Tuesday, September 15, 2009

Survival Strategies

Speculation is rife that the brick and mortarboard, chalk and talk higher education establishment has reached senescence. The particular charge is, that Edusaurus rex has grown thick-limbed on the richly oxygenated air of heavy government subsidies and cannot survive the change in economic conditions, which now favor the fleet-footed Cyberdon meme, which potentially can deliver the same product much more cheaply and conveniently. Let me elaborate on this cataclysm with a (cue crashing thunder)...

Worst Case Scenario. Imagine an unholy union, birthed on a Friday the thirteenth midnight in a graveyard, between University of Phoenix and Wal-Mart. Because continued exposure to "that which cannot be named" may have unpleasant physiological effects, let us call it Yoyo U to disguise this chimera in polite conversation*, or more formally as Cyberdon yoyo.

The trough of state and federal money for higher education is deep and broad and as untouchable as a third rail. The bricks and mortarboard institutions have gobbled it up, burped, and said "more please!" before even using a napkin. To get into the feeding pen and belly-up to the rich public broth, one must first pass through the baleful gaze of the accreditors and weather their harsh words and blows from compliance prods. Imagine though that Cyberdon yoyo passes this gate, slips in unannounced, and proceeds to feed. And reproduce.

As a rule of thumb, provided that you can talk your students into taking out loans, you can count on about $10K per student per year without them having to dip much into their own pockets. In fact, the way the loans are set up, they can sometimes take out extra money and buy a bass boat too. I've actually heard "College Eks is paying me to go to school." But yoyo is bred for value, and manages to wholesale price its educational product at subsidy level: any student--particularly PELL-eligible students with high enough GPAs to qualify for some state-based merit aid--can attend nearly for free. To be sure, this requires a very clever financial aid digestive system on the part of the Cyberdon, but this is a worst-case scenario, remember.

Of the 170 or so small private liberal arts institutions, I suspect many of them depend on bread and butter students like the ones described: some need, good credentials. More generally, any institution that depends on state and federal aid would see fierce new competitor gobbling up part of their PELL and potato stew as true discount education comes to the masses.

At first, Edusaurus laughs at the scrawny little unattractive furry beast. It makes jokes about the quality of the product, and mocks the labor standards. But by and by, the weather turns chilly, and there are suddenly a LOT of little yoyos running around, gobbling up all the best parts of the stew.

Eventually, because of shear scale, Cyberdon yoyo can offer services that Edusaurus can't dream of. Free textbooks for class, and high quality ones too. A massive online library. A return policy that can't be beat. Gift cards for a PhD. True, the selection may not be as great as one would like: there are no Masters of Applied Ambiguities degrees or Historiogragraphy of Post-Colonial Xenobiology courses, but you can find what you need, and it's cheap. And you can get a degree while working full time! Heck, all you need is a smart phone--you can take classes while driving down the interstate!

What happens to the small colleges that then have their customers staying away in droves? I think it's safe to say that if this scenario plays out, many venerable institutions will face unplanned obsolescence. The ones that survive this K-T boundary, like the alligator, need to find an undisturbed ecological niche.

There are still bookstores. Amazon.com and bn.com didn't kill the traditional bookstore. You'll notice that you pay a lot more in Borders or Barnes and Noble stores than you do online, but you can buy coffee and hobnob with other customers. It's a social activity to shop for books in person. The bandwidth is higher in real life (see my last post), which allows for a richer experience, and some people will pay a premium for it. That gives us our main question to drive survival of the small privates.

What's special about being here? Don't look at things you'd wish to be different as much as what you do well. Close to the beach? How can you take advantage of that? In a major city? What unique benefit can you leverage for your students? What is it that's worth paying a premium for?

A perhaps less palatable question is this: how can you subsidize your traditional program with cheap-to-operate secondaries like online and evening school? The latter has a built-in advantage over yoyo because of locality--if it's convenient and customer service is excellent. Online programs probably need to be limited to a very few, very good ones--something you can specialize in . Maybe the Masters of Applied Ambiguities is your niche.

If it's liberal arts you're into, it's a lousy brand. Fix it. I'm not saying the product is bad, but the marketing generally is. Answer the question: what does liberal arts mean in terms of the graduate's career? See my post about the mismatch between expectations and reality here:
The bottom line is that we discovered that many of our students don't understand the product they're buying, and we don't understand them very well either. It's not the kind of thing one can slap a bandaid fix on, but will require a complete re-think of many institutional practices.
Get some young people involved. Youth may be wasted on the young, but only they understand exactly how it's being wasted. If your strategic planning group is all over 22, you have a problem.

In general, survival means always looking for an edge to increase the probability of making it one more year (details). This will become critical if the easy meals become harder to find. I heard someone say once that success is a big predictor of failure. The point was that complacency is not conducive to increasing those probabilities. At this point, I think there's plenty of opportunity to find a niche. But there are only so many niches, and to mix metaphors, the music will stop at some point leaving a bunch of Edusaurus species with growling tummies.

[Edit: I changed cybercodon to cyberdon as easier to say and arguably more accurate]

Update 10/8/2009: See "Served, Yes, But Well-Served?" from Inside Higher Ed. Quote:
The list published by the Student Lending Analytics blog last month jumped off the computer screen: Of the 10 colleges and universities whose students received the most Pell Grant funds in 2008-9, 7 were for-profit institutions.
The article goes on to speculate about the meaning of this, but one thing is clear: Cyberdon is through the gate. The big players in the online market aren't heavy discounters aiming for the best students--that's not where the easy money is to be made right now. Judging from the article (and looking at the Pell grant numbers), the opposite may be the case: find students who have trouble getting into bricks and mortarboard institutions because of their own qualifications or because of overcrowding at two-year schools. It's a kind of captive audience. Squeeze out all the subsidies and loans you can, and keep the price high. As long a students are willing to take out loans, there's no downward price pressure.

See also: "Scaling Higher Education" and "End of the World, Etc."

*I mean no disrespect to either institution, nor to the idea of low cost ed. I got the moniker like this: University of Walmart = U of W = U of (UU) = (UU) U, but You-You is easier to say as Yo Yo, hence Yo-Yo You. Logical, no?

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