Do MOOCs Spell the End of Business Schools?

A report released by  the University of Pennsylvania’s Wharton School of Business brings good news for MOOCs. Professors Christian Terwiesch and Karl T Ulrich confirmed that the future does not look bright for full-time MBA programs, and maybe not even for higher education in general.

The reason for the pessimism about the current business school model and optimism about the newly emerged MOOC model comes down to cost. More specifically, the cost of faculty. Breaking down the numbers, Terwiesch and Ulrich found that the total cost per course taught by a tenure-track faculty member is $57,000 ($1,475 per student), while for adjunct instructors the cost still remains high at $37,000 per course ($975 per student).

In contrast, they calculated the cost of developing a MOOC as $70,000, with a marginal cost of $7,000 for each offering. So if the course is offered 10 times and attracts a total of 250,000 students over 10 cycles, that breaks down to a cost of $0.56 per registered student, and $11.20 per completing student (based on avg. completion rate of 5% for all students and providers).

According to the authors, the main driver of this huge savings is the technology used in MOOCs, commonly referred to as “SuperText.” The strengths of SuperText begin with the way the course is authored (by a subject matter expert, or SME) and increases as the course  is customized, released, and consumed.

The authors write: “It is SuperText that poses the threat and the opportunity. The MOOC, we argue, is a Trojan horse: While public attention was focused on the massive and open characteristics of the courses, the SuperText technology quietly proved highly effective as a learning technology.”

They suggest that the SuperText technology will lead business schools in one of three directions:

  1. Existing faculty will use SuperText to increase output.
  2. Business schools will need fewer faculty to produce the same output due to the efficiency of SuperText.
  3. SuperText will alter “the entire architecture of business school education.” Terwiesch suggested in an interview with The Chronicle of Higher Education that business schools, for example,  could move to a model that combines a short immersion program with lifelong learning.

In other words, the authors suggest that the rise of MOOCs will lead to exactly what higher education faculty have been fearing:  job cuts. They recommend that faculty should focus on making themselves relevant in the new environment, by enrolling in online courses, starting to use the SuperText technology, or moving to areas that won’t be affected by SuperText.

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