A Post-Pandemic Strategy for U.S. Higher Ed

A Post-Pandemic Strategy for U.S. Higher Ed

by Vijay Govindarajan and Anup Srivastava - June 02, 2020

Universities have many pressing short-term issues to deal with right now: large budget cuts, a growing reluctance among students to pay full tuition fees for online education, demands for reimbursement of already-paid fees, the possible disappearance of international students who pay full fees, the large-scale deferral of admissions, a sharp spike in the need for financial assistance among students because of the impact of the pandemic and ensuing recession, and finally, the question of whether and how to reopen.

Nevertheless, university leaders should not overspend their time on fighting fires and forget about the long term. The current crisis also creates opportunities to remake institutions. We provide a strategic framework for how universities must start considering their options, experimenting with alternatives, and start planning now.

The New Higher Ed Agenda

Three external forces have come together to create a perfect storm for American colleges:

• The cost of higher education has been skyrocketing. Student debt has reached unacceptable levels, leading to a public outcry in America. Education has to be transformed so that higher education, which more people will need in an automated world, becomes more affordable and more accessible.
• The new generation of digital technologies - such as mobile, cloud computing, machine learning, AI, AR, and VR - have matured, so immersive and personalized education can be provided online at scale at a much lower cost than that of conventional education.
• The current forced experiment with online instruction has significantly lowered the psychological barriers to change among parents, students, faculty, and university leaders.

While the first two forces have been active for a while, now the Covid-19 crisis accelerated the urgency for change. University leaders must use what they are learning in crisis now to position their institutions for greatest impact in the decades to come. That means using data now from the current forced online learning experiment and initiating small pilots during the next academic year to test future higher education models. This article is intended to set the agenda for university leaders to develop a point of view about the future which can guide short-term action. They must choose between the three paths.

1. Augmented Immersive Residential Model

The world’s experiment with online teaching is making more apparent and salient the superior value proposition of immersive, four-year residential programs. Students get to live on college campuses, away from their families, perhaps for the first time in their lives, and engage in open-ended discussions, joint problem-solving, experience-based learning, and conflict management in classrooms (and in their dorms). Their interactions with other students generates confidence, brand loyalty, camaraderie, lifelong friendships, and a unique feeling of community. They develop communication skills, emotional intelligence, and networking skills. An intense residential experience builds in them a “sense of place,” which richly fosters identity and self-reliance.

For all its benefits, the four-year residential, immersive college experience comes with a high price tag and the superiority of personal, connected, and transformative experience of a four-year residential program should not be used as an argument to make it the only choice available for college education. Top-ranked universities with all their structural advantages - global brand recognition, access to world class scholar-teachers, prestigious employers, and influential alumni - now have the opportunity to explore how their recent experience with online learning can help strengthen their traditional model.

The heads of these institutions should be asking:

• How can the new digital capabilities make the residential experience even better?
• How can the residential experience be opened to more high-achieving students from historically underrepresented minorities and students from low-income families? Can we offer more scholarships?
• Is it possible to supplement the gold-plated residential learning degree with a different kind of certificate that is more hybrid and is more accessible to many more students? What are the different bundles of experiences universities can offer?

2. Hybrid Model

The current experiment with online teaching is providing universities with real-time data about which aspects of their courses can be substituted, which can be complemented or augmented, and which can’t be replaced by the digital medium. They must start determining the varying degrees of face-to-face, real-time virtual, and asynchronous-virtual experiences required for each course. Consider, for instance, physics. The basic concepts of mass, length, and time can be taught using graphics and the audio-visual techniques of a software program. Students can learn at their own pace, repeat as many times as required, do key-word searches, link concepts, and rearrange teaching modules based on the own skill levels. Nevertheless, certain aspects of learning physics need the hands-on experience of a lab. Courses such as Roman culture and democracy, which benefit from extensive discussion, can be taught through virtual meetings. In contrast, building a robot or learning ballet require the coming together of an instructor and fellow students at a common time.

Boards and university presidents should consider the following issues:

• Which of our offerings can only be manifested in person? Universities now have the data to ascertain the optimal percentage of face-to-face, real-time/virtual, and asynchronous/virtual components required for each course. That can provide insights to decide how to complete the degree in less than four years. The hybrid model will simultaneously preserve the benefits of a residential experience while lowering the cost of education.
• Which proprietary assets are differentiators in the hybrid model? The cornerstone of Northeastern University’s educational model, for instance, is the co-op program where students alternate semesters of academic study with periods of full-time work. Northeastern University can use this experiential learning as a differentiator in its hybrid model.
• What is the optimal tuition fee? Once the pandemic ends, there is likely to be considerable price pressures on universities. By using a hybrid model, they can balance a lower tuition per student with higher enrollment. As we have seen, many components of courses can be offered digitally and can be scaled up with minimum incremental costs.

3. Fully Online Model

Take the case of hundreds of thousands of youngsters, straight out of high school and working for the minimum wage. For them, the escalating costs of higher education are unaffordable. Besides, they may not want to or be able to leave their jobs to attend college. There is a need for a good quality college education whose annual tuition cost is, say, under $5,000 and the degree is awarded by a reputed public university. Our current experience is providing ways to develop that solution. Online college degrees are not new but when reputed universities enter the space, it will be a game changer. Public universities must debate the following issues:

• How do we orchestrate an ecosystem to offer low cost and high quality? Universities usually follow a vertical integration model where they do everything in house, from admitting students all the way to awarding degrees. Instead, universities must outsource areas where others possess superior core competencies at scale by orchestrating an ecosystem of partners: content creators such as Outlier.org; technology platforms such as edX; and Silicon Valley edTech startups, especially those whose lineage is in the gaming industry with expertise in artificial and augmented reality and capabilities to create immersive experiences.
• How do we assemble a consortium of corporations to make a low-cost model work? One strategy to consider: If 100 companies invested $10 million to underwriting the annual college education of 2,000 employees each, that’s 200,000 students and an annual revenue of $1 billion. Asynchronous online courses scale at nearly zero marginal cost, so an annual tuition fee of $5,000 might make it economically viable.
• Which strengths adjacent to the classroom experience can universities leverage? Colleges possess many unique competencies: screening high school students for their readiness for college, knowledge creation, pedagogy, evaluation, credentialing, and quality brands. Can these competencies be applied in new ways?

Quick Change Is Not Total Change

We do not believe that digital technologies will make obsolete the current university system. Consider retailing: Although Amazon started e-commerce almost 30 years ago, by 2019 online sales accounted for only 9% of total U.S. retail sales. Still, university leadership and faculty have individually responded to the shock of Covid-19 incredibly well, migrating to digital platforms in as little time as a week. The coming summer is a great opportunity to build on that momentum and transform higher education into something that is customizable and affordable to the vast majority of people. The time to act is now.

Vijay Govindarajan is the Coxe Distinguished Professor at Dartmouth’s Tuck School of Business and Faculty Partner at the Silicon Valley incubator Mach 49. He is the author of The Three Box Solution. His HBR articles “Engineering Reverse Innovations” and “Stop the Innovation Wars” won McKinsey Awards for the Best Article published in HBR. His HBR articles “How GE Is Disrupting Itself” and “The CEO’s Role in Business Model Reinvention” are HBR all-time Top 50 Best Sellers. Follow him on Twitter and LinkedIn.

Anup Srivastava holds Canada Research Chair in Accounting, Decision Making, and Capital Markets and is an Associate Professor at Haskayne School of Business, University of Calgary. He examines the valuation and financial reporting challenges of digital companies.