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.

Is strategy back?

You may not be interested in strategy, but strategy is interested in you.

Attributed to Leon Trotsky

Strategy in real life has never been far away, however in academics it seemed to be a period in time that strategic thinking was out of fashion. Or as a former dean of our faculty said: Strategy is about everything, so it has to say something about everything. Strategy became an adjective, in the sense of strategic human resources, strategic management or strategic operational decision-making. Since the introduction of the business model, the business canvas and open innovation, strategy has again become a serious topic. Comparing the different approaches in strategy, you can see a common point. All modern approaches put the customer central, moving to a more service oriented theory of the customer (the so-called Service Dominant Logic). On the input side of the business model, there is a certain distinction between approaches. For example, the Osterwalder canvas lists cooperation as one of the fields of importance in determining your business model; the Prahalad approach and Open Innovation of Chesbrough and van Haverbeke are even more explicit in setting cooperation as one of the essential competences to develop unique competitive advantages. As Prahalad put it in “The Age of Innovation”, it is not ownership of resources, but access to resources even if they are owned by other firms.

In another context I have shown that this is the reason why open innovation is counted as part of the so-called Open Movement. The Open Movement consists of Open Source, the development and implementation of free software by a massive group of volunteers; Open Access, the movement against expensive publishers and for opening up all kind of resources; Open Education, a mix of different kind of educational resources for teachers and learners, total free courses and programs provided by volunteers but also by top universities and Open Innovation, the realization that collaboration of firms is necessary if innovation has to be successful in the present complex world. These initiatives range from a completely free towards a copyright protected exchange of ideas. As Open Business Models are a part of the Open Movement, the success of open activities requires new business models. For example, it is now possible to use your computer with a free Linux Operating System, using FreeOffice, (replacing Microsoft Office) and other kinds of free software, including web development software as Moodle. This calls for new business models on the part of commercial software: what are the features people are prepared to pay money for, as there is a free alternative? Open Access caused a major discussion between the UK government, academics and the publishers. .The UK government has taken the decision that work, paid for by the British taxpayer will be free available online for universities, companies and individuals, to use for any purpose, wherever they are in the world (The Guardian, 15 July 2012 ). To make this possible, the government changes the business model of scientific publishers from being paid by the subscribers of their journals to making the authors pay an ‘Article Processing Charge’ (APC) around £2,000 per article. This APC is financed by the research funds of universities and research institutions (the so-called Golden approach, commission Finch; contrasting the Green approach). Open Access will change the business models in publishing, but possible also in other artistic business as movies, music ect. Open Education is about individuals and organizations offering different kinds of education and educational resources. Sometimes for free, sometimes for a small fee. New technological developments allow a larger access, a broader participation in education. Partly this will make good education available in places where it was not available before, Secondly; it sets the standard for other teachers as students can compare the free course with the courses at their university. However, it can also influence the business model of traditional and distance teaching universities. What do these institutions offer to make up for the fees as compared to the free courses? Of course, Open Innovation is less about getting things for free but more about the must to cooperate, opening up a traditional very closed activity. Surely, research and development departments were heavily guarded places, whereas now, openness and interaction are propagated in by the open innovation and open business model approaches, Yet, there are still approaches which stress the importance of the closed enterprise. For example the blue ocean – red ocean approach of Kim and Mauborgne assumes that the firm has to move towards a position of relative loneliness, to survive. In these approaches strategic decisions have to do with the distinction between the firm and its competitors. If the resources you use are available for everyone, there is no distinguishing competitive advantage!

The more co-creation and non-price factors determine the competitive position of an organization, the more important collaboration with other firms. The more price competition determines the success and survival of the organization, the more important specific individual competences become. Strategy is about recognizing your own position in relation with the outside world, the industrial relationships, the customers, competitors and others. Copying the behavior of others will not lead to an unique position, collaboration can result in a competitive advantage when combined with special internal competences. The same applies for the motto attributed to Leon Trotsky at the beginning of this blog. Searching the internet, this quote can be found at hundreds of websites. However, at the more serious websites pointing towards publications in which the quotes can be found, this quote is not found; the only quote looking like it is: “You may not be interested in the dialectic, but the dialectic is interested in you”.

Copying the “free content” provided at many websites might not always be the best policy to get the best results 😎