Last week, tech titan Amazon purchased grocer Whole Foods in a strategic move that captured the attention of the business community and general public. Amazon has become one of the most valuable companies in the world—with a current market value of $475 billion—based on its domination of e-commerce (holding an astounding 50 percent share of all online retail sales); its leadership in the cloud computing business; and the strength of its software algorithms.
Given that success in all things online, it’s worth noting how much of Amazon’s recent bets involve establishing a brick-and-mortar presence. For years, Amazon has been strategically investing in physical presence, including fulfillment centers closer to its customers and recently piloting brick-and-mortar bookstores.
The strategy is that the online and offline commerce worlds are converging in unprecedented ways, not just in selling groceries but in all kinds of areas. There’s a lesson for higher education, about the importance of offline channels in a digitally-driven economy—and a moment to reflect on the impactful trends that have materialized in the online education market.
Beyond Online vs. Traditional
Colleges and universities have been approaching their delivery strategies in a bifurcated fashion that segregates digital delivery—often enabled through outside partners—from its campus (place-based) core. That approach goes against broader trends in trends in the consumer landscape.
In his 2014 book Location is (Still) Everything, Wharton professor David Bell argued that the future of online business is shaped by the physical world—and this is especially relevant when it comes to “experiential” products such as education. Integrating online and offline is central to the strategies of leading firms such as Apple and Warby Parker with their place-based and online retail stores, and online bank CapitalOne with its city-based banking cafes: this growing integration of online and place-based delivery channels is the known as “omnichannel” marketing in business. Notably, the masters of omnichannel business models are premier brands such as Disney and Starbucks—which sell customer experiences as much as products and services.
The expectation that students can integrate their learning experiences across channels is now arriving in higher education. Online education has reached a tipping point where almost 30 percent of all students in U.S. higher education are enrolled in at least one online college course. A significant number of students are already blending their experience across online and offline channels—and numerous data points speak to the evolving value of blending online delivery with physical presence, as suggested by Amazon.
In national surveys of prospective adult students that we have conducted regularly at Northeastern University over recent years, we have consistently found that 60 percent of students prefer a blended or hybrid learning experience. In other words, the majority of the higher education student market is neglected by today’s dominant approach that focuses on offering either online or in-person programs.
There is also growing evidence that fullyonline students prefer local brands, local service, and in-person interaction with classmates and instructors, in an omnichannel fashion. Seventy-five percent of online learners choose an institution within 100 miles of their home—and 76 percent visited the campus of their online program during the last year (up from 38 percent in 2014), according to the recent 2017 Online College Students survey. Similarly, the U.S. Department of Education’s latest data shows that of the 3 million higher-education students studying fully online, 55 percent enrolled with an institution located within their home state. Moreover, the same data shows that enrollment growth in blended programs that mesh online and on-campus study has actually been outpacing the growth rate for fully online programs.
Hundreds of primarily online programs that also include site-based residencies have gathered momentum and disrupted the market for traditional weekend, evening, and executive-format offerings. These include, for example, the online Master of Health Administration offered by the University of Southern California, the paralegal science bachelor’s program at Eastern Kentucky University, and the “global immersions” hosted in cities around the world in UNC Chapel Hill’s Online MBA, among countless others.
At Northeastern, we have developed a unique strategy that integrates online delivery into a network of campus sites across North America: this has powered double-digit annual enrollment growth rates in regions where we have a campus site. We’ve learned that online students value not just face-to-face classroom activities, but the chance for in-person mentorship with instructors; networking and study groups with fellow classmates; and on-site career coaching.
Even “disruptive,” non-institutional providers of postsecondary education are examples of the move toward omnichannel delivery. MOOC providers such as Coursera and edX have recognized this trend for years, with hundreds of organized MeetUps around the world where their learners are encouraged to join study and discussion groups related to their online-only courses. Additionally, coding bootcamps—whose heritage is deeply rooted in intensive, classroom-based study—are also moving in an omnichannel direction. Galvanize, has for example expanded into hybrid “flex” offerings, while General Assembly has built out a portfolio of online-only offerings as it evolves to serve corporate customers.
Software is (Slowly) Eating the Higher Education Market
Amazon’s lesson also shows us the advantages that software-driven entities can have in physically-based delivery. Although many higher-education experts may disagree with Clayton Christensen’s assertion that online education will lead 50 percent of American universities into bankruptcy over the next 10 years, his theories about disruptive innovation and technological capability resonate when considering the omnichannel environment of the future. Christensen has himself suggested that the winning business models are “hybrid” ones, in which online technology becomes adopted in the traditional campus-based business.
Over the next decade, growth and competitive success in higher education will not be a function of who is able to offer online programs. Instead, the successful institutions will be those who can symbiotically integrate their placed-based educational operations and experiences with software-driven analytics, learning science, and machine learning to create a more personalized experience. A more Amazon-like experience.
Notably,the tens of millions of dollars being invested by M.I.T. and Harvard into edX have from the beginning had the explicit goal of enhancing on-campus education through technology and bettering teaching and learning through online-informed research. Earlier this month, M.I.T. announced the results of an online course pilot for residential students, which preliminarily found benefits to a flipped classroom model and the blending online and residential study. And out in Silicon Valley, an experimental college called the Minerva Project has hinted that its endgame may be to license its software platform to other institutions, in a recent EdSurge interview. This software-oriented school-as-service model also happens to be a potential business model for leading K-12 startup AltSchool, suggesting that the trend will have resonance at all levels of education.
A Winner-Take-All Race?
Amazon’s momentum and its Whole Foods acquisition also shine a spotlight on the benefits of scale, and how software can shape place-based experiences.
Like Amazon, the colleges and universities that are able to deliver across channels—leveraging the combination of physical presence and online algorithms—will be uniquely positioned to take advantage of the in-demand, destination nature of studying in certain cities; the local sourcing of faculty; and proximity to key employers, industries, and job opportunities.
Like savvy corporations, omnichannel higher education providers will be able to build on these advantagesto extend their leadership into the global market, in a classic scenario where national leaders become multinational winners. The potential market is enormous: Of the millions of online students that U.S. colleges already enroll, only a tiny 1.3 percent of these students are international. Succeeding in online education globally will hinge on place-based networks of international sites, partners, and recruiters.
In the years ahead, the advantages of scale and distribution are likely to accelerate the consolidation of the U.S. higher education market—as the technology- and resource-rich “haves” develop assets and advantages that the “have nots”—such as struggling small private colleges—cannot. As student demand continues to grow for experiences that are integrated across offline and online channels, colleges and universities must move beyond a focus on their “online education” strategy—and instead position themselves for a more student-centered, personalized approach that integrates both digital delivery and the richness of in-person experiences.
It is time to move beyond binary thinking and toward omnichannel thinking.
Sean Gallagher is Executive Director of Northeastern University’s Center for the Future of Higher Education and Talent Strategy and Executive Professor of Educational Policy.
