MOOCs Won’t Replace Business Schools — They’ll Diversify Them
Over the past few years, business school administrators — like other university officials — have been losing sleep over Massive Open Online Courses (or MOOCs), worrying that these low-cost digital alternatives will cannibalize their business model.
As elite business schools have started to offer their own courses through platforms like Coursera, commentators have pointed out that it’s now possible to cobble together an elite MBA for free. Others have argued that executive education programs are likely to be disrupted, as companies weigh the savings they could achieve by directing executives to MOOCs instead. These programs are a crucial source of revenue for business schools. At Wharton, nearly 20% of the annual revenue comes from executive education, while at Harvard Business School 26% does, and at IESE, it is nearly half.
Are these fears well founded? The answer depends on the students participating in MOOCs. If they fit the profile of traditional MBA or executive education enrollees, then the threat to business schools is clear. Our data suggest that this is not the case. At least at present, MOOCs run by elite business schools do not appear to threaten existing programs, but seem to attract students for whom traditional business school offerings are out of reach.
Though a few studies from Harvard, MIT, and the University of Pennsylvania have examined MOOC participants, none to date have focused specifically on those taking business classes. We analyzed data on over 875,000 students enrolled in nine MOOCs offered by the University of Pennsylvania’s Wharton School. This includes a demographic survey with over 65,000 responses. The nine courses consisted of four that introduce the MBA core — Accounting, Finance, Marketing, and Operations Management — as well as Gamification and the Global Business of Sports. These business MOOCs do not appear to be cannibalizing existing programs but do seem to be reaching at least three new and highly sought-after student populations.
According to the Wharton data, 78% of individuals who registered for an online business course came from outside of the United States. For comparison, Executive MBA programs in 2012 only attracted an average of 14% foreign students. Part-time or flexible MBA programs attracted 10%-32% foreign students, depending on the type of program. Even full-time two-year MBA programs, which attracted 45% foreign students, fall far short of the international reach of these business MOOCs.
It is clear that none of the traditional business education programs can match the global reach of MOOCs, which is all the more impressive when you consider that they are operating at significantly larger scale.
For business schools, then, MOOCs are a tremendous opportunity to expand into underserved markets. Nearly half of the international students enrolled in Wharton’s MOOCs hail from developing countries.
Businessmen and women in developing countries have few sources for high quality management training; there are only five business schools in all of sub-Saharan Africa that have received AACSB, AMBA, or EQUIS accreditation – all in South Africa. They are turning to MOOCs for accessible world-class training.
Even among U.S. enrollees, there appear to be important differences between the population of MOOC students and traditional business school students. First, well-educated foreign-born U.S. residents appear to be overrepresented in business MOOCs. Overall, 35% of all U.S. individuals enrolled in the Wharton business MOOCs are foreign-born, with 54% having a graduate or professional degree. Only 12.9% of the U.S. population is foreign-born. Though MOOC enrollees are quite educated overall, the rate of advanced degrees for foreign-born U.S. enrollees exceeds that of other students.
17%, or one in six, of the highly educated, foreign-born American enrollees in business MOOCs are unemployed, higher than the 13% unemployment rate for native-born American MOOC enrollees. Again, we seem to be seeing groups of individuals who cannot access elite executive education courses obtaining training through MOOCs. And for the unemployed, this may be a way to obtain credentials and skills to enhance job searches.
The final group enrolling in business MOOCs is underrepresented minorities. In open, online Wharton business courses, 19% of American students are underrepresented minorities, compared to 11% of students enrolled in traditional MBA programs at nine of the top U.S. business schools. And in terms of absolute numbers, not just percentages, there are vastly more underrepresented minorities online. Across those nine top business schools, that 11% represents just 315 underrepresented minority MBA students, while 19% of the Wharton online business classes constitute 166,552 underrepresented minority students.
Business schools are trying to attract these three groups — students from outside the United States, especially developing countries, foreign-born Americans, and under-represented American minorities. According to the 2012 Application Trends Survey by the Graduate Management Admission Council, these populations were among the most likely to receive special, targeted outreach by business schools. Open, online business courses are reaching them in droves. These MOOC courses might then provide a highly enriched recruiting pool for full-time and executive MBA courses.
One area where business MOOCs are falling short is in attracting female students. While more than 40% of applicants to MBA programs are now women, only 32% of students enrolled in business MOOCs are women. That number drops to 23% in BRICS countries. Women in the developing world face even greater barriers to traditional business training than their male counterparts. Careful marketing aimed at these women might open the door for yet another large population of new business school students.
If business schools want to take advantage of the MOOC opportunity to reach a more diverse group of students, they should seek to better understand those students’ motivations. For instance, lots of previous debate over MOOCs has focused on the relatively low rate of course completion. Indeed, only one out of every twelve students who enrolled in Wharton’s courses were still watching the lectures after eight weeks. Only 5% completed all of the course material and assessments (slightly higher than the 3% rate for non-business courses). And it turns out these “completers” tend to be disproportionately male, well educated, employed, and from OECD countries. Among American students, they tend to be white.
On its face, this finding might seem to undermine MOOCs’ potential to enhance the diversity of business school offerings. But for many students, completing an online course is not the most important outcome. Just 43% of respondents to a pre-course survey administered to nine business and non-business courses at Penn indicated that receiving a certificate of accomplishment was “extremely important” or “very important” to them. Similarly, edX has found that only 27% rank earning a certificate of mastery as extremely important.
Business schools must bear this in mind and move away from a business model of charging for certificates of completion. Instead, they must tailor offerings to the goals of these learners, whatever they may be. This could be as simple as moving to a monthly subscription or “freemium” model for access, or it could mean a more fundamental rethinking of what comprises a “course” online.
It is clear from our research that, rather than cannibalizing business school course offerings and executive education, open, online business courses appear for now to be expanding the overall reach of business education. Even in their infancy, business MOOCs from Wharton are reaching groups of students most commonly targeted for outreach by business schools: working professionals outside the United States as well as foreign-born and underrepresented minorities in the United States.
MOOCs are undoubtedly disrupting higher education. Business schools, like other university institutions, will need to strategically adapt to changing circumstances. But the MOOC disruption may not necessarily be the threat everyone is worried about. In fact, it looks more like an opportunity.