Rethinking Value in Higher Education (#1)

In the old days, higher education institutions were used to add value to students, participants and other stakeholders altogether, by delivering a “value equation” which didn’t differ too much didn’t matter the audience it used to target.

After some research and insights-gathering I’ve come to write down this equation as follows:



V=Overall Value;
K=access to relevant Knowledge;
X=access to a great learning experience;
C=value of credential/degree.

Accessing to relevant knowledge (K) used to be a monopoly of higher education institutions and professors acted as a “sage in the stage”. This is why universities and business schools alike had incentives to remain “product-centric” or “tenure-centric”.

Accessing to a learning experience (X) had to do with all what a campus experience has to offer, but also about intimacy and professor-student meaningful class interaction.

On top of this, knowledge and the learning experience itself were just not enough. Students, participants, companies, expected to raise it to the power of the value of a degree or a credential (C). A top credential gave access to a better job, better corporate connections, an exclusive alumni network and a world of status and social recognition altogether.

The value of the traditional credential had to do with a world full of information asymmetries: for instance, employers couldn’t know for sure about a graduate’s abilities and skills; or company executives didn’t know how to reduce their uncertainty when it came to the cost of opportunity to get some part-time executive training. A credential is a currency which brings trust to an asymmetric system, as much as actual currencies, issued by a Federal Reserve or a Central Bank, add trust and stability to the monetary system.

In the same vein, Universities’ core business model has been for decades to issue a currency. Consequently, their main incentives have not had to do with the students’ learning  but about how to increase the “face value” of their own currency: for instance, rankings have been instrumental for this purpose.


Now, how healthy is this Value equation these days? Not much.

First of all, digitization has made knowledge abundant and access to knowledge has come to be almost demonetized, as Singularity University’s Peter Diamandis would very boldly say. In addition to this, digital knowledge, as every piece of digital information, can now be unbundled and re-bundled, that is, can be personalized. In the same way that music is shifting from product (say, the CD or DVD industry) to service (streaming of single songs and personal playlists), higher education allows the same thing for the most part. For instance, Coursera specializations are a re-bundle of separate courses into a “playlist” of one specific topic.

On top of this, the digital experience is increasingly sophisticated and on a Moore’s Law trajectory. EdX’s Anant Agarwal says that MOOCs are still in their infancy when it comes to their possibilities. Consider, for instance, the recent implementation of the first GROOC (a MOOC for Groups), delivered by McGill University on the EdX platform, taught, among others, by Henry Mintzberg. GROOCs may soon be a killer-app for companies. Or consider how much room for grow is still unexplored in the intersection of VR (virtual reality) and the classroom experience. The learning experience is in the process of replacing some of its components and also in the process of augmenting some of its horizons and possibilities. For one, professors will need to reinvent their function along the line of becoming more a “guide on the side” instead of a “sage on the stage”.

Finally, the building block of traditional credentials is under threat of disruption. Most of the information asymmetries that were the foundation for which credentials were useful, are disappearing: the so-called on-demand or “Hollywood” economy is based on a number of  platforms that match projects to skills and efficiently uses all resources available, removes barriers for starting up new businesses and foresees a future of work as an ecosystem of contractors and flashing projects. Additionally, new research has given some evidence about the declining value of traditional degrees and credentials: for instance, Google’s Laszlo Bock mentions that traditional degrees are not predictors of good job performance anymore, except for the first two years. The Rotman School at the University of Toronto came to a similar finding, saying that traditional credentials were only doing their job of signalling in the banking and consultancy industries.

Actually, in an economy where change is a given and lifelong learning a must, product-centric long-term  residential education may become what Clayton Christensen calls an “overshot”: offering more than “customers” need. The confluence of this with digitization has prompted the credential market to become also “unbundled”, in the same way as knowledge itself. With it, the “skills industry”, a $30b market according to EdTech, has come into existence. And it is no longer a business of only digital offerings but also of short-term -by-the-hour- residential offerings, like those of General Assembly in San Francisco or Foxize in Barcelona. On the other end still remains the traditional degree or credential as a bundle of knowledge, learning experience, campus atmosphere, access to an exclusive network, etc. But the latter does not hold the monopoly of education anymore. And even so, new players like Singularity University in Silicon Valley or Thnk School of Creative Leadership in Amsterdam are new arrivals in the realm of transformational residential education, but with slightly lower fixed costs than universities or business schools, usually have.

Within this context, one of the next frontiers in higher education is how institutions establish transferability mechanisms between the “all you can learn” model of MOOCs or similar offerings and the traditional-residential experience. MIT’s Micromasters (which allow MOOC participants to get credit for a MIT Master) and Arizona State University’s Global Freshman Academy (which allow MOOC students to get credit for college) have been the first-movers.

There is no doubt about the growing complexity of how academic institutions in general and business schools in particular will generate -and capture- value in the upcoming few years. The traditional equation of Value might be -at best- under reinvention, and thus, with this trend, institutions, will have to reinvent themselves too.

In subsequent blog posts I will keep exploring a number of ways about how the higher education sector is becoming increasingly complex and also about which strategies incumbent schools might unveil to weather the storm.

Ivan Bofarull

Director, Global Intelligence Office, Esade

Visiting Advisor, Georgetown’s University McDonough School of Business


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