Pre-pandemic, there was already widespread acknowledgement that the traditional higher education business model is seriously challenged. Fall 2020 marks a clear inflection point as students, educators, and government leaders alike scrutinize the price and value proposition of higher education through the new lens of traditional classroom versus multiple modes of digital delivery. What’s more, machine learning, SMS messaging, and AI are having a growing impact in optimizing student services and support. These technological developments make it imperative for college leaders and the policymakers who govern them to make digital transformation and technology a much more central strategic priority, especially when it comes to their core businesses: learning and credentialing. This school year marks a major inflection point for America’s colleges and universities. Which institutions will seize the moment to transform, and which ones will be left behind?
Higher education is being pummeled by the Covid-19 pandemic. This spring’s campus shutdowns led to a quick rush to “remote learning,” exposing the fragmented adoption of high-quality education technology and digital capabilities across thousands of colleges and universities. The tumultuous fall semester, complete with aborted campus openings and widely diverging online and blended options, has only increased the pressure on America’s colleges and universities.
Pre-pandemic, there was already widespread acknowledgement that the traditional higher education business model is seriously challenged. Fall 2020 marks a clear inflection point as students, educators, and government leaders alike scrutinize the price and value proposition of higher education through the new lens of traditional classroom versus multiple modes of digital delivery.
A number of elite institutions — such as Princeton University, Williams College, Spelman College, and American University — have substantially discounted tuition for their fully online experience in an historically unprecedented fashion, highlighting pricing pressures and opening up Pandora’s box. This comes after a decade of growth in postsecondary alternatives, including “massively open online courses” (MOOCs), industry-driven certification programs, and coding bootcamps. This moment is likely to be remembered as a critical turning point between the “time before,” when analog on-campus degree-focused learning was the default, to the “time after,” when digital, online, career-focused learning became the fulcrum of competition between institutions.
Higher education has significantly lagged behind other industries in moving to a more digitally-driven, outcomes-focused business model. One measure of this is that less than 5% of college budgets are dedicated to IT spending. According to U.S. Department of Education data, while one-third of all U.S. college students had some type of online course experience before the pandemic, the other two-thirds remained traditional campus-based lectures — little-changed from hundreds of years ago. Education is one of the least digitized and most people-intensive economic sectors — suggesting that the opportunity for and risk of technology-driven disruption is strong. Following a slow, two-decade march toward more digital business models, higher education’s overdue technological transformation has been rapidly accelerated by the events of 2020, and centers more than ever on technology- and analytics-driven online learning experiences and business models.
As in many other economic sectors, the digital transformation of postsecondary education is being increasingly driven by start-up companies and private capital. According to investment intelligence firm HolonIQ, the first half of 2020 was the second-largest half year for global edtech investment — at $4.5 billion — three times greater than the average 6-months of VC investment during the prior decade. Much of this investment is focused on higher education and its intersection with the workforce. Unlike other industries — such as finance and healthcare — education has lagged behind in having a capitalized “industry” to support it, but those trends are now rapidly catching up.
Online learning became the default in 2020, but the approach most colleges are employing is simple “remote learning” via live Zoom classes, a method little evolved from video conferencing from the late-1990s. However, in the multi-billion dollar market for fully online courses and degrees, a variety of powerful new platforms and technologies have emerged, grounded in cloud computing, enormous datasets, and artificial intelligence. MOOC platforms such as Coursera and EdX leverage data from tens of millions of learners and billions of course datapoints, using machine learning to automatically grade assignments and deliver adaptive content and assessments.
Forward-thinking institutions like the University of Illinois are disrupting the graduate degree market using technology that reduces faculty labor to scale programs to thousands of students at a discounted cost of $22,000 for an entire M.B.A. — leading to the retirement of its traditional residential degree offering. Georgia Tech’s pioneering online masters in computer science program, which costs only $7,000, recently announced they’ve exceeded 10,000 enrollments for this fall. There are now more than 50 MOOC-based degrees worldwide, many priced at even deeper discounts. The aggregation of multiple universities and their courses and programs into single distributed platforms is also opening up new business-to-business (B2B) channels through direct partnerships with employers. Online education providers like StraighterLine and Udemy are taking this trend even further, offering Netflix-like options for students to earn transferrable college credits or other credentials for a monthly subscription.
Machine learning, SMS messaging, and AI are also having a growing impact in optimizing student services and support. Like commercial businesses, many universities are beginning to deploy blended and fully AI-based chatbots to support students and answer questions — integrating with their learning management systems, enabling blended use cases that empower student service personnel with data, or using pattern recognition to help students navigate key admissions, enrollment, and course deadlines. These approaches are also extending into digitizing campus services via smart speakers in student dorms — basic self-service innovations that make the higher ed experience more customer-centric, while bringing down costs. AI is even being leveraged by institutions such as Georgia Tech, which pioneered the use of an AI-based teaching assistant in its online degree programs. More generally, many universities are investing in predictive analytics, enabled by the data generated by learning activity that takes place online — but which often relies on access to outside consulting experts and datasets.
Another major trend is the digitization and explosion of educational credentials — a rapid shift from static educational records and transcripts, previously an extremely analog process that centered around degrees, to online, digital credentials focused on certificates and certifications that summarize achievement, skills or competency. This trend is being driven by employers and industry certification programs, working in partnership with community colleges, extension schools, and university graduate programs — and is central to the “unbundling” of degrees into shorter-form microcredentials that can stack into a larger lifelong curriculum. Many elite business and extension schools have embraced this direction and the new revenue streams that new types of digital credentials represent.
The market is increasingly demanding that colleges and universities move beyond bachelor’s degrees as their primary product, toward more nimble, lower-priced, digital “credentialized packages” of learning and mastery valued by employers — which will be essential in a digital economy where continuous upskilling is needed to keep pace with technological advances and the shrinking shelf-life of skills. This move away from one-and-done degrees and toward lifelong learning and upskilling is central to achieving the widely-embraced goal of greater education-workforce alignment, which hinges on integrating college and employer hiring/HR systems that today lack the standards and attention to connect — and which could open up a more fluid and efficient ecosystem in digital skills, including the “credentialized” recognition of job skills and work experiences. It’s worth noting that such a change to the system may also unlock opportunity for some 71 million Americans who, according to recent research, have the skills to succeed in higher-wage jobs but are systematically overlooked because they lack four-year degrees.
These technological developments make it imperative for college leaders and the policymakers who govern them to make digital transformation and technology a much more central strategic priority, especially when it comes to their core businesses: learning and credentialing. The accrual of valuable intellectual property and market share in a handful of key education technology companies also makes developing sound partnership models with outside firms much more critical. Many top universities, for example, have committed to decade-long, multi-million dollar contracts and joint ventures with education online program managers (OPMs) in core, critical academic areas. If structured properly, these partnerships can enable universities to leap forward.
Higher education is also starting to experience the technology-driven consolidation of market share and power that’s already occurred in other industries. This is already happening in online learning: 2,500 colleges offer online programs, but the 100 largest players have nearly 50% of student enrollment, according to U.S. Department of Education data. This fall, the long-forecast consolidation of the higher ed market is accelerating, hastened by the inequities of the pandemic. While the digital road ahead for colleges is long, these capabilities are core to survival.
Finally, the rise of technology-driven college alternatives and degree substitutes means there will be many more options for both consumers and employers to sort through. This will require new digital learning standards and infrastructure — as well as regulation that is attentive to quality assurance, but that also encourages innovation. During this digital learning transformation, institutional, student, and employer behaviors are all simultaneously shifting, making this a critical time for evaluating outcomes and business cases, and revisiting strategies and policies through a fresh lens.
This school year marks a major inflection point for America’s colleges and universities. Which institutions will seize the moment to transform, and which ones will be left behind?