1
Finding Stability in the Current Fiscal Storm
A Strategy for Success in the Era of Coursera
A potential report to the Committee on Institutional Cooperation (CIC)
And Member Institution Presidents
University of Chicago
University of Illinois
Indiana University
University of Iowa
University of Michigan
Michigan State University
University of Minnesota
University of Nebraska-Lincoln
Northwestern University
Ohio State University
Pennsylvania State University
Purdue University
University of Wisconsin- Madison
Presented by:
Cheri DeClercq and Nate Smith-Tyge
Michigan State University
June 22, 2012
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Table of Contents
Executive Summary
Introduction
Strategic Policy Questions
Institutional Landscape – Public Research Universities
 International trends
 Funding issues
 The new opportunity
Online Learning -- Context and Outcomes
 Current environment
 Online strategy
 Quality of learning
 Faculty and assessment considerations
 Resource and financial considerations
Emerging Alternatives – Meeting Global Needs
 Coursera
 Udacity
 Edx
 EmbanetCompass
 BISK
 2tor
Best Practices – Consortia
Recommendations
Conclusion
3
4-5
5-6
6 - 12
References
41 - 44
13 - 22
22 - 30
30 - 35
36 - 40
40
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Executive Summary
Online education is changing the world. Top-tier public universities in the Midwest face a
considerable challenge as they seek to develop and implement appropriate strategies for
engaging in this rapidly changing and emerging context. New technologies provide an
opportunity and a responsibility for institutional leaders whose missions are to provide access to
the knowledge that is essential to expanding economies and improving lives around the world.
Millions will benefit if institutions are able to provide broad access to quality education.
Certainly these opportunities are not without challenges, the first of which is the quality
and credibility of online education. Research on this critical aspect indicates that well-designed
online courses not only provide access to a virtual and remote population of students, but also do
so with a level of quality and faculty interaction that can equal or exceed traditional lecture
formats. Elite institutions have moved into the online market, albeit often with non-profit
spinoffs, making it difficult for naysayers to relegate this trend as a subpar alternative to a “real
university experience”. However, key concerns regarding the risks and financial implications for
public universities must be recognized and considered.
Leaders of top public universities must understand and address the opportunity and
challenge that is online education. They must develop a clear institutional strategy and
infrastructure that aligns with their mission and core competencies. And they must act soon or
risk being left behind in an increasingly global and competitive educational market.
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Introduction
It is critical that public institutions understand and carefully consider the global landscape
as it pertains to online learning initiatives in higher education. To ignore this phenomenon is by
default a decision to not engage in the possibilities available, yet many institutional leaders lack
the expertise and resources needed to examine these opportunities and recommend appropriate
institutional strategies. This report provides an overview and assessment of online learning in a
global higher education context, outlines primary considerations for institutional leaders as they
develop strategies for engaging in online learning, and provides recommendations to institutional
leaders of top, public research universities in the Midwest regarding how they should respond to
the growing emergence of online consortia.
Drawing on scholarly work and practitioner/news sources, this strategy report includes a
comprehensive review of the trends, the drivers, and the benefits of online learning as a means to
meet the educational and economic needs of a global knowledge economy. Following this review
of the landscape and the funding realities of public higher education institutions, the report
assesses the potential for online educational partnerships with vendors and/or consortia to
enhance institutional funding and brand identity. Benefits and challenges for institutions are
reviewed in regards to creating new consortia, joining existing partnerships, partnering with forprofit vendors, or developing their own in-house initiatives. The report concludes with
recommendations for institutional leaders as they develop strategies within their universities,
including whether such strategic decisions should be at an institutional or unit level to have the
best outcomes.
It is clear that online learning is fundamentally changing education, teaching and
learning. This paradigm shift aligns with the growing demand for an educated workforce as a
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means of improving economic realities around the world, and the need for public higher
education institutions to implement new revenue generating initiatives. Online learning is a
strong and financially viable way for many public institutions to provide global access to quality
education and credentials. Institutions that choose not to act decisively in this emerging market
will quickly find themselves left behind. Those who quickly consider their options and move
strategically ahead will find significant opportunities to lead in this global phenomenon.
Strategic Policy Questions
As leaders of large public research universities, it is imperative to consider the impact of
recent and pending trends in online education. Recent and continuing trends in higher education
indicate a need for institutions to seek additional funding sources. An increasingly competitive
global marketplace lends to increased need for institutional brand enhancement and reach. These
trends, when combined with the needs of an emerging knowledge economy produce a rich, yet
challenging opportunity for top-tier research universities in the U.S. This report provides a
general overview of the global knowledge economy in regards to the needs and restraints facing
higher education, shares perspective on the perceived benefits and challenges in online
education, describes the emerging trends in online education and reviews best practices.
The report then outlines specific recommendations for developing and implementing
strategic online initiatives that align and supplement the university’s culture and structure,
answering the specific strategic policy questions:

What impact, if any, is online learning having on higher education?

How should top public research universities respond to the growing trends in
online education?
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
If institutions choose to implement new online initiatives, what strategies should
they employ to achieve success in the global marketplace?
Institutional Landscape – Public Research Universities
Clark Kerr once famously pointed out that the longest enduring institutions in the world
are universities (Kerr, 1963). In addition to the enduring value of learning and knowledge
creation, one of the reasons for this longevity is the ability of universities to adapt to the changes
in the society writ-large that result in changes to the nature of knowledge creation, learning, and
sharing (Duderstadt & Womack, 2003). In many senses large public research universities find
themselves in one of these periods of transition and the successful navigation of this period can
determine the continued longevity of the research university enterprise. As leaders of large
public research universities you face many of the challenges we are about to explore on an
everyday basis. Often times, confronting these challenges in their multiple manifestations on
your campus can consume so much of your time that is hard to see beyond the problem of the
moment to the larger issues and ways around them. This report is part of looking beyond the
issue of the moment to confronting some of the structural challenges facing your institutions and
details how leadership in an emerging sector can provide part of the solution for solving these
structural challenges.
The first part of this discussion requires a review of the structural challenges facing large
public research universities. Before looking at the challenges it makes sense to make a moment
and recognize that despite the seriousness of these challenges there are many successes to
celebrate. Indeed, there are many things that large public research universities do well – record
levels of research productivity, record levels of graduates, and thousands of service projects. In
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reports of this nature these success are often over-looked but is because of these successes that
your campuses are positioned for success in these challenging times.
International Trends
Large research universities in the United States are still regarded as the global standard
for higher education (Ehrenberg, 2003). However, research universities are growing in stature
and productivity in China and India and with the emergence of the Bologna system in Europe
competition for this coveted global position has increased. The United States is not in danger of
losing this top spot but the competition has resulted in universities engaging in efforts to enhance
their global brand and compete for the elite international student populations (Marginson, 2006).
While traditional approaches to increasing international stature often yield positive benefits,
including positive revenue streams from full tuition paying international students, these efforts
are expensive and sometimes come at the exclusion of other campus-based programs during the
budgeting process (Rovai & Downey, 2010). Additionally, large public research universities
face some political pressure to focus on home-state students and programs. There will not be a
shortage of international students looking to study on your campuses (Margingson, 2006) nor
will there be a shortage of international project opportunities, however there will be demands to
make these programs cost-effective and efficient. To this end, large public research universities
should seek opportunities to leverage their global competitive position that maximize return on
investment and provide additional revenue to the core of the institutions’ mission.
Funding Issues
The Great Recession of the late 2000’s drastically reduced state tax revenue and resulted
in significantly lower state budgets across the country. In the United States’ state-based system
of public higher education funding these cuts to state budgets meant large reductions in
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university funding. States in the Midwest were especially hard hit by the economic downturn
and most of your campuses have acutely felt the budget crunch of the past three to four years,
especially following the drying up of Federal Economic Stimulus dollars at the end of the 2011
Fiscal Year (FY). In real terms this has meant a reduction in nationwide higher education
funding of over six billion dollars from FY 2010 to FY 2012 (Grapevine, 2012). The most
recent round of cuts have ranged from a low of .09% in Nebraska to 20.9% in Wisconsin. The
lone state increasing higher education funding in the region was Illinois, which provided a 12.1%
increase in funding to its higher education system. As the following chart demonstrates most of
the states in the Midwest have experienced significant reductions in state support for higher
education over the last three budget cycles.
State Support for Higher Education, 2006-7 to 2011-12
State Support
State Support
2010-11
2011-12
Including
Including
Stimulus Funds
Stimulus Funds
1-year %
State Support
change,
2006-7 (000s)
2010-11 to
2011-12
(000s)
(000s)
Illinois
2,848,130
3,200,025
3,585,962
12.1%
Indiana
1,456,514
1,564,731
1,549,460
-1.0%
804,449
758,712
739,052
-2.6%
Michigan
2,035,388
1,869,659
1,641,659
-12.2%
Minnesota
1,400,500
1,381,065
1,283,690
-7.1%
604,026
653,935
647,843
-0.9%
Iowa
Nebraska
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Ohio
2,208,184
2,282,711
2,013,797
-11.8%
Pennsylvania
2,153,998
2,108,381
1,826,879
-13.4%
Wisconsin
1,166,362
1,458,596
1,153,559
-20.9%
(Grapevine, 2012)
These cuts in state support have come at the same time as calls to increase access and
graduation rates come from virtually every corner of the political arena and spectrum. The goals
of the Lumina Foundation to increase college participation to 60% of the population have
become the policy of the Obama Administration. However, these new demands and the decrease
in funding have not changed some of the basic costs structures that universities must confront
(energy, employee health care and retirement). Therefore, pressure on the university budgets has
increased and resulted in higher tuition rates across the country (Delaney & Doyle, 2011). The
reliance on tuition increases to fill the gap created by state funding cuts has also been
exacerbated by reductions in endowment revenue and threats of less federal funding for basic
research.
As university leaders this annual funding battle seems to be never ending. And indeed
there is a fair amount of evidence to support that sentiment. Many states see higher education
funding as special budget category that is easier to cut in tough times as universities have
additional funding streams that other categories in state budgets do not enjoy. Of course, this is a
double-edged sword for universities that most state political leaders are happy to exploit. State
legislators know that universities can increase tuition to make up for their funding cuts, but they
also know they can make political hay out of the rising tuition costs. This allows state politicians
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to make painful cuts in higher education by passing funding responsibilities on to students and
families all while having political cover by blaming the universities for rising costs.
The other end of this unique state funding situation is that universities are often the
beneficiaries of large funding increases when state budgets are flush with revenue. Hovey
(1999) identified this shifting funding cycle for higher education as the balance wheel of state
budgets. When times are good higher education enjoys larger increases than other state budget
categories and when times are bad higher education receives larger decreases than other state
budget categories. Further empirical work on the model by Delaney & Doyle (2011) has
confirmed the basic tenets of the balance wheel model. The balance wheel theory is visually
represented in the figure below.
(Hovey, 1999 and Delaney & Doyle, 2011)
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The balance wheel funding model does not provide much comfort to institutions that are
seeking stability in their revenue stream. This boom and bust approach to higher education
funding has resulted in soaring tuition and all time records of student loan debt. Yet demand for
higher education is also at all time high and this especially true at the large public research
universities. The value of a college degree is a significant driving force in this demand and
despite the sour job market for recent college graduates a college degree is still understood to be
an essential tool for long term career success (Pew, n.d.). However, there are still some observers
that predict higher education is approaching bubble status and in danger of bursting (Lacy,
2011). Certainly, not all observers and few researchers agree that higher education is nearing
bubble status, as the demand for college degrees is relatively fixed in the digital knowledge
economy. Regardless, because of the creation of some level of uncertainty the potential for a
looming higher education bubble adds another layer of complexity to revenue stability.
However, a strong case can be made that most large research universities will be able to weather
a bubble, if one indeed exists, but the results of a bubble burst would likely lead to another
downturn in state funding.
All of these factors (recent large cuts, the instability of the balance wheel model, and
uncertainty regarding the future market for higher education) create volatility in the revenue
stability for all of higher education, and especially for large public research universities.
However, the situation is not all gloom and boom. An emerging sector in higher education
provides an opportunity to bring some level of revenue stability through enhancement of brand
identity and new revenue streams. This opportunity is discussed in the following sub-section.
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A New Opportunity
The ascendance of the digital age in learning and the growing “edupunk” movement have
often been viewed as threats to the old order of many large research universities. However, a
few early adaptors in the large research university sector have provided a road map for turning
that threat upside down and further cementing the role and value of large research universities.
By providing open access to certain content and embracing new online educational technology
large research universities can position themselves to lead in these new formats. This leading
position will allow for increased brand identity that will result in stable enrollment and tuition
patterns and provide new points of access to your institutions. Further, this new opportunity also
provides the opportunity to identity significant new revenue streams that can support the core
missions of your campuses and weather the instability of state budget cycles. Simply put, when
300,000 students from around the globe are taking an online course in a non-credit format the
potential to raise significant amounts of revenue is presented. This is a long-term strategy for
revenue stability and an immediate strategy for brand enhancement and the benefits derived from
strengthening your campus’ brand identity. Harvard, MIT, Stanford, Cal-Berkeley, Yale, and
others have realized the potential of this emerging sector and it is not too late for the institutions
of the CIC to realize this potential as well.
Before getting into the specifics of how the CIC can capitalize on this opportunity it is
important to understand the contexts for this new opportunity. To this end, in the sections that
follow a discussion of online learning and the current programs in the emerging sector will be
presented. After providing this context the report will explore the history of consortiums and
specifically how the CIC provides an ideal launching pad for an entry into this new sector of the
higher education landscape.
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Online Learning – Context and Outcomes
Current Environment
Online learning is changing the way education is defined. Historically, a university could
be described as a place where highly credentialed experts pass along their knowledge to a group
of 18-23 year old students, who sat in classrooms and captured the professors knowledge in
(three) credit-hour increments. Today, many institutions call themselves “universities”, including
institutions that are fully online, and affiliated with corporations. These institution offer training,
certifications, and degrees—with instructors ranging from part-time facilitators to full-time
subject matter experts (Altbach, 2006).
Online education, as defined as courses with 80% or more of the content delivered online,
and blended courses that combine face-to-face delivery with 30 to 79% of the content delivered
online, have seen an increasing trend in enrollments over the last several years (Allen & Seaman,
2011) . A recent estimate shows that online enrollments grew by ten percent from Fall 2009 to
Fall 2010, resulting in 6.1 million students taking at least one online class in that semester
(Allen & Seaman, 2011). This is particularly remarkable in comparison to the .6% growth of
total higher education enrollments during this same one year period (Allen & Seaman, 2011).
Given the tremendous growth in online students, public universities have much to gain
from embarking on an online learning initiative, including:

Strong potential for significant, new revenue streams

Opportunity to leverage institutional core competencies to a global marketplace

Potential to synergistically share resources across institutions

Ability to extend the institutional brand and reputation worldwide
Online Strategy
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As public higher education leaders consider the benefits and risks of online learning
initiatives, understanding the key considerations can help to develop an appropriate strategy. The
rationale for developing online courses varies, as do the best practices for implementation. One
practical consideration is the institutional mission (Schiffman, 2005). Whether the mission is
specific to traditional students or a broader potential student population and whether the scope of
constituents is local or global can lend insight to the likelihood of acceptance among the
universities’ stakeholders. Equally important, if the institutional mission purports to serve nontraditional students or to be a premier global university, than online initiatives may be a
necessary core competency. Finally, if the institutional goal is to be self-supporting or revenue
generating, it is likely that online alternatives may be appropriate (Bishop, 2005).
Despite the fact that chief academic officers at public institutions admit to its importance
in their long-term strategy, there is a significant gap between the recognition of importance and
the implementation of a planned approach (Allen & Seaman, 2011). According to the ninth
annual Online Sloan Survey, over 70% of responding chief academic officers in public
universities recognized that online programs are strategically important to the institution, yet
less than one-half included them in their strategic plan (Allen & Seaman, 2011). What’s even
more surprising, is that previous studies indicate that the percent of institutions that believed
online education to be critical to their long-term strategy was over 70% in 2006, indicating that
although the significance of online education has not changed significantly in the last five years,
institutions have not taken action on developing an online strategy (Allen & Seaman, 2011).
There are likely many reasons that public institutions are slow to move forward on
implementation of an online strategy. In part, financial restraints in the public education arena
make implementation of new and costly systems prohibitive. A lack of institutional resources to
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fund both the implementation and the maintenance – both in systems and in training – is a key
detractor. In addition, the pace of technological change complicates both the adoption process
and the decision process, as institutions struggle to determine the ideal entry point. Slow
diffusion of online innovations can also be attributed to the institutional culture and structure.
Without a system that is supportive financially and emotionally of unproven initiatives, the
likelihood of full acceptance and incorporation of new online models is slim.
Organizational structure can also influence the pace implementation process for online
education. Public institutions that structure the entire online operation in a central, self-contained
unit are able to expand their courses at a faster pace than their counterparts that rely on a system
of cooperation between academic departments, information technology, marketing and student
support units (Schiffman, 2005).
One example is the University of Maryland - University College (UMUC), a public
university known for its prominence in online learning. UMUC was founded in 1947 with a
specific institutional focus on providing adult, part-time students with access to higher education.
Recently, UMUC realigned their already centralized structure in an effort to enhance
effectiveness and efficiencies within their successful online model which boasts over 100,000
enrollments (Bishop, 2005). New York University’s School of Continuing and Professional
Studies (SCPS) also is centrally structured in a way that encourages entrepreneurial, student and
market driven approaches, giving them the ability to quickly respond to changing trends. NYU
took this separate structure to the extreme in the form of a 1998 for-profit spin-off, NYUonline,
which failed after only three years due in part to bureaucratic processes (Carlson & Carnevale,
2001). Today, NYU continues to offer significant online options through the University’s SCPS
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structure. Not surprisingly, decentralized structures lack goal congruence and struggle with ways
to appropriately share resources and revenues.
Collaboration and sharing of best practices, as well as resources, can leverage the
investments of time, training and expertise. This type of collaboration can exist across programs,
across units, across institutions, and between business and industry (Schiffman, 2005). Several
university-industry partnerships have emerged over the last several decades as corporation have
worked to provide customized, high-quality educational options for their employees in multiple
locations. American Express, JetBlue, and WorldCom, to name a few, have sought innovative
university partnerships that provide joint-venture education for their employees world-wide
(Lynch, 2005). Collaborations involve significant and authentic sharing of each
organization’s goals and core competencies, as well as willingness to compromise when
necessary. They can, however, be ideal ways to leverage expertise and resources for the
institutions involved.
Having a supportive organizational culture that rewards and accepts risk improves the
likelihood that an institution will embrace new ventures—whether these involve other
institutions, vendors or corporations. Visionary, entrepreneurial leadership that encourages the
administration and the faculty to stretch toward new opportunities and to think broadly about
their institutional goals is key to implementing a successful online initiative.
In addition to the organizational challenges, university faculty can provide an additional
layer of resistance to online initiatives. Faculty issues can involve quality, autonomy, intellectual
property rights, assessment, and resource concerns. Because of the critical need to understand
add address the primary faculty concerns, these are addressed in detail in the following sections.
Quality of Learning
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Academic leaders’ perception of the quality of online education varies greatly across
institutions. These perceptions, in aggregate, have changed gradually over the past nine years of
the Sloan Online Survey (Allen & Seaman, 2011) as described below.
Faculty at My School Accept the Value and Legitimacy of Online Education
Fall 2002
Fall 2005
Fall 2009
Fall 2011
Agree
27.6%
27.6%
30.9%
32.0%
Neutral
65.1%
57.8%
51.8%
56.5%
Disagree
27.6%
14.7%
17.3%
11.4%
When distinguishing these results by institutional type, 35.6% of the academic leaders in public
institutions agree that their faculty accept the value and legitimacy of online education, 56.5%
are neutral and only 8% disagree. The fact that 8% of chief academic officers at public
institutions believe that their faculty do not accept online education provides reason for
optimism, if in fact, the administration is accurate in their perceptions.
Defining the quality of online education continues to be a challenge. The Sloan Online
Survey provides insight into the quality of online degree programs based on several qualityrelated dimensions. There has been (since the results published in 2003) a slow but steady
increase in the number of academic leaders who report that the relative quality of learning in
online courses is the same or better than that of face-to-face courses. Of course, there is
significant variation in the quality of any delivery model. Across institutional types, 67.6% of
reported that they believe online education is the same or better than face-to-face (Allen &
Seaman, 2011).
When properly designed and delivered, online courses have been shown to provide richer
learning experiences than their face-to-face alternatives because of the interaction between
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students, content and faculty. Proponents of online education argue that it provides more direct
interaction between the student and the faculty than traditional large lecture-based courses.
Furthermore, online courses can provide students with resources and virtual experiences that
would not be possible in a traditional classroom. These benefits, combined with the flexibility of
online, mean that students are able to focus on the learning experience in ways that improve their
engagement, their retention and their outcomes (Robinson, 2005). In addition, when institutions
maintain the same admission and assessment requirements, they can ensure that online
experiences have the same rigor and accountability as face-to-face courses.
Institutional leaders indicated that they implemented online courses because they provide
better flexibility for students—both in terms of scheduling and in the pace at which students are
allowed to progress through the content. In this regard, online learning was perceived to be
“better” than face-to-face options. Face-to-face, however, maintains an advantage in regard to
student-to-student interaction (Allen & Seaman, 2011). Many supporters of online education
believe that a hybrid model that leverages the benefits of online education and face-to-face
interaction and accountability is the ideal way to maximize the learning experience. Others
continue to seek ways to enhance the interaction between students in a virtual context so that
they can provide alternatives to remote students who would otherwise not have access.
Faculty and Assessment Considerations
Even if the faculty is convinced that academic quality standards can be met in an online
environment, many tout additional concerns with virtual education. Some resist being involved
in what they perceive as the “business of education” for philosophical reasons. These faculty
members believe knowledge should be accessible to all, and they resent the market-driven
approach they see as the driving force for online initiatives. Others are concerned with
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intellectual property rights, voicing concern over their ability to manage their personal
knowledge capital if students have access to copy and potentially redistribute recorded lectures,
course materials, and other faculty resources. Another concern is the time and training needed to
create a quality online course experience. Faculty at public research institutions are already
tightly stretched between research, academic service requirements and teaching loads. Carving
out time to learn best practices and develop online courses requires a significant time investment
that detracts from their other responsibilities.
Another important concern and challenge for online education is the question of
authenticity and academic integrity. Ensuring that the student does his own work is becoming a
top priority. While cheating is a concern throughout education, the often disconnected
environment that makes online education attractive may contribute to the willingness of students
to cheat. Fully online courses with hundreds of students make it unlikely that students have a
relationship with the faculty member or feel a responsibility to the academic integrity of the
system. And with the ease of access comes the possibility for a lack of commitment to learning –
and a strong focus on getting the credit and the grade (Young, 2012).
The prevailing growth of online education makes it unlikely that institutions will be able
to avoid the potential risks of authenticating an online education. Research on this growing
concern indicates that faculty and companies need to collaborate and pool resources if they hope
to have an advantage of the students who are “gaming the system” (Young, 2012).
Resource and Financial Considerations
Although tuition and fees at most public higher education institutions have increased
steadily throughout the last decades, increases in institutional costs have climbed at an even
higher pace. Public universities have responded by working to increase productivity and
20
efficiency; and by seeking new, alternative revenue sources. Online courses have the lure of
expanding enrollments with a low delivery-cost structure, yet the actual cost-effectiveness of this
learning modality is unclear for many public institutions.
Cost-effectiveness is commonly referred to as the ration of costs to outcomes. Since there
is not agreement on how best to measure learning outcomes, institutions commonly leverage
course enrollment (Robinson, 2005) or retention when attempting to determine costeffectiveness. Accepting that these proxies are reasonable, institutions must then seek to
differentiate the online course costs from those specifically allocated to their face-to-face
counterparts. Often the costs of online education include the infrastructure for implementing the
technology platform. Robinson (2005) argues that to get a true cost comparison between face-toface and online delivery, institutions should identify the specific costs that would be attributed to
either delivery model. In his study, overhead and instructional costs, including existing buildings
(face-to-face) and technology platforms (online), were not included. The resulting cost study
found that the cost of delivering online courses was on the low end, yet still within the range of
cost for delivering face-to-face courses (Robinson, 2005). One implication from this study is that
over time, it is reasonable to expect that courses will return a stronger return on the initial
development costs. In addition, for institutions with current capacity restraints, online learning
provides a cost-effective savings in construction costs for campus. These likely outcomes, when
combined with the increased interest on the part of students and the generally similar perception
of quality, provide an attractive alternative for public institutions striving for cost-effective
alternatives.
Public institutions that have been successful at growing successful online learning
initiatives indicate that the need for institutional sustainability (either in growing enrollment, in
21
managing capacity or in generating new revenue) often was the catalyst for aligning institutional
resources towards a shared goal (Schiffman, 2005). Collaborations generally require sharing of
revenue across programs and or institutions and having clear understandings and projections on
both costs and revenue streams is critical as partnership options are considered.
Although profit is not a word that is used in public universities, online learning initiatives
are generally intended to not only be self-supporting, but to contribute additional revenue to the
institution after covering the program’s expenses. This “profit center” implication can be a
necessary evil – both producing much needed revenue for other institutional needs, and giving a
“cash cow” perception that can reinforce the distasteful notions of some traditional educators
who scorn for-profit institutions. One successful business model approach is to develop a
business plan for each new program prior to committing to development. At the University of
Maryland – University College, a detailed proposal that includes financial assumptions, revenue
and cost projections and market analysis must be prepared and approved by senior leadership
who strategically consider financial feasibility and institutional alignment before authorizing new
program development. Once new programs are launched, leadership continuously monitors their
performance in terms of revenue, expense and enrollment targets, ensuring their costeffectiveness (Bishop, 2005). This “business approach” to education is not standard practice for
public institutions, yet it is a model that makes sense for institutions that expect their online
initiatives to contribute positively to their institutions bottom line.
Marketing of higher education can be a concern as institutions struggle with the
conflicting goals of growing online enrollments and maintaining their elite brand, and the models
for marketing online initiatives vary greatly. The least involved is a simple in-house approach
where students seek out the program through its existing resources (website, catalog). Moving
22
along a spectrum of marketing sophistication, the next model is departmental or institutional
marketing efforts that can include online advertising, recruitment events, and other traditional
marketing communications that are managed internally by existing staff. This moderate approach
spans a wide-range of generally internal resources, sometimes in partnership with specific
vendors to support efforts. A more intentional approach is an integrated marketing strategy that
employs a professional team of marketers who allocate as much as 15-20% of budgets on
marketing (Schiffman, 2005) based on expected “return on marketing investment”. Other
marketing techniques include affinity or coalition marketing where institutions join a partnership
in an effort to “grow” their offerings and compete more directly with larger, more resourced
online initiatives.
Emerging Alternatives --Meeting Global Needs
The successful integration of higher education and information technology is critical to
meeting the current and future needs of the global knowledge economy. Many universities are
considering strategies for how to embark on this transitional journey, but few have the internal
resources necessary to move into this important sector. Some with technological expertise have
embedded this into their core offerings. For-profit institutions like the University of Phoenix
have also emerged as separate educational businesses to meet this need. But many public
universities lack the internal resources needed to meet the demands of this growing, globally
competitive market. Consequently, several alternative models have emerged in the last few
decades. Some organizations were created as non-profit entities; others are for-profit vendors
providing services in exchange for a significant portion of expected future revenues.
23
Coursera
One of the newest entrees into online education is the recently announced consortium of
Coursera, which launched on April 18, 2012 (Gage, 2012). Its emergence into the market has
generated significant buzz in higher education systems, in part because of the $16 million dollars
that venture capitalists contributed, and in part because of the elite institutions that it represents.
How was Coursera born? Andrew Ng and Daphne Koller of Stanford University created
the learning platform that initially attracted 200,000 students to two computer science courses.
This early success led the founders to spin off and create a company that was quickly funded by
New Enterprise Associates and Kleiner, Perkins, Caufield & Byers who invested $16 million
into the new venture. Coursera’s model is to support top universities in creating (initially at least)
free online courses that will be branded under the individual university (Gannes, 2012). Its
current partners include some of the world’s academic elites: Princeton, Stanford, the University
of Michigan, UC - Berkeley and the University of Pennsylvania.
This newest online partnership between top-tier institutions has left institutional leaders
who had previously discounted online education reconsidering. No longer can faculty and
administrators relegate online learning as a sub-standard alternative to the classroom experience
and justify this position. After all, if the top-ranked institutions have embraced this learning
modality, there must be a way to provide a quality educational product that will enhance top-tier
university brands. Coursera, however, is not the first online consortium to enter the world of
open access courses. Previous initiatives include Massachusetts Institute of Technology’s
OpenCourseWare Project, Yale’s Open Yale courses, and Berkeley’s Webcast (“Stanford’s open
courses raise questions about true value of elite education | Inside Higher Ed,” n.d.).
24
Udacity
An alternative startup also emerged from Stanford professors may have been genesis for
this next phase of education. Based on the Khan principles that were presented at a TED
conference in March 2011 Thrun was introduced to the concept of teaching to the masses.
“While Thrun admired MIT’s OpenCourseWare—the university’s decade-old initiative to
publish online all of its lectures, syllabi, and homework from 2,100 courses—he thought it relied
too heavily on videos of actual classroom lectures. That was tapping just one-ninth of the
equation, with a bit of course material thrown in as a bonus.” (Leckart, 2012).
What began as CS 221: Intro to Artificial Intelligence has set the world of academia on
edge by creating a paradigm shift in elite education with 160,000 students participating (Gannes,
2012). What was revolutionary about the Stanford courses was the fact that students could not
only access the content of top institutions at no charge, but that they could also participate in
online quizzes and discussions with faculty. Any would be student with an internet connection
could gain access and fully participate, completing midterms and finals on tight timelines and
getting back “auto-graded” assignments just like their Stanford classmates on campus. The
primary differences were costs (free for those online as opposed to the elite-priced education on
campus) and credits – students completing the online course could be awarded a Statement of
Accomplishment rather than course credit (Leckart, 2012).
Since the initial courses’ success, professor and founder Sebastian Thrun, who recently
stepped down from his tenure position at Stanford and created KnowLabs with $300,000 of his
own for startup Udacity (Leckart, 2012). On an aggressive timeline, Thrun and a small team
worked through the summer to create a website that could handle 10,000 students while working
closely with Stanford on what credentials could be offered. Stanford’s administration was
25
supportive of the creative vision and the concept –but balked at the idea of online assignments
and the certificate credential. In August, 2011 an agreement was reached to offer the (free)
courses with a Statement of Accomplishment and a disclaimer that the courses would not count
towards Stanford’s academic programs (Leckart, 2012). News of the venture went viral and
attracted over 100,000 students. Of these, 23,000 completed the full course. This initial success
captured the attention of venture capital firm Charles River Ventures who provided additional
funding.
Udacity’s mission today is to provide high quality (currently technical courses) at no or
low cost (“Udacity - Free Classes. Awesome Instructors. Inspiring Community.,” n.d.). Yet
while the courses themselves are free, the potential business model includes options for students
to pay for additional services including study aids and job placement through recruiters (Leckart,
2012). The start-up hopes to build on their initial platform of 8-week online computer science
courses to also offer additional quantitative options including engineering and hard sciences,
leveraging dynamic film-quality production and top professors.
Edx
Meanwhile, a similar partnership was developed in 2012 when Harvard University and
Massachusetts Institute of Technology (MIT) joined together. Leveraging the OpenCourseWare
technology platform that MIT developed, the non-profit entity of Edx was launched to “extend
their collective reach to build a global community of online learners and to improve education
for everyone” (“edX - FAQs,” n.d.). The organization is owned jointly and equally by Harvard
and MIT, managed by a board of directors that includes individuals from both universities, and
lead by a former dean and current professor at MIT. Their goal is to eventually add content from
other universities to supplement the offerings.
26
According to the venture’s website, the first set of courses will be offered in Fall 2012.
There is no admissions process, but students are expected to have the appropriate pre-requisites
needed to succeed in the (not-for-credit) courses. Details are still being finalized, but the intent is
that those students who demonstrate mastery of the material will be able to purchase credentials
in the form of an Edx, not a Harvard or MIT, certificate.
EmbanetCompass
The organizations discussed above have had a dramatic influence on the decision
processes of university leaders, but long before these newest start-ups emerged, colleges had
been moving into online course partnerships with for-profit organizations. EmbanetCompass
represents a merger between two early entrants and former competitors in this market - Embanet
and Compass. The resulting organization represents a significant proportion of the current online
enrollments, and their website boldly states, “We are pioneers of online education… proudly
offering nearly two decades of experience partnering with top-tier, not-for-profit academic
institutions to deliver fully realized online learning solutions” (“EmbanetCompass,” n.d.). The
scope of their partnership is broad, encompassing nearly all elements of course development and
student service except the faculty themselves. In exchange for this turn-key online operation,
EmbanetCompass earns from 50% to as much as 85% of the tuition charged to students (Parry,
2010). Partner institutions include Boston College, Wake Forest University, George Washington
University, University of Southern California and several other well-respected universities.
27
(“EmbanetCompass,” n.d.)
EmbanetCompass strives to provide potential online students with a seamless, customerservice approach. Requests for information from an online partner program receive prompt,
knowledgeable follow up from an EmbanetCompass representative, and are helped through the
admissions process into courses. But the vendor’s involvement doesn’t stop outside the
classroom. EmbanetCompass’ employees advise faculty on course design and serve as
facilitators in the virtual classroom, grading and interacting with students directly. They even
reimburse institutions for tenure-faculty instructional costs. All of these resources make online
education possible at resource-constrained institutions. In fact, Northeastern earned $2 million
even after the hefty tuition split in the 2009-10 academic year (Parry, 2010).
Faculty and administrators, however, have mixed feelings about the appropriateness of
these partnerships. Some believe that these relationships simply expand and enhance the faculty
28
in delivering to a broader student population. Others argue that they don’t want to outsource their
core competency and or their academic reputation.
Bisk Education
Bisk has been involved in continuing education since 1971, and began working with
traditional universities fifteen years ago. Since then, they have developed their “Six Principles of
Excellence that Drives Student Success” approach which begins with a “comprehensive 360°
value chain analysis process that will assist you in determining institutional readiness as well as
identifying marketability of specific programs”(“Online Programs Higher Education Strategic
Planning | Bisk Education,” n.d.). This strategic analysis helps institutions to consider essential
questions before they develop and implement new online initiatives. Key internal factors of
analysis include infrastructure, institutional support, faculty perceptions, assessment options,
staffing realities, pricing, and overall institutional feasibility. External/market factors are also
assessed in detail to determine what market opportunities exist, the scalability of these potential
offerings, and the competitive landscape. Recommendations are provided to institutional leaders
as to what they can expect to accomplish through Bisk (“Online Programs Higher Education
Strategic Planning | Bisk Education,” n.d.).
Bisk collaboration provides institutions with the tools and resources they need to achieve
their online education goals. These resources include instructional designers with expertise in
online and adult learning best practices, who work with administrators and faculty to build
effective courses, along with the flexibility for schools to use their own learning management
system or build these through Bisk. Courses can include streaming video, interactive learning
opportunities, and simulations, all of which are supplemented by a variety of course materials
29
and resources. Their website (www.bisk.com) boasts that they have over 120,000 active students,
although this number is dwarfed by the enrollments in the one Stanford course already
mentioned in this report.
Bisk supplements the instructional aspects of online learning with their complete inhouse marketing and enrollment management teams. These Bisk employees build, implement,
and monitor comprehensive marketing plans that drive inquiries towards their call centers and
fulfillment teams (“University Distance Learning Brand & Image Management | Bisk
Education,” n.d.). They then train call center representatives to field calls and encourage
enrollment for interested students. These marketing and enrollment management systems are
designed to leverage the institution’s academic capabilities and brand reputation without
requiring internal support staff or resources. In short, Bisk considers itself to be a no-risk, limited
resource investment solution for institutions looking to capitalize on online opportunities.
2tor
A third major competitor of EmbanetCompass and Bisk is 2tor. This organization was
created in 2008 with a specific focus on online graduate programs for preeminent universities.
Their small list of affiliate schools and programs includes only Georgetown University’s Master
of Science in Nursing, UNC-Chapel Hill’s Master of Business Administration, and USC’s
Master of Social Work and Masters of Teaching and Education. 2tor provides their partner
schools with tools and resources that expand their reach globally (“About the 2tor Affiliate
Program « 2tor, Inc.,” n.d.).
Clearly there are a myriad of options available to the public universities who are
exploring options for engaging in online education—and the pace of new entrants into this
30
growing market is escalating. As institutions and learners become more comfortable with the
credibility of online courses, leadership at public institutions is faced with a considerable
challenge of how to strategically determine their place in the changing global education
marketplace. Balancing their need to manage an intellectual brand while engaging and expanding
internationally, given limited resources, often leads them to consider partnership with vendors
and or with university consortia.
Best Practices – Consortia
In addition to the emerging sector of online consortia programs discussed in the previous
section consortiums have been a regular feature of organization for post-secondary institutions
for over fifty years (Bostick, 2001). There is little doubt that your institutions are members of
multiple consortia ranging from purchasing groups to joint academic programs (most likely
located within your respective medical colleges). In fact, there are probably too many
consortiums operating on each of your campuses to list in this report. There are, however, two
common consortiums that each institution reviewing this report share. The first is also the most
common among all post-secondary institutions and that is library consortia. The second common
consortium is the Committee on Institutional Cooperation (CIC). In the remainder of this section
best practices from these two common consortiums will be discussed with special attention paid
to the CIC.
The most common form of consortium that higher education institutions participate in are
academic library consortiums. Virtually every degree-granting post-secondary institution in the
nation is a member of at least one library consortium (Bostick, 2001). These consortiums have a
long history dating back to the Nineteenth Century and have provided shared resources and
access to resources since their founding. The modern library consortium regime first took root in
31
the 1960’s (Bostick, 2001) and has grown beyond shared buying groups to complex
organizations that provide advanced technology resources and share digital resources (Jin &
Mauerer, 2008).
Library consortia provide many solid examples of effective inter-institutional
collaboration and chief among these examples is the flexibility with which digital resources are
shared among consortium members. Advances in information technology have allowed the
modern library consortia to provide advanced information resources to virtually all postsecondary students in the United States (Jin & Mauerer, 2008). Resources that even a decade
ago might have only been available to faculty and graduate students at elite research universities
are now also available to part-time community college students across the country. This has
become possible because of the sharing of digital resources among library consortium members.
Consortiums have leveraged their pooled resources to secure access to multi-faceted information
resources and used high-speed access to make these resources available on every member
campus (and to every campus members’ laptop or personal computer). To create this leverage of
resources library consortiums have focused on common principles and focused on the
information demands of each member campus. By carefully creating networks of access library
consortiums eliminated duplicate and redundant subscriptions and resources and found new ways
to allocate acquisition resources to meet the needs of the consortium members (Jin & Mauerer,
2008). It is not uncommon for even modest academic libraries to be members of multiple
consortiums that provide access to resources in different content areas and across different
geographic and sector boundaries (Bostick, 2001). All of these efforts have lead to a
maximization of available resources even in times of budget constraints and fiscal uncertainty.
32
Additionally, library consortia have also expanded professional development
opportunities for library staff and faculty members. This is another example of leveraging
shared resources to maximize the benefit for multiple institutional and individual members. An
added benefit of this has been the increase in connections and partnerships outside of the
consortium amongst members, again both at the institutional and individual level (Jin &
Mauerer, 2008). Increases in work-place satisfaction and productivity have been well received
outgrowths of successful library consortiums and these sorts of serendipitous results provided by
consortiums have helped to cement their role in the modern academic library.
Library consortia provide many positive and instructive examples to consider. Practice in
this area has demonstrated how to leverage shared resources and technology for greater access to
information. It has also shown to be valuable for staff and faculty development and improving
work-place culture and productivity. All of these examples will help to guide the
recommendations for successful online consortiums detailed later in the report. To get these
results library consortia have had a long history and weathered some serious storms. These
experiences are also instructive for new consortium efforts and help to provide a good checklist
for insuring success in new joint ventures. Librarians have learned that consortiums need to be
defined around a core mission, clearly state expectations and responsibilities of member
institutions, have simple and easy to follow processes, provide opportunities for member
interaction, respect member (and individual) needs, serve members and not have members serve
the consortium (including not bogging staff down in countless meetings), and remain flexible
and adaptive to changing resources and demands (Jin & Mauerer, 2008). These best practices
from library consortiums provide a solid base upon which to build any new inter-institutional
organizational and will help to guide the recommendations offered in this report.
33
Each of the universities reviewing this report has extensive experience with another well
established and success consortium. The Committee on Institutional Cooperation (CIC) was
founded in 1958 as the academic counterpart to the inter-collegiate athletic Big Ten Conference.
In many respects the CIC provides the perfect platform upon which to base a new online
program effort. Member institutions have been sharing resources and cross-listing courses and
enrolling students almost since the organization’s founding (Wells, 1967). Further, the CIC
provides the shared brand and prestige tag of the some of the finest research universities not just
in the Midwest but the world. This long history of collaboration and brand identity make a CIC
based on-line program in the model of Coursera an ideal possibility.
The CIC already partners on multiple technology and academic projects, which allows
for the creation of a new program to be an efficient and streamlined process. The fundamental
basics of a program partnership are already in place and would respect the CIC’s long history of
collaboration and support amongst member institutions. In other words, the core mission of the
organization is already defined and instead of inventing a whole new wheel, the CIC provides a
ready built wheel upon which the new joint online program could become a prosperous and
beneficial spoke. Moreover, the CIC already has the basic infrastructure in place to support a
new program without significant start-up costs. The OmniPoP network is an already existing
fiber network that connections member institutions and could serve as the backbone for a new
online program. The CIC also hosts shared digital storage resources that could provide further
infrastructure support for a new program.
Beyond the technological aspects of a new program the CIC provides a key resource that
many of the new start-ups in the emerging online sector lack and that is a long history of
collaboration and connection. The Provosts, CIO’s, and COO’s at CIC meetings will not need to
34
wear nametags at the programs first meeting to know who is who. And beyond that superficial
level, they will also know the needs and campus cultures of their partners in this new program.
Coursera might have venture capital investors and one course to build on but a CIC project will
have over fifty years of experience and partnership to build on. This feature alone can account
for any ground that might be lost to Coursera’s splashy start-up. A CIC program might have to
play a little catch up but it will be doing so at full stride and even Coursera cannot say they are at
full stride yet.
The CIC also has strong brand identity and instant credibility in an online program
market. The Big Ten institutions plus the University of Chicago all have strong levels of prestige
and are consider among the nation’s and globe’s elite or near-elite universities. Twelve of the
thirteen CIC institutions are members of the prestigious research university organization the
American Association of Universities (AAU) and all members are among the 100 best
universities in the world according to the latest rankings from Times Higher Education and
Shanghai Jiao Tong University. Additionally, CIC member institutions conducted 7.1 billion
dollars in sponsored research in 2011 (CIC, n.d.). This high level of prestige and brand identity
means that a new program from the CIC and its members would have instant credibility in the
emerging online market. This instant credibility also provides the program with an appealing
position for venture capitalists that are looking to invest in the emerging sector.
All of the pieces are in place for a new program based in the CIC to be successful. There
is a ready built infrastructure, a long and successful history of collaboration, and instant
credibility in the market. However, there is also a need to insure that a new program meets the
needs of member universities and respects individual campus autonomy and programs. For the
most part, the history of the CIC suggests that this will not be a major issue. However, as this
35
will be a new joint program the Provosts and Presidents need to clearly articulate expectations
and responsibilities for all partners to avoid any confusion or infringements on individual
campus autonomy. Once the basic agreement is in place the CIC can begin to build and market
the program. Much like the experience of Coursera there are ready built courses on each of the
CIC campuses that lend themselves to this format and would be a perfect fit for the new venture.
These are courses that are taught by experienced and respected faculty members, already
formatted for an interactive online environment, and have mass appeal to a broad audience of
non-degree seeking learners. One of the early key decisions for the CIC to determine will be
what courses should be used as the program launch courses, as this will determine the success of
the launch and thus the long-term viability of the program. CIC leaders will also have to
determine how best to fund the program’s start-up and create a long-term strategy for monetizing
the program (and how best to divide revenue from the program and here again twelve of the
campuses already have experience in creating equitable revenue sharing plans based on their
experience with the Big Ten Network).
The CIC is the best vehicle to launch this effort and does so within an existing
collaborative and collegial structure. This is the advantage of over fifty years of successful
consortium work and partnership. The new program in the emerging online sector is the next
phase of development for the CIC and its member universities. This next phase will cement the
CIC and its members as global leaders and at the same time provide needed additional revenue
and enhance brand identity all while expanding access to knowledge across the region, nation,
and world.
36
Strategy Recommendations
Prior to starting the new joint program as part of the CIC, member institutions should
consider the following questions and take the recommended courses of action.

Member institutions should move ahead with developing online degree programs in ways
that support their institutional mission.

Institutions should determine how broadly and how quickly they want to develop and
expand their online initiatives, based on their core competencies and the (global) market
demand in these targeted areas.

If the online strategy is intended to engage more than one department and competency,
institutional resources should be deployed to create a stand-alone operation that is
responsible for implementing relevant and appropriate online learning. The institution
must provide this unit with sufficient start-up resources to ensure that the technology
infrastructure will support a rich learning experience. Similarly, the institution must
provide staff resources and set a culture of expectation in the intended academic
departments such that the administrators and the faculty are motivated to support this new
initiative with their expertise.

Whether online initiatives are to be integrated into the core of the university or
supplemental to the core business of the institution should be carefully considered,
knowing that marginalizing these efforts can be problematic.

Institutions should develop and track key measures so that they can monitor the costeffectiveness of online learning initiatives. Measures should include components such as:
o Scope:

Growth of offerings
37

Enrollments

Faculty involvement (teaching, training)
o Financials:

Revenue

Variable (including potentially faculty) costs

Fixed (infrastructure and potentially faculty) costs
o Quality:

Student satisfaction

Student retention

Student repetition/referrals
Once each member campus has thoroughly reviewed their own online program offerings
and created the systems and metrics recommended above, the CIC should convene a planning
meeting for the new program to begin planning the new joint program. Each member institution
should identify at least three courses already offered on their campus that can be easily
transitioned to the new joint program. These courses should be courses that meet most of the
effectiveness measures outlined in the previous set of recommendations (scope, financials, and
quality). The new program planning committee should produce a program plan for the full CIC’s
consideration that includes the following:
 New program structure and organization
 Recommended start-up courses
 Plan for using existing CIC infrastructure resources to launch the new program
 A recommendation for a funding model and/or a recommendation for an RFP
from potential venture capital interests
38
 Recommendations for individual campus policies regarding faculty time and pay
considerations and continuation of the original courses as for-credit courses on
member campuses
 A long-term plan for converting the program to a revenue producing unit and
revenue sharing model
 An evaluation and assessment system for the new program that ensures the
program is competitive and enhances revenue, brand identity, and global reputation
In offering their report on the above items the planning committee should consider the
following options:

Adding the program as part of the CIC Charter, thus insuring the online program
is a legal entity of the CIC and operates within the normal practices of the CIC. And
includes a program staff structure and oversight committee within the organization of
the CIC.

Using the CIC’s OmniPoP network as the host for the new program.

Selecting three start-up courses for the program – one in computer science, one in
ethics or philosophy, and one in physics or astronomy as these subject areas have
proven to be successful in generating broad interest within the online market

One of the start-up courses should be from either the University of Chicago or
Northwestern University as this will help establish the program’s ability to compete
with Stanford, Harvard, MIT, and the Ivies.

The online program should be designed to not only serve as a stand alone offering
but also provide numerous portals to connect participants to credit granting programs
39
and research projects at all CIC institutions – this will establish the “foot in the door”
for growth in each campuses’ regular programs.

Offer the program’s course offerings at no cost to begin but offer a certificate of
completion for each course at a nominal rate to start – this will generate some revenue
to assist with start-up costs and establish a pricing floor for the program that can be
built upon as the sector grows and the CIC program cements its position within the
sector.

Secure some outside funding from venture capitalists to defer start-up costs,
including a coordinated purchased and earned media marketing strategy. The
agreement with venture capitalists should closely resemble the agreement between the
Big Ten Network and Fox Sports Net so that future revenues insure ample funding for
the CIC and its members and also provides enough return on investment for the
venture investors.

Encourage member institutions that might be parts of other consortia in the
emerging sector to grant exclusive rights to the CIC program and drop membership in
other consortia in the sector. This will eliminate brand diffusion in the sector. Further,
it will allow the member institutions to work with trusted partners and exercise more
control over their participation within the sector as the institutions’ relationship with
the CIC and its structures is already well established.
These suggestions are in keeping with the best practices in the field and are based on the
practices of groups already operating within the sector. The planning committee will have many
items to consider and adopting these recommendations will speed the planning process and allow
40
the program to launch sooner. Further, The report authors are available to serve as consultants to
the planning group and help the CIC launch the new program.
Conclusion
The global winds of change and challenge are once again at the door of large public
research universities. However, this need not be a time of constraint and fear on campus.
Despite increases in global competition and dwindling state support this is a time of great
opportunity and by leveraging existing partnerships and developments in online learning all of
the members of the CIC can seize that opportunity. This will result in an enhanced global
position, expanding brand identity and a long-term alternative revenue source. CIC member
institutions are in a great position to compete in this emerging market and by following the
recommendations outlined above can quickly establish the CIC and its members as global
leaders in this new segment. The time to act is now – your institutions are primed for continued
success and leadership in this emerging market is a key to continuing your centuries of success.
41
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