remedial_Higher Education_ChristensenInstitute

Innovators Worth Watching: StraighterLine

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Aug 8, 2017

Welcome to our “Innovators Worth Watching” series, spotlighting interesting and potentially disruptive players in higher education.

Every year, American students and taxpayers spend roughly $7 billion trying to bridge the gap between finishing high school and actually being ready for college. In two-year colleges, 52% of students are funnelled into remedial coursework. Of these students, only about 40% finish the remedial courses, and less than 10% even graduate. High schools and colleges nationwide are making some headway in improving outcomes, but there is tremendous room for innovative thinkers to make their mark.

StraighterLine, an ambitious Baltimore edtech company, has been making its mark on the remedial education space for eight years. Their solution? Radically low-cost, low-risk, competency-based online courses recommended by the American Council on Education (ACE). “Given low completion rates nationally, starting college is a high-risk decision for most students,” says StraighterLine founder Burck Smith. “By starting with a free trial and then continuing with a monthly subscription, students can get a sense of whether they are likely to be successful before committing to the much higher tuition of a traditional college.”

Students buy individual entry-level courses as needed, taking them at their own pace, with access to StraighterLine advisors and ten hours of free online tutoring. The courses incorporate interactive exercises and frequent assessment opportunities.

StraighterLine has a network of over 130 partner colleges that guarantee full credit transfer, with nearly 2,000 additional institutions having accepted StraighterLine credits in the past. The company is also exploring more integrated partnerships with colleges that will allow students to use federal aid instead of paying out of pocket. In 2016, the Obama administration selected StraighterLine to participate in the EQUIP program to test just such a partnership with Dallas County Community College District and the Council for Higher Education Accreditation.

StraighterLine offers us an opportunity to study an almost decade-old startup. This is pretty rare in the higher ed tech innovation world, where time might as well be measured in dog years. StraighterLine has longevity, enrolls 22,000 students a year, and could soon bypass significant regulatory hurdles. But is it disruptive to the general education and remedial courses market? We put StraighterLine to the test with six questions for identifying disruption.

1. Does it target people whose only alternative is to buy nothing at all (nonconsumers) or who are overserved by existing offerings in the market?

Yes. StraighterLine students are typically working adults who are trying to get their first degree. They often have dependents and are always looking to save money. Many of these students are taking StraighterLine courses as a way to fulfill enrollment requirements or prerequisites for a program. Others have the option of attending traditional institutions, but they are able to take courses through StraighterLine for a fraction of the cost.

2. Is the offering not as good as existing offerings as judged by historical measures of performance?

Yes. StraighterLine does not offer a full degree, and its credit transfer network still has room to grow. The courses consist of online textbook readings, videos, and slides with voiceovers. There is no live professor or in-house discussion group for collaborative learning. By design, StraighterLine has sought to perform well on different performance metrics—namely stackability, affordability, and portability—than those used by traditional providers.

3. Is the innovation simpler to use, more convenient, or more affordable than existing offerings?

Yes. Students can enroll in courses at any time, begin whenever they want, and progress at their own pace. StraighterLine offers simpler pricing than traditional universities, including digital course materials and transcripts at no additional cost. StraighterLine is also cheaper: the equivalent of one year’s worth of tuition and fees costs a mere $1,382, less than half the cost of one year at a public two-year college. Further, the pay-per-course model allows students to only pay for what they use, as opposed to taking out a loan for a full year of tuition and fees.

4. Does the offering have a technology that enables it to improve and move upmarket?

Yes. In disruption theory, “technology” includes the processes that companies use to create value. StraighterLine succeeded in getting its courses recommended by ACE, and can leverage this credit transfer technology to partner with more colleges and universities, increasing both options and prestige for students. It can also use its cost-effective course development partnerships to expand the number and type of courses offered, making it a more comprehensive solution for students seeking general education credits.

5. Is the technology paired with a business model innovation that allows it to be sustainable?

Yes. StraighterLine has now thrived for almost ten years with its highly affordable subscription model, in which students pay a monthly membership fee (currently $99) and then purchase the individual courses that they need. These courses typically cost $59-$79, with some courses requiring additional purchases. In terms of expenses, StraighterLine does not pay for physical classrooms or expensive tenure-track faculty. This extremely low-cost, pay-as-you-go structure is refreshingly innovative in a higher education landscape dominated by high fixed costs and upfront tuition models.

6. Are existing providers motivated to ignore the new innovation and not feel threatened by it at the outset?

Yes. Students needing remedial coursework require more attention and investment to get them up to speed. Many schools have overhauled or eliminated their remedial offerings. Others are actually turning to StraighterLine to provide these courses. What is particularly striking is that Smith was hard-pressed to identify a direct competitor when asked, positing a series of tangential possibilities.

StraighterLine is certainly onto something—and that something shows strong signs of being potentially disruptive. The company has positioned itself as an effective on-ramp to an undergraduate education, interfacing seamlessly with hundreds of colleges and universities. StraighterLine’s exploration of a symbiotic integration model with access to federal aid through the EQUIP partnership is also very compelling.

With so many positive developments, and with the primary ingredients for disruption in place, StraighterLine is approaching its 10-year mark with a vitality that belies its relative old age. Pretty rare indeed.

As a research associate on the Christensen Institute's higher education team, Richard helps investigate novel business models in postsecondary education, professional development, and lifelong learning.