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A New Course for Online Education

Coursera needs to offer accredited degrees and original content to become the leader in online higher education.
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Over the past decade, the internet has created a new channel to distribute knowledge on an unlimited range of topics to a wide audience at a fraction of the cost of a traditional lecture. However, it has yet to radically disrupt the education system as previously predicted.

Universities and institutions have been slow to embrace the internet’s new digital learning channels. Consequently, online educational companies have begun to fill a gap in the market by helping institutions deliver their content online, either through distance education programs or by incorporating content into their classroom curriculum. The main players in this B2B space are 2U, Deltak, and Embanet.

More commonly, however, are B2C companies such as Udemy, Udacity, edX, Khan Academy, and Coursera, who offer what are referred to as massive open online courses, or MOOCs. MOOCs are courses of study offered over the internet, often free of charge, to a massive audience of online learners with close to zero marginal cost. In 2010, Bill Gates stated that, “Five years from now on the web for free you’ll be able to find the best lectures in the world. It will be better than any university.” However, as of 2014, only 3% of survey respondents have reported to have taken a MOOC. While both these B2B and B2C companies have begun to grow the popularity of online learning, no one has yet to effectively disrupt the education industry.

Coursera’s Uncertain Future

Over the past five years, numerous companies have emerged with the goal of being the leader in online education, but Coursera seems to rise above the rest. With over 17 million users, Coursera is an online education platform that partners with top universities and organizations to provide free online courses. However, despite being a leading MOOC provider in 28 countries with 138 institutional partners, Coursera lacks a sustainable competitive advantage and a strong revenue model to drive its success. Most courses offered on its site can be taken for free, with users opting in to purchase a certificate of completion for $40-$110 USD. This is currently the only significant source of revenue for the company. However, there is a clear discrepancy between the price and value for these certificates; they lack the credibility of other degree granting educational institutions and are not recognized credits.

Coursera1Right now, Coursera walks the line between being an educational institution, by offering high quality and structured classes, and a website of special interest videos, similar to Khan Academy, by offering its content free and unaccredited. While its Series C raising of $60M in 2015 brought Coursera some breathing room, it is unclear whether the company will be able to secure further funding runway unless it starts showing increased success with its monetization model. Additionally, its investors include John Doerr of KPCB, an education reform advocate who sits on Coursera’s Board of Directors, who would be interested in the company delivering on its social purpose.

With increasing competition in the market, Coursera’s unfocused business model will underperform unless it can find a new source of value and create a model that is sustainable , profitable, and truly impacts education.

B2B or B2C?

As Coursera strives to establish itself as the dominant player in the online education industry, it must decide exactly what position it wants to play in the market. With a market that is continually seeing new players enter the space, it is critical to find a clear position and competitive advantage.

B2B

In order to drive profitability in the future, one business model Coursera could pursue is to transition to the B2B market, becoming an enterprise software and course developer for universities. In this model, Coursera would leverage its platform by leasing it to universities while developing engaging interactive digital content for them. Revenue streams would be set up as a percentage of fees from enrolled students to ensure recurring earnings. Additionally, fees for developing and setting up courses could be charged. As online education becomes more attractive for students, institutions are realizing they lack the time, expertise, and technology needed to provide a quality learning opportunity for their students online.

While a B2B strategy provides a quick source of cash in the short term, it does not provide Coursera with a sustainable competitive advantage. Once institutions have gained expertise from the initial partnership with Coursera, they will no longer require further services. A crowded market full of players such as 2U, that have a greater focus on technology and a bigger brand in the space, pose a threat if Coursera fully commits to only being a B2B player.

B2C

The alternative model for Coursera is to pursue a B2C market strategy by becoming a degree granting institution and hosting both content from partners and self-created content. Currently, Coursera leans toward a B2C strategy, but the content it provides is created by third party institutions. Further, Coursera does not grant degrees. Studies show that the top concerns of students today are the affordability and quality of education and they see online education as a convenient and viable alternative to traditional college degrees, which are significantly more expensive. Coursera’s platform could meet this criteria by offering highly diverse course offerings with the highest quality content from top institutions and faculty while being convenient, user friendly, and affordable. This brand is something they could capitalize on in the future to create their own Coursera degrees. In the meantime, Coursera can leverage its partnerships with institutions to source content from the “creators” and package it into “Coursera degrees”. Due to its ability to distribute one course to such a wide audience, it is estimated that Coursera could offer content at a lower cost per active student. This would allow Coursera to offer accredited courses at a significantly discounted price while maintaining a sizeable margin. This differs from the “Signature Track” courses currently offered, which are not accredited and therefore less valuable for students if their goals are more than just casual learning. Further, online education programs have been shown in studies to offer similar or superior student outcomes while offering more flexibility and being delivered at a lower cost. Coursera could be the alternative to a traditional degree and help meet the demands of students for more affordable education.

Overall, pursuing a strong B2C strategy by developing accredited degrees and content in-house aligns well with the shifting trends in education, market demands, and the capabilities of Coursera.

Graduating the Coursera Degree

The long-term path of Coursera should be to follow a B2C strategy with the goal of being the leader in online higher education through online degrees. This will be accomplished by providing its own accredited Coursera degrees and original content at a fraction of the traditional cost. To get there, Coursera will need to engage in accreditation, brand building, and corporate partnerships that will help establish it as a leading player.

Coursera is currently not accredited and lacks the experience and brand equity to become an accredited online degree institution immediately. Therefore, Coursera must work to get the courses it builds with institutions accredited, for example through the Distance Education Accrediting Commission (DEAC). In this way, it will begin to build a reputation for being an alternative to getting a credit from a college. This will increase the value of Coursera’s paid courses and consumers’ willingness to pay. However, accreditation is not the most challenging component for Coursera. Once being able to legally offer degrees, Coursera will need to build its brand equity both to attract consumers and employers who will be hiring its graduates.

In the short-term, Coursera should expand its creation of co-branded content similar to its current IMBA program with the University of Illinois. Co-branded content will help tie Coursera’s name with the high quality reputation of its top institutional partners, helping to grow Coursera’s brand equity.

Once Coursera has built a portfolio of accredited courses with the institutions it works with, and has established a strong brand for high quality education, it can begin packaging these courses into an accredited “Coursera degree”. The first Coursera degrees can be packages of complementary specializations. The courses themselves will be content from a variety of leading institutions, but students will graduate with a Coursera degree. These degrees will not compete with Coursera’s institutional partners as they will not directly target the students of top tier universities. These top universities offer extracurricular activities, extensive alumni networks, and other value that Coursera does not offer. Instead, Coursera will be disrupting less established institutions, community colleges, and other educational providers. Students that go to these schools do not do so for the brand name, but rather to get a degree and the learning it can provide. Coursera will be a viable replacement by offering all the same benefits for a fraction of the cost. For its institutional partners, Coursera will be providing an ancillary revenue stream through a percentage of revenues and profit consistent with its current agreements, while not threatening its partner institutions’ core businesses.

In addition to building a reputation for potential students, Coursera will need to build its brand with employers that would consider hiring graduates of its platform. To begin with, Coursera should leverage its network of investors: venture capital firms such as New Enterprise Associates who have hundreds of startups and public companies that are active or former portfolio companies. These partners can be matched with students for the more hands-on capstone projects, allowing students to gain practical experience and network with potential employers. The first degree program that should be offered by Coursera should be in the field of Computer Science or Data Management, where employers are more open to non-traditional educational routes such as coding boot-camps and other online training. Following this, Coursera can begin to expand to other fields.

A Coursera Original

Finally, in the long-run, as Netflix coursera2begin to build its own original content, once its brand is well known. At this point, it can start incorporating these Coursera classes into its current offered degrees and can eventually begin to offer fully accredited degrees using only Coursera content. Coursera is uniquely positioned to offer high-quality native courses through its ability to leverage user data it has collected through its previous offerings. Just as Netflix has used its viewership data to produce shows highly aligned with its audience, Coursera has the ability to integrate course completion data to design highly effective courses. With such a large user base, creating its own original content will allow Coursera to truly create a competitive advantage in the market that no new online platform will be able to compete with.

Within the next decade, education will be more modular, with students being able to pick and choose their course content from a global selection of schools and professors. Coursera will be able to offer top professors larger audiences and global distribution of their work. Course creation will lie with those that have a core competency in developing and delivering content that can be easily accessed by users. While this poses a threat to traditional institutions, Coursera is in a position to be a leader in this new market by offering accredited degrees with a range of high quality content at a reasonable price.