As you're reading this article -- perhaps on your iPad at the airport, a personal computer at work, a smart phone at home -- think about all the recent advances in information technologies. Over the past three decades an expanding ecology of mainframes, personal computers, software, Internet, mobile platforms, clouds and other high-tech, high-speed networks have transformed the way we work and live, meet people and exchange ideas. The rise of a digital economy has upended traditional ways of doing business and decimated profits in many industries -- including music, newspapers and retail -- while spawning new business models and entrepreneurial opportunities, such as Facebook, Google and Amazon.
One knowledge-based industry and information-intensive institution has seemed relatively immune to the potent forces of digital alchemy: America's colleges and universities.
The impact of information technologies operating in an intensely competitive global economy has also multiplied the rewards to educational achievement. One telling statistic: The median wage premium for four-year college educated workers in 2010 was nearly twice that of their high school peers, up from a low of 1.4 in 1980.
Yet one knowledge-based industry and information-intensive institution has seemed relatively immune to the potent forces of digital alchemy: America's colleges and universities. Walk on almost any college campus and it will appear pretty much the same as it did in the 1970s. Professors are still lecturing while students listen, take notes and try to stay awake. Yes, computers are everywhere on campus. The Internet has dramatically changed research methods. Debit cards are ubiquitous. Plenty of colleges have invested in computer-based learning on campus and to a wider off-campus audience over the past several decades. A pioneering example is Plato, or Programmed Logic for Automated Teaching Operations. It was developed at the University of Illinois in the 1960s and marketed commercially in the '70s and '80s by Minneapolis-based Control Data. Thousands and thousands of students took classroom instruction through the mainframe-based Plato network.
Still, while the potential of computer-aided instruction and online teaching captured the imagination of technologists, the grand prophesies of a coming digitally driven transformation of higher education repeatedly fell far short of prediction. None of the efforts have managed to fundamentally break the classic mold of the professor lecturing and the student listening at traditional four-year colleges and universities. The American university business model of labor-intensive teaching of students by well-educated professionals on everything from comparative 20th century literature to physics 101 has proved remarkably durable. Sleep-starved students still roll out of bed to cross campus for 9 a.m. lectures.
That is, until now. All of a sudden there's widespread talk of an online classroom revolution, with the "MOOCs" in the vanguard. No, MOOC isn't an acronym for a rebellious style favored by college students. It's shorthand for "massively open online courses." These entrepreneurial enterprises seem to offer the potential to transform higher education because they involve some of the most famous institutions in academia along with their star professors.
Professor Andreas Zeller records a lecture for Udacity. (Photo: Stephen Smith)
Take Sebastian Thrun, a professor of computer science at Stanford University, director of Stanford's Artificial Intelligence Laboratory and a Google Fellow. He recently co-founded Udacity, a free online college learning company, after some 160,000 students from around the world took an online artificial intelligence class he co-taught at Stanford. EdX is a partnership between Harvard, MIT, and the University of California, Berkeley that will offer free online courses with a certificate of completion. Venture-capital-backed Coursera was founded by Stanford computer science professors Daphne Koller and Andrew Ng. It offers online courses from top-tier universities such as Duke, Rice and Johns Hopkins.
A cluster of powerful forces for change are gathering momentum. The most urgent reason for grappling with online technologies is economic pressure. The unmistakable message from the Great Recession and the Anemic Recovery is that a college education is more valuable than ever. However, families are finding it increasingly harder before to finance a student's college education. College is expensive.
To be sure, college-educated workers have been buffeted by the harsh economy. The job market has been inhospitable to newly-minted graduates. Yet these college grads are much better off than their less educated peers. The consultants at McKinsey & Co. note that the unemployment rate for workers without a secondary degree doubled during the Great Recession to more than 15 percent, while the unemployment rate for people with a college or graduate degree never exceeded 5 percent. Ever since the economic recovery began in June 2009, workers with a bachelor's degree or better have gained two million jobs, according to the Center on Education and the Workforce at Georgetown University. Those with a high school diploma or less have lost 230,000 jobs over the same time period.
That said, the cost of attending college has soared over the past three decades. The price tag for tuition alone at private four-year undergraduate institutions has increased on average 3.5 percent above the rate of consumer price inflation, according to Ronald Ehrenberg, director of the Cornell Higher Education Research Institute. The comparable figure for public four-year institutions is 5.1 percent. Median household income declined by one percent after adjusting for inflation over the same period. Families and students increasingly rely on borrowings to finance college, especially as state governments slash their support for higher education. Student loan debt now exceeds $1 trillion. According to the College Board, some 56 percent of students earning a bachelor's degree in 2009-10 from a public four-year college borrowed for their education, with average debt per borrower $22,000. The comparable figure for private nonprofit colleges is 65 percent and $28,100, respectively.
Technological optimists typically underestimate how much trial and error it takes for organizations to figure out how to take advantage of new technologies.
Student loan debt keeps growing while incomes remain stagnant at best. Little wonder colleges and universities are under pressure to adapt their expensive Ivory Tower business model to the promised efficiencies of the digital age. How fast will tradition-bound colleges and universities adapt? Technological optimists typically underestimate how much trial and error it takes for organizations to figure out how to take advantage of new technologies. Take electricity. Many of the critical advances came after the 1880s. By 1900, when Henry Adams, writer, social philosopher and scion of a prominent American family, visited the Great Exposition in Paris he marveled at the Gallery of Machines with its massive engines, transformers, and dynamos for generating electricity. Yet it took another two decades or so before the productivity-enhancing promise of electrification was realized. Similarly, advances in the underlying computer-Internet-mobile technologies are now combining with the learning insights gleaned from earlier experiments and investments.
What shape might the digital transition take at colleges and universities? The impact of digital technologies on other industries offers intriguing hints. In college, students pay for a bundled package even if they're only interested in a handful of subjects. It's reminiscent of music buyers who once had to purchase an album to listen to two or three songs. Online learning might unbundle the educational offering, allowing students to take one course from the University of Minnesota and another from Cal-Tech.
America's leading public and private universities could become truly global institutions, victors in a worldwide winner-take-all market. Again, the music business is instructive. It has always been the case that people want to listen to the best musicians. The British opera singer Elizabeth Billington was extremely successful at the turn of the 19th century. She earned somewhere between £10,000 and £15,000 in 1801 (approximately equivalent to $650,000 and $888,000 in today's dollars). She filled the seats at London's Covent Garden and Drury Lane. It's a nice sum of money, but it pales next to the more than $760 million in inflation-adjusted dollars the Irish rock band U2 grossed on its world tour of 2009-11. The combination of technology and globalization allows musicians with box office appeal and sterling reputations to reap outsized rewards.
The same market dynamic holds for lawyers, actors, chief executive officers and, yes, colleges and universities. By going online, premier institutions like Stanford, Carnegie Mellon, Harvard and other highly regarded schools can leverage their sterling brick-and-mortar reputations into even bigger global brands, educating qualified students online anywhere in the world. The prospect is pushing these brand-name universities to devote more resources to their e-learning experiments, despite the obvious risk of diluting the value of their costly educational credential by putting out their curriculum for free.
The other side of winner-take-all markets is that institutions with lackluster reputations that have done fine over the past half century could find themselves caught in a rapid downward spiral. Why pay a hefty price tag to attend a mediocre college when you could earn a degree from a well-known school online? The experience of other industries that have been upended by information technologies suggests the gale wind of digital transformation will be painful. Like corporations before them, the spread of digital technologies will push colleges and universities to restructure, reengineer and overhaul their operations. Productivity should improve and prices should be better contained. The trick will be to both innovate and adapt to the promise opened by online education without crippling an institutions core business. Easy to say. Hard to do.
College presidents and faculty have many more questions than answers about the impact of digital technologies on higher education. Among the biggest areas of uncertainty involve certification. Students may learn a lot about the world at college, but at graduation the critical question is will employers still value the diploma. In the classroom, is the Silicon Valley mantra that e-learning means the "lecture is dead" and professors should devote their time to taping their lectures and putting them online? Will state legislatures decide the existence of "free" curriculums from the MOOCs allows for them to further slash state support of higher education (where 80 percent of students go to college)? Most importantly, will online innovation pay off in terms of new revenues stream or will colleges and universities find themselves doing more and earning less?
What won't happen: The walls of academia won't come tumbling down. America's colleges and universities are remarkably durable institutions. Perhaps more important, technology has transformed universities for the better in other times. A classic example is the mass production of books in the 19th century. It allowed education to spread cheaply and efficiently. But the knowledge contained in books wasn't a substitute for a college education. It was complementary, says Andrew Samwick, economist and director of the Nelson A. Rockefeller Center at Dartmouth College. "The question we should be asking ourselves is now that such material and experiences can be delivered adequately, if not superbly, online and global, what does this free us up to do in the on-campus environment?" he adds.
Everyone has a stake in what happens to America's colleges and universities. Their research, their knowledge and their teaching are critical to the economy -- locally, regionally, nationally and globally. Done wrong, a quick embrace of online learning to slash costs could do enormous damage to institutions. Done right, with a drive for improving the educational experience, America's colleges and universities could become even better than they are now at a more affordable price and accessible to more people worldwide. Stay tuned.