The New York Times proclaimed 2012 the year of the MOOCs (Massive Open Online Courses). MOOCS, online courses aimed at unlimited participation and open access via the web, made the audacious claim that they would “democratize access to education and kill tradition higher education as we know it today. Well-funded startups such as Udacity, Coursera, and MIT’s edX all entered the race to be the MOOC platform of choice. But 4 years later, MOOCs have, in large part, failed to live up to their promise.
I will analyze the MOOC platform model (and its purported failure) through the lens of Coursera. Coursera was founded in 2011 by two Stanford computer science professors, Daphne Koller and Andrew Ng, and was largely considered a MOOC “front runner.” I will outline Coursera’s initial value creation and capture model, will explain their most recent pivot, and will end by sharing brief thoughts on how Coursera can continue to build a more defensive platform business.
Initial Value Creation & Capture Model
Coursera’s initial mission was to provide all students/life-long learners with access to the highest quality content as created by respected academics from prestigious universities. Ng and Koller believed that everyone should be able to benefit from Stanford’s world-class robotics program, for instance. The initial value creation model assumed that people crave knowledge and want to continue to attain information and skills in a wide array of topics. And even though MOOCS were labeled higher education killers and potential brand diluters, they also created value for academic institutions that saw the potential for a new, future revenue stream. Additionally, individual professors were excited about the exposure and reach MOOCs would provide them as academics.
Coursera and the other MOOC’s were relatively unconcerned with value capture in their early years. The prevailing belief was that Coursera should amass as many users as possible and that monetization would come later. Coursera and its peers raised large rounds of capital from well-known institutional investors to fund fast, aggressive growth. MOOCs and their investors believed that this market would have strong direct network effects as well as indirect network effects (through peer-to-peer learning). Initially, Coursera offered classes free of charge with the future intent to test out creative monetization strategies (freemium model, transaction fee for connecting students with recruiters, etc.).
The Pivot: Exploring a new Value Creation & Capture Model
Coursera and the rest of the MOOCs learned a hard lesson in the four years since their founding – neither their value creation nor their value capture model worked. Students churned out of the product and the course completion rate was extremely low. The life-long learning value proposition wasn’t as strong as assumed – most students wanted to see something for their work (a credential, a new job, etc.) This lack of value creation prevented Coursera from benefitting from any potential network effects. Furthermore, multihoming was rampant because there was very little product differentiation across the MOOCs.
Coursera found it hard to capture value in this context so it was forced to go back to the drawing board. Coursera refocused on three things:
- Create more value for users with improved product quality – Coursera became serious about building a high-quality platform. They worked to improve both student-professor and student-student interaction. And they hired a former Netflix product executive rethink Coursera’s search and course recommendation functions with the goal of driving tailored content to users based on their learning needs.
- Reduce multihoming via an “all you can eat: subscription offering (a la Netflix).
- Capture more value through an enterprise business model – Coursera has built a B2B platform and is going after the corporate and workforce training via partnerships with corporations and governments. Coursera, in keeping with its mission, will maintain its B2C business, but it has realized that more money is on the enterprise side right now.
Looking Forward – How Coursera Can Continue to Build a Defensible Platform Business
The verdict is still out on which, if any one, platform will dominate the MOOC space. Early results indicate that Coursera is moving down a profitable path. Looking forward, I believe it will be critical for Coursera to avoid devolving from a platform business to a service business. It could be tempting for Coursera’s enterprise business to morph into a learning management system, but I fear that business model that is much more limited in scope and easily commoditized. I believe that, going forward, Coursera should continue to differentiate their platform from competitors, consider strategic use of the data the platform is collecting, and encourage third party developers to enrich the Coursera community and increase user stickiness with third party features and functionality.