Saturday, March 02, 2013

About Start Up Higher Education

These are lean times. Gone are those days when capital was plenty and start-up was glamorous: More so, when people believed in the ideas of an world constantly getting better. The start-up revolution has muddied the waters so that changing the world has become so commonplace that no one believes in it anymore. Besides, there is simply less to go around, with one funding cycle coming to an end and everyone has to do with a little bit less. So, lean is the buzzword: Getting started through bootstrapping is glamorous, even heroic. Getting paying customers from day one, rather than the fantastic business plans predicated on losing money for a decade, is more in vogue. Start-ups, therefore, are what they should be - a struggle for existence to prove that they fall in the fittest category.

However, it is not as bad as it sounds. Because opportunities of disruption keep coming. Big incumbents keep getting sloppier and sloppier. Technologies change quickly, opening up opportunities that were not there before. Lean times also mean good people looking for opportunities, everyone, particularly the landlords, giving away deals all the time, and the policy-makers encouraging start-ups hoping that they can pick up the jobs slack after all their other efforts have failed. So, in a Dickensian way, this is the worst of the times and best of the times for start-ups.

New industries also keep opening up for start-ups. In a way, Education, and now Higher education, is the best thing that happened to start-ups in a decade; it is also the other way around, start-ups are the best thing that happened to education in about hundred years. Education gives a real chance to start-up entrepreneurs to change the world, even more substantively than people sharing music. The technologies make it possible - the manicured lawns and Gothic arches are replaced by a www when it comes to education start-ups. It is just a different life form, but growing rapidly. And, with all their objections, students are going used to it too. No wonder that the Economist picks Education as one of the only two industries with a positive outlook in 2013 (the other being Construction) in their The World in 2013 publication.

Also, as much start-ups needed higher education, higher education needed start-ups too. The sector is close to the breaking point with rising costs, failing education and graduates without future. Peter Drucker may have been half-serious when he suggested that the universities will disappear in thirty years: Twenty years on, the business models of the sector is certainly under siege. And, this is not just public versus private battle, where unions and inefficiencies are ailing public bodies and privatization is the answer. Some of the big education players are private organizations, big publishers of textbooks and journals, the software providers which dominated educational software, and they are as sloppy and as out of date as their public counterparts. The journal publishers, who made handsome profits out of privatizing knowledge, are now at the receiving end of disruption themselves. The textbook publishers, mired in eternal confusion with the electronic form, are building warehouses (perhaps) to store these and battling the customers on rights and wrongs of usage. The industry needed a digital disruption, and the incumbents, despite their corporate structure and billions of dollars of war-chest, were wholly unsuited to bring it on. Start-ups, therefore, are the best thing happening to education.

Indeed, this is early days of start-ups in higher education, but some are clearly getting traction. The excitement is noticeable, with new business models that challenge the assumptions and ways of doing things. And, this is clearly where the challenges for start-ups come from. The technologies are all ready and even the customers too, with a new 'digital native' generation waiting at the gates who will instinctively find our current models of education limiting and too top-down. However, it is the start-up founders who must construct the new assumptions and business models, and convince the investor community, most of whom is so used to a certain, old, idea of a college and tend to view everything else as an aberration, that time for change in education has come. And, to do so, they must bootstrap their way into a minimum viable product, something that works but can work without much investor support. The big question for education start-ups is, therefore, what this really looks like.

There are a number of ways education start ups are different from other start-ups, and one needs to appreciate these differences to be able to construct a start up proposition in higher education. To start with, an education institution must be recognized, which is different from accredited, to offer value for its students. This is a step which takes a great amount of effort, and start-ups are thinking differently about recognition. Some, who could afford it, have offered courses free, in order to acquire reputation and following: They have also used big name professors from recognized universities and leveraged the name recognition. Others have taken a route which will take longer time, and have gone for full accreditation. This route indeed needs full investor backing and patience, as this may take years before a start-up could be fully recognized. Some, and we fall in this category, had to take the middle path - accreditation to get real students, but a stepped approach to accreditation because one needs to get to market without waiting for years. This is therefore the first ingredient of the minimum viable product - recognition in some form - that an education start-up must secure.

The other key issue for a Higher Ed start-up to consider is that whether they compete or complement the existing education models. The current model looks broken, but to overhaul it completely needs significant investment and commitment, which is difficult to raise. So, many of the interesting new start-ups are designing themselves to complement the institutions, rather than trying to reinvent the wheel. And, the business model so far is to apply technology and build platforms to create value which was not hitherto possible, and leverage the content and expertise already available in the institutions. It is indeed content which is the expensive bit, and creating platform businesses, with content flowing in from the institutions which have it, is what the education start-ups can do well. Indeed, this not just about creating a technology platform and selling it to universities - that business is dead and buried: To be successful, the start-ups need to create a flexible, scalable and innovative business model that the public and private sector incumbents can not create, primarily because of the self-imposed restrictions of quality assurance, territorial licenses and simple myopia of being too focused on content.

Finally, education start ups must resolve, in their own minds at least, whether how to deal with the 'reputation question'. There are far too many start-ups trying to create the reputation hallow, and education entrepreneurs seem to believe that what ailed the previous generation of education companies, the 'For-Profit' ones, is the lack of reputation: The fact that they were too downmarket, publican, in their appeal. But, one could equally argue that there is no point in chasing 'reputation' for a start-up, because what most people refer to the R word as a proxy of social prestige and exclusivity. There are enough provisions for prestige seekers already and no space for start ups there: Higher Education's problem is relevance and productivity and this is the problems start ups should address. Besides, the current model is to try to rent reputation rather than going through the patient process of creating one, and arguably, this is counter-productive: Not just one can't just live in reflected glory, but that such short-cuts undermine the very process how reputation is built, through a patient acquisition of successes over a long period of time. The current game of reputations, putting on the wall plaques of some well known universities, reduce the incentive to develop a coherent vision and commitment to do things well.
 
So, Start-up Higher Education is a different kind of Higher Education, which may not replace our colleges and universities, but complement them and bring a much needed twenty-first century update. They perform a useful social role when they extend good quality education to those who the traditional higher education fails, and they can do this by building innovative delivery and accreditation systems and leveraging the power of technology and globalization. It is a mistake for them to get sucked into the social prestige game, that is not their role, and to try to rent reputation: It is time we get start-ups who know what they are doing, and which build a system from ground up that drives education innovation.

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