Can technology and AI support coaching and mentoring at scale?

Coaching and mentoring tech market map, by Emerge Education.

We’re building our annual list of the top emerging edtech companies in workforce development for 2024 with our Workforce Development board chaired by Donald H Taylor. As we do, we’re diving into the trends and opportunities for innovation along each step of the workforce development journey, for individuals and for organisations → from job discovery, pre-hire assessment and interviews to onboarding, upskilling, talent management and reskilling for the future of work.

In this third article, we’ll explore coaching and mentoring tech — a huge space which is now being radically disrupted by new AI-powered models that enable both expert-led and peer-to-peer coaching at scale, democratising access to these opportunities for all levels of the organisational pyramid. (In our next piece, we’ll link this trend up with the potential for next-gen L&D and training to redefine performance management.)

The employee journey in workforce development.

Read on for:

• Challenges, trends and opportunities, including our predictions for the transformative impact of genAI
• Views from sector experts, plus tips for founders
• A mini-market map of key players and top emerging startups in this space

Keywords: coaching, leadership, career progression, soft skills, mentoring, managers, organisational culture

💡 Why it matters

2023 was the ‘year of the manager’, according to McKinsey. LinkedIn’s report on the most in-demand skills for that year led with management, followed closely by other decidedly human skills: communication, leadership and teamwork. It’s not just the working landscape that’s evolving — leadership also needs to change to face the challenges and grasp the opportunities ahead.

But it hasn’t been a great time for middle managers. More than half say they’re burnt-out. ChatGPT rates itself as either “good” or “excellent” at 70% of the skills most management roles require, according to a recent study from the job-search website Indeed. And part of the problem might be that many managers are simply not suited for their jobs. The 1969 book The Peter Principle gave a name to the phenomenon that’s gone largely unchanged in almost sixty years since: employees are promoted to management roles based on their success in previous jobs, regardless of whether they have the skills or even desire to be managers. A 2021 PwC report found that ‘lack of leadership capability’ ranked among the top three most significant inhibitors to progress and to companies’ ability to address urgent challenges. It can also negatively impact company culture: front-line managers oversee customer-facing teams and set the tone for the way business is conducted.

Gallup research suggests that nearly one in five of those currently in management roles demonstrate a high level of talent for managing others — but, crucially, another two in 10 exhibit some characteristics of basic managerial talent and can function at a high level if their company invests in coaching and developmental plans for them. When companies can increase their number of talented managers and double the rate of engaged employees, they achieve, on average, 147% higher earnings per share than their competition.

🏈 State of play

• Years ago, coaching was stigmatised as remedial help for underperformers. More recently, it’s transformed into an elite, high-cost activity, often reserved for the highest-status executives; traditional models of in-person coaching are expensive, with executive coach fees averaging $500/hour). But in both cases — whether helping the worst or the best performers — executive coaching has been inherently small scale, due to its bespoke, one-on-one nature.
• We’re still in the early days of coaching at scale, but technology is now making it possible for far greater numbers of employees to benefit from coaching. The global online coaching market is estimated to grow from just over $3bn in 2022 to $11.7bn by 2032. While most funding to date has been invested in coaching solutions that focus on soft skills and leverage human interaction, focus is now shifting to the potential of digital coaches driven by AI. (Emergence Capital’s coaching networks thesis is well worth reading.)
• We see three main value propositions being offered by companies to serve the on-demand coaching/mentoring market. At a basic level, professional coaching platforms such as BetterUp, CoachHub, AceUp, Sharpist and Moovone are making it easier to find and select a coach (sometimes using AI-powered matching) and to do long-distance coaching via video conferencing — or potentially even holoportation in the future. Peer-to-peer coaching/mentoring, both within enterprises (e.g. MentorCliQ, Piper) and across enterprises (e.g. Enrich, Plato, Guider), can give all relevant employees access to a broad array of expertise. Finally, digital coaching tech is enabling coaching conversations without the involvement of a human at a much lower cost. Bots, such as Pocket Confidant and People Squared, allow people to ask questions, work on simulation challenges and practise skills in competitive games. AI coaches like Guru, Chorus, Wave, Sparkplan, Rocky.ai, Edward.ai, Mendo, many of which leverage artificial intelligence to provide feedback and guidance which is narrow in scope but often much more iterative.
• Historically, leadership coaching has been a black box in terms of measurement, but digital coaching platforms have the capability to capture massive amounts of data on interactions and outcomes, which helps companies measure the impact of their coaching programs. For example, BetterUp shared data from one large client that showed coached managers were 32% more likely to be promoted and that they consistently received higher manager effectiveness ratings than their non-coached peers.
• New coaching delivery models can bring costs down and enable coaching to happen at all levels in organisations. It’s truly the democratisation of coaching. Not only is having a coach or a mentor at work a proven way for individuals to accelerate professional development and for companies to improve organisational effectiveness, but targeted coaching programmes can help build social capital for those from minority or protected characteristic groups.
• The most basic fundamental right that you have as an employee in any company is that you get to improve at your job. For that to happen, you need guidance on how to do it.

“Coaching was previously reserved for senior execs but even then, it’s patchy; it stops and starts. How can edtech help? With low-cost coaching which is constantly available, democratising access across all employees. But as ever it’s important for corporations to design with corporate strategic goals in mind, setting coaching in that context. Measurement strategies and systems are really important to this process so you can see what’s working and where (for example) to add the human coach into the loop. Accountability is key: defining objectives at the outset is super important, with pre- and post- assessments aligned to core behaviours or desired results of any kind.”

Piers Lea, Emerge VP and chief strategy officer, Learning Technologies Group

🚨 Challenges

• Companies often struggle with sustained use, even after strong initial uptake. Time is often cited as a reason for lack of engagement with any learning initiative, not just coaching, but nobody will make time unless the right systems, incentives and prompting processes are created. (One survey found that 45% of managers don’t feel confident in their ability to develop the skills employees need today and lack the time required to support employees with targeted feedback.) There needs to be motivation, capability, accountability and incentivisation. This is of course linked to a systemic issue around learning generally in organisations, which is too often seen as a ‘fire and forget’ solution, rather than something that needs to be part of the managerial reward system and part of the performance review mechanism.
• Individual accountability and motivation is key. If the first step is for organisations to put in place wraparound processes to incubate coaching in the flow of work, ultimate responsibility will always lie with individuals to engage. Coaching is not something that can be overly prescribed. Unsurprisingly, however, engagement often follows a Pareto principle: the top performers do it, but others do not.
• Impact is still poorly understood. In 2023, Corporate Research Forum found only 44% of survey respondents were evaluating the effectiveness of their coaching. At a high-level, its impact is clear. According to the International Coaching Federation, 96% of those who had an executive coach said they would repeat the process again and 70% of coachees report gains in their relationships, communication skills, interpersonal skills and work performance. Coaching has been found to reduce poor work-related mental health by 38%. Executive coaching has also been shown to not only benefit those currently in leadership roles, but also those who are transitioning into new roles or preparing for future roles. Yet many organisations still struggle with defining success metrics and tracking impact, which in turn dampens buy-in.

“At EZRA, we’re interested in building capabilities for managers to become more coach-like — but not to become coaches, as that isn’t their primary role. We measure capabilities before and after so that we can detect movements in behaviour change. We like to measure across 9–12 months so that we can capture long-term team performance — but not all of our customers want to do that. When they’re willing to measure, they can clearly track behaviour shifts as a result of coaching. One global bank did a comparative study and found that branches with coaching had a 17% lift in product purchases and customer retention after 3 months. Coach readiness matters: coaching requires a two-way commitment.”

Cynthia Stuckey, Emerge VP and senior vice president, global sales, EZRA Coaching

🔥 Trends

• The promise of AI is that it offers a fairly inexpensive and unlimited way to scale coaching to more employees, while also solving one of the major challenges of in-person coaching: consistent check in and feedback. It also means, as a first starting point, standardising data — currently one very big hole in the world of coaching tech.
• Coaching works when it is both incidental (responsive to actual, specific situations/needs) and iterative, helping individuals to develop over time. Performance coaching was introduced as problem-centred ‘fixes’, but if we think about coaching as something that is ongoing, sustained and prolonged — a relationship that lasts as long as you want it to — this might create a different set of expectations, and also a different set of outcomes.
• There is increasing overlap between performance, learning and engagement platforms. Many offer personalised learning pathways and consistent follow-ups, spreading learning over time with nudges for regular conversations with managers. These functionalities overlap with what coaching has come to mean — and AI is poised to transform our ability to track all of our written and verbal outputs and provide personalised, in-the-flow feedback based on company-specific LLMs for skills assessment.
• AI will redefine management. Big changes are coming, and before you can get to the coaching level, you need to nail the feedback level. It is not possible to push coaching down the pyramid of an organisation unless the fundamental basics of a culture of learning are in place. That has to start with just giving people feedback on whatever they’re doing in their day-to-day job.

🌍 Key players

Coaching and mentoring tech market map, by Emerge Education.

More than $1bn has been raised by digital coaching companies the past decade alone. Number one and global leader continues to be BetterUp. Founded in 2013, it has raised a total of $600M with a valuation in October 2021 of $4.7bn. BetterUp has a network of +3,000 coaches and has more than 380 enterprise clients including Hilton, Salesforce, bp, NASA, Chevron and Snap Inc.

The leader in Europe is CoachHub, founded in 2018 and based in Germany, with a total raised of $330M. CoachHub claims a network of +3,500 coaches, with more than 850 employees and clients including Fujitsu, Braun, BNP Paribas, SoundCloud and GroupM.

There have been some big M&A plays in recent years, too. In 2021 alone, performance improvement company FranklinCovey acquired management training platform Strive for $20M, Pluma was acquired by Skillsoft and CoachHub acquired French market leader MoovOne. One year later, CoachHub moved again, for Austrian coaching company Klaiton.

Other digital coaching companies in receipt of notable funding are Torch ($40M raised, which merged with Everwise [$26M raised]), SoundingBoard ($30M raised), Bravely ($15M raised), Chorus.ai ($45M raised), Guru ($40M raised) and Aviso ($60M raised). Many fast-growing consumer-facing learning companies that incorporate coaching (like OpenClassrooms, Ironhack and Lambda School) see this opportunity as well and are branching out into B2B.

🔭 Who is getting ahead?

“Sales training just doesn’t work. Whether it’s a massive company or a small startup, this is not an overstatement. Yet 90% of organisations buy at least one sales enablement platform — that’s a terrifying conflict of data points. We’ve really obsessed over this problem. The conclusion that we’ve come to is that it’s not a problem with the training, it’s a problem with what happens next. Practise, feedback and coaching are not really a thing in most sales organisations, which is why people don’t know how to transfer learned knowledge in order to use it in the real world.

We built a tool called Replicate. Replicate provides AI roleplay simulations based on actual reps and customers; when a rep completes a simulation, they get instant, objective feedback that’s constructive that tells them how to improve. We’ve validated with customers that our feedback is within 95% accuracy of an expert-level coach (this is compared to a professional coaching organisation, not just a manager within that company). We can even teach our simulations to look for what’s ‘interesting’, simply by giving it 10+ calls that you’ve reviewed yourself in your organisation.

I think that people have been burned by history, by the fact that the coaching and the training that they’ve received and the hours that they’ve been pulled into meetings has been ineffective, so there’s a general expectation that whatever the next big thing is, it’s not going to work. The best way to break down these barriers is when people start using a solution that works — they very quickly see that they get material benefit from it, and it sticks. Making what we’re doing accessible is a key component of that.”

James Pursey, founder, Replicate Labs (Emerge portfolio)

Case study: self-actualisation at Snow.

Read the full case study here.

Case study: skills-based talent management at AstraZeneca.

Read the full case study here.

“Employees who have a coaching manager are eight times more likely to be highly engaged compared to their peers with managers who don’t take a coaching approach. RunYourself is a prompt-driven, AI-assisted platform designed to make it easy for managers to have effective coaching conversations — whether peer-to-peer or with their team members. Managers both learn how to coach and get coached themselves via a peer coaching model, all supported by a technology scaffolding.

The benefits to companies vary depending on their use cases — from increasing manager effectiveness to enabling more effective M&A integrations. We enable meaningful and productive connections, more effective communication and decision-making. Managers themselves say that they are making better decisions faster and with greater confidence; and they’re becoming more effective communicators, which is helping them be better managers and better leaders. We have found this to be especially impactful for women, who are saying, “I no longer have impostor syndrome because I can show up in a room and even if I don’t have the answer, I know I can bring value through listening and asking effective questions. I have more influence without authority.”

Data privacy is a common question, especially when using AI. We’re using OpenAI’s API product, which doesn’t train on customers’ data, and we don’t store any of the chats with the AI. The other thing that comes up a lot is bias. We decided not to start with a blackbox AI — instead, we started with pre-defined coaching pathways and prompts created by us as professional human coaches. We then use the AI to generate more nuanced and fully-customised coaching pathways, which we check and verify on an ongoing basis. We also use the AI to generate feedback on the conversations, which again is checked and verified by our team of professional human coaches (at least for the time being).”

Mica Vaipan, founder, RunYourself

🔮 Predictions

• Personal trainer vs. gym — Technology can be the gym, but can it also be the personal trainer? There are so many nonverbal cues and other things that are very much part of the traditional coaching experience. In many instances (think chess), we’ve seen that the complementary mix of human and machine insight is superior to either alone. One could imagine, for example, a human coach that has access to an AI-based analysis of actual workplace outputs throughout the week designing a much more valuable in-person session. (Redpoint VC partner Tomasz Tunguz has identified AI-driven service businesses as an increasingly prominent business model more broadly for SAAS companies in the ‘AI Agency’). While earlier coaching tech focused on streamlining tasks associated with coaching (finding and paying coaches, facilitating conversations between coaches and coachees, and matching coaches to coachees), newer tech goes beyond those traditional functions to include coaching without humans (machine delivery), integrations with work tech, nudges and absorption of work tech data to make coaching algorithms better. This is all part of driving learning to become more personalised, socialised, contextualised and impactful, within a personal learning cloud.
• Manager vs. coach — Should managers also be coaches? The role of the manager is changing. According to Mintzberg’s management theory, a successful manager needs to play a good role as an information processor. Yet AI’s ability to synthesise vast amounts of data and extract valuable insights from it transforms the role that a manager plays within a team. Degreed’s Skills Coach, for example, provides a manager dashboard that summarises a team’s skills, as well as providing data on each individual, so that managers can plan the coaching for both the team as a whole and individuals. The core question is no longer, “how can I use performance data to get the most out of my people?” or “how do I maintain oversight if my team is spread out geographically?” Instead, it falls more along the lines of, “if I don’t assume that people need to be managed for the work to get done, how would I promote self-governance and accountability?” A recent McKinsey report claims that “we are moving from an era of individual leaders to an era of networked leadership teams that steer the organization. The old hierarchical model of leadership is increasingly seen as an obstacle to meeting the complex demands facing today’s organizations.”
• Focused vs. wide range of coaching topics — For example, CoachHub saw a need for leaders with better Diversity, Equity, Inclusion and Belonging (DEIB) skills; it created a framework that can be used to build those skills throughout organisations. Another example is BetterUp’s recent foray into wellness and mental health — in fact, if you check out their website, coaching is now de-emphasized as they move into these new areas. Their coaches include therapists and peak performance experts, with the goal of ensuring that employees receive the individual care they need to be at their best.
• Professional coach vs. industry expert — We’re seeing a bifurcation between the rise of generalist executive coaching platforms like BetterUp and SoundingBoard, which provide access to coaches trained to help people, and specialist platforms such as Plato (peer-to-peer engineering mentorship) or Drishti (AI-driven manufacturing coach) which provide deep insight but don’t necessarily build in the structure of traditional coaching.

🎯 Opportunities for startups

GenAI engines of opportunity for workforce development.

In this category, we see particular opportunities for AI-driven solutions that offer:

• Learning networks and communities → Problem: Masterminds one of the most valuable ways to learn, yet not really scalable. Solution: Tech that enables masterminds/other communities to form and support each other.
• Corporate low-cost performance coaching and mentoring → Problem: Coaching and mentoring only available to managers and leaders. Bottom of the pyramid doesn’t have access. Solution: Platforms that figure out a smart way to radically decrease the cost of delivering coaching/mentoring to (frontline) employees, such as using peer-to-peer coaching or AI coaches.
• Flight simulator for interpersonal skills → Problem: Practising skills in a high-stakes environment is not the best way to learn because you cannot afford to fail so in practice it doesn’t happen. Solution: GenAI unlocks flight simulator training for complex interpersonal situations — interactive learning experiences that create safe environments in which to train for high-stakes situations or interpersonal skills. Especially exciting as this moves from chat, to voice, to XR.
• Skills assessment and feedback through business/sales call recordings → Problem: So much rich data is now captured on our performance yet we only get feedback based on what our managers see and one every couple of months during performance reviews. Solution: Tracks all of your video calls and give you automated feedback against a series of verbal communication dimensions.
• Track all of our written work output and provide feedback → Problem: So much rich data is now captured on our performance yet we only get feedback based on what our managers see and one every couple of months during performance reviews. Solution: Robot that gives you feedback on your written work output against a series of communication dimensions.

💎 Tips for founders

• Don’t sell functionalities, sell outcomes: The biggest mistake Guillermo has witnessed founders make is trying to sell functionalities instead of outcomes.

“If you are going to buy a car, you have several options in the market. The desired outcome is not to enjoy all the features on your dashboard. The desired outcome is transportation. We need to think the same way when we are selling to companies. You have to sell the outcome, you cannot sell functionalities. The functionalities will help and make your product more relevant, but start with the outcome and then go back into how you get into that outcome.”

Guillermo Miranda, Emerge VP and advisor to unicorns such as BetterUp and Beamery, as well as early stage startups like FutureFit AI, WISQ and CareerKarma.

• Do not over-tailor your product: Listen to your early adopters but, as you grow, beware of becoming a low margin consultancy. Early adopter clients value innovators that are open to feedback and co-developing a curriculum or product. Listen to feedback but make sure you are finding the middle ground between tailoring to clients’ needs (eg white labelling, adding feature options, integrating with existing content and software) and building a highly scalable product. The cheaper your product the less you can support your client and the more clients you have, the less hand holding you have time for.
• ROI is not the silver bullet: Being better at impact is great, but proving causality and bottom line results is difficult and often not necessary. While most organisations list ROI of workforce development solutions as a top priority, what they really care about is finding ways to see and express progress. There are many ways companies can show positive impact, through defining and tracking of data and relevant metrics, without having to perform randomised controlled trials.
• Design with diverse audiences in mind: Currently the typical use-case for design is upskilling existing teams. But a broader view of design principles and of who you’re catering for, both now and in the future, is vital to ensure ongoing relevance, taking into account wider organisational ambitions around reskilling, future workforces and D&I. This means assessing using different metrics, thinking not just about size of catalogue, number of users, their outcomes or satisfaction but also seeking more granularity around who is benefiting and how your solution can contribute to a more diverse workforce. When testing design, put it in front of other diverse people who aspire to be in those teams and see which platform they like best. Access and inclusivity will become increasingly part of procurement processes, so platforms must meet this need upfront.

🔗 Read on

• Edtech 20:20 vision: the top 40 emerging companies for workforce development in 2023
• The future of workforce development (Emerge/Coursera green paper)
• L&D, leadership and selling culture (from Emerge’s Product-Market Fit academy)
• Retaining top talent in edtech: strategies for cultivating a high-performing team (from Emerge’s Product-Market Fit academy)
• Part 1 in this series → How startups can drive innovation in recruitment, career navigation and pre-hire skills assessment
• Part 2 in this series → Edtech for employee engagement: how startups can support onboarding, retention and a strong learning culture

Read more news, views and research from the only fund backed by the world’s leading education entrepreneurs, in Emerge Edtech Insights.

📣 Call to action

We are now building our list of the top emerging edtech companies in WD in 2024.

👇 If you have seen an exciting company in this space, please tell us in the comments 👇

Our list analyses 100s of companies operating worldwide, using public and private data — it is crowdsourced, and voted on by our Workforce Development edtech action group, led by Donald H. Taylor.

Please share companies you think we should consider in comments 👇and join us on 2 July to discover who has made the final list!

🙏 Thanks

At Emerge, we are on the look-out for companies (existing and new) that will shape the future of workforce development over the coming decade.

If you are a founder building a business addressing any of these challenges in L&D, we want to hear from you. Our mission is to invest in and support these entrepreneurs right from the early stage.

If you are looking for your first cheque funding do apply to us here: https://lnkd.in/eWi_9J5U . We look at everything as we believe in democratising access to funding (just as much as we believe in democratising access to education and skills).

Emerge is a community-powered seed fund home to practical guidance for founders building the future of learning and work. Since 2014, we have invested in more than 80 companies in the space, including Colossyan, FutureFit AI and Skills Trust.

Emerge Education welcomes inquiries from new investors and founders. For more information, visit emerge.education or email hello@emerge.education, and sign up for our newsletter here.

Thank you for reading… I would hugely appreciate some claps 👏 and shares 🙌 so that others can find it!

Nic