It's no secret that the education market is undergoing big changes. We're at a time when we will benefit from looking outside our domain for advice. One of my heroes on the outside is at the forefront of powerful thinking, futurist Joel Barker. If you aren't familiar with his work, I encourage you to view Joel on YouTube or read one of his books. Joel has built his entire career around studying paradigms (models, patterns of behavior) and their power to blind us to trends that change the world. As I write this article, I am reminded of one his basic principles, "You have to go outside the boundaries to find new rules." When a paradigm shifts, everything goes back to zero! As you know, we are at that point right now in the education industry. The rules are being rewritten. The good news is that you can go outside the boundaries and help rewrite them! This article (I'll deliver it in two parts) is a great starting point to make your move.
The growth of widely available free products is a catalyst behind the paradigm shift. In response, many leaders of companies that sell to school administrators want to lessen their reliance on revenue from traditional product sales. What I'm going to unpack in this two part article is strategy considerations that will be helpful for many companies shifting from selling products to selling services.
Not on board yet with retooling to a services-oriented business? According to data from studies done by Education Market Research, Ambient Insight and others, the train has left the station on the move toward service sales. Multiple factors are driving the need to reinvent our business model around offering services — cloud computing and declining budgets for traditional products for example. But the most disruptive change is the four-letter word "free." That's right; "free" is shaking up our industry's paradigm and may be the biggest threat to your business — ever.
Make no mistake, pressure from free is building on the supply side as well as on the demand side. Companies and organizations offering free products to educators are popping up everywhere. And educators are downloading and using these free products: open source curriculum and content management systems, license-free operating systems and free software apps instead of paying for similar products. Google docs is a prime example, replacing Microsoft Office. Now is just the beginning of the shift to free. I predict that educators will soon be able to get free hardware as well — free or nearly free computers, mobile devices, interactive whiteboards — you name it. Some of you may be shaking your heads as though this idea is far fetched. But I caution you to remember when this big shift began and the blinding nature of paradigms. I'm getting a flash back to Joel Barker's Paradigm Shift video I saw about 25 years ago. During that video, Joel proves, with a simple example using playing cards, that we are blinded by our brain's stubborn grip on patterns of behavior. We find plenty of reasons why new ideas won't work. We are quick to defend and justify the current model and firehose suggestions of doing something different. I was able to better understand how powerful my resistance to change is after studying Joel's work. It's amazing and scary — until you understand how to use this basic aspect of our humanity to your competitive advantage!
When did this shift to "free" begin taking hold in the education market? Free stuff has existed for my entire career working with educators — 28 years and counting. Educators are notorious for snatching up free teaching materials at conferences, seeking free product samples and asking for free trials from suppliers. For me, the first big bang that signaled the paradigm shift in the education industry was in 2006 with the launch of Curriki, the K-12 open source curriculum platform. I remember attending a panel session at the Association of Educational Publishers conference that year. Executives from the big textbook publishing companies sat alongside one of the founders of Curriki and passionately debated whether open source learning materials would be accepted and whether Curricki could survive. Naysayers abounded at that meeting. Interesting idea, they said, but it won't work. Fast forward to 2012. Curriki is not only surviving, it's thriving. As of April 2012, Curriki had 6.5 million users from 194 countries and 260,000 subscribers — over two-thirds of them are professional educators, and the growth has continued to accelerate.
How will you compete with free? I've heard some education industry experts suggest that the answer is "freemiums" — give away a basic version or piece of your product and then charge for premium features. That's certainly not a new idea --not a new paradigm at all, just a new name for an old game. Others, including a panel of experts at EdNet 2012, the annual gathering of education industry leaders, said the best solution for us needing to make money in the K-12 market is to shift to selling services — "learning services," to be specific. They define learning services as those offerings that fill gaps required to make free products and platforms into solutions that educators need. I think the development of a learning services segment is an interesting idea, and something that I think could be new and powerful if we are ready to think out of the box and break down the barriers that blind our thinking.
How urgent is it that you formulate your service sales strategy in response to free? David Bryce, professor at Harvard Business School advised in his article in Harvard Business Review, "Most established companies must not only respond with a free offering but also radically change their business model to survive. And they need to do so pretty quickly—within two or three years." My opinion is, selling learning services is going to be a growing, high potential segment. But I don't think product-oriented companies have two years to address their business model. I know what a tight grip we all hold on our behavior and our ways of doing business. That Joel Barker paradigm shift video keeps reminding me of our resistance to change. What we do on the commercial side of education reflects the incredible resilience of the education system we serve, basically a 200 year old paradigm! Becoming service-sales savvy and leveraging the shift to free will be a tough transition for many of us who have grown up in the product-centric education industry. That's why I believe now is the time to begin your strategy process if you haven't already. The value of our products has always fueled our bottom line. We love products passionately and dampening this love affair will be painful. Waiting to respond to this shift is very high risk.
I hope I've got your attention that the f-word is creating urgency for K-12 market managers to formulate a new strategy. The panelists who delivered the session at EdNet titled, "Farewell products. Hello services." also made a convincing argument that missing this shift could be fatal. This very moment, while you are reading this article, new players are moving into our market, some from outside the U.S., and they are beginning to disrupt our old product-centric business models.
Maybe you're not convinced how much this paradigm shift is impacting or will soon impact your business. But there is real evidence to back up my opinion, to validate the advice of presenters at EdNet, and to give credibility to the caution from David Bryce. Just listen to my interview with Tyson Greer, co-founder of research firm Ambient Insight, on the SellingToSchools Radio Network. Tyson and her fellow research analysts have been studying the learning services trend in the education market and have data to substantiate the growth in the services sector. And, to get added perspective on this trend, I encourage you to read (and contribute to) the discussion products vs. services discussion going on among members of the STS LinkedIn Group, largely managers of companies that serve the K-12 school market. It has been interesting, but not surprising, to see the reaction to this trend is steeped in our old paradigms. The most popular response is that charging for product training is the way to respond to free.
This paradigm shift is a great opportunity to challenge our old go-to-market approaches. Because of my background and interest in sales and marekting, I encourage discussion among senior managers about new marketing and sales strategies. There is tremendous inertia to follow the path we have for the past twenty years in the area of sales especially. We stubbornly rely on a field-based sales methodology that is as old as the schools we call on, and many industry veterans insist that it's the only way to sell. On the product marketing side, we might instinctively consider an "offer it and they will come" strategy. After all, the "build it" version has persisted for decades with product-centric education start-ups and even with veteran players that serve the school market. We develop and package a wonderful product to teach math or reading, for example, and believe buyers will beat down the doors to get it. Our market is littered with products that failed to get more than a tiny share of the market with this approach. Now, the question is, will traditional strategies work for developing and selling learning services in this new paradigm? Given the dramatic shift to free, will we need a new paradigm for sales and marketing as well? I think so! So, let's assume the learning services train has left the station and you still want to get on board. What's your ticket look like? What are the implications for your marketing and the way your company sells to school administrators?
Case studies are a good way to begin thinking about this. Selling learning services to school administrators isn't new. A few companies have done it successfully for quite a while. Some examples come to mind. One is Moodlerooms. They've built a big business around providing services to customize instructional solutions for schools using Moodle, an open source learning management system. Another successful player is RedHat. They provide technical support and customization services that leverage the free operating system, Linux. In the professional development area, Solution Tree successfully integrated their services business with the product business and have built a highly profitable enterprise in a very competitive K-12 market segment. Anyone seriously considering a move to learning service sales should look at these three business models and others.
Leaders of companies who run successful services businesses for K-12 schools, and anyone else in a service business (like I am) in the education market will attest to the challenge of building and sustaining a services business. I was successful selling products to school administrators for the first fifteen years of my career — computers, software and related educational technologies. I have been successful selling sales and marketing consulting services to managers of education companies for the last 18 years. I can assure you this has not been an easy shift for me. I've had to rethink my marketing and sales strategy. I am still learning and refining what I do every day in order to attract and retain clients. Like you and everyone else, paradigms hold a tight grip!
That wraps up Part One of this two-part article. In Part Two, I'll offer you some ideas for specific actions you can take to build a successful services business. I'll unpack how success factors for a service business differ from product-oriented business. I'll also offer the advice of other experts about strategies you might consider to respond to the paradigm shift in the education industry. I trust that these free tips will make your paradigm shift easier and help you capitalize on the growing learning service segment. (There's the "f" word again!). I hope you will plan to get involved in the discussion and share this important analysis with your colleagues. This really is an exciting time to be in, and to reinvent the business of education!