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Reading the Latest 2U 10-K as Academic Research

On scholars of higher ed change, university/for-profit partnerships, and time to dig into the documents.

March 6, 2019
 
 

Here is what I want you to do.

I’d like if you reserve a bunch of hours to spend time figuring out how partnerships between universities and for-profit companies are likely to impact the postsecondary ecosystem.

For your research, please dig into the latest 2U 10-K filing (105 pages), review 2U’s fourth quarter and full-year 2018 financial results, and then read through the February 2019 2U earnings call transcript (33 pages).

After you do all that, you should probably try to read the latest analysis of both 2U and the broader online program management (OPM) sector.  You may want to make some calls to folks who watch the OPM space closely. And then you should synthesize what you are learning into a research note so that you can get feedback.

Wait, what is that you are saying? 

You are telling us that you don’t have 8 hours to devote to reading all these 2U documents, doing all this research, and having all these conversations.

You think that the idea that you can spend 8 hours on this question is crazy, given that every minute of your day (and long into the evening), seems to be already filled with e-mails to answer and reports to write and meetings to attend.

Well, exactly.

The people seem to be spending the most time thinking about 2U, and all the for-profit companies that are at the center of our higher ed conversion from residential to online, are financial analysts.

The people who decide whether or not to buy shares in the publicly traded 2U (TWOU), or to invest venture funds in private OPM companies, are the people paying closest attention to this market.

None of these people are academics.

If you read all the 2U materials, you will come away highly impressed with both 2U’s leadership and the discipline in which they are executing on a long-term plan.

2U is doing a fantastic building its core online graduate school business, creating new opportunities for institutional relationships with its Short Courses segment (after integrating its brilliant 2017 purchase of GetSmarter), and of expanding offerings without damaging the core brand with its Keypath stake and partnership.

How many academics will have the time, however, to read all this 2U stuff?

In the 2U earnings call, all the questions were from financial analysts, and they were all about the business of 2U.  Maybe this is how it should be, as it was after all an “earnings call.”

But I kept wanting to hear more discussion about the impact of 2U, and the overall OPM sector, on higher ed.

What I would like to see is a critical and informed discussion on the positive and negatives, advantages and risks, of university/for-profit partnerships in core areas of teaching and learning.

The financial analysts on the earnings call had done their homework.  The analysts asked detailed questions, and Chip Paucek (co-founder and CEO) and Cathy Graham (CFO) provided detailed and informative answers. The conversation was collegial.

Imagine if scholars of higher education were as deeply informed about the business of 2U, and the sector at large, but had different sorts of questions for 2U’s leaders.

And imagine if there were some way to engage in the discussion where everyone admitted some level of doubt, uncertainty, and concern about where the future of higher education is going.

There are enormous benefits to schools and students when new online programs (degree and non-degree) are developed.  These benefits extend far beyond the possible financial benefits to schools.  They include the creation of high-quality online programs that are accessible to learners who also have work and family responsibilities.

Done correctly, online education should be an engine of institution-wide learning innovation.

To the extent that companies like 2U can enable schools to build and grow online programs, and to do so at lower levels of up-front and opportunity costs, then we should look positively at the OPM field.

We should also look at the potential downsides of university/for-profit partnerships, such as outsourcing core capabilities in learning design and the difficulty in integrating lessons from OPM enabled online programs in residential teaching and learning.

For too long we have worried about the wrong things when it comes to OPMs.  We have fretted about the revenue share and the length of the contracts.  These are important points, but the discussion to partner or not with a provider like 2U should be much broader and more strategic than only financial concerns.

We need to look at the impact of the OPM model from an ecosystem, or system-wide, perspective.

We should be viewing the evolution of higher ed through a wide lens, and right now the most important higher ed story is the rise of the university/for-profit partnerships in online program development.

And while we are talking about 2U, a few words to all the financial analysts and investors who are always calling me to get insight into the company and the broader OPM industry.  Invest now.  2U is a great company.  2U will be a $10 billion company in a few years.  And while you are investing in 2U, you should also look to invest in some (although not all) of the players in the OPM space.

What I wish is that I’d have more conversations with academics, and fewer discussions with money people about 2U and their competitors.

The OPM trend is too crucial to the future of higher ed to outsource our knowledge about these companies, and the partnerships with schools in which they engage, to financial analysts and consultants.

We need to find a way to bring our critical scholarly lens to the 2U’s of this world.

How are you trying to make sense of our new world of university/for-profit partnerships in the creation of online programs?

Are scholars of higher ed change digging into the 2U 10-K?

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