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Post secondary education in the United States could not demonstrate more clearly that the same business model that drove its ascendancy in the 20th century is suffocating it in the 21st. Even as obtaining a degree becomes less cost-beneficial to many learners, educational institutions continue to load them with excessive burdens. In exchange for paying greater tuition, enduring longer time to program completion, and assuming nearly all the risk, consumers of education are receiving end products that are unlikely to return positively on their investments.

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Unsurprisingly, such consumers are turning to the market for feasible alternatives. While higher education contemplates the relevance of its 21st century academic mission, potential consumers are becoming increasingly sophisticated in internet technologies and social media, and consequently becoming attracted to massive open online courses, or MOOCs. Using innovative combinations of cloud, mobile and social media, MOOCs are able to deliver entire curricula at no cost to education consumers, and in the same environment where they game, tweet, blog, email, IM, share, and stream.

Although the promise of transforming education through technology has existed since the 1960’s, the infrastructural ingredients are just now becoming consumerized. Yet enormous economies of scale alone do not guarantee the success of MOOCs. To deliver on this promise, product managers must apply the same kind of design thinking that course developers and cloud engineers use in putting MOOC ingredients into the hands of consumers.

Answer the trick question with design thinking

Design thinking dictates that in order to deliver effective solutions we must know our customers’ customers. For MOOCs, they are the consumers of education—the learners. Yet one of the biggest clichés in instructional technology is how much easier it is to address specifications directed by an LMS host (the customer) than to meet the needs of the learners who actually access the LMS (the customer’s customers). Consequently, our customers become alienated from their customers, neglecting learners’ needs and ultimately failing to deliver value to them.

To make matters worse, vendors routinely confuse efficiency and effectiveness when reporting the merits of their products. The majority of online learning metrics describe efficiency, in as much as instructional technology facilitates greater reach and reuse, two areas where efficiency gains are readily demonstrable and thereby create value for the customer. Yet the same instructional technology does not necessarily enable regular content production or even effective learning, both of which represent value for the learners, the customer’s customer.

Three paths to unlocking the value of MOOCs

It is easy to see how determining ways to unlock the value of MOOCs leads to a trick question. But now that we have foiled the trick, we can ask candidly, what is the value proposition for MOOC customers?

The answer is there are three. And no, this is not a trick answer. Education is one of the most complex economic goods, and therefore unlocking its value requires much astuteness of what learners really come away with. Let’s look at the three value propositions for MOOC consumers. Following Susan Galer’s recent SCN entry, let’s use business education students as examples, although the three value propositions apply equally well to adult learners in general.

No. 1: The things you know (Human capital)

Human capital delivers value to learners by an accumulation of knowledge, skills, and capabilities that enable greater market competiveness, and consequently higher wages, greater returns from venture opportunities, or higher rents from financial investments. Although some human capital can be acquired through self-study, amounts sufficient to generate high returns on investment often cannot be readily acquired outside of an educational program.

A common criticism is business education is preoccupied with reinforcing orthodoxy in strategy, finance, and governance, while truly valuable human capital is developed on the job. By imparting superficial knowledge, business educators fail to increase human capital, which instead should be developed by offering instruction in managing in authentic contexts.

No. 2: The flag you fly (Signaling)

Such criticism of human capital leads to a second view: value is realized not by anything learned in a business education program, but rather successful completion of the program, which confers the learner a valuable signal to the market.

To illustrate, consider most MBA students: their education is often self financed, and opportunity costs are substantial. Completing an MBA program informs the market, venture partners, or investors that the degree holder enjoyed earlier business success that yielded sufficient earnings to pay for the signal. But perhaps more important, completing an MBA indicates superior quantities of confidence, diligence, and good business judgment by virtue of earning the degree, thereby separating the degree holder from those unable to purchase the signal. Therefore it is the signal, and not human capital, that enables greater market competiveness for the learner.

No. 3: The company you keep (Networking)

In this view, business activity is driven primarily by networks of relationships, not knowledge or information. Value is therefore realized not by acquiring human capital or a signal, but rather social capital. As the name suggests,social capital arises from socialization activities embedded into business education coursework, which later develop into strong-tie business contacts and relationships. Socialization according to common experiences is also important. By mastering the same business cases, and even work mannerisms, business students are initiated into a powerful guild, one which creates a network of mutual trust sufficient to reduce transaction costs in future exchanges.

The lack of in-person socialization afforded by an online education environment is regarded as a major weakness. However, MOOCs can simulate a virtual work environment, thereby providing socialization opportunities for business learners anticipating managing virtual teams. 

Don’t let MOOCs become a tricky business

Instructional technology, no matter how disruptive, is not likely to change the DNA of higher education. However, MOOCs show great potential for serving a market to which higher education is slow to adapt. With several millions of potential customers, understanding the value proposition should not be a trick question.

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  1. Holger Stumm

    Thanks for that great blog, Ray. Even for me being so long in business, two phrases are strinking new for me:

    The flag you fly and the company you keep.

    I see more and more, that with SAP HANA, the cloud and the era of MOOC, the field of consulting is drastically changing.

    And your categories are really true and important:

    As a consultant, you are always one among many. And you differentiate by these two things:

    How big is the flag you waiving (to get recognized) and – much more important and often overlooked:

    It is the network of people and opportunities in your RL surroundings. (Real Life that is) , not the online likes in facebook or the followers in Twitter.

    thx for the blog

    -Holger

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    1. Ray Rivera Post author

      Hello Holger:

      Thank you very much for your kind word!

      You bring up an excellent point about consultants, who are the perhaps the prototypical knowledge workers and are paid for their high human capital accumulations. But unfortunately, human capital is very hard to measure. And with so many clients and customers on cognitive overload, judging the value of knowledge workers by the flags they fly and the company they keep is much easier. I can see LinkedIn being used for this, but I agree with you that simply the number of followers is a crude measure. That might be an area where MOOCs can be really disruptive: if they can provide the same sort of certification that higher education provides through degrees, and if MOOC certification helps the market judge talent better than college degrees.

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