“By entering into this deal, Harvard and MIT have shown that they’re committed to a new business model. That is, they’ll continue their excellence in the residential model for a select few but will also leverage their expertise and teaching resources to provide high-quality education to the masses at affordable prices. To start with, they developed an incredible collection of content in edX, which netted them $800 million. They’ll use that money to further expand their online strategy.

This development should serve as a wakeup call for other colleges and universities. Lamenting a lack of government support and declining enrollments won’t help. They must instead ask how they can orchestrate an ecosystem to offer high-quality education at low cost. They currently follow a vertical integration model where they perform the entire value chain in house, from admitting students all the way to awarding degrees. They must start thinking about how to unbundle the value chain and outsource areas where others possess superior core competencies — for example, to content creators like Outlier.org, outreach platforms like edX, and those in the gaming industry with expertise in artificial and augmented reality and capabilities to create immersive experiences. By partnering and controlling significant parts of value chain instead of resisting them, universities can gain a significant portion of revenues that would steadily migrate toward EdTech companies. Those additional revenues can provide seed capital to universities to drive their own EdTech initiatives. Right now, they’re mere spectators in the game.”