“I wish they all could be California.”
- The Beach Boys

MOOC providers must have been singing along last week as the Democratic leader in the California State Senate introduced a measure that would require state-supported institutions to award credit for faculty-approved online courses taken by students unable to register for oversubscribed classes on campus. The motivation is noble and necessary following a recession when over a half-million students were shut out of California’s state colleges and universities, and hundreds of thousands more were unable to progress due to capacity constraints: “No college student in California will be denied the right to move through their education because they couldn’t get a seat in the course they needed.” The implication for MOOC providers, of course, is that their courses may have value and they may find themselves with a business model after all.

If you believe this, there’s bridge in San Francisco with your name on it. In the length of time it will take to pass the legislation over the objection of all three state systems (agitated at the loss of faculty control over credit and curriculum) and then – according to the draft measure – for panels of faculty members from each system’s Academic Senate to review and approve potential courses (with one key criteria being persistence/completion – a track record MOOCs do not have), California community colleges and private universities like Patten will launch their own online courses priced at $140 per 3-credit course. It’s hard to envision how MOOCs will have a level playing field to reach students who likely are already enrolled or on a waiting list at one of the state systems.

There seems to be general agreement among the cognoscenti that MOOCs don’t have a business model today, but will just as soon as they are accepted for credit towards degrees. But what if MOOCs already have a business model that doesn’t involve assuming shared governance with faculty is done and dusted? What if there is a business model that is complementary rather than competitive with traditional higher education?

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For over a century, Harvard Executive Education has offered short, not-for-credit courses to professionals with a desire to learn, and a greater desire to slap the Harvard brand on their resume. Harvard Business School enrolls over 10,000 students each year in not-for-credit, non-degree courses. Is there any evidence such a model could work online?

An answer to this question might be found in South Africa where a company called GetSmarter has partnered with the country’s top university – the University of Cape Town – to launch a range of 10- week not-for-credit online courses directed at working adults. As with other online service providers, the courses are branded University of Cape Town and GetSmarter shares tuition revenue with the university. This year GetSmarter projects 6,000 students and revenue of $7M. The University is thrilled because GetSmarter has opened a new market it views as complementary rather than competitive to its degree programs.

The differences between today’s MOOCs and the GetSmarter model are instructive in thinking about a potential path forward for MOOCs:

	MOOCs	GetSmarter
Instructor	No interaction with individual students	Interaction with individual students
Assessment	Peer graded	Like most online courses (GetSmarter instructor assesses, University faculty member conducts second marking)
Certificate	Tentative, if at all	Real certificate of completion from University
Student outcomes	5-10% completion rate	96% completion rate
Price	Free	Comparable to cost of 3-credit course at private university
Business model	X	✔

The lesson is clear: if Coursera, edX and Udacity make MOOCs more like traditional online courses, they could find themselves with a business model without needing to convince faculty that “MOOC” isn’t the sound of their jobs being cut. Not coincidentally, this was Udacity’s decision to add staff mentors to monitor the courses it is offering in partnership with San Jose State. And it was not surprising that the draft bill in California requires that courses provide some “interaction” with instructors in order to be approved. Of course, the more instructor interaction, the less “massive” the course and the easier it should be for faculty to embrace the form. But even as MOOCs become mOOCs with a small “m”, it will be a long road to convince traditional higher education to rethink the anti-MOOC prejudice that has already developed – particularly as this prejudice is strongest at the elite universities leading the MOOC parade.

Of equal importance to the question of the current business model is the certificate. Most MOOCs don’t offer certificates, either because the university isn’t willing to stand behind the faculty member or the faculty member isn’t willing to vouch for the learning of students he or she has not interacted with. Where certificates are offered, they may have minor caveats e.g., the student named on the certificate may not be the student who completed the coursework, which isn’t particularly helpful in impressing employers.

Assuming MOOCs evolve along both these lines, Rob Paddock, Founder and Managing Director of GetSmarter, has some advice for the MOOC providers. According to Rob, not-for-credit, non-degree courses are attractive to and have significant value for adult learners if all of the following criteria are met:

1. There are common job titles incorporated into the course name (e.g., Internet Marketing, Supply Chain Management);
2. The course provides a specific set of skills that aren’t recognized as taught in current university programs; and
3. Students have a very strong desire to identify themselves with the brand of the institution. There are two elements to this:
a. The brand of the institution is extremely strong
b. The target market isn’t already highly qualified (i.e., not Ivy League graduates)

GetSmarter’s most popular courses, Internet Marketing and Project Management, check all three boxes.

This is in stark contrast MOOCs currently offered by Coursera and edX. A review according to the above framework reveals that not a single MOOC currently offered by Harvard (edX), MIT (edX), Berkeley (edX), Stanford (Coursera), Princeton (Coursera) or Penn (Coursera) meets the GetSmarter criteria. While some of the courses meet the second and third criteria, none of the MOOCs offered by these universities meet the first (common job title incorporated into course name).

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If MOOCs hope to find a business model that is simpatico with traditional higher education rather than at war with it, they have two hurdles. First, they need to incorporate interaction with instructors and award real certificates. Second, they need to meet the GetSmarter criteria, which means gently directing university partners to more practical offerings.

Unfortunately, there is also a third hurdle – one that is insurmountable for some institutions. The GetSmarter model works in South Africa because University of Cape Town is far and away the country’ s top higher education brand. So once they get smarter, MOOC providers may well regret expanding their rosters of universities beyond (and now far beyond) the super-elite.

As with most new markets, many of the follower universities starting to offer MOOCs will have as much trouble making the GetSmarter business model work as they will convincing their own faculty to award credit. These institutions are destined to continue California Dreamin’ in search of a viable MOOC business model.

University Ventures (UV) is the premier investment firm focused exclusively on the global higher education sector. UV pursues a differentiated strategy of ‘innovation from within’. By partnering with top-tier universities and colleges, and then strategically directing private capital to develop programs of exceptional quality that address major economic and social needs, UV expects to set new standards for student outcomes and advance the development of the next generation of colleges and universities on a global scale.