Alternative credentials are reshuffling the higher education deck

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Jul 25, 2017

“Hard problems often solve themselves, if we get the categories right.” – Clayton Christensen

In a simple version of the world, work and learning are considered separate spheres. But in fact the categories are not so clear. The world of work involves learning too, and while much of this learning is experiential or “on the job”, companies have built a range of solutions to help their employees develop and learn new skills, including internal training sessions, external seminars, and corporate universities. They also turn to colleges and universities. But these institutions are but one piece of the puzzle.

We generally break learning down further into a neat progression of schools: elementary, middle, high, college, & graduate. But here, too, the complexity of the real world defies our schemes to classify it. For instance, 40-60 percent of college students require remedial classes, to the tune of $1.3 billion per year. Put differently, this means that millions of college students are spending money—including their own cash, federal loan dollars, and federal grants—to take high school courses from colleges and universities.

This is one of many examples of the costs of getting the categories wrong in higher education.

Interdependent vs. modular architectures

The simple story—of education neatly preceding work—describes a modular architecture, whereby colleges make sure that students meet employers’ specifications, and then send them off to those employers, their education complete. Modular architectures favor flexibility, because the pieces can be put together in different ways. Companies can recruit college-educated workers from a variety of different institutions and students can bring their degrees to bear in a variety of professions.

But in reality, learning doesn’t end with a graduation ceremony. Corporations are spending billions on training, using many avenues, of which traditional higher education (either on campus or online) is but one. Much of the training that happens within companies could be described as an interdependent solution. Interdependent solutions are preferable when standards are not well defined—just as the learning and skills outcomes of traditional higher education are highly variable between institutions and between students. Companies optimize the performance of their employee preparation and training by building their own solutions.

For instance, McKinsey, one of the world’s top consulting firms, has long recruited some of the best and brightest from the world’s elite universities. But once new consultants arrive at McKinsey, their first stop is more training. These internal training efforts formalized into McKinsey Academy, which has since evolved to be a profit center in its own right, providing McKinsey’s clients with leadership training in the form of in-person seminars as well as online courses.

Industry architectures are rarely either purely modular or purely integrated. Reality most often lies somewhere in the middle. These architectures are also not fixed over time—they oscillate toward modularity or integration as needs change. This is true in education; industry practices around training and credential requirements shift over time. Corporate universities represent a shift to a more integrated solution for training business and management functions. But other roles, like nursing, have seen a move toward a more modular architecture as requirements for degrees replace on-the-job training practices.

Categorizing new solutions

Enter the booming industry of bootcamps, nanodegrees, micromasters, and the like. These, like college itself, are a third-party provider of education and training, and represent a modular solution that plugs into the workforce. In some cases, they pose a disruptive threat to other modular players, like traditional institutions’ graduate programs in computer science. But more immediately, they compete against interdependent solutions—employers’ internal training and development programs—signaling a shift in the architecture of adult learning toward a more modular design.

But while modular, many of the new entrants offering alternative credential programs have been savvy in designing those programs to specifically fit the needs of employers. In some cases, these programs have been built in specific partnership with particular companies. In other cases, these programs are being hired not by eager students looking to make a career change, but by companies themselves, who are looking for external providers to customize specific offerings to train or onboard their workers.

Alternative credential providers are gaining ground for two reasons, anchored in the drawbacks and benefits of modular versus integrated solutions. First, the market is prioritizing flexibility. The economy is becoming more turbulent; even within the same job, needed skill sets are changing quickly. This favors modular, customizable solutions. But secondly, newcomers are providing something that performs better—in terms of meeting the specific training needs of companies—than options that were previously available. By viewing employers as the end customer and designing with their needs in mind, they are also well-positioned to add value to students who are looking to enhance their own career progression.

Colleges have the potential to compete in this landscape as modular providers who align to employer training needs in a more targeted ways. But doing so will require aligning their programs with the needs of the workforce. This is not an impossible task, but it’s not one that higher education has historically prioritized. As I wrote in College Transformed, business model changes and disruptive strategies are necessary in order to innovate against these challenges. If colleges can’t provide the performance that companies are seeking—in this case, by aligning their programs to the skills and competencies that employers need—then they will lose to the new entrants who, from the beginning, have honed in on workforce alignment, while still offering the flexibility that a third-party modular solution affords.

The boundaries of the campus quad are blurrier than their wrought iron appearance might suggest. College coursework spans across that which is typically taught in high schools and that which is often learned on the job. College does not hold—and never has held—a monopoly on post-K12 learning. Alternative credential providers may not be pulling recruits away from traditional colleges. Yet. But new entrants are changing the fundamental architecture that connects higher education to the workforce. As such, they represent a challenge to the very categories and boundaries that we have placed around work and learning. Initially, these solutions compete primarily against employers’ in-house, integrated solutions. But over time, as the pace of the economy quickens and as alternative credentials continue to improve, they are likely to compete head-to-head with traditional modular providers. College, that’s you.

Alana Dunagan

Alana leads the Institute’s higher education research and works to find solutions for a more affordable system that better serves both students and employers. In this role, Alana analyzes disruptive forces changing the higher education landscape.