Details continue to emerge about Pearson’s massive restructure and what it might mean for ELT. The consistent theme is a relentless focus on digital at the expense of all else. Basically, Pearson believe they know where the education market is going and are willing to bet everything on it, even though their current customers aren’t really there yet. But then, according to what follows, maybe that’s not a concern.
If you’ve missed the hype so far, the world’s biggest education publisher is spending £150m on a total restructure which involves an immediate move to digital learning, a focus on emerging markets, and a transformation from publisher to education services provider. If the English language learning market is worth $4billion a year, then Pearson still only have a very small chunk of it. And if you’re a company as successful and ambitious as Pearson, that just isn’t good enough – so a change of direction is needed. In order to deliver this change, the company have recently announced their new senior management team.
What’s this going to mean for ELT?
Pearson generally vies with OUP for the title “world’s biggest ELT publisher” – the signs are, though, that ELT publishing as we’ve known it is not a business that Pearson really wants to be in any more. Presumably because it’s not profitable enough and doesn’t have enough growth potential. I think every other ELT publisher suspects that may be the case too, but everyone else is looking at evolution rather than sudden revolution.
Here’s what I think we’ll be seeing from Pearson:
- No real interest any more in the ‘ELT world’, as represented by IATEFL.
- No more big investment in print courses.
- No more focus on ELT teachers and language schools as the primary customer.
- A move to a direct-to-consumer business – selling direct to learners of English rather than to the schools or teachers who teach them.
- Publishing managed by marketers and technologists rather than editors. This is already evident in recent job ads for the ‘Channel Managers’ who will be running what, in publishing, we used to call ‘lists’. (MBA preferred for those jobs, by the way).
- A drive to bring in talent from the high-tech world – people with no knowledge of ELT, but with an understanding of digital and consumer markets which is currently very thin on the ground in all ELT publishers, including Pearson.
- A focus on two or three ‘mega brands’ (such as Top Notch) at the expense of the ‘long tail’ of products.
- A drive to own the entire language learning chain – use a Pearson course to learn English, perhaps supplemented by lessons in a Pearson school, before then taking a Pearson exam to get a Pearson qualification. Perhaps while all of this is going on, you’ll happen to be studying for a Pearson degree?
The EdTech gamble
Moving this fast is certainly a bold move. That complex network of customers (and therefore revenue) represented by schools and teachers took a long time to build up – could that really be abandoned in the rush to digital and B2C? Pearson ELT has no real history of success in the (very tough and unpredictable) consumer market and they’ve only given themselves a year to sort that out. The logic is clear, though – if there really is an EdTech revolution happening, then it’s going to completely disrupt not just publishing but education as we know it, and cut out the middle men – schools, universities, publishers. MOOC cheerleaders are already asking why anyone would run up tens of thousands in debt going to university when they could get the same education for a fraction of the price, or even free, by studying online. If you believe the hype about EdTech, then what Pearson are doing makes perfect sense, and they’ve got the scale to cope with a couple of years of revenue falls while they build up their all-new B2C business.
Turning round the oil tanker
Can they really do it, though? What will it take for an enormous company to function at start-up speed, which they absolutely have to do in order to make this work? Will shareholders allow them to make the mistakes needed in order to build a profitable new business in an uncertain and rapidly changing market? Or will it all get watered down if the strategy doesn’t yield instant success? My hunch is that Pearson are probably big enough to make the rules that everyone else in education will have to play by. If I was starting a new ELT publishing business today, it would be pure digital and focussed on emerging markets. I reckon I’d need a lot of investment to get it off the ground, though. Maybe about £150m…
Disclosure: I work for one of Pearson ELT’s competitors. Although as an ELT publisher, maybe Pearson no longer see them as a competitor anyway?
To read Pearson’s Brian Engquist on how Pearson has changed, two years later in 2015, check out Notes from the oil tanker.
Interesting analysis of a typically bold statement of intent from Pearson. As we have seen with past initiatives from the world’s largest educational services provider however, there is sometimes a severe disconnect between grand top-down strategy and on-the-ground reality. Huge swathes of the global ELT market have not tipped to digital, and will not be ready to do so for many years to come. Pearson may in truth be handing share in their traditional markets to their competitors for a very long time before their own vision comes to fruition or, as seems likely, their shareholders lose patience at the timescale required for the world to catch up with John Fallon’s thought leadership.
At the moment, striking gestures such as the absence of a single print title on the Pearson stand at IATEFL 2013 suggest a business that is asking its customer base to follow it, rather than the more traditional position of aiming to reflect its customers’ needs. Does even Pearson have the clout to drive the market in this way?
Quite agree, Rob. The number of teachers on the ground who engage with digital on a professional level is relatively small, even if you include those who use the web for research and resources; the number of teachers who actually use digital materials in the classroom on a daily basis even fewer. If we just take IWBs as a example, while researching an article for “Interactive Whiteboards in Education” I noted that classroom deployment of these tools in state schools in Germany is still around 5%. Few European state classrooms – particularly in core ELT markets such as Spain and Italy – are equipped with wifi or internet connectivity of any kind. I think your analysis that Pearson is trying to force the market to follow its lead is correct. Mr Fallon needs to take a reality check, and join a sales rep on a trip to a crumbling state secondary early on a February morning. The sales approach required is utterly different to selling either books or digital tools, as what you are really selling -or trying to – is cultural change, to a very conservative customer base. Laurie’s alternative is that Pearson will sell to the consumer market. The bulk of customers are not adults or university students, where this is a viable option, but primary / secondary. To reach this notoriously difficult consumer market would require massive marketing investment and the “sexing up” of their entire product list to try to increase its appeal to the majority of learners in these segments, for whom English language learning is just another a chore. No self-respecting teen is going to boast about having the latest digital edition of New Total English” on their smartphone.
Thanks Rob. Yes, Pearson are definitely in ‘lead the market’ mode here, and the direction they’ve set out is way ahead of the majority of the ELT market right now. Isn’t the calculation, though, that the ‘ELT market’ as we know it is no longer attractive and can be rendered irrelevant by going straight to the learners themselves? Just because language schools etc are years away from fully embracing digital in many countries, does the same apply to those who actually need to learn English, and who live in an online/mobile world in their everyday lives? The gamble is whether that potentially huge new market can be reached and monetised quickly enough to replace all those existing customers who may move elsewhere.
However it pans out, the impact on the ELT world as we know it now is surely going to be pretty big one way or another.
Laurie, you make the point well of Pearson’s view of a very different ELT world on the horizon – indeed even the term “ELT” is becoming obsolete as short-hand for the integrated educational services industry that Pearson wants to lead. My biggest doubt though is around the apparently extreme nature of their paradigm shift. ELT, even with the multiple challenges it faces today, is still at the extremely profitable end of the publishing industry, and while I understand that Pearson registered respectable ELT growth again last FY, pure digital income from ELT products probably didn’t exceed 5%.
Yet rather than looking after the short-term business while investing in this bright digital future, Pearson have been rather perversely hiding their excellent print list from their existing customers (see above), laying off core ELT salespeople and, I gather, cutting back the publishing programme.
Are Pearson’s ambitions for the new digital markets attainable within their time-frame (usually no more than 3-5 years), as their strategists clearly believe? Or are they over-extrapolating onto the ELT business from their US educational experience? Wouldn’t it be wiser to move towards the brave new B2C world in more measured steps, without the need to sacrifice a lot of easily serviced short- to medium-term demand?
With the scale of legacy that Pearson has to protect, can they afford to move as boldly as a start-up? Or in chasing their emerging but elusive vision, might they be at risk of throwing a large institutional baby out with the bathwater?
Seems to me it’s absolutely the case that Pearson are abandoning the traditional print ELT market for exactly the reason Laurie suggests – that it’s no longer interesting (read profitable enough). With the massive internal reorgs that seem to be going on at most ELT and educational publishers, this seems highly plausible to me, and based on the experience I’ve had of seeing publisher p&ls at all levels, I’m sure ELT publishing is no longer the profitable business it once was. Dwindling profitability seems a pretty good reason to me to reshape yourself into what you think the world will become, and Pearson have never been afraid of that.
I can’t however see that moving away from the traditional ELT model necessarily implies a move to a B2C model, does it? Why wouldn’t students continue to attend institutions of various sorts even when everything has gone digital? It’s already the case that many of the very largest global learning institutions – Kaplan, Laureate etc run their own digital platforms, serving materials to all their students globally.
Why do we assume it’s either/or, either digital or print? MOOC or face-to-face? Why can’t we imagine a hybrid world of many different delivery styles in varying ratios, depending where in the world you happen to be and what your particular needs happen to be?
The Clay Christensen disruption posits that the inferior technology, ignored or disdained initially by the mainstream, offers to the poorer majority something they can’t get any other way. That something in this case is education, of which there is a massive global dearth. The changes now unfolding in their messy and lurching way will help to solve this. Let’s not forget that ELT has largely been the preserve of the relatively wealthy who have access to schools and universities.
The global English language learning industry is thought to be worth around US$63.3bn (2012, GSV EDU Factbook, April 2013), of which the global ELT publishing industry, which I think is worth closer to $2 than $4bn, is a pretty tiny piece. Why wouldn’t you want to push out into the much bigger world and get a piece of a much bigger pie, and one which is going to change the lives of millions, as well as the face of the world we’ve all known and loved in ELT publishing’s heyday?
Thanks very much for the comment Sue. I’m sure Pearson still plan on sales to institutions being a big part of their business for some time to come – it’s surely that they want those institutions to be Pearson-owned where possible. I think the drive towards B2C is going to happen because of the desire to cut out the middle man – i.e. anyone who sits between Pearson and the learner anywhere in the value chain. Why sell your courses to institutions so that they can profit from teaching students if you think you can do it all yourself? As you say, if the entire English language industry is worth $63bn, then the real growth potential lies in extending your reach far beyond the $4bn market that is ELT publishing – and that means taking out the learning providers rather than the publishers.
And I certainly agree that it’s not a case of either/or when it comes to digital vs print or online vs classroom learning. It’s all about the blend!
Great article, Laurie and all the comments are extremely acute. I agree with the first two commentators: it seems to me perverse to carelessly sideline a still-profitable ELT print business in a hubrist-ic bet to become the Microsoft of the brave new world of global education-as-a-commodity. Surely making it clear to an existing set of loyal customers that you can no longer be bothered with what they want because you’ve got bigger fish to fry is a mistake in every possible way. It makes sense to abandon a market in decline for a bigger better things, but not when it’s still bringing in enough revenue to help you finance your new ventures; Pearson couldn’t have gone about in a clumsier and more wasteful fashion. And is ELT really in terminal decline? I can’t see any evidence of this. The need and demand for English is, in anything, increasing. If the current ELT publishing model has become less profitable perhaps it’s the model that’s at fault. The self-perpetuating trend over the last few years of publishers vying with each other to produce huge multi-component courses featuring lots of expensive-to-produce gratis material was clearly wasteful and unsustainable in the long term. This was always going to have to evolve. At the same time, the evolution of digital media creates new opportunities to reaching out directly to learners (what used to be called the self-study market) as well as teachers; we just have to learn how to do it, that’s all. And it doesn’t seem to me that Pearson is showing us the way. If , as the restructuring seems to suggest, they are opting out of ELT altogether in order to pursue the ‘bigger fish’ of the general global education market, then simply planning to roll out across the world digital models similar to those which have worked for them up to now in North America does not seem to me to be a particularly inspired strategy. How about considering each market on a case-by-case basis and tailoring content and delivery (digital, via mobile networks or print) according to their needs and current state of evolution? Above all, replacing editors and educators with marketers and technologists and reducing the status of authors from valued partners to that of minimum-wage labourers is working to create an immense black hole, a swirling vortex of emptiness in the place of what used to be high-quality content. Which used to be and, as far as potential customers are concerned still is, the point.
Thanks Anna – yes, there seems to be a bit of a consensus building that they’re throwing the baby out with the bathwater. Time will tell. I agree that extrapolating US domestic market experience to the global English language learning market wouldn’t make a lot of sense, and a more localised approach is needed – especially if the growth is to be in wildly varied emerging markets (Brazil, Turkey, Russia, the Gulf etc). In general, I have to admit I’m a bit on the fence about whether they’re doing the right thing or not (regardless of HOW it’s being done). I think bold and decisive action is certainly needed for anyone hoping to build long term success in the digital economy. But de-emphasising content seems rash – if that’s really what’s going to happen. Just because you’ve already got a lot of content doesn’t mean you’ve got content that’ll work well for digital. In my experience, print content doesn’t adapt well to digital, however attractive the idea of ‘repurposing assets’ may seem to those in boardrooms who never look at content.
And finally, if Pearson really are going to leave a swirling vortex of emptiness, then someone else will surely fill it!
Though I still think John Fallon (an, in fact, all chief execs) should accompany a sales rep on a cold winter morning to visit a few state schools, I don’t think Pearson are de-emphasising content, but re-appraising the way in which that content will be used and delivered – and to whom. Shifting to the digital delivery of educational content, with the massive cultural change that will be necessary to achieve this end, is going to provide Pearson with a huge challenge if they continue to regard their core customers as teachers. Shifting focus to users themselves presents quite another set of challenges. I’m sure that Pearson are looking at the rise of MOOCs – and the “success” of FutureLearn and Coursera in particular – as indicators that there is a big, reachable user market out there. But the MOOC success in attracting users is based on the fact that MOOCs are free, so if Pearson are considering exploring the MOOC model with regard to ELT how will they monetize their content? The universities involved in launching MOOCs seem to be following the approach adopted by Google, which first banks users, not money (see Jarvis, “What would Google Do”). The money follows when critical user masses are reached, via the onselling of ads, goods, services and data. The other obvious issue relevant to a MOOC model is that users are generally 18+, not kids at secondary / primary level – the big market segment for traditional ELT publishers. The accepted way of thinking is that to reach the sub 18 target group, you sell to the teachers. But the truth is that teachers at this level are a conservative lot. Anyone who has tried selling a new general English coursebook will know how difficult it is to shift a teacher from their current favourite if it more or less does the job, and they can source class sets easily – service and fulfilment are every bit as important as content. So my guess is that Pearson can hang on to much of their existing primary /secondary market without too much effort, while building on a whole new big one – the B2C market adult learners. If they do pursue the MOOC model in this context it will, of course, have huge ramifications for their authors. But that’s another discussion point!
I would not be surprised that Pearson are looking at the Laureate rather than MOOC model for long term sustainable if not rising profitability. I think this is about owning the relationship with students for lifelong learning on a pathway that embeds high value accredited learning. High value accreditation is surely going to become more critical to employers as peer-to-peer learning models rise with variable levels of learning quality and outcomes.