Why Economies of Scale? Why Now?
Unlike most industries, higher education has largely failed to take advantage of economies of scale to gain efficiencies. In the U.S., a decentralized and fragmented system of thousands of institutions mitigates against large-scale adoption of best practices. Fundamentally, the history and culture of higher education present powerful obstacles to the idea of scale. As resources become more constrained, pressures on university leaders to leverage the benefits of scale will only grow.
Online education may seem to offer the promise of scale without a commensurate increase in costs. Yet by itself online education cannot disrupt the facts on the ground. Grafting new delivery platforms onto traditional approaches to teaching and learning does not enable institutions to benefit from economies of scale. In fact, online education may exacerbate inherent inefficiencies.
To deliver on the benefits of scale, fundamental changes to how universities function are required.
What Does It Mean to Apply Economies of Scale?
Applying economies of scale means that universities develop processes and systems that allow rapid, additional growth at marginal cost. Applied to online learning, this means that as new sections of a given course are added, growth of enrollment revenues will increase more quickly than any costs associated with adding additional sections.
For example, adding an additional course section of 25 students may increase revenue by x amount, but there is still a cost to adding that new section. The total cost of that hypothetical new section should include all costs, not limited to direct instructional costs, but also including indirect costs of student support, marketing, technology, and so on. The lower the total cost of adding that additional section, the greater the revenue that each additional section produces. But, if the total cost to add an additional section is more than this hypothetical x, then the institution is in the unenviable position of potentially growing itself out of existence.
Obstacles to Economies of Scale in Online Higher Education
The ways in which universities have traditionally developed and delivered the curriculum virtually guarantee that costs will grow, quickly outstripping gains in revenue. This structural obstacle is deeply rooted in the historical governance models of universities, in which faculty serve as content, learning design, and teaching approach architects. Although most higher education faculty are experts in their discipline, very few have a background in learning science, learning design or teaching effectiveness. This is not to blame the faculty. Indeed, higher education institutions are realizing the need to provide expertise and support in these critical areas.
Decentralized Course Design
In most institutions full-time faculty who teach online determine the design of the course and select the course materials. When this model is transferred to online education—allowing each section of a course to have varying learning outcomes, textbooks and materials, and a unique faculty-specific approach to learning—total costs will increase rather than decrease for the institution.
For example, the personnel costs of having a textbook services team order 6 different textbooks for different sections of the same course, based on individual faculty preference, are much higher than the personnel costs of a common textbook chosen by the faculty. Similarly, the cost of having sufficient instructional designers and technologists to support each individual faculty member is prohibitive. A common design can increase quality and decrease costs.
Non-centralized course design and textbook selection is also expensive for the face-to-face classroom as well. But when courses are offered online, the inefficiencies are magnified—and with growth, can multiply rapidly. Online education by itself cannot bring the benefits of economies of scale.
Traditional models in which each faculty member’s course is the “unit of production,” guarantee that any growth in online education will increase, not decrease, inefficiencies. If five faculty members each teach a slightly different face-to-face version of the same course, there will be fewer negative impacts on operational costs (negative impacts on student learning are another matter). Online, when course sections differ in learning outcomes, learning resources, and policy nuance, the staff members who support and maintain these courses bear the extra work. Although invisible to faculty, this work comes at a real cost to the university.
No Common Learning Model
“Teaching philosophy” is traditionally treated as a matter of individual expression, unique to each faculty member. Yet this lack of a unified approach to learning is a source of inefficiency is well, and therefore an obstacle to scaling online education.
Learning science has come a long way; we now know a great deal about how humans learn. But most faculty are not aware of this work. Chemists learn chemistry. Psychologists learn psychology. But they teach by modeling what they experienced throughout their education. A common learning model across a university, supported by a rich culture of faculty engagement in improved learning models, creates a far richer learning environment for students and also supports economies of scale in online learning.
Insufficient Resources
Even with the best of intentions for promoting online education, administrators (who began their careers as faculty members) may lack the expertise and resources to create economies of scale. And, an institution must be willing to invest in new systems, processes and personnel to handle rapid and agile scaling processes. The optimum technologies, appropriately trained staff and faculty, and replicable processes are all critical to economies of scale.
Can Scale Help Quality?
With advances in learning science and educational technology, scale does not need to degrade quality. In fact, for the first time perhaps in our history, higher education can scale learning (online) while maintaining or even increasing learning quality. Unlike a face-to-face institution that equates scale to large lecture classrooms, online educators are on the brink of creating personalized learning networks that can serve a larger number of students while helping each one learn more effectively. But this will take investment, new skill sets among faculty and staff, and a new vision for higher education. Are we ready for this next climb?
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