Wharton’s report, released today, says that the architecture of business schools may “change fundamentally”, and hints that technology embedded in Moocs poses a threat to schools.
The report, written by Christian Terwiesch, co-director of the Mack Institute, and Karl Ulrich, vice dean of Innovation at the Wharton School, confirms what many have speculated about: that Moocs may mark the decline of traditional business school models.
The authors say that it costs a business school about $1,500 in instructional costs to provide one traditional course to one student – but “it costs just pennies to register a new student in a Mooc”.
They argue that Moocs offer the prospect of dramatically lower instructional costs, possibly without the financial burden of faculty research, which itself does not generate revenue but is expensive to produce – about $400,000 per published scholarly article.
The cost of an article can pay for the development of six Mooc courses, they suggest.
“With such a cost advantage, one might predict that Moocs will offer the same fate to professors as befell stage actors in the early 20th century,” they quip.
They argue that Mooc technology – chunked asynchronous video content created by an expert – has the potential to “destroy full-time MBA programs as we know them today”.
The report, Will Video Kill the Classroom Star?, estimates that business schools pay professors about $200,000 per year, which can swell to $300,000 when factoring in other costs.
Based on the return for this compensation and other factors, the report estimates that it costs $1,475 to provide a student a course via a tenured or tenure-track professor in a large full-time MBA program.
Yet the study estimates that it costs just $11.20 to teach a student a Mooc course – the total development of a program totalling about $70,000.
The video technology used in Moocs, which they call “SuperText”, shifts the efficient frontier in education, the report argues, which “in the case of the Mooc, can translate to a hundredfold increase in productivity”.
Many argue that Moocs are simply brand-building initiatives and marketing schemes. The Wharton report argues that they can “build reputation”, and “can showcase the quality of the faculty directly”.
It continues: “Moocs provide business schools with ways of reaching an enormous audience, attracting applications, increasing yield, or increasing prestige.”
Moocs may also solve a problem many schools face: revenue. Some high-profile schools including Ashridge and the Thunderbird School of Global Management have recently faced financial difficulty and received much media attention.
The Wharton report argues that schools can use Mooc technology to generate additional revenues through delivering executive education. Executive education has traditionally been the biggest source of most schools’ revenue.
Combining online executive education with tenure-track faculty generates a surplus of $995,000, the report says – yet combining this with Mooc technology could generate $3.7 million.
The report also says that by using a “preceptor” – a course administrator – instead of a tenure-track faculty member could incur savings of 40%.
“We believe the technology is likely to be irresistible and adopted in the long run,” the professors add.