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Digitize or sink — The future of higher education

Who will be the iTunes of EdTech?

There are a few industries that are primed for disruption: e-commerce, education, and health are some examples.

A few weeks ago, I spoke with a Silicon Valley tech pioneer and he mentioned that the AI department at Stanford university is in shambles because its most promising faculty are competing in EdTech startups. I personally think EdTech startups like, Khan Academy, are overstating their impact, but I certainly think that these startups, and new ones, will slowly “digitize” higher education one experience at a time. The problem at the moment is that most EdTech startups aren’t transforming how people learn, but rather how knowledge is distributed. Essentially most of these startups said: instead of having a lecturer give lectures sequentially to 100 students, provide all lectures in a course to anyone with Internet access.

This is great. Especially if you are smart, well-educated, and wealthy because now you can have fun on Sunday mornings learning about BitCoin, String Theory, and Napoleon. However, a lot of work remains to be done for EdTech startups, mainly because the traditional educational system hasn’t figured out how to deliver a high quality educational experience: Poorer students are still at a disadvantage than richer ones, most universities have a 6-year graduation rate yet their students lack the basic skills to be competitive in the marketplace, and a university’s highest paid employees (president, faculty, etc.) spend most of their time fundraising (including writing grants) rather than educating.

Now “education” is a big and complex package that includes: learning, socializing, prestige, certification, dating, etc. In fact, the benefits of a college education are so non-linear that even universities can’t properly articulate their value proposition! This is why the Internet is primed to disrupt education. Given that its value proposition is so complex, no single startup can scoop in and make brick-and-mortar universities obsolete. Instead, multiple startups will emerge each one tackling one aspect of a university’s value proposition.

“Companies are free to ignore digitization; they are also free to go bankrupt.” — Michio Kaku
Tower Records went out of business because it, along with the entire music industry, failed to adapt

When the notion of digital music started gaining traction in the mid 1990s, the music industry just ignored it as a “fluke” or a “geek hobby”. They were certain that people will continue to buy music the old fashioned way. Professor Michio Kaku, of my alma mater The City College of NY, phrased it beautifully: “companies are free to ignore digitization; they are also free to go bankrupt.” As a result, most readers of this post have never seen the Tower Records mega store in Union Square. But it isn’t only the music “sellers” that have failed to adopt to a digital age. The entire music industry failed to adapt, and today every aspect of the music experience from listening, to watching videos, to attending concerts have been transformed: Most people watch music videos on Youtube and Vimeo and MTV doesn’t even play music videos anymore! Most people listen to radio via the Internet and share digital music via Dropbox. And soon, concert tours will be funded via Kickstarter — no middleman needed.

The Internet makes outdated technologies irrelevant by stripping their functionality piece by piece

This is how the Internet has made various “technologies” irrelevant: by taking them apart piece by piece — not in a single big shot. No technology could replace the printed news, but over a 10-year period several Internet startups have striped print media from its value proposition: Craigslist took away classifieds, Medium gives a better platform for writers, and Reddit collectively curates the most newsworthy stories on the Internet. What’s also interesting about these startups is that they also tend to augment an old technology’s value proposition. For example, not only did the telephone make telegraphs obsolete, it also transformed how we communicated long-distance.

The new generation of EdTech isn’t about scale, it’s about personalization and to do that you must start small.

The one advantage that a brick-and-mortar university allegedly has over eUniversities is dedication: If I know you personally I’m more committed to your success. When Sebastian Thurn teaches 100,000+ students over the Internet, you’re just a username in the crowd. However, we all know that students fall through the cracks in “real” universities all the time, so if an EdTech startup can solve the “commitment” problem where every single student who registered is guaranteed attention and support to finish his/her degree that would be a very compelling value proposition.

There is a fundamental mismatch in EdTech: founders seek to change the world, while VCs seek to make a profit.

The main problem with EdTech startups is that they are funded by VCs that don’t know much about education. EdTech isn’t about scale, it’s about personalization and to do that you must start small. If you are lecturing 100,000 people you have already gone down the wrong path. Scale-based EdTech startups can’t deliver their promise because they confuse lecturing with teaching. Yes, you are lecturing 100,000s of students but how many are actually learning? VCs get giddy when you say I have 100,000+ active students because more eye balls correlates with potentially more revenue. This is a fundamental incentives mismatch: one party wants scale to “change the world”, the other to make a potential profit. And so far neither party is attaining their objective.

So what should a EdTech startup focus on. I think lecture delivery is very crowded at the moment if you are following the same video distribution model as Udacity and Coursera with quizzes sprinkled within the lectures. There is potential for reimagining the content delivery paradigm, especially to augment the information-consumption experience from the student’s perspective. However, other aspects of a traditional university’s value proposition are up for grabs such as: certification, learning assessment, alumni networks, continuing education/ skill upgrades, real-world social networks, peer-to-peer learning, college dating, college sports, college perks/infrastructure (libraries, gyms, health clinic, etc.) All of these aspects of college education are up for grabs. University presidents insist that MOOCs can’t replace the above-mentioned aspects, and no one said they can. But other startups have a golden opportunities to create thriving businesses out of other aspects of a university’s value proposition. This means that if universities continue to focus solely on MOOCs they will be out of business in the next 20 years.

One cautionary tale is that you will have to move quickly and systemically to create partnerships that will solidify your position in the market. When the music industry was resisting change, Steve Jobs did an amazing job of imposing his company in the heart of the digital music revolution, mainly through partnerships with the music labels. As a result, iTunes has become the biggest player in the digital music space. Of course, as an EdTech entrepreneur you’re out to leave a positive imprint on the world, but it doesn’t hurt if you can build a successful business along the way — just start by taking a small bite out of the big apple.

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Thank you to: Rill Shikhanov for helpful suggestions.