column | Postsecondary Learning

Yes There’s ‘Disruption’ in College Market, But the Bigger Trend Is Growth of ‘Enabler’ Companies

By Sean Gallagher (Columnist)     May 9, 2017

Yes There’s  ‘Disruption’ in College Market, But the Bigger Trend Is Growth of ‘Enabler’ Companies

The rallying cry among many higher-education startups is “disrupting” college as we know it. Some of the education sector’s most celebrated and best-funded startups—including Coursera, Minerva, and General Assembly—focus on providing alternatives to traditional postsecondary education, or challenging traditional approaches to higher education.

Sure, there are aspects of the college world that seems worthy of disruption, and colleges face serious challenges: flat enrollment trends and demographic headwinds; appropriate concerns about debt levels and increasing costs; and growing numbers of struggling institutions. But the intense focus on “disruption” as a guiding principle often overlooks that delivering higher education is a large, diversified, and resilient market—$600 billion in the U.S. alone. This dwarfs the nascent markets for unaccredited microcredentials (perhaps $250 million) or the revenue generated by coding bootcamps ($200 million in 2016, according to Course Report). What’s more, over the next decade the global market for higher education is forecast to grow by many millions of students each year, on the strength of rising middle classes and respected and still growing value of traditional degrees internationally.

Meanwhile, a bigger shift is underway in how higher education operates in a world that is increasingly digitized. College and university leaders are increasingly willing to work with technology and services partners and various “enabler” firms that are much more integrated into their operations—not only at the margins of their value chain, but at the core. As much as there are exciting businesses to be created by challenging the dominance of colleges and universities, there is also significant value for students, institutions, entrepreneurs, and investors in the building of technologies and firms that augment, enable, and evolve the provision of higher education in the 21st century.

The Rise of Enablement Businesses

For a while, much of the investment energy went into building for-profit colleges. Yet, for a number of years, the momentum in the high-growth online education market has been shifting to non-profit institutions, notably often powered by the technology and services of corporate partners. Consider that of the very small number of edtech firms that have successfully gone public over the last decade, two of the recent successes include 2U and Instructure – firms that provide services or technologies for their university partners to deliver their core academic programs. And, over the last year – alongside the disrupters – firms that provide technologies that help colleges and universities operate and deliver in a digital world have garnered some of the more significant venture funding rounds, including for example Panopto (lecture capture), Kaltura (video), Examity (remote proctoring), and Knewton (analytics), among others.

While it is something of an outlier, the recent purchase of for-profit Kaplan University by Purdue University is one of the clearest examples of the ascendance of service-oriented enablement businesses. Fundamentally, Purdue is acquiring what it sees as a strategically critical capability so that it can reach a new market, bringing a key aspect of its academic business into the online age. And, on the Kaplan side of the equation, the deal appears to be an assessment that the long-term future of building profitable businesses in education is more about servicing universities than in owning and operating them.

Beyond online education, the enablement ethos has already extended into many other domains where for-profit companies are signing high profile, financially significant long-term partnerships with colleges and universities. In the international student sector – another key growth segment for colleges – there is start-up Shorelight Education, alongside industry veterans like Navitas, INTO University Partnerships, and Study Group. There is also an emerging class of companies that is partnering with colleges and universities for what is being termed “continuing education program management”—for example, the provision of coding bootcamp type programs, and includes firms such as Trilogy Education Services and The Learning House.

Toward Deeper, More Symbiotic Partnerships

These developments point toward new hybrid models of colleges and universities that operate their core academic activities in symbiosis with their enabling partners. This is not yesterday’s world of seat licenses and advertising-based revenue models—but rather, a marketplace that is increasingly driven by joint ventures, revenue sharing, and shared risk—in a world where competitive advantage increasingly comes from algorithms. If the first generation of edtech businesses was built on selling products to individual professors and CIOs, the next generation focuses on services and increasingly integrates at the level of presidents, trustees, and deans embracing more symbiotic partnerships.

Perhaps one of the most intriguing frontiers is the blurring boundaries between higher education and the workforce, as institutions seek to better deliver on career outcomes for students – but will need to rely on private industry for competency-oriented software, project-based learning platforms, credentialing technology, and deeper integration between job skills and curriculum.

These new approaches will continue to surface a number of strategic and often existential questions for college leaders and policymakers—as new constructs, legal entities, and institutional models are spawned, and long-standing notions of governance, institutional identity, and ownership and liability are tested. Higher education’s traditional policy and regulatory architectures—which can both impede, but also are critical to ensuring quality—must adapt. In this way, as a recent example, the U.S. Department of Education’s EQUIP experimental sites initiative is an interesting case study that recognizes there is value in aligning non-institutional, upstart providers of education with respected traditional institutions – but also that this direction will demand new, outcome-oriented quality assurance models.

In this new landscape, colleges and universities remain in the driver’s seat—but they must be careful to assess and consider their core competencies. Entrepreneurs have the opportunity to open up entirely new markets by thoughtfully providing ideas and practices from the for-profit industry while aligning with academic values, and working as true partners and co-developers of technology rather than in just a classic “vendor” model.

Sean Gallagher is Executive Director of Northeastern University’s Center for the Future of Higher Education and Talent Strategy and Executive Professor of Educational Policy.

column | Postsecondary Learning

Yes There’s ‘Disruption’ in College Market, But the Bigger Trend Is Growth of ‘Enabler’ Companies

By Sean Gallagher (Columnist)     May 9, 2017

Yes There’s  ‘Disruption’ in College Market, But the Bigger Trend Is Growth of ‘Enabler’ Companies

The rallying cry among many higher-education startups is “disrupting” college as we know it. Some of the education sector’s most celebrated and best-funded startups—including Coursera, Minerva, and General Assembly—focus on providing alternatives to traditional postsecondary education, or challenging traditional approaches to higher education.

Sure, there are aspects of the college world that seems worthy of disruption, and colleges face serious challenges: flat enrollment trends and demographic headwinds; appropriate concerns about debt levels and increasing costs; and growing numbers of struggling institutions. But the intense focus on “disruption” as a guiding principle often overlooks that delivering higher education is a large, diversified, and resilient market—$600 billion in the U.S. alone. This dwarfs the nascent markets for unaccredited microcredentials (perhaps $250 million) or the revenue generated by coding bootcamps ($200 million in 2016, according to Course Report). What’s more, over the next decade the global market for higher education is forecast to grow by many millions of students each year, on the strength of rising middle classes and respected and still growing value of traditional degrees internationally.

Meanwhile, a bigger shift is underway in how higher education operates in a world that is increasingly digitized. College and university leaders are increasingly willing to work with technology and services partners and various “enabler” firms that are much more integrated into their operations—not only at the margins of their value chain, but at the core. As much as there are exciting businesses to be created by challenging the dominance of colleges and universities, there is also significant value for students, institutions, entrepreneurs, and investors in the building of technologies and firms that augment, enable, and evolve the provision of higher education in the 21st century.

The Rise of Enablement Businesses

For a while, much of the investment energy went into building for-profit colleges. Yet, for a number of years, the momentum in the high-growth online education market has been shifting to non-profit institutions, notably often powered by the technology and services of corporate partners. Consider that of the very small number of edtech firms that have successfully gone public over the last decade, two of the recent successes include 2U and Instructure – firms that provide services or technologies for their university partners to deliver their core academic programs. And, over the last year – alongside the disrupters – firms that provide technologies that help colleges and universities operate and deliver in a digital world have garnered some of the more significant venture funding rounds, including for example Panopto (lecture capture), Kaltura (video), Examity (remote proctoring), and Knewton (analytics), among others.

While it is something of an outlier, the recent purchase of for-profit Kaplan University by Purdue University is one of the clearest examples of the ascendance of service-oriented enablement businesses. Fundamentally, Purdue is acquiring what it sees as a strategically critical capability so that it can reach a new market, bringing a key aspect of its academic business into the online age. And, on the Kaplan side of the equation, the deal appears to be an assessment that the long-term future of building profitable businesses in education is more about servicing universities than in owning and operating them.

Beyond online education, the enablement ethos has already extended into many other domains where for-profit companies are signing high profile, financially significant long-term partnerships with colleges and universities. In the international student sector – another key growth segment for colleges – there is start-up Shorelight Education, alongside industry veterans like Navitas, INTO University Partnerships, and Study Group. There is also an emerging class of companies that is partnering with colleges and universities for what is being termed “continuing education program management”—for example, the provision of coding bootcamp type programs, and includes firms such as Trilogy Education Services and The Learning House.

Toward Deeper, More Symbiotic Partnerships

These developments point toward new hybrid models of colleges and universities that operate their core academic activities in symbiosis with their enabling partners. This is not yesterday’s world of seat licenses and advertising-based revenue models—but rather, a marketplace that is increasingly driven by joint ventures, revenue sharing, and shared risk—in a world where competitive advantage increasingly comes from algorithms. If the first generation of edtech businesses was built on selling products to individual professors and CIOs, the next generation focuses on services and increasingly integrates at the level of presidents, trustees, and deans embracing more symbiotic partnerships.

Perhaps one of the most intriguing frontiers is the blurring boundaries between higher education and the workforce, as institutions seek to better deliver on career outcomes for students – but will need to rely on private industry for competency-oriented software, project-based learning platforms, credentialing technology, and deeper integration between job skills and curriculum.

These new approaches will continue to surface a number of strategic and often existential questions for college leaders and policymakers—as new constructs, legal entities, and institutional models are spawned, and long-standing notions of governance, institutional identity, and ownership and liability are tested. Higher education’s traditional policy and regulatory architectures—which can both impede, but also are critical to ensuring quality—must adapt. In this way, as a recent example, the U.S. Department of Education’s EQUIP experimental sites initiative is an interesting case study that recognizes there is value in aligning non-institutional, upstart providers of education with respected traditional institutions – but also that this direction will demand new, outcome-oriented quality assurance models.

In this new landscape, colleges and universities remain in the driver’s seat—but they must be careful to assess and consider their core competencies. Entrepreneurs have the opportunity to open up entirely new markets by thoughtfully providing ideas and practices from the for-profit industry while aligning with academic values, and working as true partners and co-developers of technology rather than in just a classic “vendor” model.

Sean Gallagher is Executive Director of Northeastern University’s Center for the Future of Higher Education and Talent Strategy and Executive Professor of Educational Policy.

GET THE LATEST HIGHER ED NEWS
Be the first to know, with our weekly newsletter.

GET THE LATEST HIGHER ED NEWS
Be the first to know, with our weekly newsletter.