Notes for the June 4 - 5, 1997
NLII-ITP Symposium on Creating and
Delivering Collegiate Learning Materials
in a Distributed (Networked)
A Business Model for University-Corporate Collaboration
by Carol A. Twigg
Acknowledgements: These notes draw heavily from the 1996 Educom monograph,
Academic Productivity: The Case for Instructional Software; the 1997 Educom-IBM
monograph, The Virtual University by Carol A. Twigg and Diana G. Oblinger, a
product of a joint NLII-IBM symposium; and from an unpublished article, Time for
Nationally Authorized Universities by Robert W. Tucker and John Sperling. In
addition, Carolyn Jarmon of Educom and Bob Carlton of ITP have made substantial
contributions to the development of these notes.
Part I. Assumptions Regarding The Current ModelWhat follows are a
number of facts and assumptions about the four phases of the current process of
creating of collegiate learning materials and using them in credit-bearing
courses: 1) content assembly--the creation and maintenance of learning materials
(e.g., textbooks, instructional software, and so on); 2) the marketing and
distribution of those materials; 3) course delivery--the use of those materials
in credit-bearing instruction; and, 4) the certification of the learning that
results (e.g., award of academic credit, accreditation of the instructional
provider, and so on.)
As you read these notes in preparation for our discussion in Boston, please
be ready to add your own assumptions or to challenge any that we have listed
here. Our goal is to develop an explicit understanding of the current business
model, including the workflow and financials underpinning it and a clear picture
of what each potential partner brings to the table.
GeneralWho's in control?
- Accredited institutions of higher education control the place, the
content, the delivery, and the quality of education through a process of
aggregation. Instruction, assessment, degree granting, content development,
content delivery, quality of service, and compliance with government
regulation are all in the control of these institutions.
- Publishers respond to higher education as a customer by organizing data
into teaching and learning solutions.
Higher education is a diverse market, in both its institutions and its
- There are four distinct kinds of institutions (both public and private):
Research universities (R1 and
Residential liberal arts colleges
colleges and other two-year institutions
- Six distinct groups make up higher education's population.
Group 1: 3.9 million traditional undergraduate students--ages 17 to 24,
seeking a bachelor's degree and enrolled full-time at a campus;
Group 2: 650,000 traditional graduate students--ages 22 to 34, seeking
either an academic or professional master's or doctoral degree and enrolled
full-time at a campus;
Group 3: 2.9 million semi-traditional undergraduate students--ages 17 to
24, seeking a bachelor's degree and enrolled part-time at a campus, usually
working part-time in a non-career, entry-level job;
Group 4: 487,000 semi-traditional graduate students--ages 22 to 34, seeking
an academic master's or doctoral degree and enrolled part-time at a campus.
(Employment varies among this population. Some have part-time work in a
variety of campus and off-campus non-career jobs. Others work in full-time
careers, e.g., school teachers, principals and superintendents or college
teachers completing their doctoral degree.);
Group 5: 5.3 million non-traditional undergraduate students--ages 25 and
up, they are career-oriented members of the labor force, usually seeking a
first degree in an on-campus or off-campus program, enrolled full- or
Group 6: 880,000 non-traditional graduate students--ages 25 and up, working
full-time in a chosen career, enrolled full- or part-time, seeking a
professional master's or doctoral degree in an on-campus or off-campus
- Delivering educational services for credit is higher education's primary
source of revenue. (Research universities and well-endowed private colleges
and universities also generate significant revenue from research and
endowments, but these sources are not typical of most institutions.) Their
ability to generate revenue is severely constricted by public policy (public
institutions) and by their non-profit status (public and private
- Publishers generate revenue by selling products and services to consumers.
In the current model, buying decisions are "intermediated" by college faculty.
The higher education market is in flux; it is not a stable market.
- This market is being affected by changes in students, in technology, and
in providers. (Part II describes these changes in greater detail.)
- Higher education is an expanding market, a growth industry. Based on
demographics alone, an increase of some 2,000,000 traditional-age college
students is expected in the next ten years, a growth of 14 percent in just one
decade. Add to this the increase in older and employed students seeking skills
enhancement and continuing education, and the numbers go much higher. New
learners coming from the workforce are projected to add more than 20 million
full-time equivalent (FTE) students by the year 2000.
The current relationship between publishers and higher education is
primarily a supplier/consumer relationship; it is not a partnership.
- Higher education has traditionally dictated the content of what is
- Large undergraduate enrollments are concentrated in relatively few
academic areas. 44 - 52 percent of community college enrollment is
concentrated in 25 courses; 35 percent of baccalaureate enrollment is in these
same courses. Put another way, about 1 percent of the nation's courses
generates nearly half of its total enrollment.
- The "One Percent" course titles include introductory studies in English,
mathematics, psychology, sociology, economics, accounting, biology, and
- In many large institutions, those courses are not "owned" by individual
faculty members in the same way as are advanced level courses. They are
frequently not "owned" by any curriculum in particular but rather serve as
feeders to multiple programs.
- In the textbook development model, publishers pay faculty outside the
- When a textbook is published, the faculty member provides the content, and
the publisher produces the book.
- Faculty are generally not recruited as pedagogical experts but as content
experts; others serve as pedagogical experts.
- Faculty or other experts serve as "authors" but additional personnel are
needed for effective presentation of materials.
- Authors play a pivotal role on the product development team.
- Authors of textbook materials include both college faculty and
- Most textbook content is not new but rather represents restated or
rearranged, known content. Consequently, faculty developers are not creating
something new or unique.
- In the overall cost of content development, about 40 percent goes to
content assembly and 60 percent goes to production.
- Content has traditionally been assembled for use in a linear model of
learning. Custom publishing has begun to break this linear process into a more
- A package or aggregated product is the norm with custom publishing
representing less than 5 percent of the total.
- Texts and other instructional supports are field tested before they are
put on the market. Field test sites are selected based on market size, quality
of program, and fit with the target market.
- On innovative or reform-based products, publishers have partnered with
institutions or consortia to beta test. In some cases, publishers have
partnered with institutions to co-develop content or courses.
Marketing and Distribution
Characteristics of the market
- Markets are segmented by level of education (K-12, community college,
baccalaureate, graduate, etc.), by subject area and by geographical location.
- The overall value of the college textbook market is $1.5 - 2.0 billion.
- Products are differentiated by point of view, breadth and depth of
coverage, and instructional supports for faculty to use in teaching.
- In order to make it viable, the number copies of a textbook that must be
sold is a function of the investment level required in terms of design, color,
production values, royalties, and the size and complexity of the instructional
package that is required.
- About 15 - 20 percent of textbook revenue is allocated to marketing and
distribution vs. 35 - 40 percent of revenue for content assembly.
- About 70 percent of textbook adoption decisions rely on individual faculty
decisions vs. 30 percent on committee or departmental/program adoptions. These
numbers nearly reverse, however, when revenue is considered: about 60 percent
of market volume (revenue generated) relies on committee adoptions vs. 40
percent on individual faculty decisions.
- Committee vs. individual decisions vary based on type of institution and
geography. As the use of part-time or adjunct faculty has increased, committee
selection has also increased.
Sales and marketing
- Sales and marketing personnel are responsible for generating revenue, with
both teams on a base and commission plan.
- Sales are focused on faculty or teams of faculty through choice of text.
- Marketing is done with faculty, usually by personal visits or phone calls
by company representatives and/or direct mail.
- Texts are supplied free to faculty for review and possible adoption.
- Faculty expect students to read texts of faculty choice.
- Pricing is increasingly a factor in choice or adoption of text by faculty
as well as in consumer purchase at comprehensives and community colleges.
Pricing is not a primary factor at research universities and liberal arts
- Print advertising is done selectively.
- Texts are sold in an institution's bookstore and priced to compensate the
intermediary (75/25 split).
- Unit sales of textbooks have declined. For example, in 1987, in a
100-student class, 80-85 students would buy the textbook; today, only 40 of
those 100 buy a new textbook, 20 buy a used textbook, and 40 do not buy
- Revenue, however, has remained static; the decline in units sales has been
offset by price increases and new product offerings.
- Higher education is a campus-centric system that is both place-constrained
(the campus or the classroom) and time-constrained (delivered according to an
academic calendar and a specific course schedule that is controlled by the
- The campus-centric model assumes that students will choose from a
campus-established set of courses and curricula. Control over the content is
in the hands of the provider--the faculty or the institution.
- Administrative functions such as admissions, financial aid and
registrarial processes are set up for the convenience of the institution
regardless of the needs of the consumer.
- In today's academic culture, responsibility for course content and
delivery rests with the faculty.
- Faculty select appropriate and desirable content designed for a group
rather than for individuals.
- Course materials are selected by the faculty but purchased by the student.
- Most faculty perceive conveyance of knowledge as their most important or
- In addition to assigning traditional textbooks, other models include
faculty selecting and assigning readings from a variety of sources or complete
reliance on lecture and/or laboratory.
- The predominant model of course design is that faculty use textbooks and
their structures as the basis; exceptions are in advanced humanities courses.
- Course design most often assumes that knowledge acquisition is linear or
- Evaluation of learning is integrated with acquisition of learning.
It is not clear that institutions are committed to student academic
- Higher education is comfortable living in an environment where a large of
number of students who enter our doors do not leave with any token of
achievement. We are satisfied, for example, with such things as:
--freshmen failure rates of 60 to 70 percent;
--extension of the freshman year to eighteen months due to closed sections
of basic introductory courses in English and mathematics;
--a 28 percent loss rate between the freshman and sophomore year despite
the existence of remedial summer programs before the freshman year;
--satisfactory completion rates for the "One Percent" courses of 64
--community college systems where only 9 percent of the students who come
wanting an associates degree actually secure an associates degree;
--four-year schools where less than 40 percent of the students get
baccalaureate degrees within seven years;
--graduation rates for all but the most selective institutions in the 43 to
53 percent range;
--five- rather than four year-baccalaureates due to students' inability to
take the courses required to complete their degrees.
- Higher education's funding formulas are based on enrollment ("time
served") rather than successful completion.
Course offerings: who does it? how are they compensated?
- Institutional resources are expended primarily on personnel (salaries and
benefits) and on facilities rather than on learning materials.
- Only a few college administrators can provide cost per unit of service
statistics for each of their educational programs.
- There are a variety of compensation approaches for faculty: 1-, 2-, 3-,
4-, and 5-course loads for full-time faculty (differentiated by institutional
type) apply to about 55 percent of the nation's faculty. Forty-five percent of
instruction is offered by part-time or adjunct faculty.
- At many of our leading universities, freshmen and sophomores rarely see a
tenured faculty member. They are taught in the main by graduate students or by
adjunct and temporary instructors.
- A shift is occurring in higher education where increasingly the
institution is, in a sense, buying content which it can control. We are seeing
tremendous growth in the number of courses taught by untenured, part-time,
adjunct, or temporary instructors. In addition, the decision-making structure
of many community colleges, continuing education and distance learning
programs is institution-based rather than faculty-based.
- Typical compensation for developing a course, regardless of delivery mode,
ranges from $1500 to $4000 on an adjunct or overload basis.
- Typical compensation for teaching a course, regardless of delivery mode,
ranges from $1500 to $3000 on an adjunct or overload basis.
- Some schools pay per enrolled student, typically $100-$150 per head, for
teaching distance education courses.
- Ownership of the course usually rests with the institution.
- Many publishers are currently involved in course delivery in the
workforce/career development segment.
- None are involved in credit-bearing course delivery.
Certification of the Learning
Higher education is a highly regulated industry.
- Institutions operate under the rules of more than sixty-five accrediting
associations, fifty state licensing agencies and, increasingly, the U.S.
Department of Education, the U.S. Department of Defense and the Veterans
- Accreditation ensures some measure of quality control by controlling the
providers of education.
- In many fields, degrees are needed to obtain a job. The possession of a
degree indicates a desirable/reliable collection of knowledge.
- The regulators of the higher education market--accreditors, state agency
officials and a variety of federal officials--have constructed capital and
labor intensive "input" standards (e.g., numbers of books, seats, Ph.D.'s, and
the quality of the students who are admitted) that they believe will ensure
that the education offered by institutions they license or accredit has value.
- Policy makers manage public resources by regulating competition (reducing
program duplication) and restricting who can award degrees and grant credit.
- In 1993, only thirty-four institutions of higher education operated in
more than one state and only nine of them operated in more than two states.
Out-of-state programs had a combined enrollment of 47,000 which represented
0.3 percent of total higher education enrollment. Twenty-six states had no
students enrolled in programs operated by out-of-state regionally accredited
institutions; twenty states had less than 1 percent in out-of-state
enrollments and four had less than 2 percent.
- In eleven states, including the industrial states of Connecticut, New
York, Pennsylvania and Ohio, no out-of-state institution can be licensed to
These arrangements perpetuate the status quo.
- Authority to grant credit is in the control of the faculty, both
individually and collectively--e.g., individual faculty members decide which
students will receive credit, departments decide which credit is applicable to
what degree, and so on.
- Regional accrediting associations are made up of member institutions who
control the standards by which they and their peers are certified.
- Professional accrediting associations are made up of faculty in the
discipline who control the standards by which institutional programs are
certified. This frequently results in conflicts between an institution and the
association (e.g., accountants wanting five-year degrees, many associations'
insistence on certain library holdings, etc.)
Only accredited colleges and universities grant credit.
- College credit and degrees can only be granted by accredited institutions
of higher education.
- Alternate certifiers (e.g., ETS, ACT) disaggregate the outcome from the
process. However, they can only certify competence; they cannot grant credit.
- Even though the Advanced Placement (AP) exams represent widespread
agreement in the higher education community about subject matter excellence,
colleges make independent decisions about when and how to grant credit for the
- Academic credit banks which provide a repository for students to deposit
credits and, when certain requirements have been met, receive an "accredited"
degree can only be offered by accredited institutions.
- There are institutions without campuses but with a discrete faculty as
well as institutions with neither campus nor faculty which have been
- Many publishers are currently involved in certification of learning in
career or vocational segments.
- None are involved in certification of collegiate study.
Part II. Assumptions Related To The Digital Future
What follows in Part II is a set of assumptions about the digital future
which will affect the current model and create the opportunity for developing
new models. We have included only those things which we believe to be
true--i.e., these statements are intended to be statements of fact rather than
speculation. Again, this list is not complete. As you read, please think about
additions to it--or clarifications--and make note of any you believe may not be
- The communications, computing, and information industries are converging
in the digital environment.
- The digital environment will include a convergence of sound, video and
data with synchronous and asynchronous communication.
- Digital technology will continue its rapid ascent as analog technologies
continue to decline. Microprocessor performance has been increasing at a
relatively constant rate, doubling approximately every 18 months. This trend
is expected to continue.
- The Internet is predicted to grow at a compound user growth rate of 62
percent between 1994 and 2000. Conservative estimates put the number of
today's Internet users at around 50 million. Predictions are for over 1
billion users before the end of the decade; network traffic will exceed
- Bandwidth will see the most revolutionary change in the next decade. While
computing power is estimated to increase 100 fold between 1990 and 2000, the
expansion in bandwidth is anticipated to be between 800 and 1,000 times. The
expansion in bandwidth will allow such things as the delivery of multimedia
directly to the home.
- The rate at which new technologies are penetrating business and the home
can be expected to increase.
- More than 40 percent of adults own a computer.
- Proficiency in using technology is now for all practical purposes a
required competency in the workforce; it is becoming another basic skill.
Sixty-five percent of all workers use some type of information technology in
their jobs. By the year 2000, this will increase to 95 percent.
- The capacity for individuals to use technology both independently and
collaboratively in their work is increasingly required. No one person has all
the competencies needed in today's high performance workplace; collaboration
- By the year 2000, 50 percent of the working population of the United
States will be employed in home-based businesses. Telecommuting is becoming a
way of life.
- Increasingly, we are experiencing the permeation of network use throughout
society. Entering students will arrive on campus network-savvy and our
graduates will move into a world increasingly reliant on networked
communications. Even in many traditional institutions, the majority of
students live off campus and, in part, telecommute to their campuses.
Networks and networked information lead to disintermediation,
disaggregation, diffusion and differentiation.
- Information technology places pressure on the middleman. Computer networks
offer the possibility of disintermediation--the consumer accessing services
and information directly rather than going through an intermediary (such as
ATMs, travel information, stock transactions, and so on.)
- All of our modern technologies with rapid diffusion rates (high consumer
acceptance) have been personal and disintermediated. Personal mediation is
moving to the background while "user friendly" and simplified but "smart"
automated mediation moves to the user interface.
- Diffusion implies that the more something is used, the more value it has
(such as the telephone). As Perelman puts it, "A few television sets are a
novelty; one hundred million televisions define a way of life."
- The impact of diffusion can be seen in the rate of increasing returns
(Paul Roemer), assumptions that now drive many technology companies' business
models. For example, Microsoft is able to leverage their installed base of OS
to make the cost of sales approach zero in the introduction of new products.
- Technology drives us toward disaggregation. It enables us to disaggregate
the place, the content, the delivery, and judgments about the quality of
education. By separating instruction from assessment, teaching from degree
granting, content development from content delivery, and even service from
compliance on the part of government, traditional roles are redefined and new
- Information products and services are being repackaged to cater to the
desire of consumers to disaggregate the packages that publishers, librarians,
and even authors have been using to produce and distribute research
- Teachers and learners wish to disaggregate the one-size-fits-all packages
of the courses and the textbooks that have characterized learning environments
for the past several hundred years.
- Disaggregation enables "mass customization" where learning materials may
be customized by the instructor as well as the learner.
- Technology also enables differentiation of products and services; they can
be combined and used in different ways for more than one purpose to meet
Desirable Characteristics of Instructional Software
- Instructional software needs to be disaggregated: to allow users to have
the ability to pick and choose and use pieces as needed in diverse learning
environments, to combine and re-combine if desired.
- Software that is differentiated can be combined and used in different ways
for more than one purpose to meet different needs (for example, in high school
classes, community colleges, introductory courses in universities, corporate,
government and military training settings).
- Software that is diffuse seeks to be used by lots of people to drive the
price down¬in other words, is scalable. For example, it is designed for higher
education as an industry rather than for a particular class or institution. It
costs the same to build a software module for one person as for a million
people; therefore, in order to be profitable, software must be scalable.
- Such software makes use of those technologies that have widespread use,
like the personal computer or the television or the Internet, rather than
depending on the creation of new or specialized technologies.
- Instructional software needs to be disintermediated--that is, capable of
being used by learners to a large degree without human mediation. The same
software should have the capability to be used in a traditional classroom
setting or by individuals studying at their own pace, off campus.
Impact on Higher Education
The wired campus
- Campuses are going to be wired with or without new instructional models.
Institutions have already made¬and will continue to make¬huge investments in
- In the past, institutions have felt compelled to "provide" the
infrastructure by building computer labs on campus. But increasingly, students
are buying the technology just as they buy textbooks. For example, about half
of entering freshmen at the University of Wisconsin-Madison arrive on campus
already owning computers, mostly laptops, many with CD-ROM drives. The
availability of less expensive, "network" computers promises to accelerate
- Academic and administrative services offered by traditional educational
institutions are changing to accommodate this consumer-focused environment.
University systems use computer technology to streamline financial aid offices
admissions and registrarial procedures.
The Net expands opportunities
- Distance-learning technologies, such as the Internet, and to a lesser
extent, cable and satellite-based systems, enable learners to access education
whenever and wherever they want. Online experiences offer educational
opportunities to millions of learners constrained by time, location, or other
- Communication, computing, and networking technologies expand the reach and
range of traditional residential colleges and universities and enable students
to synthesize on-campus with online experiences.
- Other students, particularly working adults, are opting entirely for
online educational experiences that provide them with the education and
flexibility they need.
- The online experience allows colleges and universities to project
themselves far beyond their physical locations. The place of higher education
is shifting from the classroom and the campus to the workplace, the home, the
library, the network. Students are able to access learning from a variety of
- The time for learning is also changing. Communications technologies enable
a shift toward asynchronous rather than synchronous learning experiences,
which makes learning available seven days a week, 24-hours a day. Increasingly
learners use networks to interact with their peers, their instructors,
professional experts, and other information resources; they are doing it when
it is convenient, not simply during scheduled class times.
- The network expands options for interaction among faculty and students;
external experts are more easily accessed.
- The opportunity for faculty to individualize learning to account for
previous experience, style of learning and preferred pacing and to personalize
contact with students is increased.
- The online format can significantly expand the availability of continuing
education programs and offerings for recreational learners as well.
The Net challenges regulation
- New developments in technologies and the explosive growth of networks will
continue to erode the geographic hegemony of higher education. Students will
be more likely to select educational institutions based on offerings,
convenience and price than on geography. This competition will not be limited
to the United States or North America; it will be global.
- Communications technology is creating a national and global market for the
production and sale of education delivered across state lines by a variety of
electronic modalities. Today, American institutions can offer electronically
delivered education over the Internet to students living in every nation that
has a telephone system.
- The development of ever more effective electronic modes of delivering
education at a distance challenges the tradition of unfettered state control
Providers and Consumers
- Interactive multimedia and other technologies will change how we think
about providers and who we regard as providers. Learning resources that were
once only available through educational institutions now appear in retail
stores in the form of multimedia software and other computer-based courseware.
Consumers can purchase learning products independently and learn at their
- Historically underrepresented in the traditional model of education,
consumers now collectively spend millions of dollars each year on education.
This buying power will have a tremendous impact on who controls learning.
Part III. Questions About The Digital Future
Part III is intended to be speculative. What are some of the implications of
the characteristics of the digital future described in Part II? What is it that
we do not know about how this future will affect the development of new models?
Please think about your own questions as you read. During our discussion in
Boston, we intend to try to answer as many of these questions as possible.
- What is the rate of change?
- When will the digital environment be sufficiently established to build new
(profitable) business units and models?
- Will disaggregation be sufficiently prized over aggregation by users? By
how many? Why or why not?
- Will users seek learning materials on a just-in-time basis?
- Will students or other users be significant purchasers and decision makers
with many more using their own or employer funding?
- Will the identification of quality be more complex?
- How will users gain information about quality and content? Will there be
new kinds of intermediaries to provide this information?
- Will users want to pay for only what they need to learn rather than a
- Will buying decisions become continuous rather than two or three times a
- How will purchasing decisions be made--e.g., based on price, ease of use,
- What is the rationale for buying instructional software? increased
quality? greater productivity? snazzy technology?
- Will greater access and flexibility lead to greater market opportunity?
- Will mass customization permit a reasonable opportunity to make a profit
via volume sales?
- Will competition increase? Will competition come from not only traditional
publishers but also cable companies, video companies, Internet companies, and
other unknown consortia?
- Will institutions continue to be in the business of materials
Assessment and Certification
- Will assessment of learning be decoupled from acquisition of learning?
Under what conditions?
- Will assessment become a separate market for both documentation of
learning and identification of needs for learning?
- Will certification for degrees decrease in importance?
- Will large corporate or nonprofit organizations increase their learning
offerings to employees or members without the goal of a degree, potentially
by-passing higher education?
- Will certificates be awarded by knowledgeable organizations and companies,
without participation by higher education?
- Will geographical certification of institutions decrease in importance?
Part IV. Is The Present Textbook Model Transferable?
This chart is intended to help us take a look at what transfers from the
current business model and what does not. As you read, please think of other
categories that need to be added.
|Current Market Textbooks
|New Market Learningware
|Direct selling, direct mail
|>Timing of buying
|2x per year
|Sold through intermediaries (bookstores)
|Sold directly to the user via the Internet
|Limited (for faculty); None (for learners)
Part V. Developing A Collaborative Model To Create Network-Delivered,
Interactive Instructional Software, Including A Variety Of Possible Scenarios
For Such A Model.
Increasingly, as they think about how to live and work in a networked world,
colleges and universities are talking about getting involved in developing and
marketing intellectual content in the form of interactive software. Some
companies are thinking about extending their role in the learning environment to
instructional delivery and certification. Scenarios A and B lay out these two
"go-it-alone" strategies and cite a number of issues connected with each. Again,
these notes are not intended to be exhaustive but rather they are designed to
stimulate your thinking and your comments.
Scenario C is based on the assumption that both the publishing and higher
education communities bring something of value to partnerships and that both
stand to gain from them. It does not present an explicit model for establishing
partnerships but rather lays out some questions and issues related to them. Our
intention is to help both sides understand the requirements--and the
complexity--of a new collaborative model to create network-delivered,
interactive instructional software; to clarify our respective roles, including
our strengths and weaknesses; to understand the advantages and disadvantages of
pursuing strategic partnerships; and to identify critical decision points. The
intended outcome of this discussion is a workflow description and business model
for future university-publisher collaboration.
Scenario A: Universities Go It Alone
In this scenario, universities move into the content development and
marketing/distribution space. They raise the necessary capital (through state
investment, venture capital, consortial activity, grants, etc.) to develop and
market products, and they acquire the necessary operational and knowledge
competencies (high quality design expertise, software development expertise,
marketing expertise, timely customer service structures, etc.). The goals of
such a venture are twofold: 1) to develop needed instructional software to
improve the quality of educational services, and 2) to generate additional
revenue streams to supplement current funding. To be successful, this model
requires commitment on the part of the developing institution(s) to use the
software it produces, thus integrating design w/delivery and continuous
Product development is not mission-critical
- The mission critical activity of higher education is the production of
degrees to specified standards of quality, quantity and cost.
- The business of colleges and universities is educating students and
conducting research; it is not the development, production, distribution, and
marketing of products.
- Colleges and universities are organized, financed, and staffed to provide
educational services and conduct research. They are nonprofit, tax-exempt
institutions. Public institutions in particular have specific mandates for
service as a condition of their existence.
- Were they to reconceptualize their mission to become producers of learning
materials¬i.e., to go into business¬they would need to transform their basic
organizational and financial structures, and forego their special status, in
order to compete with the private sector.
Lack of business expertise
- Higher education is presently not skilled at generating business. Most
educators have little experience with developing business plans (for example,
they lack awareness of the potential learningware market.)
- Institutions presently lack structures for business development of
- Higher education lacks a track record in successfully developing products.
- Higher education's executive leaders/decision-makers are generally not
knowledgeable about the IT industry and the requirements of product
development. (This is the understatement of the century!)
- Venture capitalists are unlikely to invest in higher education. Without
the expectation of profit, private investors and entrepreneurs will not make
the investments and take the risks entailed in creating and marketing a new
- Higher education perceives the individual faculty member as the generator
of content and delivery; this view is not suitable for a scaleable operation.
Strategies depending on individual faculty members to develop instructional
software cannot result in a sustainable body of materials.
- Higher education tends to think that faculty can develop software with
only a minimum amount of preparation by using easy-to-use authoring. Software
development, however, is a full-fledged programming job. It is also an
iterative process: as projects progress, additional improvements are always
recommended and upgrades are always needed which, in turn, leads to more
- Despite the potential offered by instructional software, most
institutions--even those who have worked hard to create them--have failed to
integrate their use into their academic programs (i.e., the shoemakers
children are not wearing his shoes).
- Much of higher education today resists defining the student as customer.
Good higher education management would embrace the student as an intelligent
and informed consumer of educational services and strive constantly to improve
the efficiency and quality of those services.
- Decision-making structures on campus¬or the lack of them¬are an obstacle.
Decisions to change are frequently made by a faculty committee. The committee
system tends to support the old way.
- Timing is generally set by the institution, not by the customer;
institutions would need to make major adaptation in operating procedures.
- Higher education is labor intensive and unaligned with the digital
economy. Approximately 80 percent of the costs of colleges and universities
are attributable to personnel costs. This compares to 25 to 40 percent for
most of the manufacturing industries and less than 60 percent for the service
industries. How can universities compete with the private sector given such a
- Most of higher education's budget goes to compensate its employees,
especially production employees (i.e., faculty). Any change in the way of
doing business that increases the ratio of production employees to production
affects the efficiency of the organization.
- There is a large disparity between "corporate speed" and "college speed."
Educational institutions would need to learn to move much more quickly in
order to be competitive.
Lack of incentives
- There is no pressing incentive for change. What incentives do institutions
of higher education have to leverage their intellectual resources and become
Scenario B: Publishers Go It Alone
In this scenario, publishers expand their current role to one in which they
create, distribute and deliver instruction. They would continue to aggregate
content, but they would wrap additional educational services including full
course delivery (instruction) and certification of learning achievement around
that content. These services include the administrative support services
(registration, billing, etc.) that currently exist within traditional higher
education institutions. Publishers would begin to market products and services
to new kinds of intermediaries (e.g., Sylvan Learning Centers, University
Online, AARP, employers and other workforce development providers) and directly
to learners in vertical markets (e.g., law, biology). They would also gain
approval from regulatory agencies to grant credit and award degrees.
- Publishers have or can attract the required capital. They have a track
record in product development.
- Publishers have experience with and can sub-contract appropriately
(content expertise, technical expertise, instructional design expertise)
and/or outsource aspects of the teaching/learning process.
- Publishers are accustomed to market identification, customer service, and
timely delivery of product which could transfer to this new environment.
- Publishers could integrate the marketing process of individualized
learning and delivery by linking just-in-time learningware development with
- Publishers could price and market both by disaggregated pieces and
aggregated learning packages; they could bundle and unbundle services.
- Publishers could pick and choose areas of content delivery which related
well to content development strengths; they are not be obligated to develop a
full university curriculum.
- Publishers could focus on instruction; they are not obligated to fulfill
research or public service mission.
- The market is uncertain.
- Such a move may alienate primary customers: colleges and universities
("Thou shalt not disintermediate thy customers.")
- Outsourcing may create quality control problems.
- This is a new business: lack of experience in dealing directly with
students (e.g., providing student services, academic advising) may be a
- Publishers would need to seek accreditation and other certification
Scenario C: Collaborative Model(s)
In this scenario, some set of collaborative alliances would be identified in
which both partners would "get" more than would be possible through a
conventional buyer-seller relationship. In this collaborative model, each party
(higher education institutions/systems/other academic collectives and
publisher/software developer) would bring strengths or competencies which can be
effectively--and profitably--linked with the competencies of the other. Both
parties must gain greater leverage of all resources by collaborating with other
players in the value chain.
In Scenarios A and B, each partner lacks one major component. In the first
scenario, higher education would need to significantly modify its mission and
outsource production to enter a totally new business: scaleable software
development. In Scenario B, publishers would also have to modify their mission
in order to award credit or grant degrees and take on new competencies in the
full delivery of educational services..
In a collaborative model, the development of a seamless and efficient but
flexible channel should be the outcome. Gaps in development and delivery would
be reduced; risk sharing would result. Ideally the partners would be able to
respond flexibly to changes in student needs and more reliably know demand since
the partnership would control the entire channel from production through
completion of study and/or degree granting. Success would include both risk
reduction and greater productivity.
Principles and Questions
In a collaborative model, what would this
workflow look like? A joint venture? Shared resources?
- The advantage of a collaborative model is that each party need not develop
competencies brought by the other partner. In order to be successful, however,
each party must be clear about what competencies it brings to the effort.
What competencies do universities bring to a partnership? (e.g., ability to
grant credit and degrees, name recognition, potential of being a customer as
well as a co-developer)? What competencies do publishers bring?
- In some collaborations, there may be a significant overlap of expertise.
Areas of competency overlap must be identified and a conscious decision made
about boundaries of effort to avoid duplication and internal competition.
Do universities and publishers have overlapping competencies (e.g.,
expertise in content, programming, graphic design, instructional design)? If
so, what are they?
- A new collaborative model will require a different collection of team
participants. It seems likely that since both parties will be expanding their
knowledge into a relatively new area of learningware development, additional
partners or outsourcing could be needed.
What are the requirements for personnel? Can all these requirements be
found among the two major partners or would other partners need to be
identified? What characteristics would these additional collaborators need to
- In the current model, a reasonably well established set of criteria
underlies each decision made in the value chain. Publishers have knowledge of
a history of market demand including information about curricular areas,
geographically based-sales, best selling authors etc. Colleges and
universities have made decisions about curricular offerings and degree
programs based on information regarding employment trends, student markets,
gaps in opportunities etc.
What decision criteria make sense for transition to yield sufficient
initial return? e.g., Academic areas--business? human service professions?
Areas with large demand and little interest from higher education such as
remedial work? Areas leading to outside certification such as securities
brokers? Areas with significant visual options? Areas with low geographical
concentrations of students?
- With the expectation that the technology will transform the learning
development and delivery paradigms currently in use, it is also reasonable to
expect that distribution mechanisms will undergo change as well. Beyond the
general ideas that much distribution will occur on the Web or via the
Internet, distribution models have received little attention.
What types of distribution models would be needed? What, if any, aspects of
the present model would apply?
- It is clearly advantageous for producers to have "group buyers." In a
collaborative model, publishers' strengths in production are linked with
potentially guaranteed use and certification of learning.
Can universities guarantee institutional purchases if collaborative
development is undertaken?
- The bases for decision-making by business and higher education are
different since each receives funding/makes money and measures success by
different standards. Higher education is traditionally funded on an FTE basis
from public sources or not-for-profit costs from private payers or third party
lenders. Success is identified through number of graduates and reputation.
Publishers secure revenue through the sale of goods and services and must make
a profit for their shareholders.
Can these two groups of partners successfully understand and incorporate
the different missions and measures of the other? Can higher education
organize to insure that the partners in publishing can make a profit? Can
publishers understand the non-profit orientation of higher education and the
resulting need to provide a public service component to their efforts?
- Pricing of learningware has included production factors as well as costs
related to marketing and distribution. Pricing of course delivery and degree
or credit granting has been dependent in some cases on known costs, but at
other times on set prices which are relatively divorced from actual or known
expenses. All sections of the value chain have been priced independently by a
range of players. In the case of course delivery, some pricing has been set by
a third party, the state.
In a collaborative model, how can pricing occur to meet the needs of all
partners within the constraints which both experience? How will the new
delivery through technology contribute to a more complex pricing model? Will
prices of bundled goods and services be able to reflect these many factors?
- In the current model, the workflow is fairly discrete between higher
education institutions and publishers. The publisher works with authors and a
product development team, as well as with production and distribution
partners, to provide instructional material. Higher education institutions
work with instructors and other parts of the institution to attract learners
and provide instruction.