May 26, 2017
Is This The New House of Brands in Higher Ed?
You’ve probably heard, but Purdue University’s board approved a decision to buy Kaplan University, the online education giant. At first pass, you may tilt your head and say “that’s a weird move.”
But on a second glance it warrants a “Shit. Really?” The higher education product is changing too fast for most. In the last year or so, Stanford tried to set up a physical East Coast locale, “nanodegrees” became a word (which is just the worst) and Purdue may have just started a Gap-like house of brands model by purchasing the Old Navy in Kaplan to their Banana Republic. To be honest, I have no idea where Purdue is going with this, but it’s a whole lot of fun to speculate.
So why might this be serious news? For one, this wasn’t a fly-by-night decision. Purdue has a ton of smart people involved. Like, astronaut smart. And while we like to think that our institutes of higher education only care about the education of today’s youth, that’s not the full truth. They need to make money. And what’s one way to make money? Get more students. But their geographic footprint is limited and they will eventually run into other “Purdues” as they get farther from West Lafayette and try to recruit students that can get into Purdue. So when your product hits a supply cap of future space folk, you need a different product.
Purdue has the old “make, rent, buy” decision in front of them. They can make new products by creating new programs, but that’s expensive and can take time to get off the ground. They can rent, which may mean partnering with other institutions or third parties who offer programs that can borrow the Purdue brand & give a cut back to Purdue. Or they can buy, which is what they are doing. And while expensive, it also comes with immediate cash and a brand that knows its demographic and vice versa. It opens up the non-traditional adult learner market without diminishing the Purdue brand. The physical location also expands Purdue’s footprint in Indiana and allows it to claim an educational impact on a far greater number of people within Indiana.
Monetarily, it could provide Purdue with a ton of advantages and flexibility. While most schools in state systems operate pretty independently, Purdue and Kaplan could combine forces and benefit from the combination. While Purdue isn’t setting up shop in new parts of Indiana anytime soon because its brand is rooted in West Lafayette, Kaplan can easily start with one location and branch out because its traditional home base is online. Kaplan and Purdue have plenty of resources to make this happen. While that’s not a bad thing per se, it would scare me if I were a middle tier school in Indiana. The Kaplan brand on its own would have trouble with this model, but with Purdue’s brand equity in the state and the PR engine that could power, smaller state schools that offer similar programming could struggle to keep up.
If Purdue proves this model successful and peers in other states adopt it, we’re looking at the worst of all cases which is a monopolistic system that dominates higher ed. The big schools swallow up the little ones. The product becomes diluted. There are fewer choices. The Senate can’t get out of anti-trust hearings, and cats and dogs are now living together.
That’s obviously a ridiculous notion and nothing more than rampant speculation. Don’t get me wrong, I believe Purdue has the best of intentions and this will ultimately be positive. But, I wonder if this is a one-off move or the first pebble about to make real waves in a big blue ocean.