Editor’s Note: This month we focused the entire issue on the business side of distance education. The starting point for this issue was formed through our collegial relationship with MSU (Michigan State University) Global’s Christine Geith and Karen Vignare, two veteran online degree educators with more than 20 years of combined experience related to numerous levels of online operations, marketing, teaching and learning. Geith and Vignare are also members of the Educational Pathways editorial advisory board. Geith’s and Vignare’s research, along with Stephen Schiffman’s from Babson College, helped to frame a series of interviews we conducted with the administrators of nine higher education units that manage online higher education courses and programs. The information that came out of these interviews was used primarily for a recent Sloan Consortium workshop and then re-purposed, in part, inside this issue of Educational Pathways.

What business plans and strategies are utilized during the early phases of developing an online degree program? What kind of control or lack of control do you have over the development, delivery, maintenance and marketing of your online programs? How are tuition revenues and fees allocated? What costs are you responsible for? How is your unit positioned within the overall mission of your institution?  We have found that the answers to such questions differ greatly from one institution to another. For example, one institution may have well-developed, highly detailed and disciplined business planning and strategy models that are referred to well before any online degree program is approved for development. Another institution may still be developing such plans and strategies and operating more on a kind of ad-hoc basis, making decisions, within a less structured fashion, about what online programs to develop and how to deliver and maintain them over time. Why are there such operational differences among the providers of online courses and programs?

Educators who are studying business-related issues and challenges are beginning to see some patterns among the many diverse online higher education operations that are growing in numbers. Conclusions about how to at least look at business plans and strategies, change management and leadership roles related to online credit and non-credit courses and programs are starting to emerge.

Starting Points

In a recent Sloan Consortium (Sloan-C) online workshop titled “Identifying Successful Business Strategies for Online Learning,” presenters Christine Geith, director of MSU (Michigan State University) Global; Stephen Schiffman, associate professor of Entrepreneurship, Babson College and FW Olin College of Engineering; and Karen Vignare, director of MSU Global Ventures (formerly Senior Research Analyst for the Rochester Institute of Technology) pointed to research that identified underlying business models that have given birth to and ultimately sustained the life of online courses and programs in higher education.

Business Models

For example, Geith explains that if a college or university already had a relatively large continuing education and outreach unit, the administrative management of any newly created credit or non-credit online courses and programs typically stayed within that continuing education department. In this scenario, the department operates its online learning initiatives under a self-funded, revenue-generating business model and typically has little direct control over academic quality. These types of operations are based on what’s often called a “cost-recovery” model. They have to survive monetarily and are independent continuing education departments. This type of operational business model is referred to as a Self-Funded Independent Unit.

Another scenario is where an academic college creates and manages its own credit or non-credit online courses and programs by itself. Like the Self-Funded Independent Unit, these operations also must survive monetarily and are independent but part of an actual college as opposed to a continuing education department. “Here [unlike the continuing education department] they have closer ties with the curriculum and they are well positioned to customize their curriculum for corporate clients,” says Geith. This type of operational business model is referred to as a Self-Funded College Unit.

Another scenario is where there was not a strong tradition of continuing education or outreach. Here the providers of online courses and programs typically became service units that support the overall institution’s online courses and programs on multiple levels. These service units were typically funded by the institution and catalyzed out of the institution’s technology group. This type of operational business model is referred to as an Overhead-Funded Service Unit.

“Most places are a combination of getting an annual subsidy from the university and having to make back everything else based on revenues, and sometimes having to give back a portion of revenues to cover part of the annual subsidy,” says Geith.

The three business models were the most predominant ones identified in a survey conducted by Geith, Vignare and Schiffman that collected information relevant to online learning business practices. The survey was distributed to the Sloan-C listserv, the National University Telecommunications Network (NUTN) listserv and the University Continuing Education Association (UCEA) listserv and had a total of 117 responses from 100 institutions.

As noted in a paper outlining the results of the survey (see references at end), more work needs to be done on identifying the best terminology for these business models. However, these business model groupings did help identify certain patterns related to what business and academic functions online learning departments/service units were responsible for, had control over, or did not have control over.

The Adoption of Innovation

So, keeping these business models in mind, the early business decisions administrators made (the starting points) are directly related to the context in which online learning operates now and into the future at any given institution, notes Geith. “Financial business benchmarks like your cost effectiveness, or how you compensate faculty, or your development costs, and so on, are directly related to how you started. This is a dynamic thing, and it is all about adoption of innovation. Where are you placed in the organization, and where are you headed in the organization? What is the change-management adoption of innovation like within your context? These are some of the things we are finding that make a difference. In order to compare notes and benchmark with anyone else, you need more than just an existence proof that somebody is doing something and it is costing them X amount of dollars. You need to understand all these contextual variables.”

Geith further explains that within all these wide-ranging contextual variables “what seems to drive differentiation is how much funding a unit is required to obtain. It is not surprising when you boil it down. The key factors are how much operating funding do you have to generate yourself and whether or not you are a service unit, independent unit or academic college.”

EdPath’s Role

After digesting all this information provided by Geith, Vignare and Schiffman, Educational Pathways interviewed online learning administrators from nine institutions in order to compose case studies about their operations that were published inside the “Identifying Successful Business Strategies for Online Learning,” Sloan Consortium online workshop.

We asked these online learning management professionals about their organizational context and structure. We asked about how much responsibility they had for learning effectiveness, for hiring and firing faculty, and for curriculum development. We asked what mechanisms they had in place for business planning, student services, academic quality oversight, and more.

A synthesis of three of these interviews is provided in this issue - from University of Illinois at Springfield (Overhead-Funded Service Unit), Colorado State University (Self-Funded Independent Unit), and Duquesne University (Self-Funded College Unit). The remaining six interviews - University of Central Florida, University of Michigan, University of Georgia, University of Massachusetts Lowell, Georgia Institute of Technology, and Dallas County Community College District - plus an interview related to MSU Global’s business model and strategies, will be synthesized in future issues of Educational Pathways.

References:
Karen Vignare, Christine Geith, and Stephen Schiffman. Business Strategy Survey Results. Sloan Consortium. Needham, MA: Sloan-C, in press 2005.

Gary E. Miller and Stephen Schiffman. ALN Business Models and the Transformation of Higher Education. Sloan Consortium. Needham, MA: Sloan-C, in press 2005.

Stephen Schiffman. Business Issues in Online Education. Sloan Consortium. Needham, MA: Sloan-C, in press 2005.

Websites:
UIS Office of Technology-Enhanced Learning - http://otel.uis.edu/
U of I Online - www.online.uillinois.edu

Colorado State University Continuing Education
www.learn.colostate.edu

Duquesne University’s School of Leadership and Professional Advancement
www.leadership.duq.edu