Sunday, January 26, 2014

The MOOC stumble: Lessons from Napster and the Music Business!

I have been a long time proponent of online education and have been offering webcasts of my classes since 2001. However, I was a little skeptical about the news stories that appeared a couple of years ago about Massive Open Online Courses (MOOCs) being the next "big thing" in education. If a class were only about delivering content, a MOOC may do the job, but a good class should be (though it often is not) more than that. It has to foster hands-on experience, interaction, excitement and "aha'" moments, and MOOCs (including mine) have not paid enough attention to these pieces. Thus, as the initial buzz about MOOCs has faded, we are discovering the achilles heels of online classes: high drop out rates and poor retention of knowledge. It is therefore not a surprise to read stories like this one about the failures of and financial troubles faced by MOOCs.

As is often the case, some journalists and analysts are over reacting to these news stories to conclude that online education is a failed venture. Some of the more reactionary university administrators and faculty are gleeful and are ready to go back to what they have done for decades: take students for granted and cater to the other interest groups that feed at the higher education trough. That would be a mistake, analogous to music companies reacting to the demise of Napster more than a decade ago by going back to their old modes of business (selling CDs through music stores), only to be swept away by Apple iTunes a few years later. The MOOC model represented the first serious foray of online entities into education and like Napster, it failed because it not only came with flaws but because it's promoters failed to fully understand the business it was trying to disrupt.

It is also worth noting that the failure of MOOCs really rests on your definition of the word "fail".  My corporate finance MOOC, offered on iTunes U, YouTube and online last spring had 50,000+ people registered in it. By my count (and it is unofficial), about 10% of them have finished the class, as of now, and a significant portion took more than a year, and another 5% or 10% may get around to completing the class in the next few months. While that represents only 15% to 20% of the overall total, that works out to 7500-10000 people taking the class, a number that I would find impossible to reach in  a physical classroom, even over many years. If that represents failure, I will take it!

One reason for the inability of MOOCs to penetrate the education market is that they started with the faulty premise that the core of what you get for the college tuition that you pay is classroom content. As my third child went off to college last year, I had a chance to revisit the question of what it is that you get in return for that check you write out to the educational institution of your choice. The first thing to note is that universities operate like cable companies (and other monopolistic entities) and force you to buy a "bundled product", whether you want the individual pieces or not. The second is that classes are only a piece, and perhaps not even the most critical piece, of the "education" bundle. As I see it, here are the ingredients of the bundle:
  1. Screening: It can be argued that the most value-added day of your education at a selective school (say an Ivy League, Stanford, MIT or Caltech in the US or the equivalents in other countries) is the day that you receive your admissions letter from the school. The rest is purely academic (in the truest sense of the word), since the fact that you were able to make it through the screen becomes the most noticed part of your education. 
  2. Structuring: For better or worse, universities have been able to define the content of an education for centuries. This includes not only a specification of how long it takes to get a degree (in terms of time and courses) but also the breakdown of courses into required or core classes and the sequencing of electives thereafter. 
  3. Classes: Within the course structure are classes, delivered by faculty (generally exclusive to that university) in restricted settings (physical classrooms) owned by the university and with an infrastructure of exams, tests and grades that affirms to outsiders that students have taken and mastered the content in these classes. Students in these classes learn from interactions (usually live) with the faculty and other students and can get help from tutors or teaching assistants for these classes. In special cases, students that have an intense interest in a topic may be get mentoring and advice from faculty who are (presumably) experts on that topic.
  4. Networking: Even those of you who have been victimized by the "old boy (or old girl)" network have to admit that it works remarkably well at taking care of those who are lucky enough to be part of it. The networks that are created when you are a student at an educational institution may provide you with job openings, employment options and business opportunities later in life. This can be augmented by smaller networks also created by sub-groups (fraternities & sororities, clubs) at schools.
  5. Career advice: Recognizing the economic imperatives that most students face in terms of getting employment after their education, universities have invested (some more than others) in providing both career advice and placement services. 
  6. Entertainment: While this may sound irreverent, it is reality that a portion of the college experience is entertainment. Whether it be going to football games at Alabama or Notre Dame, enjoying a concert on campus or just people-watching on Sproul Plaza on Berkeley, you don't realize how much fun you have in college, until you graduate (and get into the real world, where such entertainment is more difficult to find, more expensive and expose you to more danger). At the risk of sounding cynical, I would also include as part of entertainment, the semester abroad programs that schools love to tout as a "bargain educational experience in exotic foreign locales" , since there is generally more fun to be had in your semester abroad in Spain/France/Brazil/Italy than learning.
  7. Education: There is a final fuzzy component that universities claim to aspire to deliver, though there is no way of measuring whether they deliver on the promise. "Send your 18-year old to us", they say, "and and we will turn them into educated people".  A Harvard panel defined educated people as those who “leave school with a deep understanding of themselves and how they fit into the world and have learned how solve complex problems, be creative & entrepreneurial, manage themselves and to be life long learners". Well, good luck with that!!!
There are undoubtedly other bits and pieces that I am not including in the bundle, ranging from on-campus food/housing (which is now a requirement and not an option at most schools) to an implicit belief (misplaced or not) on the part of some foreign students that getting an undergraduate degree at a US university will improve their odds of being able to work and live in the United States. (If I have missed pieces of your specific college bundle, please do let me know and I will add it in).

The value of this bundle and its components will clearly vary from school to school. With some highly ranked, research universities (that I will leave unnamed), the screening, networking and career advice may be the predominant parts, with classes a distant fourth. That is perhaps the admission that Wharton was making when it put a large chunk of its first-yar MBA classes online, for free. With small, teaching oriented colleges, the tilt may be towards classes and structuring (with customized programs), with small but very strong networks, as a bonus. Of course, you could end up at a college that is not particularly selective, has a one-size fits all for coursework, indifferent faculty/content-heavy classes, weak networks and little or no career advice/placement and unwatchable sports teams. If so, I hope that you are not paying $50,000/year for an education, because you certainly are not getting your money's worth.

If you are or were a consumer of the education bundle, some introspection may be called for. If your college education was in the past, was it worth the money you paid for it and the time you spent acquiring it? If so, what part of the bundle has paid off the most? Was it the screening, the class content, the connections (network), the entertainment value or that unquantifiable secret ingredient (personal growth)? If you or your child is in college right now, ask the same questions about your ongoing experience. In particular, are there parts of this bundle that you are paying for that you have no use for? The one thing you cannot do is assume that the threat has passed, just because an immediate threat (MOOCs) may have dissipated.

If you are a faculty member or a college administrator, you have to ask the same questions and your future may ride on the answers. In particular, you have to look at what it is that you offer (as a college or university) that makes your education bundle unique, different and difficult to replicate (either online or in another institution). If you are an online education entrepreneur, your task is to figure out ways to unbundle the product and probe its weakest points. That will be the subject of a companion post.


Unknown said...

Very useful post. If we were to change the context and turn to K-12 education where some of the online 24/7 tutoring providers (, are coming up. In your opinion, what are the key ingredients of them succeeding or failing.



I am a huge fan of your work.., Thanks for tonnes of online resources you have shared.., I have completed Corporate Finance Classes and more than half way through Valuation Class from your website..,
My humble suggestion would be to make it a little bit more challenging for the students who take it online.,eg: like website & app called Duolingo which teaches foreign languages., Students get to access level 2 after they complete level 1 by passing a quiz etc..,
Students will feel that they have earned the material when they get to access higher levels and also feel a sense of achievement when they complete the course..,

Varadha said...

Prof - nice, informative post. With the democratization and "freemium" content model, the day won't be far off when a lot of universities provide the content for free or for a small subscription (similar to the economist), with the on-campus activities coming in at a huge premium (recruitment, workshops etc.).

The shift would be towards learning the stuff on demand and the "actual application" being done in the brick and mortar world.

Nitiin A. Khandkar said...

Prof. Damodaran, your thoughts make eminent sense.
I am a small education provider based in Mumbai. I conduct a distance learning program in equity research, and have trained a couple of overseas trainees recently. What I noticed was that on-line courses are usually based on course content download and self-study. In the distance learning program, I teach and mentor trainees personally, which is the differentiator.
Like you rightly said, I may never be able to reach beyond a certain number of audience via physical classrooms. Of course, the challenge for me is to achieve branding and scale.

Eduardo Moreira said...

I couldn't agree more with you, Professor. I know that you are especially interested in the nuts and bolts of education, and clearly this is an area which will undergo massive transformations in the next decades, which will bring deep economic consequences worldwide.

Clearly there is a lot of signal (as opposed to noise) in one's possession of a degree from a prestigious university, and maybe a lot of its underlying value comes from the heightened student engagement that comes from the university environment: different people with different personal experiences, but being simultaneously exposed to the same carefully designed system of co-opetition (in Prof. Brandenburger's sense).

What is truly wonderful is that the trend of delivering more and more educational content online (regardless of whether it's in a distance learning or traditional classroom setting) seems to be somewhat irreversible, which creates massive amounts of data, which can in turn be mined and experimented with, paving way for the education community to increasingly understand what it takes to achieve a great educational model.

I truly hope you and other outstanding minds in academia (such as Prof. Spence) dedicate a good deal of your already-scarce "free" time to search for answers for these issues which will ultimately shape the way mankind organizes and propagates information in the future.

Eduardo Moreira


The copyright provisions are to difficult to enforce.

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