Transcript UV Investor Presentation

U V C O N F I D E N T I A L // T R A D E S E C R E T
College Disrupted:
The Great Unbundling
of Higher Education
Ryan Craig
February 2015
American Higher Education
» Biggest strength: Highest rate of matriculation; diversity of students
» Biggest weakness: Isomorphism (the four “Rs”)
» Creates higher education myopia
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The Dystopian Counterfactual
What if 100% of the benefits of higher education are a result of self-selection
bias?
What if the pool of degree completers would have demonstrated the same
outcomes (employment levels, incomes) without regard to their education?
» Initiative
» Talent
» Grit
What if colleges and universities are costly playpens for 18-22 year-olds?
Only way to respond? Outcomes data.
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Crisis of Data
“My only question is if he’s that good a hitter, why doesn’t he hit better?”
- Billy Beane
“Good hitter” in baseball = 4Rs in higher education
OBP in baseball = ??? in higher education
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Crisis of Affordability
» 1970s: typical student could pay tuition by working 182 hours
» 2013: it takes 991 hours (full-time job for half the year)
» Wealth gap between young and old is at its widest point
– Typical household headed by 65+ year-old has net worth 47x greater than
household headed by someone under 35
» Price discrimination
– Typically not merit-based
– Impact on lower income and minority groups
– “Scholarships come and go, but high tuition is forever”
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Crisis of Affordability
The Canary in the Higher Ed. Coal Mine
Law school applications have gone from 100,000 in 2004 to 59,400 in 2013.
Twice as many law graduates as estimated job openings.
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Seeing Impact Now
» 43% of small private and midsize state universities failed to meet budget for
both freshman enrollment and net tuition revenue
» BUT approximately half of institutions that claimed to hit their budget were
reporting against downward-revised budget numbers
– And 40% of institutions that revised their numbers downward did so more than
once
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Crisis of Governance
» Missions tend to be multifaceted, complex and vague
» Sometimes there’s a double-bottom line
» More often, so many bottom lines, there’s really no bottom line at all
» How do fiduciaries exercise appropriate governance?
» Symptoms:
– Growth in noninstructional staff (up 240% from 1975 to 2005)
– Athletics
– Research?
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Lazy Rivers
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Lazy Rivers
» Texas Tech spent $8.4M on a waterpark with a lazy river and waterslide, paying
for it with an incrase in student fees.
» Auburn has developed a $52M waterpark including a 45-student paw-print-shaped
hot tub and a 20-foot wet climbing wall, paying for it by raising its student activity
fee from $7.50 to $200.
» Pensacola Christian has put in a $1M wave rider.
» North Dakota State is building a waterpark with a 36-foot vortex of swirling water,
a fireplace on an island in the middle of a pool, a rain garden to mist lounging
students, and a zip line atop it all.
» Clemson is developing a 38-acre Lakefront property to include “blobs” – floating
mattresses placed so students can jump “like [on] American Ninja,” says the
University’s director of recreation.
» Louisiana State is building a lazy river that will spell out the letters LSU in the
school’s signature Geaux font. Missouri has a lazy river, waterfall, indoor beach
club, and a grotto modeled after the one at the Playboy Mansion.
» Missouri State has put in a waterpark complete with zip line and lazy river, but
insists on calling the lazy river a “current river” because Missouri State students
are “not lazy.”
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Where is the Focus?
» Quality
– Arum and Roksa study showing one-third of students showed no improvement
in critical thinking, analytical reasoning or written communication
– Less time spent on school work (one-third spend less than 5 hours per week)
– Average is 27 hours in total – roughly same time commitment as kindergarten
» Diversity
– 75% of students at 200 most selective colleges come from top quartile, only 5%
from bottom quartile
– 80% of whites attend top 500 schools, while 75% of minority students attend
schools outside of top 500
» Technology
– Are universities considering educational technology expertise in determining
board composition?
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Exogenous Forces
Globalization
Digital
Disruption
Public
to Private
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Technology: MOOCs and the Spice Girls
» Global media phenomena
» Actually More of the Same
» But Represented Something Important
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The Promise of Technology for Higher Ed.
Stage 1:
Stage 2:
Stage 3:
Accessibility
Affordability
Efficacy
We are here
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Start with Simplification
» Steve Jobs hated complicated
manuals, saying products needed
to be so simple that a stoned
freshman could figure them out.
» The only instructions for the Star
Trek game he built for Atari were:
‘1. Insert quarter. 2. Avoid
Klingons.’…
» If there’s one product or service
that should be designed so that a
stoned freshman can figure it out,
it’s higher education.
» Complex rules are hard to follows.
Complexity is the enemy of
completion.
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Competency-based Learning
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Competency-based is Simpler and Cheaper
Simplicity
Affordability
» Competencies laid bare
before prospective
employers
» Online delivery = half traditional
delivery
» Relegated to the dustbin of
academic history:
» Competency-based = half of
standard of online
– Failure
– Credits
– Transfer
– Financial aid (?)
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Immersion: Focus and Flow
» Middlebury language schools
» Controlled focus vs. focus by choice
» Theory of flow:
– Highly challenging work
– Student has sense that skills are above average and more than adequate to
succeed with the work
– Goals are clear and feedback is consistent
» Likely solved by adaptive learning and gamification
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Promise of Adaptive Learning
Size Matters
Larger student community interacting with learning objects
= more effective the learning system
= better student outcomes
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Power of Gamification
» 70% of gambling revenue
» Only game materially improved by technology (gamification):
– Illusion of control
– Appearing to operate on variable payout
– Near misses 30% of the time
– Increased arousal (bells and whistles)
– Immediate gratification
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Technology Also Changes Classroom
What Works: The New Consensus
1. Flip classroom so “transfer of information” occurs ahead of class
2. Incorporate of technology in the classroom (handheld clickers or
smartphone apps) to quickly ascertain (typically via multiple choice
questions) whether students have understood key concepts
3. Integration of active learning techniques to improve understanding of key
concepts, including:
a) Peer learning, where students with different answers pair up and try to
convince each other
b) Group problem solving
c) Project-based learning
d) Studio/workshop/experiential learning
The above ideally including “perspective transformation” wherein students
change their frames of reference by critically reflecting on their
assumptions
4. Through technology (again), ascertain whether learning has occurred i.e.,
do more students now understand key concepts?
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The Smartphone Challenge
What Doesn’t Work: The “Holy Trinity” of Online Learning – content/lecture,
discussion, assessment – doesn’t translate to smartphones
» Navigating curriculum challenging on smartphones
– Small screen
– Less patience (5 seconds to load, max.)
» Discussion boards can work well on smartphones
– Ubiquity counts for a lot in discussions
– However, smartphone posts are likely to be much shorter and informal than
faculty are used to (e.g., 140 characters)
» Assessments
– Formative assessments work well
– Summative assessments do not
» Solution: purpose-built apps
– Very different from allowing mobile access to courses with traditional online
architecture
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Will Degrees Go the Way of Debutantes?
» Return on investment
» Opacity
» Too exclusive
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The Great Unbundling
» What is a degree?
– Specific knowledge + skills
– General education
– Stick-to-itiveness to complete multi-year endeavour
– Certification that student met standards for admission
– Intangible benefits (network, fun, athletics)
» Introduction of Competency Management Platforms
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Competency Management Platforms
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Powerful Assessments and Remediations
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Future Consumer-driven College
Sonographer
Nurse
Medical
assistant
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Significantly
more revenue
from
employers/
placement and
less reliance on
Title IV
Colleges begin
to look like
RPOs and vice
versa
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Future Competition
~100 RPOs with over $100M in revenue (vs. ~ 20 for-profit universities)
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Education-as-a-Service
SaaS Model: Adobe Creative Suite becomes Adobe Creative Cloud
Lessons from Salesforce.com:
» Decide on your business model
– There may be many
» Build product from Day 1 with focus on customer experience and value
– Unbundle into component parts
» “Customer for life” mindset
– Major opportunity from EaaS model
» Agile product development
– Salesforce has 500 product releases per year
» Governance for better, faster decision-making
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Do-it-Yourself (DIY) vs. Just-in-Time (JIT)
» DIY hasn’t had impact
» JIT will become new standard
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Returning to Current State of Market…
» Elite universities will be fine
– But probably will feel pressure to adopt double-click degrees, e-portfolios
» Midtier universities have all accoutrements of elites, without the quality
(isomorphism)
» 43% of small private and mid-size state schools failed to meet ‘15 budget
» Another 30% only hit budget after revising budget downward
» Beginning to see “Great Hollowing Out” consistent with other service
sectors (retail, restaurants)
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Changes Non-Elite Schools Must Make
1. Decide on strategy: discount or premium
2. Strategy drives delivery: discount = 100% online; premium = blended
- 80% online
- 20% onground, immersive, employer-centric
3. No more lazy rivers (and unbundle athletics and research)
4. Shift onground instruction to active learning/dynamic classrooms
5. Migrate from seat-time to competency-based
6. Refocus on competencies employers care about: predictive cognitive
skills + work attitude/self management skills
7. Connect with employers – both onground and online
8. Create “skunkworks” to make lots of small bets; invest in winners,
disregard failures
9. Increase outsourcing / private partnerships (e.g., solve for smartphones)
10. Stay close to emerging human capital data revolution (LinkedIn and The
Great Unbundling)
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International Consumers Also Have a Say
Challenges in emerging markets:
» Irrelevant Curricula
» Spoon feeding
» Underfunding
» Cheating
» Shortage of prestigious, world-ranked institutions
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Import/Export Opportunities
Today: Importing Students
Tomorrow: Exporting Programs
» Chinese universities: Blackpool before easyJet
» Opportunity to become U.S. and UK’s largest export
» International demand will prolong the life of degrees
» Brands matter, a lot
– Including brands from outside higher education
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