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How creative destruction is altering the economics of higher education

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While tuition costs for traditional higher education soar, market forces and technology converge to offer a new way of learning.

If you have college-bound children or are still in school yourself, you are only too keenly aware of the high price of education: $20,000, $40,000, $60,000 a year and up.

While tuition costs for traditional higher education seem to be soaring in multiples way above the cost of living index, market forces and technology are also converging to offer new approaches.

For example, as Kevin Carey reports, an online education provider called StraighterLine offers online courses in subjects such as accounting, statistics, and math -- for a flat rate of $99 a month, plus $39 for each course started. The company offers Web-based course materials, videos, podcasts, and collaborative online study groups. According to the report, StraighterLine courses were designed and overseen by professors with PhDs. Again, all for $99 a month, or a fraction of the cost of traditional institutions -- or even online institutions.

StraighterLine was founded by Internet entrepreneur Burck Smith, who "envisions a world where [students] can seamlessly assemble credits and degrees from multiple online providers, each specializing in certain subjects and -- most importantly -- fiercely competing on price." StraighterLine partners include CharterOak State College, Fort Hays State University, Lake City Community College, Potomac College, and Kaplan University.

Will traditional higher education follow the path of other industries, such as automakers, banks, and newspapers into the financial abyss? Carey makes the observation that "Colleges are caught in the same kind of debt-fueled price spiral that just blew up the real estate market. They're also in the information business in a time when technology is driving down the cost of selling information to record, destabilizing lows."

As Carey pointed out, the educational world is not immune from creative destruction, the uprooting of massive institutions with new ways of thinking; our minds opened by new technologies. Welcome to the age of the Personal University, in which resources are drawn together from across the globe to meet individual learning or training requirements.

Technology is the great equalizer. The opportunity to learn from the greatest minds in science, math, literature, and history is open to everyone - not just Ivy Leaguers. More than two million students now engage in online learning, according to a report from Eduventures. The firm also estimates that for-profit universities now constitute 42% of all the post-secondary online sector, compared with nine percent for the overall post-secondary market.

A couple of years back, I delivered an online lecture to students at Duquesne University on the rise of the  "Personal University," which is built upon all forms of institutions.

The Personal University is far more than non-traditional educational institutions. Such a facility knows no boundaries, and is blurring the distinctions between educational institutions. Students can be anywhere between ages nine and 99. Not only are colleges and universities are interconnected with each other, with students and faculties, and even K through 12 schools. But the Personal University is more than a network of schools and colleges.

It draws in organizations from outside of the educational realm. Corporate training programs, private training organizations, and non-profit groups contribute to this curriculum. It can pull in any resources that exist across the World Wide Web.

When a learner is on a computer on the network, the world is his or her hard disk. But the Personal University is more than technology. It is high tech; it is also "high touch," to use the words of the futurist John Naisbitt. Technology supports the Personal University, but it's not about technology. The Personal University is a combination of digital and live resources.

It promotes a self-designed, self-directed learning environment. It enables learners to design their own curricula, and tap into resources from across the globe - other universities, private training firms, online publications, blogs, newsgroups and user groups, and online publications.

The most likely beneficiaries are the lifelong learners, the busy professionals, who need the convenience of being able to attend class via PC or laptop. It's also worth noting that most on-campus students also have PCs or laptops, and this also represents a new learning channel that can augment classroom learning.

What does the future of e-learning hold? The movement as seen by many experts is in the direction of simulations, or sophisticated recreations of learning environments. Think Flight Simulator for situations other than flying, such as medical procedures, engineering projects, or any number of activities.

There are weaknesses that are inherent in computer-based training - namely, the absence of face-to-face instruction and interactivity - are carried over into the Web environment. Instructors in both business and academia will need to address and achieve a balance in the flexibility of distance learning with a high level of interactivity.

Great teacher-to-student relationships, just as is the case with business-to-business relationships, depend on personal contact, and, for lack of a better word, are often driven by serendipity. Relationships - the old-fashioned person-to-person variety - are a supreme advantage in both the classroom and the boardroom.

Let's face it, our attention spans are much shorter online as well. It's more difficult to concentrate on and absorb long documents online, versus on paper. Many organizations and training providers now provide training and informational updates via bite-size "Webinars" that may only last 10 to 15 minutes. Links to more information are made available. The concept of a "course" - such as a block of hour-long sessions held three days a week - is breaking down, and becoming granularized. Various course nuggets and components - lecture videos, audios, notes, and syllabus -- can be kept available to learners well beyond the "official" life of the course - possibly for years, and even decades.

We need to understand, and be able to harness, knowledge management, to be able to collect and make sense out of the information moving across organizations and societies.  Its a challenge to attempt to store and pass on the collective learning gathered in classrooms or other educational settings. Knowledge can be captured to some degree, and digitized, but education providers need to be able to provide a mix of both electronic and human-level contact.

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Joe McKendrick

Contributing Editor

Joe McKendrick is an independent analyst who tracks the impact of information technology on management and markets. He is a co-author of the SOA Manifesto and has written for Forbes, ZDNet and Database Trends & Applications. He holds a degree from Temple University. He is based in Pennsylvania. Follow him on Twitter. Disclosure