EdX — MOOC with a Mission and a Profit Motive

MOOCs reach the masses

Massive Open Online Courses or MOOCs first began to gain popular attention and market penetration in 2012. Several for-profit and nonprofit entities began packaging college-level learning materials delivered by leading universities onto their proprietary learning management platforms. EdX is one such organization that was founded by a partnership between Harvard University and the Massachusetts Institute of Technology in 2012. The mission of edX is to: “increase access to high-quality education for everyone, everywhere; enhance teaching and learning on campus and online; and advance teaching and learning through research.” (edX|About)The edX platform and learning management system is organized as a not for profit enterprise. (MOOC|Wikipedia) (MOOCs|NYT2012)

MOOC platforms generally have a number of common features. They operate as a multi-sided business whereby university content providers pay to deliver content on the platform and people interested in learning pay to take these courses. Courses may include video lectures, slides, videos, practice problems, graded assignments, discussion forums and even live streamed events or interviews. The creation and production of a course can carry significant up-front costs that are offset over time and through economies of scale. Most MOOC providers operate by training their partner schools to produce to the standards set forth by the provider and consulting to help them create. Once a course is produced it may remain or repeat with minor changes for several years.

As a competitor in the burgeoning online higher education market alongside other for-profit and nonprofit entities, edX faces different challenges than its competitors like Coursera and Udacity among others. (“List of 39 providers offering MOOCs”|Class Central) EdX is a rare type of social benefit organization, in that it operates using a multi-sided business model within a mixed marketplace of for-profit and for-benefit organizations. The challenges it faces exhibit in the following ways each detailed below. EdX needs to demonstrate financial success more quickly and definitively than its for-profit partners. It needs to maintain its brand promise and mission equity as well as safeguard intellectual property and protectable processes, to ensure their market share and sustainability. EdX fosters long-term, high-quality relationships with its stakeholders and institutional partners to get them invested in long tail strategies to ensure profitability. Lastly, edX is unlike its for-profit counterparts who may be able to more easily pivot on their target educational markets, or revenue models, without risking their stakeholder or customer base. (“Eyeing Revenue Sustainability”|Class Central) These four challenges will be analyzed separately followed by conclusions and recommendations.

How to be an uncommon influencer in the market

Challenges to making ready profits

EdX needs to demonstrate its own viability quickly, and surely. The for-profit competitors are funded with multiple rounds of investment by established tech investors with upwards of US$140M each. (Coursera|Crunchbase) (Udacity|Crunchbase) These funders are accustomed to a startup environment that may take several years to turn a profit.(“Venture Caplital Exit Times”|AngelBlog) Meanwhile, edX begins with a US$60M establishing grant with pledges of ongoing support from its two founding university partners. So at the starting line, edX is somewhat handicapped to its for-profit competitors and needs to prove its model more assuredly and quickly. This pressure forces the business model at edX to be more aggressive with its partner/content provider relationships. EdX maintains two tiers of university partnerships and a growing array of other ways for content providers to access their open source platform. EdX depends on the highest quality content produced by its partner universities, as is explored in the next section.

EdX “Charter Partners” include top tier universities from around the world. Their “Members Level” partners are then filled by global universities with good reputations. (edX|Schools) Charter Partners are asked to invest between US$250K and US$1M to join. In addition they are asked to contribute cash to the development of new courses and pay an administrative fee of around US$50k each time a completed course is run on the platform. These fees are currently used by edX to consult with the partner schools in the development of technology and human resources infrastructure, and to offer the 24/7 technical support that is expected of an internet company in today’s market. EdX realizes, that in order to deliver the highest quality courses, it also has to be in the production and training business with its partner institutions. The business model seems to point at a long term outcome of getting contributor Charter partners to become self sufficient in the media production of their own courses. At that future time, course administration fees charged to universities would then carry a small profit margin. (It appears from a 2015 agreement between Arizona State University and edX that edX has chosen to waive the sign up fee for some university partners presumably in an effort to more quickly grow. “Contract — Inside Higher Ed”)

Lastly, once a course is produced there is a 50/50 revenue split from course fees paid by learners. These fees are split between edX and the partner university. This revenue split is significantly higher than the 8–20% of course fees paid back to partner institutions by their for-profit competition. The edX revenue split may be seen by content-providing institutions as being more equitable in the long term.

Sample course screen from an edX course MITx CTL SC0x 2016

From students, edX and their competitors derive income by charging learners for course certificates or credentials. There is less commitment within for-profit competitors to offer free courses alongside their paid versions. In contrast, edX is committed through their mission, to spreading high quality education to anyone who has an internet connection and offers all courses with a free option. In the last two years edX has added a revenue stream through packaging groups of courses into its proprietary MicroMasters credentials. These credentials are currently in the process of becoming accepted for credit by a growing number of edX partner universities and are being touted as industry influencing standards. Similarly Coursera offers full master’s degrees from select universities while Udacity uses a ‘Nanodegree’ to package multiple courses into a higher priced offering with more credibility.

The multi-sided nature of the business model, along with the high front-end investment costs, cause for the development of these online courses to come with considerable risk. Though the threat of new entrants into the market may be low, the threat of substitutes remains high. It may be too early to tell who will have more bargaining power between content providers and learning subscribers. But as the business and market mature, there will most likely arise bargaining options for both segments that will need to be considered.

The need to prove, and turn a profit from courses is paramount to the success of the edX business. In doing so, they will not only sustain the production cost of the model, but will fend off competition and mitigate against the powers held by their suppliers (the universities) and their learners.

Maintaining the edX Brand Promise

EdX needs to maintain their brand promise and mission equity as well as safeguard its intellectual property and protectable processes, to ensure their market share and longevity. As a nonprofit, the vision and mission of the organization play an essential role in maintaining a steady stream of customers on both sides of the business model. Schools need to believe that their brand will be positively impacted by association with the edX platform and the other partners there. Learners need to trust that the reputation and value of the certifications they receive will be viewed positively by employers and other institutions. (Online interviews with edX course learners as part of author’s role as community manager with MITx CTL.SCx MicroMasters in Supply Chain Management. March 2017)

Sample from edX Media Kit

To this end, edX simultaneously protects and shares its promise. This apparent dichotomy may make it hard to forecast their business strategy, but may lead to a robust model that combines both proprietary and shared assets. The software is built open source to demonstrate transparency and encourage additional innovation from third parties. In the MicroMasters of Supply Chain Management, having access to the code has been essential in creating cheating detection and robust testing procedures. These methods further guarantee the integrity of the course and brand while offsetting the cost of the development on to the educational partner. (“Changes Lives. Improves Careers”|edX) EdX continually commits to openness, and uses the commitment to further establish the brand value as one to be trusted and that does good works. In 2014 edX invested substantial legal resources to work with U.S. government officials to continue to offer courses in countries traditionally banned to American companies through U.S. anti-terrorism regulations. (“We are not blocking anyone”|edX)

In contrast to this openness, the organization also works diligently to protect its brand. (Media Kit|edX) (Visual Identity Guidelines|edX) (Trademark Guidelines|Open-edX) They promote explicit and prescriptive visual and usage guidelines for their MicroMasters and corporate brands. In 2016 edX received a trademark registration for its MicroMasters offering. This move illustrates the value they forecast the product to have toward their future profitability. In addition edX vigorously promotes their first mover and non-profit status in the market as badges of authenticity and trustworthiness. Lastly, edX understands that it needs its learners to thrive. An essential part of their marketing and relationship building comes in the form of promoting learner success stories.

Logo Lockups taken from internal partner brand guidelines

To conduct a back-of-napkin SWOT analysis strictly on the brand promise, one could note the following. EdX strengths come in the form of their mission, first mover status and trust quotient. Weaknesses may be their openness and over commitment to learner success over business success. Opportunities may come in the form of extending their brand to corporate or governmental contracts for training or licensing the brand to organizations. Threats could rise up in the form of competition actively undermining trust in the brand through smear campaigns or by calling legitimacy into question.

Even with this brief analysis it becomes clear that protection of assets and promotion of the mission are essential to the long term profitability for edX.

Sample screenshot from edX blog

Long Tail Relationships Matter

EdX needs to sustain long-term, high-quality relationships with their stakeholders and institutional partners and keep stakeholders invested in long tail strategies of content creation and dissemination. There are many choices that edX appears to be engaging in consciously as they build partner relationships. They strategically choose which institutions they wish to have relationships with. They invest in the longevity of contracts with partners. EdX proactively describes the intimacy of consultative relationship they wish to have with partners, understanding there are varying levels of engagement.

In the process, edX becomes part production company, part school, part online content business. Because online learning through MOOCs is a relatively new area of endeavor, there is a high barrier to entry for newcomers. It is not simply enough to film a course and place it online. The MOOC model subscribes to a highly documented, rigorously studied set of pedagogical principles of engagement that have been being developed ever since the first correspondence courses took place as early as the 18th century, but in earnest or at scale in the early 20th. (MOOCs and Open Education Timeline|Li Yuan Cetis Blogs) (“The History of Distance Learning as an Infographic | Online Courses.” — This i actually an impressive timeline on it’s own and great fun to look at.) (Handbook of Distance Education, Edited by Michael Grahame Moore, 2013, Taylor and Francis p. 3–6)

In addition, once the model is proven, edX will have to continue their work in building relationships with businesses and organizations that could be a source for additional revenue and new product offerings. But again, the edX high upfront cost and long tail model will need to be first proven. This will show potential business partners that their plan does actually work and works to create excellent value and benefit to the subscribing company or organization.

This work has already begun with the 2016 introduction of the edX for Business product offering. This product claims it provides “skill-building for today’s top talent in the global workplace”. With this offering, edX is clearly orienting itself toward expanding beyond B2C learner models and enrolling groups in this B2B model.

It is interesting to note the work of Barry Nalebuff at Yale School of Management who added the concept of “complementors” as a sixth force, to Porter’s original five forces to measure competition in an industry. According to Nalebuff, “Complementors are players from whom customers buy a complementary product or two whom suppliers sell complementary resources.” (“The Right Game: Use Game Theory to Shape Strategy.”|HBR) If we look at edX considering this sixth force, again the long tail relationships matter. With their MicroMasters offering, edX provides a record of achievement for a learner that many universities are now accepting in lieu of standardized tests for admissions. This kind of complementary product encourages more people to not only sign up for edX courses, but also broadens the applicant pool at high ranking universities that are often seeking top talent.

A More Delicate Pivot balance

Lastly, edX is unlike their for-profit counterparts who may be able to more easily pivot on their target educational markets or revenue models, without risking their stakeholder or customer base. Because market leadership and trust are so much a part of the brand promise, the edX stakeholder expects a higher level of integrity. At the for-profit competition, shareholders, or invested partners may be able to change pricing models, or quickly add new lines of business as this kind of behaviour is natural and expected from a for profit entity.

However, given their brand promise, edX may be expected by its stakeholders and the public to operate using more than strictly economic motives. EdX will always be asked to also consider the broader societal effects of their activities. They may be expected to have a heightened sense of self awareness and reflection compared to their for-profit competition. Included below is a modified business model canvas based on A. Osterwalder’s canvas that includes social and environmental costs and benefits alongside the traditional stakeholder analysis.

As a trusted non-profit with trackable and highly studied outcomes, edX has a more delicate balance they need to achieve in their business modelling.

Possible education and learning futures

Massive Online Open Courses appear to be here to stay. They will continue to expand and diversify as technical options for delivery improve and as needs for training and development grow. A global economy requires global and scalable education solutions that MOOCs in some way will be a part of. (“Investing in Global Education”|Brookings)

EdX is poised, through their strategic mission and vision as well as their business partner strategy, to lead the market in online education and training. Looking at the current success of the MicroMasters offering, their 2015 federal form 990, as well as some estimates of verified course enrollments it appears that edX is delivering on their model with significant plans for improvement. (Estimated 34,000 paid learners at $150 per course in MITx courses alone account for US$5M in revenue in 2016 from this single partner. (“HarvardX and MITx: Four Years of Open Online Courses|SSRN.”))

As an experience designer I would recommend that edX continue its current strategy model and add a few more products while offsetting some of their cost to third party providers. These additions can be grouped into two categories, credibility and sociability.

First, in order to maintain credibility in the Market, edX should become accredited by higher education organizations and professional development bodies. Both employers and learners gain benefit from the recognition and standardization that this kind of peer review could supply. To the same end, edX needs to generate learner transcripts and portable records of achievement beyond the digital certificates currently offered. These services could efficiently be sourced to third party providers.

Second, in order to provide for a more robust community experience, edX should create a teaching and learning consortia of its partner schools. This could offset the consulting costs of production training and create a peer-led, each-one-teach-one model. It would be more engaging for the university partners and create a support and innovation framework for the long term relationships cited above. For learners, the edX platform could allow for more social networking for current learners and for graduates. Through meetups, social networking, volunteer opportunities and career advice and planning, edX could extend its relationship with learners and offer many add on services. If the online tools were successfully linked to the course experience, they could be self selecting, or self-propagating.

Overall the edX business utilized and leveraged some of the best design and business planning to establish a workable model that stands a substantial chance at being an ongoing success.

Appendix

A Social Enterprise Model Canvas

Back of napkin sketch for a Business Model Canvas that takes social factors into account.