Will data kill the big brands in education?

Education, like vitamins, is very difficult to evaluate before consumption and even remains difficult after consumption. We tend to believe that education has a strong utility value for the consumer, better work and life opportunities, but in truth these are hard to measure. For the economist, education represents a classic “credence good”, as opposed to a “search good” whose utility can be evaluated before purchase.

For a lot of students, tertiary education is the first major point in their educational journey where there is a significant degree of choice. Selecting the appropriate course at the appropriate institution is not a transparent process, data is hard to come by and benchmarking surveys have varying methodologies and weightings.

For example, the well-respected QS World University rankings applies the following methodology:

• 40% – Academic reputation, based on a survey of academics
• 20% – Citations per faulty, an indication of research impact
• 20% – Faculty student ratio, an indication of commitment to teaching
• 10% – Employer reputation, based on a global survey of graduate employers
• 5%   – International student ratio, measuring international diversity of the student community
• 5%   – International staff ratio, measuring international diversity of academic faculty

Academic reputation, research impact and staff numbers represent over 80% of the weighting and only 10% is employability, which makes you curious as to what the student is actually looking for.  What is being served up to them is a heavy bias to the academic brand value of the institution, as seen by other academics. Little direct focus on the actual utility to the consumer.

So it seems you just have to have faith that the institution will deliver what you want of it a classic “credence good”. Institutions with centuries of history like this approach, as they are able to roll out their academic pedigree and sell this to the student consumer.  But should education be a “credence good”? What would it take to convert it to a “search good”?

In the land of the economists, the question relates to being able to measure the utility of the good to the consumer. Taking the UK as an example, approximately 90% of students leaving university go into the workforce or continue their studies. Employability within your chosen profession has to be a key consideration for any student. However, we do not seem to put much store by this aspect, as evidenced by the rankings methodology above. My sense is that the student is using proxies in the form of brand and academic reputation to judge the future utility of the academic certificate they are seeking to gain. And this is because they do not have comparative data they want.

‘Big data and online learning platforms will eventually push education to the “search” end of the service spectrum.’

Education acts as a “credence good” due to the lack of market clarity; there is imperfect information. However the market is changing. Big data and online learning platforms will eventually push education to the “search” end of the service spectrum. Before choosing a course you will have the data on what happened to other people who completed the same course, detailed employability statistics and importantly, student satisfaction. Combine this data with online access to course content and teaching and the restrictions on access start to fall away as well. So we start to have a market where there is good utility data as well as competitive offerings for the consumer….education becomes a “search good”.

The implications for government should not be lost. The challenge for all economies in a fast changing employment landscape is how to manage the skills gap. If we improve market information on the factors driving employability then we can manage a nation’s skill base better. As you search for your course, the data feedback would include jobs available today in your preferred sector and projections for the coming years.

At a global level, increasing transparency and information will provide a more level playing field for both the consumer and the provider. Digital disruption in education leads to a wider provision of education and training that can be accessed anywhere on the planet. The sophistication of competency based educational software and testing will mean the brand value of the course provider will be less important as compared to actual measurable competency of the student.

So as the shape of education changes, so must the providers. Institutions who trade on age and peer review need to wake up to the fast developing data rich environment that will allow students to know whether their educational vitamins are any good before they swallow them.

W: edtecheurope.com