Increase Revenue with Modern Continuing Education Software
How using modern eCommerce principles drives revenue in Continuing Education
Higher education is being dismantled by technology and further taken apart by a global pandemic. How will it be reinvented?
Much of higher education is facing a crisis. Even before the global pandemic, some 30% of our institutions were already facing serious financial difficulties. Over the last few years, declining enrollments, driven largely by demographic changes in the U.S. and rising tuition costs, together with uneven support from federal and state governments, have given rise to an increasingly difficult operating environment. Now, changes wrought by the COVID-19 lockdown, coupled with the near disappearance of international student flows this year–a critical population and revenue source for many institutions–have created existential questions for many colleges and universities.
America’s institutions of higher education have historically been the envy of the world. Still, a troubling question looms larger today in students’ minds, and anyone else paying their tuition: is college education still worth the cost?
This crucible moment in higher education is taking place against a backdrop of larger systemic change. While the job market has always evolved to reflect new technologies, today’s disruptive forces–automation, AI and the gig economy–are changing the nature of work at unprecedented speed. Concurrently, technology has rapidly penetrated the higher education ecosystem, both reshaping the core functions of teaching and learning while reinventing the landscape of institutional winners and losers. Over the past two decades, online degrees, digital courseware and software systems for learning have grown dramatically. Alternative formats of education, such as coding bootcamps or certificates offered by employers or technology vendors, have emerged.
The irony is that demand for higher education internationally has never been greater, and it is projected to grow much more in coming decades. Global enrollments of 214 million students in 2015 are forecast to grow to almost 600 million in 2040. The reality of today’s knowledge economy is that students who do not complete some form of higher education have much lower chances of building a sustainable career with expanding earning power over time.
How do we make the most of this crisis? We have the opportunity to rebuild a more flexible, consumer-centric, higher education system, one that is more responsive to the needs of students and employers alike, and offers greater flexibility, quality, and relevance. To do this, higher education and employers must embrace a new paradigm of partnership.
For anyone who examines the data, it is easy to see how our postsecondary system has underserved many students. First, traditional higher education has become far too expensive. Tuition and fees have grown at near double the rate of inflation for the last 30 years, excluding too many potential students or forcing them to take on unsustainable student loans.
As a result, over 44 million Americans —out of a workforce of about 160 million—now owe over $1.6 trillion in student debt. Worse, over 30% of borrowers are late, in default or have stopped making payments altogether just six years after graduation.
One particularly unfortunate dimension of the astronomical growth in student debt is the disproportionate impact on minorities. Exacerbated by racial pay gaps, the average Black borrower has both borrowed more and earns less than their white counterparts, preventing the creation of intergenerational wealth and magnifying racial inequity.
Second, despite these astronomical prices, outcomes for students are often disappointing and point to larger systemic issues. On average, just 58% of students who start college earn a degree six years later. Four-year graduation rates for public universities are in the mid-30% range. And of those who do graduate, over four in ten recent college grads have jobs that do not require a college degree at all, and their unemployment rate is higher than the general population. This means that, while many graduates are overqualified for their current jobs, they apparently did not acquire the skills the labor market is demanding to get better positions.
In other words, as it relates to one of the fundamental reasons students pursue higher education — to get on the pathway to better employment and higher lifetime earnings — many institutions are simply not getting the job done.
This leads to the other main weakness of our higher education system: it doesn’t produce what employers need either. While the purpose of higher ed is not only about getting students career-ready, student debt makes payback difficult if graduates do not successfully secure employment.
Much has been made of the skills mismatch: the fact that pre-COVID nearly 70% of employers reported being unable to find the talent they were seeking, according to global job placement firms. From insufficient technical skills and basic on-the-job competencies to porous critical thinking and communication skills, survey after survey shows that employers find college graduates to be woefully unprepared. On top of that, in industries like healthcare, the overall shortage of skilled workers was already reaching crisis levels, even before COVID-19.
The cost of this skills mismatch is not trivial. BCG estimates that the gap between skills the labor force possesses and skills the market demands creates a minimum annual 6% toll on the global economy in terms of lost productivity, potentially reaching $18 trillion dollars-a-year by 2025. That’s almost the size of the entire U.S. economy today.
Some of this gap is driven by the accelerated pace of changing technology–the Fourth Industrial Revolution and the growth of the innovation economy. Also at play is a higher education system that has not yet adapted to market realities nor is it doing what it takes to be an engine of human capital.
Today, the global pandemic has brought many higher education institutions to an existential reckoning. With individual university systems estimating losses this year from the pandemic to total hundreds of millions to the billions of dollars, how do institutions reinvent themselves? And how does society as a whole rethink the broader higher education system?
At its core, higher education is a bundle of services. There is the learning process: the student’s acquisition of specific domain knowledge as well as transferable skills such as critical thinking. There is a set of social experiences, supported by everything from campus dining halls to fancy football stadiums. And finally, there is credentialing—the degree or certificate that signals to employers the potential employee’s skills, knowledge, grit and potential.
In an analog world of in-person classes and textbooks, the vertically integrated model makes sense. However, the problem with any bundle is that it leads to bloat–the inclusion of offerings and services that the consumer is not interested in nor needs. It also incentivizes mispricing and fails to differentiate individual customer requirements.
To illustrate one aspect of the problem, in 1980, U.S. public and private institutions spent $13 billion on administration–academic support, student services and institutional supported–comprising 26% of total spending. By 2014, those same administrative costs had grown to $122 billion and comprised 41% of expenditures. Universities have also been trying to outdo each other with capital investments in facilities, which has unquestionably been one major driver for the tremendous growth in tuition over time. Given the uneven learning and employment outcomes discussed earlier, the return on investment for these expenditures has been questionable for many students.
Over the course of the last 20 years, with a pervasive increase in technology use everywhere, the digitization of the education value chain and the evolution of alternative learning and business models, higher education was already in a gradual process of modularization and disaggregation. For example, fully online degrees rose in popularity and were reflected in the rapid growth of campus-less entities like Western Governors University, ASU Online, and Southern New Hampshire University. EdX began offering micro-bachelors and micro-masters. Coursera enlisted brand-name universities to create certificates and courses on its platform.
Overall, this unbundling process has moved slowly and been embraced by too few institutions. Most faculty and administrators, comfortable with the traditional approach, have resisted organizational changes. This is unfortunate because a more modular and flexible approach to higher education has the opportunity to serve a broader number of students who have diverse needs.
But now, changes are being forced upon us all. The pandemic minimized the use of physical facilities, which then caused families to question whether online learning is even worth the full tuition. Without adaptation and longer-term, strategic thinking, many institutions will not survive the 2020s.
How can our higher education system reinvent itself for a post-COVID environment? Clearly, our entire system must become more responsive to the needs of its most important stakeholder–students. These students are not just recent high school graduates but also a large number of adults who must continuously re-skill and upskill in this demanding global economy.
Institutions must offer more learning options at different price points and on-ramps, with greater relevance to employers and the flexibility to mix-and-match. They must rethink access, credential stack-ability towards degree attainment, time-to-completion, and affordability. They must better align curriculum and materials with employer needs, pay attention to transferable skills as much as domain knowledge, and pair students with the support they need. Transcripts will need to evolve into learning records that reflect a continuous and career-long paradigm. And for institutions to do this effectively and quickly, they must embrace a new partnership paradigm.
A partnership model can align what colleges and universities are good at–instruction, knowledge creation and credentialing–with the abilities of other participants to bring forth current content, technology, recruiting, mentoring, placement, support, English-language training, and other capabilities important to the student journey.
Take Futuro Health, a nonprofit established through a $130M commitment by Kaiser Permanente and SEIU-UHW to address the worker shortage in allied health. It chose to gather partners into an ecosystem to tackle its mission rather than become itself an education provider. Futuro Health curates education with partners to create a learning journey appropriate for thousands of adult students from underserved communities. These partners include public, private and nonprofit sector entities who bring what they do best to bear.
In fast-growing industries such as technology and healthcare, even elite universities have already begun to partner with companies to offer these alternative credentials. They include certificates in areas such as data science, cybersecurity or design, and cost far less than a full degree. Examples of these companies include Trilogy (now owned by 2U) or Eruditus (disclosure: Victor Hu is a prior investor in Trilogy). These credentials have the advantage of being more cost-effective to the student while still delivering strong employment outcomes and salary gains.
Private enterprises have themselves begun to create alternative training and credentialing. Recently, Google launched a new suite of Google Career Certificates to help students get qualifications in high-paying and high-growth technology fields. Similarly, Microsoft announced its own initiative to help 25 million people worldwide acquire digital skills by offering free access to content in LinkedIn Learning, Microsoft Learn, and the GitHub Learning Lab, coupling this with Microsoft Certifications and LinkedIn job-seeking tools.
Education institutions are developing partnerships with employers to upskill employees. One prominent example has been Starbucks’ partnership with ASU Online in 2014 to help Starbucks’ baristas attend college; some 3,000 employees have since earned bachelor’s degrees online, with over four times that number currently enrolled. More recently, global consulting firm EY recently created a fully accredited virtual corporate MBA in partnership with Hult International Business School. The degree will be freely available to over 280,000 EY employees. EY helped to develop some of the content; Hult will award the MBA.
In the age of COVID-19, students will consume education differently, and partnerships can help existing institutions add missing competencies and adapt more quickly.
One thing is certain: the institutions that fail to adapt will grow increasingly irrelevant. They may also be disintermediate—the market need is too great and the opportunity is attractive.
Our colleges and universities are some of our most important institutions, and historically, they have risen to the challenges of their times. A more proactive approach to partnerships will help these institutions navigate the massive structural changes that have now been accelerated by the pandemic. We wish to see them thrive once again in the new world of education and work.
How using modern eCommerce principles drives revenue in Continuing Education
Author Perspective: Analyst