SCOTTSDALE, Ariz. — On a warm spring evening, hundreds of investment bankers, venture capitalists and geeky tech entrepreneurs gathered near the pool at the Phoenician, a luxury resort outside Phoenix, for a high-profile gathering of education innovators. As guests sipped cocktails and nibbled hors d'oeuvres, the mood was upbeat.

And why not? Major innovations — forged by the struggles of the Great Recession and fostered by technology — are coming to higher education.

Investment dollars are flooding in — a record-smashing 168 venture capital deals in the United States alone last year, according to conference host GSV Advisors. The computing power of "the cloud" and "big data" are unleashing new software. Public officials, desperate to cut costs and measure results, are open to change.

And everyone, it seems, is talking about MOOCs, the Massive Open Online Courses offered by elite universities and attracting millions of enrollees worldwide.

As with so many innovations, the technology is bubbling up mostly from the United States, fueled by American capital chasing profitable solutions to American problems. But as with those past innovations, the impact will be worldwide — in this case, perhaps even more powerfully in developing countries where mass higher education is new.

Global demand is surging. And college tuition dollars — including, in the United States, $200 billion annually in federal student financial aid — follow the students where they choose to enroll, making the market more competitive and open to innovation.

The 1,500 attendees here— up from a few hundred in recent years — agreed on the surprising origins of this spring-like moment: the wintry depths of the financial crisis that struck five years ago.

"People started to say, 'How do we do more with the resources we have?'" says Jim Shelton, the U.S. Department of Education's top innovation guru. "Technology has almost always answered that question for other sectors."

Richard Demillo, director of the Center for 21st Century Universities at Georgia Tech, puts it another way: The Great Recession exposed structural flaws in higher education. The system simply cost too much and accomplished too little.

"Everything from cost to price to the mission of universities kind of went under the microscope," Demillo says. "Enter technology."

What does this wave of educational innovation entail? To be sure, it includes the MOOCs and all sorts of "adaptive learning" software that promises to teach and measure some things better and more cheaply than a human teacher. The idea is to free up teachers for what they do best, not replace them, advocates insist, though many people are skeptical.

But in some ways, the innovation is broader than the technology itself, which many call cool but not yet revolutionary.

Recent financial pressures and these new technologies are opening cracks in traditional, age-old structures of higher education. Terms like "credit hour" and even the definition of what it means to be a college are in flux.

Higher education is becoming "unbundled." Individual classes and degrees are losing their connections to single institutions, in much the same way iTunes has unbundled songs from whole albums and the Internet is increasingly unbundling television shows and networks from bulky cable packages.

"The consumer, after five years on a tablet and five years on an iPhone, is just sick of being told 'You can't do that," says Brandon Dobell, a partner at William Blair & Co., an investment bank and research firm based in Chicago. "I can do everything else on my phone, my tablet. Why can't I learn as well?"


We've been here before. Every new technology promises to transform education.

In the 18th century, the U.S. Postal Service brought correspondence courses. In the 1930s, the big radio networks talked about turning the airwaves into a university for the masses. The Open University, launched in Britain in 1971, promised much the same for television. The Internet produced online learning — now 20-plus years old.

All those technologies had some effect. But traditional universities are still around, and still dominant. Technology didn't solve the scale problem: One teacher can lecture millions of students online. But truly "teach" them, with personal feedback and interaction?

"There's an endless faith in education in technology," says John Meyer, a Stanford University sociologist of education, and skeptic of the latest trends. "Right now, there's a kind of binge of belief that the Internet will solve the problem."

But the arrival of MOOCs, barely a year old, has many believing this time is different.

At his desk at a telecom company in the Nigerian capital of Lagos, Ugochukwu Nehemiah used to take his full one-hour lunch break. Now, he quickly devours his meal, then watches his downloaded MOOCs. He's finished three so far, with two more under way — courses in electronics, business and disruptive innovation, taught by institutions like the Massachusetts Institute of Technology and the University of Maryland.

Nehemiah needs a master's to advance at work, but cannot afford the program in England where he's been admitted. The MOOC learning doesn't translate into a widely recognized credential, but he cannot get such teaching locally, and it's helpful regardless.

"It's a form of self-development," says Nehemiah, a father of two. "The way I would speak when I have meetings to attend," he adds, "would be much different than the way I had spoken if I had not taken this course."

Some MOOCs are only a modest step-up from glorified lecture videos. But the star power of famous professors has helped make them hugely popular.

When non-profit edX offered its first MOOC in "Circuits and Electronics" last spring, 154,000 students signed up — more than have graduated from MIT in its 150-year history (though only 7,000 lasted and passed the final). Now edX has 900,000 students and more than 30 courses. For-profit rival Coursera has ramped up to 3.5 million students, 370 courses and 69 partner institutions.

The MOOCs, though, are just one part of this new landscape.

Sal Khan, a charismatic former hedge-fund adviser, discovered his knack for explaining things while tutoring his young cousins in algebra in 2004. In 2006, he uploaded his first YouTube video and, two years later, founded Khan Academy.

Today, Khan, who is based in Mountain View, Calif., has more students than all the MOOCs combined: Six million unique users a month from 216 countries watch one or more of the 4,000-plus videos available on Khan Academy's website. These are not full courses, but connected series of free, bite-sized lessons — about 10 minutes each — taught by Khan and others in everything from math to art history.

You can watch in 28 languages, from Spanish to Farsi, Bengali and Portuguese.

The appeal of such technologies is obvious: getting great teachers in front of more — millions more — students. But Khan also talks extensively about shaking up education across a different dimension — not just geography, but time. Khan students can learn what they need, when they need it, without having to take and pay for an entire course.

"Whether we're talking basic literacy or quantum physics," Khan says, "it's the ability to cater to one person's needs."


Here's the centuries-old concept of time in traditional universities: Yoke together students of differing abilities, sit them in lecture halls, teach them at the same speed. After 12 or 15 weeks, whether they pass with an A or a D-minus, give them equal credit. Take a break, and then repeat.

"We've organized higher education into this factory model where we bring a group of students in post-high school and march them through more or less in lock-step," says Demillo, the Georgia Tech professor and author of "Abelard to Apple: The Fate of American Colleges and Universities." "People that don't conform are rejected from the factory and people that make it through are stamped with a degree."

Researchers have long understood students generally do better with customized speed and regular assessment, but simple economics made such individualized learning unrealistic.

"But technology is a great multiplier just like in business, and it gives you the ability to do that," Demillo notes.

At Arizona State University in Tempe, President Michael Crow also is a believer in innovation's ability to improve and scale up teaching — and make better use of time.

Five years ago, ASU was already tearing down department walls, embracing technology in the classroom and re-engineering research across disciplines. Then the Great Recession's housing bust crushed Arizona's economy, and ASU's state funding was slashed by half. Suddenly, ASU had to push even harder.

"Innovation doesn't occur when you're lying around on the beach," Crow says.

ASU's challenges mirror the country's — and the world's. Amid scarce resources, the university is trying to accommodate diverse and growing demand.

Unlikely virtually any other major American university, ASU grew substantially through the downturn, expanding from 53,000 students to 72,000 over the last decade. Completion rates are up, too, so the number of graduates has doubled.

Classroom technology is a part of that. On a recent weekday morning, a handful of students work through problems in a developmental math course that looks little like the traditional model. There's no lecturer or blackboard; software takes students through the material at their own speed, adjusting to their errors. An instructor is available to answer questions — a model that's proven cheaper and more effective than the traditional class.

Yet what matters most here isn't the technology in the room. It's this: Most students have mastered the material and moved on ahead of schedule.

ASU has broken the traditional two-semester model into six pieces, which includes accelerated, seven-and-a-half week versions of some classes. So students who finish these flexible introductory courses don't have to wait nearly another two months to start a new class; they can pick up a new one immediately, and move more quickly toward a degree.

"We began to say, 'What are all these sacred cows about time?'" Crow says. "What we're looking for is intensification by freeing up the clock."

Some of these innovations alarm traditionalists who consider education a "seasoning process" that can't be rushed. But Crow says one goal is to free up faculty resources for upper-division and critical thinking courses where that kind of interaction really matters, and for the other endeavors of a physical university.

He says it would be a "fatal error" to totally unbundle the college degree not just from the institution but from the importance of interacting with human faculty.

The factory model definitely has its advantages: Peer pressure — and paying tuition — incentivize students to stick with classes. By contrast, roughly 90 percent of people who sign up for MOOCs don't complete them.

Coursera co-founder Daphne Koller counters that most MOOC enrollees don't want or need a whole class, so the courses help solve academia's problem of wasted time. But she acknowledges that MOOCs can't do everything.

"If you have the opportunity to sit in a classroom with a great lecturer, 12 people around the table having a discussion, then by all means that is the best educational experience you can have," Koller, a former Stanford computer science professor, told a recent conference of education journalists.

"I'm not trying to substitute that with technology," she said. "But even at Stanford I can't make the claim that students spend the majority of their time in classes with less than 20 people."


Changes to concepts of academic time could have far-reaching effects, on both costs and classrooms.

More than a century ago, the Carnegie Foundation invented the "credit hour," which became the basic unit of academic time across education, measuring hours spent in class but not necessarily what students learned. Now, the foundation is reviewing the whole model with an eye possibly toward a more competency-based approach — awarding credit for what students learn, rather than for how long.

The U.S. government is interested, too. In March, the Department of Education approved a competency-based program at Southern New Hampshire University and signaled other colleges could get federal approval for programs that don't mark time in traditional credit hours.

For students who want to move through college quickly and more cheaply, "this has the potential of really changing the cost curve," says Jeffrey Selingo, an editor-at-large at The Chronicle of Higher Education and author of the new book "College (Un)bound: The Future of Higher Education and What It Means for Students."

For others, it could free up time for other important learning experiences, like research with faculty or study abroad.

But change won't come easily. The credit hour is consistent and measurable. Carnegie admits competency-based learning is hugely complex, and it could end up sticking with the credit hour. When 46 countries in Europe recently integrated their system of academic credit, they stuck with a mostly time-based system.

Meanwhile, similar tectonic shifts may be contemplated with accreditation — another traditional pillar of American higher education that's been a model for the world, but which technology threatens to transform.

Accreditation, a process essentially run by traditional universities, determines who can award credits and degrees and collect federal financial aid dollars. It offers a quality control other countries envy, but it also limits supply. To education entrepreneurs who can't give credits or degrees, it's an innovation-squelching monopoly that keeps them from offering their solutions to the problem of college affordability.

The Obama administration said earlier this year it wants more flexibility in the accreditation system, to reward things like value and "student outcomes."

Such developments could open the door to new types of providers, which has entrepreneurs optimistic, though pushing for more.

"The whole monopoly on credentialing is slowly breaking," says Burck Smith, co-founder of Baltimore-based Straighterline, a small start-up with large ambitions.

The company offers online courses (self-paced but with tutors available) in subjects like algebra and chemistry. For now, it can't offer credit itself, because it's not a traditional, accredited university. But about 40 colleges have agreed to award credit to students who finish Straighterline courses —"unbundling" some of their teaching to a specialized provider.

Students also can't use federal aid to pay for Straighterline courses. But because Straighterline doesn't have a campus, it doesn't charge for things like football teams, student unions and career counselors. It charges only for teaching: $99 a month, a price most can pay without federal aid. It plans to enroll as many as 15,000 this year.

Some colleges can justify their $50,000 price tag, Smith says. But for students who just want well-taught basic courses, without bells and whistles, why shouldn't the market offer just that?

Asked recently whether he would push for more changes to open up the market, U.S. Secretary of Education Arne Duncan said he wants to make room for more experiments and to see the data.

"College costs are crushing lots of Americans," Duncan said. "I think technology has a chance, an opportunity, to be very, very disruptive, very helpful there."

"I'm extraordinarily interested," he added. "I'm not sold."


There's no simple story here. We're headed to a blended world, a partnership between innovators and traditional universities.

Students already take Straighterline courses to shorten their time at a traditional college. More than 20,000 classrooms around the world now use Khan Academy material.

California state universities are offering blended models — MOOC learning materials with onsite help from faculty — and last month 10 state systems announced plans to incorporate Coursera in a range of ways into their own teaching. The early research suggests blended models can be effective. But technology alone, while excellent at some things, can't yet achieve the broadest educational goals — especially for students who need more help.

Roughly 40 percent of Coursera's registered students come from developing countries, as do close to half of edX's. Coursera does not release its survey data on education levels, but most of its students seem already to have managed to get an undergraduate degree. Will other students have the Internet access or educational background to take advantage of MOOCs?

"Disadvantaged populations need higher-touch services, not self-services," says Peter Stokes, an expert on education innovation at Northeastern University.

Abdoulaye Coulibaly, 26, is an English master's student at Felix Houphouet Boigny University in the West African nation of Ivory Coast. He does not believe online education can or should replace the classroom.

"We're going to be very lazy online," he says. "If you put my class online, I'm going to take it and I'm not going to come to the university again. We need to come to class. They're the teachers and they have to teach us. If we don't understand, we need to ask questions. That's the only way for us to understand."

And yet, MOOCs have obvious allure in a place where the few universities burst at the seams — if they function at all. Post-election violence recently forced Felix Houphouet Boigny to close for 17 months, and its libraries still have no books. Just getting to school is an ordeal; Coulibaly must leave his home at 5 a.m. to snag a seat in 8 a.m. class, and he's been robbed a half-dozen times en route.

To Coursera's Koller, the MOOCs' potential is if anything greater in places like Ivory Coast. India, she notes, wants to increase by tens of millions the number of its young people with college degrees. Reaching its goals would require building 1,500 new universities, she notes, but India can't fully staff its current ones. Scaled-up teaching through technology is the only solution.

Francisco Marmolejo, a longtime Mexican university administrator who now leads the World Bank's higher education efforts, says governments around the world are intrigued by MOOCs, but also anxious. Technology's potential to solve the scale problem is obvious. But they fear the MOOCs will become an excuse to ignore the imperative of building local institutions.

Physical universities are "a place where you train to become a citizen," Marmolejo says. "It is not the new technologies against the old system. It is the blended component that I believe may be the key."

In 1997, Marmolejo notes, the late management guru Peter Drucker predicted that big university campuses would be "relics" within 30 years. At roughly its halfway point, that prediction seems highly unlikely, despite all that has happened.

Still, universities "need to change and they will change," Marmolejo says. "Technology will absolutely help them to change."


Robbie Corey-Boulet reported from Abidjan, Ivory Coast.