The Adoption of New Business Models as a Catalyst for Revolutionizing Education

Disruption of industries takes time. When a new product or technology emerges, it is usually simple, cheap and underperforms the existing solutions. In most cases it generates lower margins than those in the established industry, and small, if any profits at all. (The Innovator’s Dilemma, Clay m. Christenson)

There are a few major indicators for momentum in the current Education market.
These indicators have the potential to create new opportunities by themselves; however, it seems that their aggregate and mutual effects are much more meaningful.

When momentum is built, change happens fast. In many cases, it shifts the dynamics of the entire industry, challenging the economics of the product as well as the way the industry works. Netflix is a great example to illustrate this – It started out as a DVD-via-mail business, and later on, as the technology matured, it transformed entirely into a service for On-demand Video. This service, as well as their gained knowledge and experience, enabled Nextflix to be prepared for the moment of demand, and turn into a media empire in a very short period.

We suggest that the following changes are reshaping the current value-chain; the nature and the power of the stake holders, as well as major aspects in the learning experience. These changes are substantial steps towards a disruption in Education.

The adoption of Innovative Business Models
Recently, we’ve been witnessing the growing phenomenon of new business models being adopted from other industries, enabling them to reach underserved customers with affordable products – that create real value for their customers.

Just to mention two of these models (might be linked, but not necessarily) – Micro payments and Marketplaces.

As in many cases of innovation, the adoption of business models from one industry to another might actually help to revolutionize the industry. The model of Marketplaces is common in e-commerce (EBay) and among selling services and outsourcing (Fivver); Micropayments are common in the games industry, in Fintech and more. TeachersPayTeachers and TES are great examples for the adoption of marketplaces and small payments in the field of Education. Not only have they both successfully targeted an underserved customer’s segment, they both managed to enable teachers to generate revenues from the lessons and resources they prepare anyway – a value proposition that was entirely missed under the former business models. In other words, the teachers’ community, which were not traditionally considered as customers nor suppliers, can now reach / sell quality resources in affordable prices (free content, as well as a model of up to 5$ per resource).

Marketplaces are becoming an increasingly common business model in Edtech companies, and have also been adopted by many new ventures. This business model has managed to pull into the market underserved customers and give them the power to decide, create and shine.

This change, which until recently has been identified with the long tail, is now starting to be adopted by the incumbents. On January this year, HMH launched its own marketplace, providing teachers the opportunity to sell their resources. This can result in the sale of bit size content, mix and match models, visibility of the quality of content, as well as its improvement.

Diffusion of tools from Business to Education
The most popular tools teacher used in the past year (70%) were ones which were initially created for the business world. This diffusion of tools indicates that:

First, teachers are actively searching for tools and leading purchase decisions for their schools – a bottom up process.

Second, the silo of education and other industries does not exist anymore; creating new values and opportunities to serve more than one industry vertical with an identical core product. And if the teacher is the one that chooses his/her tools (and might even pay for them), the experience of usage becomes as important as in any other modern life aspects – such as news, media or music.

The more the boundaries are blurred, the more the students are exposed to skills relevant for their employment, and the education industry is more open to new business models and diversity of products. This notion undermines the attitude of “one fits all”. It emphasizes the importance of creating value for the customer; one that will hopefully spread to other participants in the value chain.

The implementation of new business models, alongside the ability to choose, may also boost the last indicator for momentum – The Unbundling of higher education.

Unbundling is the process in which the Internet and technology helps to break up and split the functional areas of traditional industries. The unbundling of higher education, and the reconstruction that follows it, usually create many opportunities to rethink education in general. Namely – why, how, what, where and when we learn. Each of these questions encapsulates a variety of new alternatives for entrepreneurial activity.

First signs of change are already visible in a many forms:

For students – new opportunities and learning experiences are evolving in a relatively impressive pace. Accelerators are being perceived as the new lucrative MBAs. Co-working facilities, with the opportunities they create for collaborations and mentorships, are gradually becoming alternatives for colleges and top universities. Companies like GA and enable their users to acquire and master new skills that are on demand in the market, offering them a new learning experience, alongside credentials and prices.

Teachers can now be on demand purely for the quality of their teaching, no matter which university they are associated with. Curriculum and content are rapidly improving as a result of sharing and collaborations; the entire learning experience, its content as well as its price, is breaking the traditional model of Teacher-Classroom and along with it – the expectation of students to learn in the same pace, at the same time.

Clay Christenson predicted in 2013 that “…Fifteen years from now, more than half of the universities (in America) will be in bankruptcy”. The Economist predicts that if Higher Ed will be affected in the same way that the newspaper industry has, colleges’ revenue will decrease by more than a half, 700 colleges will close down.

Many words have been written and spoken over the cry for disruption in the education industry. We observe, as in other industries, indicators for a momentum in this direction. The process of disruption doesn’t stop. It may move in various paces, but it certainly changes things.

For entrepreneurs it is the right time to push their product/service forward, explore new business models and serve more than one vertical at a time. It is also the right time to learn about customer behaviors and build a brand closer to the moment of demand.

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