"...It was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity..." (Charles Dickens, A Tale of Two Cities)
2013 has been, once again, both the best of times and the worst of times for education. Consider some of the developments throughout the year:
- After the US K-12 system was decried by public and private sector leaders as a national security crisis last year, international test scores confirmed this year a "picture of educational stagnation," in the words of Education Secretary Arne Duncan. The impending application of Common Core with more rigorous academic standards has stoked widespread anxiety that the narrative of failure will only be extended further.
- In higher ed, aggregate student debt has ballooned past a trillion dollars, while unemployment and underemployment continue to plague the 54% of students who manage to graduate in 6 years (not to mention the 46% who do not). Colleges and universities face shrinking public funding, declining enrollment and contracting endowment returns - and in some cases deeper, more existential questions.
- Globally, publicly traded education companies - particularly for-profit postsecondary companies - muddled through another year of generally underperforming market indices, with a handful of markets such as Brazil emerging as rare exceptions.
Yet look more closely at the bottom half of the glass, where there were positive signs to be seen everywhere.
- With the rise in property tax receipts, states and districts are finally spending again on education content and technology, with some markets set to double next year. Spurred on by compelling research, new publicly funded initiatives are underway to support greater early childhood education.
- Educators and policymakers alike are demonstrating a new openness to technology, innovation and experimentation; the flipped classroom, competence-based learning, personalized learning and other similar concepts considered newfangled or far off only a few years ago have all entered the mainstream of academic dialogue and are being seriously studied and in some cases implemented.
- Access to some of the best instructors at some of the best institutions is now, for the first time, a reality for billions of people.
- The private markets have never been more robust, with new generations of edupreneurs and investors partnering to tackle some of education’s most intractable problems.
Against the backdrop of these divergent storylines, what will 2014 bring? Below are five observations on what we can expect to see in the new year:
Capital
After averaging around $260 million for the ten years ending in 2011, venture and growth investment in education technology and services spiked to over a billion dollars in 2012, and surpassed that figure again in 2013, prompting many in the industry to cry “bubble” with reference to the first edutech crash in the aftermath of the original Internet implosion.
The difference this time, however, is that many of the companies tapping the private markets have proven product-market fit, and some have already achieved meaningful scale. The majority of edutech companies raising sizeable growth rounds recently have demonstrated the ability to serve their market segments in sustainable ways. Expect the capital trend to continue in 2014 as more and more companies seek to apply software and internet technology to transform different parts of the education value chain.
Consumerization
Private consumer spending on education, especially in supplemental education such as tutoring or test prep, has generally been much more robust outside the U.S. than inside, and typically focused on niche market segments. Nonetheless, with the increasing number of convenient and low-cost alternatives for extending learning beyond the school environment and bringing quality educational products and services into the home, 2014 has the potential to bring significant growth to consumer education markets globally.
It has never been easier to beef up on coding, do a deep dive on web design, learn some Chinese vocabulary, buy some adaptive math courseware for your third grader or even give your brain a memory workout. Various content providers are leveraging brands such as Curious George through edutainment and smart games. Overseas, areas such as language learning and IT training remain large growth markets where private consumer spending typically generates strong Return on Investment in terms of increased employment opportunities and long-term earnings potential.
Online Everywhere
Online education has been around for decades, but historically has been the domain of smaller education market segments, nontraditional learners and non-elite institutions.
We have now passed the inflection point, and online is ready to go mainstream in every part of the education continuum in 2014.
Next year, we'll be five years into the famous prediction by disruptive innovation gurus Clay Christensen and Michael Horn that online education will account for half of all high school courses delivered by 2019. In higher ed, elite universities have joined in, likely causing any institution who has not yet implemented an online strategy to race to do so. In the meantime, a variety of online learning platforms have proliferated, with diverse content and monetization strategies. After causing a media swoon in 2012, MOOCs have moved quickly beyond Gartner's "peak of inflated expectations"; some have already plunged into the "trough of disillusionment," and others are beginning the long, steady climb up the "slope of enlightenment" toward product and business model sustainability.
Tech & Media Join the Party
With close to 80 million K-20 students in the US alone and over a trillion dollars in aggregate market size (with over $40 billion in technology and curriculum spend by US schools), education is already a strategic end market for the world’s largest technology providers. Given the massive changes fast approaching in educational content delivery, assessment and even basic pedagogical models--all of which will be accelerated by Common Core--strategics see an opportunity to bring their technologies and brands to a growth market, while hopefully developing lifelong relationships with the next generation of technology users. Acquisitions by News Corp., Intel, Discovery, Amazon and others are likely only the beginning of a broader trend by technology and media companies to broaden their footprint in the education space, a trend that is likely to accelerate in 2014.
Data-Driven Personalization
The digitization of content and assessment and the increased usage of new online platforms are creating a treasure trove of data that many believe hold the keys to the future of education: truly personalized learning powered by powerful computer algorithms that adapt content to fit individual competencies and learning styles.
A number of companies have been putting resources into what is universally conceded to be a devilishly difficult problem to solve, one that requires massive scale both in content and users, not to mention highly sophisticated technology. However, the applications across K-12, higher education and corporate training are extensive, addressing markets worth hundreds of billions of dollars. We expect some of the early implementations to begin to create measurable outcomes in 2014 that will let educators and investors know whether the promise of personalization is likely to be realized in the foreseeable future.
