Are MOOCs Bad For Business Schools?

The MOOC revolution is upon us. Top B-schools such as Wharton, MIT, and Duke are offering classes online for free or deeply discounted rates. But are they cannibalizing their own potential MBA candidates in the process?

It’s a question that has dogged B-schools from the advent of the cyber courses. A new study by the University of Pennsylvania’s Wharton School offers one answer: online education MOOCs aren’t a threat; they’re a market opportunity. The study surveyed 875,000 students enrolled across nine Wharton MOOCs, and the results, published in the Harvard Business Review, conclude that MOOCs reach three new student populations: foreign-born Americans, under-represented American minorities, and students from outside the U.S.

“There’s a latent demand to take these kinds of courses online,” says researcher Gayle Christensen, executive director of Penn Global. She points out that some 45% of the MOOC enrollees hail from developing countries. Overall, 78% of the MOOC participants surveyed came from outside the U.S. – for comparison, Wharton’s Class of 2015 is 35% international.

MANY MOOC STUDENTS ARE UNLIKE THE TYPICAL MEMBERS OF AN MBA CLASS

Even American enrollees in the Wharton courses represent a departure from the traditional B-school candidate. Under-represented minority students constituted 19% of the U.S. online education MOOCs participants, compared with 7% in Wharton’s ’15 MBA class.  Interestingly, 35% of all U.S. individuals enrolled in the Wharton business MOOCs are foreign-born, compared with only 12.9% of the U.S. population as a whole.

Based on this different demographic, the study’s researchers conclude in the Harvard Business Review that “MOOCs run by elite business schools do not appear to threaten existing programs, but seem to attract students for whom traditional business school offerings are out of reach.”

It’s a compelling conclusion – bringing business education to the masses. But the leap to removing the threat (“MOOCs do not appear to be cannibalizing existing programs”) seems a bit of a stretch and a convenient conclusion for a business school currently offering them. After all, business schools need to make money to survive.

NO EVIDENCE TO SUGGEST THAT MOOCS PROMOTE ENROLLMENT IN PAYING PROGRAMS

So are these new student populations actually signing up for expensive MBA and executive education programs? Christensen says more research is necessary for the revenue portion but suggests that online education MOOCs may benefit schools in less financial terms. “My sense is that when I’ve spoken to the faculty  it can help augment their teaching … then they can bring that back to the classroom in new ways,” she says. Co-researcher Brandon Alcom, Penn Global project manager, adds that MOOC research provides a playground for experimenting with new ways of instruction.  “I think that’s one of the great frontiers of MOOC research …there’s the possibility of tracking student learning in a way that isn’t possible in a non-technology-assisted classroom setting,” he says.

But as schools devote more resources to MOOCs, the cash cow programs like executive education will undoubtedly take a hit. At Wharton, exec ed accounts for  20% of the annual revenue; that figure jumps to 26% at Harvard Business School. MOOCs often draw top faculty, technology and resources, creating at the very least a distraction from programs for paying students.

One thing, however, is clear, schools need to rethink the current MOOC monetization model. Many offer a certificate of completion for a fee. However, the Wharton study found that only 5% of enrollees completed all of the course material and assessments. Moreover, less than half (43%) indicated that a completion certificate was “extremely” or “very” important.

The researchers recommend that schools explore monthly subscription or “freemium” models where users can pay extra for consultations with professors or tutoring time with a TA. Alcom predicts that future payment models will exist along a continuum, with highly personalized instruction at the most expensive end and automated or mass teaching experiences at the other.

MOOCs may be expanding their reach and exposing new populations to business education, but they aren’t the “end all, be all,” according to Christensen.  “There’s going to need to be scaffolding around this tool…there have to be other things involved in creating the ecosystem that will allow people to take advantage of this.” For students in developing countries, things like Internet access and higher learning are important prerequisites. For administrators in the U.S., a successful monetization model will likely be the next big focus.

DON’T MISS: The MOOC Revolution: How To Earn An Elite MBA For Free or 25 Essential Business MOOCs For June