Edtech: generating income for UK schools

By Dr Mark Abell and Roger Bickerstaff of Bird & Bird

Many independent schools in the UK are finding themselves in an increasingly difficult position. Overheads are increasing, student numbers are falling, and so income decreasing. A financial crisis is looming for many. 

Educational technology has the potential to help schools deal with this problem by delivering real competitive advantage in a number of ways. 

The most obvious one is improving the quality of the learning experience they deliver to students and the academic results, thereby making them more attractive to discriminating parents.

This article focuses upon how educational technology could be a key part of their strategy to generate new income streams that will help ensure their long term viability. 

The big picture

British education is held in high esteem across the world.   

Many schools, such as Wellington, Sherborne, and North London Collegiate already have  a number of ‘sister’ schools abroad. 

However, these are only scratching the surface of the demand for British education overseas and the potential income that it can generate. As a result, some schools are now beginning to develop strategies that involve alternative or complimentary ways of exploiting this demand. Ways which can deliver key elements of British education to a much wider selection of students at a far lower unit cost. Ways that utilise digital platforms and the school’s brand to access potentially millions of students around the world for a relatively low unit cost, resulting in a substantial long-term income stream. A number of schools with a physical presence abroad are now putting together digital strategies to complement those foreign schools. 

Which schools can consider such a strategy?

This is not a strategy only available to a small number of elite schools. British schools are enjoying an unprecedentedly high reputation in developing markets. However, very few British schools have much visibility in those regions.  

The generation of additional income streams through the creation, branding and marketing of educational technology products is a strategy that is viable for the vast majority of independent British schools.

Protecting your brand

A good part of the value sought by those who sign up for the digital products developed will be the use of the school’s name. Indeed, this can be seen as a branding exercise rather than a technological one.

Therefore, it is important for the school to conduct a brand audit and pull together an appropriate international brand protection strategy. Registering the school’s name and coat of arms as a trademark must be done as soon as the school has decided that it has international ambitions, as without such protection it will be impossible to implement an international strategy.

It will also be important to ensure that the relevant domain names are acquired.

Developing the product

Creating an educational technology product from scratch is unnecessary and way beyond the ability of schools. Schools need to work with an appropriate partner that can help design, develop, build and maintain appropriate educational products and perhaps a digital platform to host it. 

It is also important to understand how the product will be monetised. It is easy to gain an online presence but not to gain any financial reward.

Edtech services are usually charged for on a usage basis. This can be the number of students on a course, the extent to which courses are taken or an alternative arrangement. The services must be properly monitored. Signing-up but not completing courses is an endemic problem.

Service providers may offer a ‘freemium’ approach. This is where basic content or introductory courses are provided on a no-charge basis in the hope that users will like the service so much that they will then sign-up for premium, paid-for services. This approach can be effective but it runs the risk that the bulk of the users stay at the ‘free’ level and the service provider has an extensive costs base with little financial reward.

There are more inventive business models. Some of these involve rewards schemes, where students are given ‘rewards’ in the form of discounts from or vouchers towards the payment for other educational or social services and products. The commercial benefit to the service provider is a royalty that is paid to the service provider, on the basis of the charges for the services and products purchased by the students.               

Advertising is unlikely to provide an adequate revenue stream in this context. Parents are notoriously cautious about exposing students to extensive advertising. Too much or inappropriate advertising can quickly damage a service’s reputation.  

Once the platform and products have been designed, it is then necessary to decide how the product will be marketed internationally. Is it something that the school itself will take on or is it something to be sub-contracted to a third party with experience and expertise in selling digital educational products? If it is to be done by the school, it will need experienced and dedicated resources, which will have a financial implication.

How should the school contract with the technical partner?

Schools should think realistically about the scope and nature of their involvement in an edtech project. Schools frequently over-estimate the extent of their involvement and it pays to take a long hard look at the school’s capability and appetite. This assessment needs to be fed into the commercial arrangements with the edtech partner.  

The most capable and ambitious schools may try and build their own edtech function, buying in expertise and experience through ‘body-shopping’ arrangements and employing the most important functions.  For most schools this is unlikely to be a realistic option. A less ambitious but still demanding approach is to enter into a joint venture with an existing edtech provider. The joint venture can be on the basis of a collaboration agreement between the school and the partner, or a new company can be established to operate the joint venture as a new business, with the school and the edtech company holding the shares of the new company. A school will need to have a convincing business proposition in order for an edtech company to be prepared to make this level of commitment.

The most straightforward approach is to licence the school’s brand and educational content to the edtech provider in return for a royalty. This can provide an additional revenue stream but will not provide any capital return for the school if the venture is very successful.

A good part of the value sought by those who sign up for the digital products developed will be the use of the school’s name

How should the school contract with the marketing partner?

There are also a wide range potential contractual arrangements for the marketing function.  The school could employ its own marketing team in the target market or contract it out to a third party – this could be the same partner as the edtech function or it could be a separate, specialist marketing function.  

Either way, there is likely to be a sharing of the income stream generated by the sales of the product. These arrangements need to be carefully negotiated to ensure that the school is able to generate a reasonable reward for its investment.

Conclusion 

Finding appropriate technical and marketing partners while ensuring appropriate contract terms is key. 

The strategy is based on branding and marketing as well as technology. The product does not need to be unique, but it does need to be well supported, well-branded and aggressively marketed.

A physical international presence and a digital one are not mutually exclusive and indeed are extremely complementary.  

By adopting an appropriate digital strategy, some schools are likely to establish substantial, long term income streams.  

There is already a race for the leading positions. Success will depend upon the quality of the digital platform, the accessibility, quality and flexibility of the educational modules and how they are taken to market.

W: www.twobirds.com 

EtonX case study

In 2015 Eton College established its first-ever commercial joint venture in partnership with Eighteen70: a technology company chosen for its expertise in delivering live-online one-to-one tutoring. The venture, called EtonX, delivers blended learning courses in social and emotional skills for teenagers attending bilingual schools in China. EtonX is now working with a dozen Chinese schools to deliver the Modern Leadership Programme, to supplement students’ formal curriculum-based learning with soft skills such as communication, collaboration and goal-setting. Despite being positioned as a premium fee-paying service, the programme was oversubscribed in many schools, eventually signing up over 200 students for the 2015/16 academic year. 

Schools who signed up to the programme received lesson material and expert teacher training from EtonX to deliver the blended learning classes, which combine multimedia instruction with engaging group activities that challenge students to put leadership into practice. Students were provided with access to an online platform for self-paced learning and received regular tutorials with an EtonX-trained tutor based in the UK. 

Students who complete the requirements of the programme receive a personalised Letter of Reference issued by the Course Director, which is designed to support them in applying to universities and in their career. EtonX is expanding its offering to launch additional courses and is working with more institutions in China.

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