Decoupling Education: a disruptive innovation journey

The fact that education does not have an Airbnb, Netflix or Tesla case does not mean at all that disruption is not happening in this industry as well. The key to understanding disruption in the education sector lies more on the “How” than on the “Who”. The formula also needs to include the “When” factor to better understand this complex mix of disruption in the higher education sector.

2012 was “The Year of the MOOC”. A year in which –according to the relevant media- one of the big MOOC providers was going to change the higher education industry forever. As we know now, this did not happen, while MOOCs had an interesting evolution also suffered important challenges like low “completion rates” and “assurance of effective learning”. Nevertheless, MOOC providers and universities proved to be good partners to work together towards a more digitalised education system. Today, accelerated by the COVID-19 pandemic that forced 1.3bn students online, the cooperation has been multiplied and we can see many well-regarded university degrees offered through these digital platforms.

One could stop here and think that the industry’s threat of disruption was paralysed and think “We are invincible”, no one can beat the big names in the industry!

This week’s CB Insights special on “Unbundling Harvard” enlightened how disruption is happening in the education arena. Although we may be tempted to focus on the most prestigious university in the world – Harvard – the key here is precisely on the other word “Unbundling”.

Before we continue with “how” disruption is happening in education, let’s look at an example of another industry that is in “Disruption progress”: PayPal, the famous disruptor in online payment. A world-class disruptor, PayPal convinced customers to share their email, banking, and credit card information in return for fast, low-cost payments. In other words, they entered in the “small”, “irrelevant” and “not interesting” part of the banking industry’s value chain. The rest is history and PayPal – today valued at USD 220bn market cap- became a global player that established players (i.e. Mastercard) had to cooperate with. PayPal did not try to become the world’s biggest bank (as it is the case of Airbnb) but with its much-segmented strategy was able to become a relevant player in this complex industry.

Education, as CB Insights superbly points out seems to be going in the same direction, a direction of unbundling or also known as disruption by industry decoupling. When transferring the formula to education, uncoupling’s main categories are:

Before the student becomes a student:

  • Marketing, admissions and financing

When the student enjoys the academic experience:

  • Teaching experience at Undergraduate and Graduate level
  • Extra-curricular opportunities
  • Language reinforcement & tutorship
  • Digitalising administrative areas (Certificates)

After the academic experience:

  • Alumni & Career services
  • Continuous education (MOOCs)

Of the up-to-date list of 495 Unicorns – private company with a valuation of over 1 billion – we can find 20 Education Technology ones. When comparing with Fintech for instance (71 Fintech companies appear in the same list) it may seem low but progress is remarkable. It is no surprise that the most valued EdTech today is based in China; Yuanfundao – now worth $15.5bn – a homework tutoring app founded in 2012. None of the remaining 19 EdTech Unicorns is trying to disrupt entirely the education industry and/or aiming to become the new “Harvard”, but rather eat part of the education plate.

In times when some industries are performing extremely well (Tech or Pharma) and others are struggling to survive (Tourism or Automobile), Education seems to be in a positive mid-term position for a new wave of EdTech start-ups as well as for a big potential group of venture capitalists that are changing their education binoculars for magnifiers.

But again, the secret lies on the how and not on the who.