Traditional colleges and their ivy-clad halls aren’t about to disappear, but massive open online course providers (“MOOCs”) are dramatically changing higher education. At the forefront is Coursera. Founded in late 2011 by two Stanford professors, Coursera has enrolled over 11 million students and raised $85 million in venture funding. While the company remains unprofitable and is far from a clear winner in a crowded space, it has closely aligned its operating model with its business model, positioning it for success. Based on an asset-lite, highly-scalable software platform, Coursera’s business model provides differentiated value to three constituencies: students, universities, and employers.
Students: Coursera’s most obvious benefits to students are inherent to online learning; it enrolls far more students than any physical institution, it reaches students regardless of location, it affords students the flexibility to participate at the time and place of their choosing, and it allows participation for free or a fraction of the cost of a traditional university degree (more on that later.)
Coursera’s proprietary technology enhances the student experience beyond competing MOOCs. For example, Coursera can provide real-time feedback, using natural language parsing to engage students in topics where objective measurement has long proved difficult. Coursera has begun developing adaptive learning courses, where the curriculum dynamically adjusts to a student’s mastery of the material. In the long-term, the granular data that Coursera collects on where students spend their time (e.g. at the lecture, page or even question level) and how that correlates with success will enable courses to “evolve” and become ever better.
One of students’ key frustrations with MOOCs has been the lack of widely-accepted credentials signaling successful course completion. Coursera has tackled credentialing through two innovative programs. In 2013, they launched SignatureTrack verification (~$50 on average), which uses keystroke pattern algorithms to verify students are doing their own coursework. SignatureTrack students have a SignatureTrack logo displayed next to their names in discussion forums, increasing the visibility of the program. Coursera has also partnered with ProctorU, which offers remotely proctored exams (via webcam), costing $60–90. These low-cost credentials provide a powerful signal that Coursera graduations “mean something,” making them more valuable than competing MOOCs as students seek new jobs.
Figure 1: Sample SignatureTrack Course Completion Certificate, showing both the Coursera and University names
Universities: Coursera’s strategic goal to provide the best courses across all fields means it must be a platform provider, rather than a content developer. Universities are Coursera’s key content providers, but they are also customers, using Coursera technology to develop their online courses. As a for-profit company with ample funding, Coursera had been able to invest heavily in platform development and marketing, which directly benefit its university partners.  For example, Coursera offers a wide variety of user-friendly, pre-built “learning units” for authoring quizzes, readings, peer-graded assignments, discussion groups, etc. These enable professors with no programming experience to easily create the architecture of an interactive online curriculum. And the SignatureTrack program helps reduce fears of cheating, which could damage the brand of partner universities.
Figure 2: A dynamic dashboard for a Coursera instructor
As a for-profit company, Coursera can allay concerns of favoring certain partners’ courses – which has been a challenge for MOOCs backed by university consortiums (i.e EdX). Moreover, Coursera’s private funding has allowed it to offer “no cost” course launch to universities and a 20% share of gross profits, aligning the institutions’ financial incentives with Coursera.  As more students use Coursera, it offers more exposure to both Coursera and its partner universities, leading to more enrollment and increasing revenue to both parties – a virtuous cycle.
Employers: Coursera helps employers tap talent they would otherwise struggle to find. Approximately two-thirds of Coursera students live outside the United States, one-third of them come from the developing world, and many of them are looking to make a career change. Employers need novel tools to connect with and evaluate such candidates.
Initially, Coursera allowed students to opt-in to Career Services, and sold employers access to students’ data for a flat fee. But the data (demographic, high-level course performance) was undifferentiated vs. competitive headhunting services and the employer response was lukewarm. In 2013, Coursera pivoted; it ended Career Services and instead began to connect students with employers during their courses through its Specializations program.
Specializations are similar to university degrees – they require multiple classes, usually taken in sequence, and SignatureTrack verification (driving revenue to Coursera). In addition to courses, Specialization enrollees complete a Capstone project, which are often designed by employers. For example, Google designed the capstone project for Mobile Cloud Computing specialization and Instagram designed project for the Interaction Design specialization. These projects provide employers direct exposure to students and data beyond letter grades to predict work performance. For example, data on student participation in discussion forums can be a good indicator of how helpful a candidate may be to future colleagues.
The jury is still out on whether Coursera will become a leading education provider of the 21st century – or whether it will even turn a profit. But the company has made great strides adapting its operating model to provide a differentiated value proposition to all its core constituencies. In the long-term, balancing its focus between students, universities, and employers should set Coursera apart.