The Education Solution

It may be hard to believe in this era of social networking and telepresence video conferencing, but there is still a stigma attached to online education. Elite institutions do not want to dilute their brands by expanding the reach of their methodology using online channels.

This is a mistake, a humongous lost opportunity, and one that needs to be revisited because an astoundingly large number of people in America need retraining and career makeovers right now. In India, China, Brazil and Indonesia, the sheer size of the populations suggests that nothing other than online education can meet the needs of billions of people hungry for an opportunity to learn and secure a passport out of poverty.

The adoption of online education has happened largely in the for-profit education world. Dr. John Sperling is credited with leading the contemporary for-profit education movement in the U.S. He founded the University of Phoenix in 1976, which is now part of the publicly traded Apollo Group ( APOL – news – people ). It has a current enrollment of 420,700 undergraduates and 78,000 graduate students, largely catered to through online channels.

Since Dr. Sperling’s pioneering experiment, however, many others have followed suit. There’s one critical pattern that I see among education entrepreneurs who have noticed and believed in the online education opportunity: the complex maneuverings around getting accreditation for their ventures.

Brent Richardson, who was the CEO of the now-public Grand Canyon University, decided to buy a nonprofit with regional accreditation in 2004 to avoid the bottleneck. "If you were starting from scratch, I would think that it would take five to seven years if everything went right," recalls Richardson. This allowed him to focus on building the university, its curriculum and student body, rather than having to worry about accreditation. (To learn more about accreditation, you can also read my interview with American Public University CEO Wallace Boston. APEI teaches 50,000 students online.)

A private equity group, Endeavor Capital, put in $18 million, and Grand Canyon went on to strengthen its existing master’s programs in education and health care, as well as add a business school. "The main area of effort, and where we thought we could get student growth, was online. Most of those students would be interested in master’s degrees in education. When I got here we had three master’s degree programs in education, and now we have 15. That was a big part of the build," explains Richardson.

Richardson was able to scale up the size of the student body through aggressive use of online offerings. "When I arrived we had 1,200 traditional students. Our goal was to get the number of students up to about 12,000 over a three-year period with the expectation that the majority of those students would take courses online. We were able to accomplish those goals."

Online is also a very profitable model because costs are mostly variable. In that aspect, it differs from traditional education. For Grand Canyon, a large portion of the program is paid for by employers. "Almost all of the hospitals we work with are on some sort of arrangement. We have about 1,500 students across 70 hospitals and in 99% of the cases, the hospitals are paying," says Richardson. (More on Grand Canyon in my interview with Brent Richardson.)
Grand Canyon went public last fall, and has close to 30,000 students. Brian Mueller, former President of the Apollo Group, is now CEO. Revenue jumped from $99 million in 2007 to $161 million in 2008, and is growing steadily this year.

Of the public universities, one of the biggest successes in embracing online delivery models is Colorado State University. About 1,000 students are currently enrolled in its online program. Hunt Lambert, the mastermind of the program, says that for 1,000 students he needs 54 faculty. "The average is slightly under 20 [students per faculty member]. If you went to 100,000 students, you would have 5,000 faculty," he says. Lambert explains another key pillar of the online equation:In this environment, there are a lot of people with advanced degrees and real-world qualifications who do not have jobs. Teaching could be a very good way to engage them, which could help rapidly scale the program. (More on CSU in my interview with Hunt Lambert.)

Lambert says there’s another reason that supports his mission."If America chooses to remain a leader in the global economy, that leadership will come from our knowledge base, not from our manufacturing skills. It is highly likely that the U.S. needs to be graduating 40% of its high school students from college. That means we need to graduate twice as many people from college, across the country, as we do today. Colorado is at the low end of that scale. We have a highly educated workforce because they move here, but only 22% of our high school students ever graduate from college. If we take that from 22% to 40%, where are we going to put those 400,000 students? The financial reality is we are not going to build traditional campuses to accommodate that many students. They are going to have to do it online."

So would the rest of the world, making entrepreneurship in online education an urgent need of the hour.

Michael Clifford is one such entrepreneur. He has made a career out of buying and selling accredited schools and turning them around by positioning them to focus on specific niches. An early investor in Grand Canyon, Clifford says, "I spend a lot of time thinking about what degrees are going to be valuable two to three years from now and it just made common sense to me that health care was going to be bigger and bigger because of baby boomers. All the doctors I knew were complaining about not getting enough billers, receptionists and radiologists in their office."

Clifford adds, "There was nobody doing health care training online. We went out and looked at 40 schools. We made offers on nine schools and got serious with three. We ended up buying a very small school in Los Angeles that had about 100 students. We bought it because it had the right regulatory platform and a 20-year relationship with the Department of Education and the ACICS (the Accrediting Council for Independent Colleges and Schools). I changed the name to LA College."

It took $10 million and two years, but now LA College is growing rapidly with courses for medical billing and others in the health care profession. "To be a medical billing clerk you do not go to Grand Canyon, you go to LA College. You get a 900-hour diploma and very quickly you can be making $45,000 a year because there are lots of jobs," Clifford explains. He emphasizes the need for quick turnaround vocational training to address the current crisis in employment. (More on Michael Clifford’s ventures in my interview here.)

One of the greatest job and wealth creation opportunities of this coming decade will be in building online colleges and universities that address the global education needs.

Entrepreneurs, listen up!


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