly, there is an agreement that “self-service” courses will be offered through edX without any further help, it pays a fixed amount of the income generated by the course to edX ($50.000 for a new course, $10.000 for recurring ones). Next, institutions can use edX as a consultant and design partner, paying for each course developed within this model. Furthermore, edX has a deal with a network of testing centres and has plans to license the courses to other universities, both potential sources of income.

Another interesting aspect is that Koller is quoted stressing that Cousera offers to share a larger part of the profits with the university that provides the course. It seems that competition between the MOOC-platforms has started?

napkin sketch by Clayton Christensen for Wired Opinion

So there are several positions taken with respect to the way we should look towards Moocs. Of course it is interesting to know the opinion of the person who labelled Disruptive Innovations. Christensen and Horn asked the question: Beyond the Buzz, Where Are MOOCs Really Going?

Their answer is simple: Yes.

For this answer, they have three reasons. Firstly, Moocs are serving non-consumers. Although Moocs are limited in the services they provide compared to traditional colleges, they offer free and accessible education to a broader audience, who can not afford the traditional offering. However, this is a characteristic of ODL in its broadest sense as can be read in the rapports of the UNESCO. China, Russia, Brazil and Turkey all offer some kind of Open Educational Resources with the intention of making education available in places where are no institutes for higher education and for people who are not able to participate in the traditional HEI’s. Secondly, as they state: disruptive innovations improve over time to march upmarket. This is also given as a reason why Moocs have become popular in recent months, using the augmented possibilities to increase quality. An observation which will not be shared by everyone commenting on Moocs. Lastly, Moocs redefine quality in the industry. As Christensen and Horn state: in the future, courses might be offered based on employer demand, not faculty research interests. MOOCs are already evolving in some ways away from traditional educational constraints: Udacity’s courses, for example, have shifted from a time-controlled to a more competency-based learning model that takes advantage of the online medium.

License Some rights reserved by Toban B.

Will Moocs be disruptive in the sense that they will change traditional education?

Their specific form, to which I will return in a later blog, makes it possible for a new segment of “customers” to participate in education. It becomes more easy to sell “education” as a product to firms, incorporating it in their corporate universities. Just as the introduction of the film, the movies, made the stage performance available for whole new audiences, winning in efficiency as one performance could be seen by millions but (perhaps) losing in other features as effectiveness  (the impact of the players on the spectators) or artistic aspects. Moocs facilitate the mass-consumption of education, but not the mass customization as predicted by Christensen and Horn. For that they are to inflexible. Furthermore, ODL and Moocs can facilitate other “revolutions” in education as flipping the classroom; transferring simple readings and task making to the e-domain, whereas the class room will be used for discussion and group work.

Predicting the future is not something I like to do, but my experiences with scenario techniques make me very doubtful if these kind of uses of Moocs will be applied soon. Drawing a line representing the use of Moocs as a change agent in traditional HEI’s versus a line of the supply of relevant Moocs by other HEI’s provides an optimistic quadrant in which Moocs will be offered and used to change the traditional educational systems against a realistic quadrant in which Moocs are offered by good willing individuals, used by individuals who have no other choice!