Harvard, and higher education in general, has long benefited from network effects. Exploiting this has been a critical strategy for Harvard and other institutions to maintain their value and prestige in the public eye. However, the digital transformation of education and online learning platforms may threaten a critical part of their operating model.
Higher education creates and captures value in a variety of ways. The knowledge creation from research institutions has created considerable value in every field: STEM, social sciences, and liberal arts. And institutions like Harvard also produce skilled and educated workers who can contribute to society as physicians, lawyers, civil engineers, public administrators, authors, and artists. Harvard captures value through monetizing its research (attracting additional public and private grants, patenting research) and through the tuition fees (and subsequent donations) that come from its students and alumni.
Harvard’s “user base” of students and alumni exhibits classic network effects. The value of the Harvard network grows with each additional user. When there are more alumni, there are more potential connections who can provide an alumna with direct benefits: her next client or job opportunity, mentorship or piece of advice. The benefits are indirect as well. More alums in more places increases the likelihood that there will be success stories that further spread and strengthen the Harvard brand. This increase in prestige increases the value of the Harvard network for every other member.
An important consideration for higher ed networks is that growing the user base isn’t simply a scale game. Traditionally, at least, it’s not about throwing the doors wide open and saying, “come on in! The more the merrier!” The value associated with the network is also driven by the perception of selectivity. Universities and colleges must have low admission rates in order to maintain the value of their networks. They must either admit a small number of students each year (and slowly grow the alumni pool) or attract a remarkably high number of applicants. Harvard is quite adept at the latter. Among its peer group, Harvard maintains very low admissions rates, and produces some of the largest classes of MBAs, lawyers, and undergrads each year. These grads are sent out into the world thereby spreading the Harvard brand and strengthening the value of the network.
The outstanding question is if higher education institutions will be able to maintain this system with the growth of online learning platforms like Coursera and edX. While MOOCs (Massive Open Online Courses) are not longer particularly novel today, they continue to put pressure on schools to open their classrooms to a broader, online community, and do it for free. This threatens the exclusivity that is at the core of many universities’ operating model. Suddenly the network of people who have taken a Harvard class could become very large. This massive increase in users could dilute the current value in the eyes of alumni. HBS has tried to split the difference by creating HBX, a classroom of the future that works to complement HBS offerings (users still have to apply and pay, and material offered doesn’t overlap with the MBA curriculum) and opening the doors just a bit to the online public. Will this tactic relieve the pressure? Or is it the first crack of many that will fragment that network that Harvard and other institutions are known for?