PRISM Magazine Online - April 2000
Last Word
A Merger with a Message for Higher Education

By Robert Heterick

The proposed merger of America Online and Time Warner has had obvious, seismic effects on the information industry--which market analysts and investors have been trying to get a handle on since the announcement in January. To put the deal's value in perspective, consider that the combined market valuation of AOL-Time Warner would be the same order of magnitude as our country's total annual expenditure on institutions of higher education. What's gone unexamined so far are the lessons that a combination of these two behemoths hold for those of us in higher education.

Last Word:  A Merger with a Message for Higher EducationMarket analysts were at first excited, then cautious about the prospects of this merger. Upstart marketspace AOL was buying established, marketplace Time Warner. Every business and organization today operates in two worlds: a physical world of resources that we can see and touch and a virtual world of information. Jeffrey Rayport and John Sviokla from the Harvard Business School have coined the term "marketspace" to distinguish this new information world from the physical world of the "marketplace."

Those who have worried about the creation of virtual universities should find solace in the prospect of synergy emanating from the combination of place and space. But while exorcising that demon, the merger should give us pause when we consider how most of our "place" institutions have treated the "space" of distance learning. Most institutions still operate a separate and distinct entity for distance learning that is not a part of the place-based academic structure. The distance learning, or continuing education, division of most institutions doesn't have full-time teaching faculty members, but rather relies upon not-always-successful strategies to entice regular academic faculty to participate. Those programs that do have full-time faculty participating generally find that they are viewed as second-class citizens in the academic structure of the institution. One would have to question whether such institutions have succeeded in marrying place and space or are even interested in doing so.

The merger of content and portal is another idea that would seem to hold a number of lessons for higher education. Much like Time Warner, our place-based institutions have developed real skill in developing content to be delivered in the place-based world. American higher education is generally the envy of the world and rightly so. Like Time Warner, our institutions of higher education have generally been unsuccessful in translating this place-based skill to the marketspace. Much of what passes for distance education simply moves the lecture into cyberspace, carrying with it all the deficiencies of lecture-based learning.

Certainly, education-oriented online companies such as Blackboard,, and WebCT think they can contribute significantly to "cyberizing" the place-based portal provided by our traditional institutions of higher learning.  As with AOL, these companies bring Internet-based skills to a marriage. Unfortunately, most of their customers are still laboring under the Gutenberg Fallacy--trying to make the new look like the old. Continuing to try to maintain student-faculty ratios as low as 20- or 15-1 in cyber classes is guaranteed to put a lot of strain on the marriage.

Analysts have also raised the issues of culture and size in regard to the AOL-Time Warner merger. Optimal corporate size is generally conceded to be quite different for place and space-based organizations. Marketspace companies generally rely upon a few radical, if not eccentric, thinkers to break from the current paradigm and produce new and sometimes heretical ideas. These ideas are usually brought to the marketspace by small teams of committed ideologues.

Cultural differences have sunk many a merger, and this same dynamic can doom the melding of higher education's "old" and "new" businesses as well. Very few organizations relish the thought that they need to cannibalize their existing product lines to help prepare the products that future customers desire. Trying to do anything new continually runs afoul of established procedures and the plethora of checks and balances that have been put in place for the traditional business line. The culture of the old is as incompatible with the new as the physics of Einstein is with that of Aristotle.

The principal lesson that higher education institutions can draw from the flurry of consolidation taking place in the information industry is the necessity to have a vision of the future and the role that they intend to play in that future. To do that requires them to understand both the value of reaching non-resident learners and how much of a role it will play in their future. Most institutions continue to operate as though the future is a simple extrapolation of the present, which probably explains why they view their distance learning activities as out of the mainstream.

For good or bad, successful or not, the AOL-Time Warner merger speaks volumes about the leadership of the two companies involved and their commitment to establishing new roles for themselves in a radically transforming information economy. That, more than any one specific, ought to be the lesson for higher education.

    Robert Heterick is a visiting research professor at the Center for Academic Transformation
    at Rensselaer Polytechnic Institute.
    This article originally appeared in The Learning MarketSpace,
    the center's electronic newsletter.

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