‘Nanodegrees’ tackling US skills shortage
Udacity is addressing the skills shortage in the US through courses on very specific skills that it calls "nanondegrees". The certified training focuses on areas lacking skilled workers, such as front-end web developing and machine learning, to be completed in under a year and costing less than $1,000. Udacity’s nanodegree programme is quickly growing in the United States, Europe, and Asia and currently has around 4 million enrolled students. The biggest challenge for the online education platform is convincing employers of the worthiness of nanodegree accreditation, with many tech companies having embraced the qualification, while uptake in more traditional fields has been slower.

In an effort to address the skills shortage, three-year-old Udacity (2016 CNBC Disruptor No. 12) has partnered with tech giants such as AT&T, Google, Facebook and Amazon to reinvent job training. The company — founded by Stanford professor and onetime Google VP Sebastian Thrun — has repositioned its focus from massive open online courses (MOOCs) to certification training on very specific skills. Students can earn what's called a nanodegree and learn things like front-end web developing, iOS and Android programming, or machine learning in less than a year — and for less than $1,000.



Sebastian Thrun, co-founder of Udacity Source: Udacity

It's a just-in-time training approach to higher education with huge global market potential. It is predicted that in two years the number of companies that use MOOCs for corporate training will rise to 28 percent, according to the eLearning Industry's statistics.



The company is hitting its stride. Though it still offers MOOCs in the form of online free courses (with 4 million students enrolled), it is quickly expanding its nanodegree program in the United States and in Europe and Asia. It's already tailored programs for students in India and China and last week launched in Germany. As recently as a few years ago, Udacity was struggling to figure out the way forward. Founded in 2011, the company had promised to revolutionize higher education through massive open online courses that would deliver high-quality collegiate coursework to anyone with an internet connection on the cheap. But roughly 90 percent of the 160,000 students that signed up for the company's first course on artificial intelligence never finished the class. By 2013 the MOOC revolution — and the company — had stalled. Thrun himself accused his own company of offering a "lousy product."

Like many agile start-ups, the company quickly changed its strategy the following year after spotting an overlooked opportunity in the global marketplace.

Since retooling its curriculum, Udacity has enrolled more than 11,000 students in its nanodegree programs and graduated 3,000 of those. Thrun said in 2015 that revenue was growing nearly 30 percent month over month and that the company is profitable (a Udacity spokesperson declined to provide updated revenue figures). Its most recent funding round in 2015 pushed the company into unicorn territory, boosting its valuation to about $1.1 billion. "At this point, I feel we have our story together," said Thrun, now Udacity's president and chairman. "We have very clear differentiation, a very clear picture of the customer, and we have enthusiastic customers. And we've built something that I think — unless we have horrible execution going forward — is built to last."

Facebook employees and visitors drink and meet at the end of the day on campus. Kim Kulish | Getty Images

Udacity's nanodegree programs work like this: Instead of choosing a generalized course of study, students select from a buffet of skill sets. For example, offerings include "Full Stack Web Developer," "Ruby Programming," "Beginning Android App Development" and "DevOps Engineer." Students pay $200 per month for the course and can take as little or as much time as they need to finish. Those who finish within 12 months receive half their tuition back, keeping the cost of tuition below $1,000 for most students (the company says students typically finish courses in six months to a year). Upon completion, students receive a nanodegree, a credential that may not mean much to traditional academia but is increasingly recognized by technology companies looking for programmers and other skilled workers — particularly those companies that partner with Udacity to create the coursework. AT&T , for instance, has pledged to reserve 100 paid internships for Udacity nanodegree program graduates, and Google has invited top nanodegree graduates to visit its Silicon Valley campus. While many tech companies in particular have embraced nanodegrees as legitimate certifications, many others either don't know enough about the new credentials or remain skeptical of their net worth. This remains a challenge for Udacity. In an effort to further legitimize its nanodegrees, the company began tacking a job-placement guarantee onto some of its degrees earlier this year. Though somewhat more costly at $299 per month, Udacity's "nanodegree plus" programs come with a commitment from Udacity to place graduates in jobs related to their coursework within six months of graduation or the company will refund 100 percent of the tuition cost.

We can make the evolution of academic content match the evolution of the world. Sebastian Thrun president and chairman of Udacity

Udacity has managed this pivot away from traditional university-style courses and credits and toward low-cost, job-specific nanodegrees by leveraging one of the key lessons learned from its troubled experimentation with MOOCs: that education is about more than access to content. The company has more than 400 project reviewers and graders employed around the world ready to evaluate a students' coursework and provide guidance or mentorship more or less on-demand. The average time between when a student turns in an assignment and when he or she receives it back with grades and feedback is just 1.4 hours, Thrun said — far faster than at traditional universities. By tapping the gig economy for its graders and reviewers, Udacity can produce a quality experience for students while keeping costs low — something that benefits both the students and the company's bottom line. "We've changed our model from content provider to content-plus-services," Thrun said. "And we also changed the student. We moved more toward professional education, to lifetime education." There is now almost zero overlap between the conventional college demographic and the Udacity demographic, he said — a fact underscoring Udacity's divergence with other online higher-education companies that still work within mainstream academia's structure.



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