2.27: EdTech with Phil Hill

Hello. I’m Alex Usher and this is the World of Higher Education podcast.

In many ways, the biggest stories of the last twenty years in global higher education have been stories about technology. Massive Open Online Courses — also known as MOOCs, the rise and spectacular fall of private on-line higher education, the rise (in the United States at least) of major public-sector online universities, and the rise and controversy over so-called Online Program Management providers — or OPMs. And of course, the great global experiment in remote learning that was COVID.

These stories haven’t just been about technology. They have been about some fundamentally different ways in which higher education has been managed and delivered. And what has made these new ways so jarring in a higher education context is not simply that they represent a new type of mixing of private and public sector entities. It is the astounding volatility of the markets in which these companies exist — the fact that the markets within which universities are operating evolve so quickly and the volatility of universities’ corporate partners fortunes as they struggle with new technological and business models.

Today my guest is Phil Hill, an ed tech consultant and Lead at Phil Hill and Associates. Phil is by far my favourite commentator on all issues related to educational technology and higher education institutions and today he joins us to talk about those last twenty years and how they have shaped the sector. We range pretty widely across a number of topics here, but the most interesting ones for me actually had to do with historic role of MOOCs. We agreed that they are a historic failure judged by the claims made about their impact at the time, but Phil argues – pretty persuasively I think, that they might just possibly have been a key turning point in the history of the delivery higher education.

But I’ll let you judge Phil’s argument for yourselves: let’s turn it over to him.

Alex Usher (AU): Phil, I'd like to start this interview by taking us back about 20 or 25 years to around the turn of the century in the early 2000s. At the time, online education in the popular imagination was the domain of for-profit organizations like Capella or Strayer and most famously, or infamously, the University of Phoenix. Why was it that at that time for-profit companies and for-profit universities had the field to themselves, and why did they ultimately fail?

Phil Hill (PH): I think the reason they had it to themselves mostly is there was a prestige issue. Online education was viewed as “okay, we get the need to reach student populations. But if I'm in a traditional school, then that's continuing education or it's somebody else that does it. It's the dirty business. Don't tarnish what we're doing.” The for-profits took a very different point of view: It’s our goal to reach a different student group with different needs and we'll redesign the organization and the structures to be able to reach them. So, they basically just didn't hold themselves back like other organizations did. You did have the Sloan Consortium which enabled a lot of non-profit schools to get an online ad, but they were the exceptions to prove the rule. University of Central Florida, Arizona State, a lot of the online leaders today really got their start back then, but most of the field was non-profit. What they got wrong, and I've done some work deep inside some of the for profits, there were some bad actors. So, first, there were a few schools that were just bad actors. But by and large, what I'd say is the for profits were good on trying to figure out how to serve and support first-generation students, working adults, different student populations, and putting their money into doing it. But they also fell into this trap of always setting their tuition to the max that the federal government would allow for financial aid. So, it became a whole game of maximizing financial aid every single year. I'd say that was the biggest problem. Then I think the runaway success of the University of Phoenix also led to some hubris of “we can keep going forever”. So, I'd say those were the two failure points that happened to a lot of the for profits.

AU: Since the high point of for-profit online education in the United States, which I guess was around 2009-2010, we've seen a wave of non-profit institutions and some private move in to dominate the space, to become mega universities. I'm thinking here specifically Western Governors, Southern New Hampshire, I think those are both in the six figure now student numbers, and Arizona State University must be getting close to a hundred thousand students in the online space. What have those institutions done right that others have not?

PH: Take Southern New Hampshire. I think early on a lot of the talk with the College for America was around competency-based education and some other approaches, but I think more important what they did was almost like a Harvard case study where they said, “if we're going to serve these students, how would we design the university?” Very similar to what I said, for profits did. They just did an excellent job of redesigning the university for the online students. But to their benefit, they also emphasize low-tuition, and service, and finding out how do you serve refugees. If you look at Western governors, theirs was based on competency-based education, which inevitably led to a lower priced education and very much customized to the student. But keep in mind, they started a decade before that, so it was a long time before they started getting huge. Arizona State, what have they done? They've been willing to experiment. They try anything, but they're also willing to admit, “hey, this isn't working. Let's shut down this initiative and go somewhere else.” So, I think all three of those were willing to bet big. But, to recognize that a lot of the bet was long term restructuring and investment in an organization that could meet those phases. I would say all three also emphasize more of the “let's keep tuition under control.” That was core to their ethos for developing the online education. Arizona State University was a little bit more of an access. Why can't we be Berkeley but without any restrictions on size? Let's take this quality and go throughout there. So, I think for those big players, those were the big secrets, if you will, on how they've succeeded so far.

AU: Another major development, say in the last seven or eight years, was that some of those former for-profit giants were acquired by public institutions. Ashford became part of the University of Arizona. Kaplan became part of Purdue. University of Phoenix has been trying hard to sell itself to a couple of universities. What's going on? Why did this happen? What are the purported benefits to public institutions of acquiring these former private for-profit giants? How are these mergers turning out in practice?

PH: You have to start out with Purdue Global. That's where Purdue University acquired Kaplan and turned that into Purdue Global. Mitch Daniels was behind that, who is a very smart politician and financial. So, if you'd say, why did they get started? It's a land grant university. They believe their job is to go reach more students. And here was a chance to really jumpstart that effort and take advantage of the environment of for-profits who needed to get out of the space. And he wanted to serve the state of Indiana. So, Purdue started it. Now, I've written about this including some inside information that even today they've turned around the enrollment decline, but they're just now getting to where they're financials are break even. It's been a long-term investment for them. To be honest, beyond Purdue Global, a lot of what drives it is what I call “Mitch Daniels Envy.” It's a bunch of presidents who say, “Hey, everybody's talking about Mitch. I want to be like him,” and there's a legacy aspect to a lot of these. That doesn't mean these other schools don't believe they should try to serve other students, but a lot of it is prestige and looking to what Purdue did.
Arizona, it’s a disaster what's happening down there. They bought the wrong online school and they completely deceived themselves on what it could do. So, what's happening out there? Now, ironically the University of Phoenix has turned itself around. It's got better enrollment, they've cut way back on their programs to make it manageable, their finances are solid. Ironically, they've turned themselves around, but it's no done deal that they're going to be purchased by Idaho, again, because of the process of buying them. How is it going? It's a lot of schools trying different methods, but in general, it's been unsatisfying results. A lot of it, in my opinion, is based on too much of it being based on hubris as opposed to an honest accounting of what it's going to take to make them successful.

AU: You just mentioned Purdue though as the successful or the relatively among these, the most successful one. What kind of extra reach does Kaplan give them? Now, they're outside of that part of Indiana that they normally serve. How broad is this? Does Kaplan make them? Are they a national or international as the word global would suggest?

PH: It's mostly national, but I think more of their success is in Indiana. Just taking the same institution and rebranding it, it's hard to argue we're reaching new students. Your logo is reaching new students if that's all that you do. I would argue that with Purdue, where they've been successful is that they've turned that into a mechanism to deepen their relationship within the state. Offering free tuition to state employees, and tuition discounts, and expanding. They're more of a national brand. But I think their success and what they've done differently, is much more of a becoming an Indiana serving.

AU: I want to pull us back a bit in time now. I want to go back to 2011-2012 and the MOOC craze of those years. It all looks comically overwrought 12 years later, right? Everything's going to be, disrupted, et cetera, et cetera, and it was all very strange because nobody at the time seemed to have given much thought to revenue but now with the benefit of a decade of distance from that craze, what do you think the long-term effect of MOOCs was?

PH: I'll go to family therapy for this answer. So, Virginia Satir is a family therapist. It was very popular in the 70s and 80s, and she had written the Satir model. A change model that was more family based, but it talked about functioning units of family in her case being in a status quo. Then you have a foreign element that breaks the status quo. You go into chaos, and eventually you find a new idea that sticks, and then that starts to grow, and you get to a new status quo level. The key insight was the foreign element and the idea that sticks are almost always different things. I think MOOCs were that foreign element. MOOCs, along with 2U's initial business model, those were the two things that forced traditional higher education to get over themselves and say, we need to take online education seriously. If Stanford, Harvard, and MIT are saying it's important and pouring millions of dollars into this, who are we to disagree? So, it broke that mentality of leave online to the continuing ed and to the for profits. So the lasting legacy is now you have most traditional colleges and universities who need to say “what's our online strategy” and the answer might be “we don't play in that space or it's very limited on a few programs” but there's very few schools that don't think strategically or at least want to think strategically about online education now. Given that I would also credit MOOCs indirectly with the COVID reaction, if schools hadn't been thinking about online education, if we hadn't been in the place we were, can you imagine COVID if it happened back in 2010? How many schools just would have ceased functioning at that point? So, I'd say those are the lasting legacy.

AU: Phil, coming out of the MOOC craze, there were really two big companies in North America that survived the initial shakeout. So, there was Coursera and there was edX which was a product of MIT and Harvard. And until quite recently, I would say those two seem to have relatively solid futures as independent providers of MOOCs or platforms for MOOCs. But then in 2021, Harvard and MIT sold edX to online program management firm 2U, who you've already mentioned. What struck me at the time was they said it was because they couldn't compete on UX, on user experience. I was blown away by this. If Harvard and MIT with the billions of dollars at their disposal couldn't compete on user experience, who could? I know you've got lots of individual institutions who are trying to create their own internal OPMs, or their own internal platforms the Kitty Hawk Project at UNC, for instance. Was this the high point for OPMs, when they could say, “actually, we can beat Harvard and MIT at this game.”

PH: Financially, I would say it would be a little bit earlier than that in the 2015-16 era. It was when things were really coming into their own, but you didn't have an oversupply of every program trying to do similar things, or too many online programs. Actually, no, I would view the edX acquisition as a low point for the OPM market. The reason that drove it, I don't believe was User design UX. I think UX describes why edX wasn't as good as Coursera. They always had a throw spaghetti against the wall strategy. They never had a strategy. They tried everything. They had tens of millions of registered learners, but no real strategy. Whereas Coursera was a lot more deliberate. So, the numbers might show them similar. But, I think that they were different. The reason 2U bought them was all about the cost of acquisition. It was about finding a way to be able to not pay as much money to Google, Facebook, Instagram, what all the young kids use these days. So, it became an email list. That's oversimplifying it. They overpaid for it. That was a huge problem. I don't think it was based around the UX. I think the UX issue was one of the reasons they couldn't compete with Coursera but from the OPM perspective you had the second player MOOC, even though it had tens of millions of learners, that didn't really have a strategy and Harvard and MIT didn't know where to take it next. Then you had 2U who had another need, and it was a marriage they made that the dowry was too high.

AU: So very soon after the sale of edX to 2U much of the OPM market collapsed, right? 2U’s value is down, I think about 95 precent, and you've been talking about them being in an end game position. Keypath is down 90 percent plus, Coursera at one point was down 75%. What was it about 2022 exactly that made this whole market collapse? Was it just the interest rates spikes, and interest rates spikes meant that companies whose business models depended on near zero financing costs were suddenly in trouble or was it something else?

PH: I think even before 2022, you had an oversupply. There were so many online programs competing with each other. Then you add to that the cost of digital marketing, the cost for AdWords for the digital marketing going to the big tech firms, which going higher and higher, partially because of many of the program are bidding on the same words, but also for other reasons. So that was already happening making it more difficult for individual programs to scale. In aggregate, you see the numbers going up, but I think individual programs already had stress. That's again, why 2U bought EdX. But, the proximate cause, or what the financial crisis is, as you said, it's the cost of money. When you are borrowing money, almost assuming that it's essentially zero interest rate and then all of a sudden, the entire environment changes, in two regards. First, the cost of loans because you have to you know renegotiate or re-up your loan if you can't pay it off. But there also has been a huge change in the investment environment. Equity for companies and investors are no longer enamored with EdTech and online education and OPM companies. That's why their stock value's gone down, but that also means they can't use equity as additional money to fund this. So, it just it's almost a perfect storm of multiple variables coming to a head in 2022. The biggest individual one to trace it to is the interest rate, however.

AU: You published some data recently about the U. S. online market that I found absolutely astonishing. You had posted, and this was based on some data from IPEDs. 25 percent of post-secondary enrollments in the U. S. are now fully online and another 25 percent or so are at least partially online. I had no idea the market was that big. What do we know about these two groups of students? How similar are they to each other and how different are they from other students? I'm asking partially about demographics, but also about which, which subjects are they clustering in, if any?

PH: It's interesting if you trace this growth back to 2011 or 2012, when we really started getting good data to separate this out. The growth rate has pretty much tracked the same for fully online and students taking some online, some face-to-face, and both of those have been growing, and at the same time what's going down is students who take no online. Fully online students very much are centered more into working adults, and people in situations where they can't go to campus. They have a family, they're working, they only have time at night to take classes. Sometimes it's convenient, but you have a lot more of that. Students taking one online course is much more, “hey, I have a face-to-face program, but I want to graduate, and I can't, I have two overlapping face to face courses. I need to take both. I'm going to take an online.” Or increasingly, students just saying, “I like having the flexibility of online courses, even if I'm sitting in my dorm room for half the time.” So, I do think that the populations are naturally different in a broad description that way. But I also think that there's much more of a strategic move for institutions to view this as no longer as bimodal (online and face to face), but the need to say there's much more of a mixture or a spectrum across the board and students should have the flexibility to migrate between partially online, fully online, no online. I think you have that. Now, as far as what where you have the clustering, a lot of the highest usage of online is in business, online MBAs. Master's degrees are probably the simple answer for fully online. Subject wise, business, nursing, some health fields is where they tend to cluster, whereas at least one online is much more broad based, undergraduate, graduate, and across disciplines.

AU: Do you see any other countries where online education is taking this kind of share of the student numbers? Obviously, you've got countries like Korea, India, Bangladesh, where you have very large open universities, and some of that is online. Some of it's still on paper in South Asia. But are we seeing widespread adoption of online learning happening anywhere else at the speed it is in the United States? And if so, how are they making it work? Are they doing it through OPMs and that kind of thing?

PH: You do see followers in the English-speaking world. So, you're seeing a rising online usage in the UK, Canada. It's somewhat following the U. S. model. You're right that the biggest online are the open universities and the national universities. Spain is another country; it’s got a very large presence there. Australia is a little bit different. Australia is a country where the population's very much on the periphery of the country at large distances and for a long time they've done stuff with online education ahead of the U. S. and in different ways. I found that they've collaborated and used online to collaborate institution-to-institution in a richer way before the U.S. does. So, to answer your question, there's no other country that's in the same structural mode with the same growth rate as the US that I’m aware of.

AU: I can't let this interview end without asking about COVID. The pandemic normalized online learning in much of the world. But at the same time, the snapback to in person has been pretty substantial. Now that we're a couple years clear of the worst of the pandemic I guess we've got a little bit of perspective. How big an impact did the pandemic have on the online industry? To what extent was it a decisive no going back event? And to what extent was it a flash in the pan?

PH: First of all, if you look at the numbers, I think that obviously online went way up in 2020 and 2021. Then there was, as you called it, a snapback, but the snapback didn't go back to the previous trajectory. So, if you just trace online growth and what it would've been because it was linear growth, it snapped back still to a level that's higher than that. So, going back up again. There's a step function. It's provided taking it up to a new quantum level but then continuing similar growth. I think for more of a descriptive standpoint, part of what it did is that so much of the discussion, including with faculty about online education was that it's bad, it's inferior, and is it good? And there was this finger-pointing at each side. Part of the benefit of COVID, I'm not saying I'm pro-COVID and let's do it again, but it got almost everybody to experience online education. So instead of talking about something they'd never done, you have better conversations now. You have all of the “get back to the classroom,” which became political, you have the zoom university, which is a legitimate criticism, but I actually think that the dialogue, the learning that's happening within the universities is richer now because most faculty and students and even administrators say “I've actually participated in this, and I know what I'm doing.” So, I think part of the future growth is we're actually in a healthier level because of COVID and you have a little bit of a quantum jump as well. So, both of those, I think have done it.

AU: Last question. What's the future? If we come back and have this conversation in 10 years, what do you think the state of online learning will be? Will uptake among students be much higher? Will OPM still be around in some form? Will anyone remember what MOOC stood for?

PH: First of all, I think it will be much more blended that whole point about it not being bimodal. You're not going to get to 100 percent of students being online or all courses being online. It's going to be much more of a multi-modality option for students. Online will be pervasive, but it won't be up at 100 percent adoption and there will be much better student mobility. For example: this semester, I need to do mostly online, but next semester, I don't know. Ironically, you probably won't be talking as much about semesters as well, largely due to online. I think you're going to have a lot more of the frequent starts and stops and a little bit more of the personalization on scheduling. That's happening with students. Now will people know about MOOCs? That will be interesting. If you look back, I think that there's so much political dialogue and higher education has such a long-term memory that I think the answer is yes. Now it might be distorted, and people misremember what things are, but higher education Still operates emotionally by remembering what happened 15 years ago. In the LMS space, they're still talking about Blackboard and when they bought web CT. In the online space, there's still so much of a focus with for profits. So yes, I do think people will know what MOOCs and OPMs are, no matter what the current form is when we get to that. But I'd say the biggest description of what the future looks like is much more blended multimodal. student mobility. That's a little bit aspirational, what I want to see as well as what I think is going to happen, but I think that's the direction we're heading.

AU: Phil, thanks so much for being with us.

PH: Thank you. I really enjoyed it.

AU: And it just remains for me to thank our excellent producers, Tiffany MacLennan and Sam Pufek, and you, the listener, for tuning in. If you have any questions or comments about this episode or suggestions for future ones, please don't hesitate to get in touch with us at podcast@higheredstrategy.com. We'll be off next week, but in two weeks time, join us again when we will be with Michigan State University's Brendan Cantwell. We'll be talking about the culture wars in American higher education, and paradoxically, why funding is actually looking very good. Bye for now.