Build online learning and they will come

Introduction to this Series

This is the first of a series of blog posts related to the multi-program financial model I have built. This financial model, housed in a Google Sheet, predicts the cash flows for your institution if it were to launch up to five new online programs in the next six years. This is a complicated model; it requires that you be able to answer a series of questions about your institution and those programs...so this won’t be a short exercise. But I’ve made it easier for you by already building the model—you just have to fill in the values. And you can always change your answers later as you learn more!

As the statistician George Box said, “All models are wrong, but some are useful.” My goal when building this model was to create a useful starting point for your own explorations of the possibilities that lie before you and the implications of different decisions. The model isn’t perfect—in fact, I will agree that it is actually wrong—but I predict that you will find it useful. After you have worked with the model for a while, you will probably want to tweak it to better fit your institution—that is, to be “less wrong.” That’s to be expected.

I created this model with a background of 20+ years as a business faculty member and dean at Michigan Ross School of Business and Babson College and now more than four years at Extension Engine working with university and college leadership to build their online programs. I will discuss some more-strategic aspects (such as in this post) and some that are less so. These posts should give you some insight into building a financial model for yourself that goes beyond the generic one you start with. I encourage you to let me start building one for you while you read these; however, this is not in any way required for you to benefit from these posts.

Build it and they will come?

Do you believe what Ray Kinsella believed in Field of Dreams — build it and they will come? Do you believe that if you build an online program that it will be successful? Okay, let’s raise the bar a bit. Do you believe that if you build a reasonably good though fairly standard online degree program, that it will be successful? If not, why not? Where does this statement fall short (or not)? Think about this for a minute, and then come back and I’ll tell you what I think.

While you think about those questions, let’s take a moment and be clear as to why this has anything to do with the financial model. Let’s start with an inarguable assertion: Online programs are complicated, comprising many pieces and many people, and are the result of dozens, if not hundreds, of decisions made over a significant period of time at many levels of the organization. Given this complication, it can be difficult to gather and then hold a complete picture of all of the distributed and diverse pieces of the program in one’s head.

The process of building, updating, and maintaining a financial model for an online program is one way—one tool—for a person to create an understanding of an online program and all of the decisions that forge and define it. Many of the decisions made about the program have an effect on the financial position of the school and on the financial success or failure of the program.

Here’s a preview of my answers to the questions posed above. Building, running, and growing an online program is hard. Given that it is hard, you will want to be careful in how you construct it. As I stated, one tool for being careful in this construction—for keeping track of decisions and for thinking about and understanding their ramifications—is a financial model.

Thus, I propose that the process of building a financial model is really the process of building an understanding of what you want your online program to be. A completed financial model will give you a way to explain your online program, what it is, how it will be run, and why the decisions that went into the program are good (or not!) for the institution.

Answers to my questions

Okay, so back to my questions. (To remind you of the central question: “Do you believe that if you build a reasonably good though fairly standard online degree program, that it will be successful?”) Do you have an answer yet? If not, I’ll give you a minute. I’m going to get a coffee in any case. So you might as well take a moment.
Okay, here’s what I think. You’re not going to be surprised given the hint I gave above. For 99% of the programs out there, the answer is a resounding “No.” Here’s why:

The market is competitive and crowded. For example, U.S. News & World Report lists 301 online MBA programs (as of this writing). And the market is getting more competitive every day. Even if you think of yours as a regional institution, when you are online you will also compete against the national online-focused institutions (Southern New Hampshire University, Arizona State, Western Governors, etc.). You have to differentiate yourself!
Finding an online program to enroll in is much less difficult for a potential enrollee because there are no time or geographical constraints. This means that more programs are available to a potential enrollee. You have to differentiate yourself.
It can be difficult for a potential enrollee in your program to even know the program exists, let alone why they might want to attend. You have to market your program in order to get enrollees, and that marketing effort will be easier and more effective if—get ready for it—you have differentiated yourself.

Do you really want to go to market, and spend all that money on, a “fairly standard” online program? Something that doesn’t reflect who you are and how special you are? Something that tells the market “we don’t like to think innovatively about our teaching”? Do you want to go through all that effort and then not enroll enough students to make it worth your while? And, finally, do you really want to go to your faculty and tell them “we need to do this quickly and cheaply, so don’t ask for anything outlandish”?

I have a few more answers for you: No. No. No. No. And no.

I have a short summary of what I mean by a “generalized differentiated strategy” (which I refer to as simply a “differentiated strategy” within this article):

Given a deep understanding of its target prospects, a school should design a program, competitive with other programs in the market, so that it provides superior quality in those features that those prospects value the most, and then design and execute a marketing strategy such that it emphasizes those features to those prospects.

Adopting a differentiation strategy is required for a program to succeed, but it’s not easy to define, and it’s not easy to carry out. The following are four high-level factors for creating a differentiation strategy:

Target customers: A program must have deep insights into its target customers. It must understand as thoroughly as possible what features they value deeply and what features they simply want to be good enough.
Relative strengths: A program must understand its own strengths relative to its competitive set given its target customers. This understanding must penetrate to the feature level at which prospects decide on one program over another.
Differentiation: The program must ensure that it is better on some feature than its less-expensive competitors or it risks irrelevance; further, if it wants to charge more, then it should choose at least one feature on which it will be markedly better than its competitive set.
Alignment: A program must simultaneously coordinate its three major processes: Marketing efforts must align with the choices made during program creation, and both of these must align with program investment.

You need to create a custom learning experience that is built for you and by you so that it can implement your differentiation strategy. It’s hard, and it will take work and investment and leadership and skill building over many years, but the result will be a program and the related knowledge and skills—you know, the story about “teach a man to fish”—that give your school the best chance to succeed in the marketplace for learning.

Online learning, more than ever, simply demands that a school build an online experience that is differentiated and effective. Your school needs to have a picture of its financial future before embarking on a major effort in online learning. Extension Engine’s multi-program financial model provides a tool for you to look at your projected revenues and expenses while planning your programs. You can weigh the need for investment with available funds (from gifts, the endowment, budget, etc.) and incoming tuition. The financial model tool can also help you think about the vast array of skills and resources that you need to have and build in order to succeed.

Let’s take a deeper look at all of this.

So many details

Standard face-to-face classes involve lots of lectures, some homework, and a couple of high-impact exams. Standard online courses have basically a similar format. The problem with this is that the student sitting alone in his or her room has generally nothing to make the experience feel different or special or...alive.

Face-to-face higher education institutions differentiate themselves based on their academic performance, on-campus experience, and student services. Many of the best schools and programs (in face-to-face learning) have the following:

A predominant pedagogy that their courses lean on,
A well-defined student culture that sets expectations and builds community outside of the classroom, and
Student services that take care of students’ extracurricular and vocational interests and needs.

Online learning programs need to address each of these needs for differentiation as well. We have worked with several schools that have thought deeply and then acted related to these:

HBS Online built a platform that implements their case-learning pedagogy. They have also worked very hard to ensure that they set expectations and norms for behavior for every cohort who signs up for their classes.
ArtCenter College of Design has a market-defining tool—what they call the “Crit Tool”—for teaching art and design online that implements their Critique Method.
Notre Dame created a student-facing mobile app that, among other things, acts as a “digital lounge” so that the students can connect with each other outside of class.
The University of Pennsylvania is building a wide-ranging website that will provide student services in a personalized way to its diverse student body, both degree-seeking and not.

It’s not a theoretical proposition that schools address these areas—it’s already happening.

To make a statement that should surprise nobody: The overall student experience for online learning occurs within a screen. More specifically, in online learning programs this experience is usually (and unfortunately) executed within and defined by a commercial learning management system (LMS)—such as Canvas or Blackboard—that was developed to support the relatively modest demands of on-campus programs. The pedagogies are limited by the technology; the user experience is limited by the technology; the integration across courses and campus services is limited; the ability to build, encourage, and support community is limited; and the ability to integrate with mentoring and coaching is limited.

Not only are these LMSs—need I say it—limited, their overall interface is so strong that the programs of one school look and feel very much like the programs of another school. This is not a good thing for any one school that is seeking to stand out from the crowd and differentiate their program from their competitors.

The alternative, a custom LMS, requires an up-front investment (and then ongoing investment for upgrades as you desire) but has no per-student annual fees, since you alone own it. Even if your school isn’t ready to go full-on custom LMS, you will want to invest extra funds in enabling more-engaging pedagogies (maybe by using something like Storyline). If you don’t invest even this amount in delivering the learning experience, why would students even think once about choosing your program, much less truly consider it?

Beyond the in-course learning experience, you also need to think about what you’re going to do to support community building among your online students as well as to deliver student services to them. What do you want the online student’s overall experience to be? What features are needed, and which ones are just “nice to have”? How can they be delivered in an effective manner?

All of this is just touching the surface on the thinking and planning that has to be done to determine the financial model for your program. You also have to consider the following questions, and all of these will impact the model:

Marketing: What’s the articulation of your program’s value proposition? Who is the target audience? How are you going to deliver that message to those people?
Strategy: What does success look like for this program within the context of your organization? How will that success be measured? How does it relate to other existing or planned programs? How does it build on your position in the market?
Organization: How do you plan to support the program with staff and faculty resources? How do you plan to support the evolution of the program over time? Do you have the expertise in program management, learner experience, creative, video, and technology to create and support the program?
Student: How many students should be in the program? Minimum? Maximum? How will you support them? How will you admit them? How will they get help for course questions? How will they connect with other students? How will you help them build a community?
Faculty: How are you going to recruit faculty to teach in the program? How will they be prepared to teach online courses? How will they learn to develop an online course? How will you develop a community among your online faculty so that they can lean on each other for help?
Alumni relations: How will you stay in touch with students after they complete the course? How will you reach out to alumni (both of your face-to-face programs and of your online programs) to help them stay engaged with your online presence?

Conclusion

When building a financial model for an online program, you must consider all of the investments that you will need to make, all of the hires needed to support the program, and why students might want to enroll (and bring with them the all-important tuition dollars). You do need to frame your up-front preparation as an investment, because you are laying the foundation for how your school will think about and deliver online learning and how your students will experience your school. Just as you invest in buildings for your on-campus students, you have to invest in software, systems, and people to make it all run effectively.

If you aren’t willing to spend the money to do this well, then you have to think deeply about whether you should do it at all. Will your faculty, staff, and alumni be proud of the program that they deliver? What decisions are important to you, to your faculty, to your donors? Which ones are they willing to make happen, and which ones will they say aren’t worth it yet? Use our financial model tool to guide your thinking about your online program and to build a model of your online learning efforts. In the end, you will build an online program with the potential to create the best outcome possible—students enrolling in and graduating from the program. And Ray Kinsella would be happy about that.

Questions for you

Here, and throughout this series, I will pose a series of questions that are pertinent to the process of defining your online program and building your financial model.

Which questions about your online program that I posed (or that I missed) are the ones you are most worried about? Why? Is it because of the expense, or because of the political challenge?
What degree program (or two, or three) are you hoping to roll out in the next couple of years? What will make them different, better than what’s on the market?
How would your school address questions related to pedagogies to be used, community building, and provision of student services for your online students? If you are already doing this, are you happy with where you are or do you feel you could and should improve these?
What are your thoughts about the differentiation strategy for a program that you have online or hope to take online? Think about the four factors: target customers, relative strengths, differentiation, and alignment.

Keep learning

What are the financial implications of developing multiple online learning programs? And, beyond that, what are the organizational and strategic implications?

This financial model can provide your school with insights into the inflows and outflows over 5 years and up to 5 separate programs: Multi-Program Financial Model for Online learning.

Build online learning and they will come — or will they?