27
April
2017

An interview with Content in Context Keynote Speaker Jonathan Knee

Both an Investment Banker and the Author of Class Clowns (Columbia Business School Publishing, 2016), Jonathan Knee deeply understands the business practices that help products and services for PreK-12 learners succeed or fail. He'll speak about the education ecosystem during his keynote speech on May 25 at 9 a.m. during this this year's Content in Context (#CIC17) conference in Philadelphia. Both full conference and one-day passes are available.

In anticipation of his keynote, we asked him questions about the education system and what lessons educational publishers could learn about the business of education.

Many who finance education-industry related initiatives do so with the hopes that they will radically change our education system. Is there room for both altruism and disruptive technology/initiatives?

The case studies that dominate Class Clowns are of otherwise successful investors who sought to do well by doing good in the educational domain. In most cases they failed in both objectives. This is not because effective altruism or sustainable new business models are inconsistent with preK-12 education. It is, though, a reflection of how hard each is individually and the extent to which the degree of difficulty is magnified by attempting to achieve both simultaneously.

In your book Class Clowns, you give us examples and lessons from education businesses that have succeeded and failed. What lesson do you think is most critical for PreK-12’s educational publishers?

The phrase "Content is King" is most often associated with the entertainment industry, but it also reflects the ethos of many educational publishers. In both domains, the underlying concept rests on faulty assumptions about the source of sustainable competitive advantage. It is true that valuable content is valuable but this is a tautology not a business strategy. The question is whether simply investing in content in the hopes of developing "hits" that are valuable is likely to yield superior returns. The answer, in the absence of other industry barriers to entry, is no.

The source of competitive advantage of the largest publishers, like that of the largest entertainment companies, is not a magical ability to produce better content than others. Rather it is a combination of the fixed cost scale inherent in a national marketing and distribution infrastructure and the captivity inherent in long-standing customer relationships. Business models that rely simply on producing better content than anyone else are misguided -- Amplify hiring hundreds of developers in Dumbo to show up the legacy publishers is a good example of this. As established publishers face increasing competitive pressures, they are better off focusing on how to deepen their customer relationships by embedding the services they provide in the workflow of the teachers and the schools.

There are more than 10,000 school districts in the U.S., many making their own decisions on educational materials. How can smaller companies best support these wide-ranging, local requirements?

This is not a new challenge for smaller education companies -- the scale players have always had an advantage in marketing and adjusting to idiosyncratic local requirements. The real difference is that technology, and in some cases regulation, has reduced that advantage so that smaller players can be more competitive. The fact that California's recent K-8 ELA adoption recommended 25 of 29 programs submitted is reflective of this. The key, however, for smaller players is to focus narrowly to accelerate achievement of relative scale within whatever domain they are initially targeting.

What advice would you give those who want to invest in the education system?

There is a high correlation between unsuccessful educational investments and articulated aspirations that use words like "transformational" and "revolutionary." The purchasing decision-making mechanisms that characterize preK-12 education markets do not lend themselves to swift, radical, systemic change. Successful businesses identify a narrow specific problem and propose a solution that typically makes life easier for the purchasing decision-maker. Particularly powerful are models where adoption by new customers actually improves the product for existing customers. The anti-plagarism software Turnitin and the instructional materials marketplace Teachers Pay Teachers both exhibit these kinds of network effects. Revolution is possible but it is usually the result of a series of successful incremental steps.

It’s been reported that $2.3 billion has been invested in education technology companies in the K-12 space in the U.S. since 2010. Do you think that we’ll continue to see the same type of interest in the next five years? Ten years?

Hope springs eternal. Investing fads go in cycles, as they certainly have in Education, but two consistent underlying factors ensure that money will continue to flow into the sector. First, the sheer magnitude of the addressable market -- even if most of it will continued to be filled by governmental rather than for-profit entities -- will prove irresistible to many. Second, as long as the sector is viewed as ignoring market forces and technological innovations, investors will continue to see education as ripe for profitable disruption. Unfortunately, to date, too many investors have failed to carefully analyze the complex industry structure in the same detail with which they have in their more successful investment. The result has been not just bad for them but for the sector, as it has bred unnecessary cynicism regarding the potential of for-profit enterprises to contribute to a thriving educational system.

About CIC

Produced by the Association of American Publishers PreK-12 Learning Group, CIC provides practical, actionable insights on content, marketing, and business strategy for learning companies. The 2017 conference will take place May 24-26 in Philadelphia at the Loews Philadelphia Hotel in Philadelphia. CIC attendees receive a discount rate of $169 a night at the Loews. The hotel registration deadline is May 3.

More about CIC, including sessions and speakers, can be found here.

Media Contact
photo:Marisa Bluestone*
Marisa Bluestone*
Communications Director
202-220-4558
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