The UK Edtech Market in 2016

Exhibitor stands at BETT 2017, the world’s largest education technology show, were snapped-up with such gusto that by Day 2 of BETT 2016, many exhibitors were already reserving their plots for 2017’s show. For the first time, there was a real sense of scarcity and danger of not being able to exhibit at BETT 2017 due to the huge demand from new exhibitors.

In 2013, London-based investment bank IBIS Capital, forecasted E-Learning to be the fasted-growing sector, with an expected rise of 23% between 2013 and 2017. The global education industry is now worth over $4.4 trillion and is set to rise even further over the next few years.

The UK’s education technology market is analogous to an idyllic village green, staging its huge summer fete, with many new stalls featuring fresh competition, enterprise, innovation, UKTI refreshments and a VC investment raffle. It’s an ideal setting for romantic plots centred around entrepreneurs and rags to riches success stories and while we don’t wish to be killjoys and rain on the parade (or fete), there might be need for a more pragmatic commentary.

Does most of what glitters often transpire to be gold? Is our edtech market really the Eldorado it’s cracked up to be? For suppliers, there’s an abundance of opportunity out there, but if you’re not prepared to change and adapt quickly to this dynamic edtech market, you might find it does not suffer fools gladly.

Firstly, I believe complacency amongst the incumbent, slightly more established firms is a huge risk factor for them. Some of these companies could be about to face the hangover of prematurely celebrating an initial market penetration as they witness their first–mover advantages and early wins rapidly evaporate. Brand recognition and marketing economies of scale are still slightly out-of-reach fantasies for many edtech suppliers and those that have achieved these to some limited degree might find these factors alone won’t be enough to secure their position in the race.  Remember, there’s a new kid arriving on the block everyday and in my humble opinion, some existing companies will begin to fall foul of the cliché “big is best, small is beautiful”.  In other words, they’ll find themselves stuck in limbo between both states without the positive virtues of either.

New market entrants offering similar, but cheaper, technologies can only result in downward pressure on existing prices for many established suppliers. Established suppliers are after all just that, “established”, i.e., no longer in flux in terms of operations and finance and they may no longer be quite so nimble and adept at lean production like they once were back in their humble, frugal beginnings. On the contrary, these same companies could face higher fixed costs and dwindling levels of contribution per unit that might paint a rather futile picture for some.

Secondly, as a viewer and cast member in this British edtech drama, I see it set to deliver some intriguing plot twists, as the market landscape transforms, assumptions about technical limitations, arch-rivalries, brand loyalty and barriers to entry are challenged in a current era of edtech natural selection. The apex predators at the top of the edtech food chain, for example, the likes of Microsoft and Google, will take such edtech darwinism in their stride. All the big boys need to do for the time being, is patiently prowl the long grass of the village green, single out and evaluate their next prey before pouncing on it with offers of exit deals, partnerships or a fatal blow in the form product replication.

Our apex friends have the weaponry in their arsenals to release the same functionality on offer by smaller suppliers, but in some situations they can do it with more pizazz and better yet, for free!  Combine this with immense brand loyalty, app integration and single-sign-on and some start-ups may find themselves becoming extinct overnight.

Going it alone as an edtech provider is going to prove increasingly dangerous over the next few years and SMEs must seek out and secure strategic partnerships if they are to weather the storm that’s coming.

Lastly, the slightly cynical notion that competition is “anyone else a school spends its limited budget on besides us” must not be allowed to rule out the prospect of synergy. From now on, suppliers must seek commercial integrations wherever possible and avoid those adversarial knee-jerk reactions when they discover some functional overlaps between what they, and another company, offer customers.

As consumers, we’re now able to experience what I call ‘technology driven consumer pluralism’. To help explain what I mean, my weekly Friday night culinary treat can now be tailored to my gastric whims simply by using my trusty take away app to get the best spare-ribs from take-away X and the best pizza from take-away Y.

The same ‘pick’n’mix’ consumer behaviour is already begging to be satisfied in the edtech market place and the need for more collaboration is not just about “safety in numbers” for suppliers, it’s perhaps more to do with good old fashioned common sense and being able to sell schools a consummate technology package that will work seamlessly for a great value price.

The suppliers who are prepared to collaborate and work together on commercial and/or technical integration partnerships will be the ones with the greatest chance to survive and thrive when the grass is cut on our village green. Companies preferring to strategise in terms of “us versus them” and continually operating in the zero-sum mind-set, may ultimately find themselves in small pieces amongst the grass cuttings.

There’s no doubt in my mind that ‘interdependence’ is the model for success in the edtech market over the next 5 years and there’s definitely a sense of impending market consolidation.

Maybe you’re reading this as a supplier yourself and you’ve felt it too? How do we know this is really happening and can we prove it is? Well, I admit that proving my prediction is going to be awkward, it is after all just a prediction, and I’ll concede that some of the main points of this article are rather normative, but so too is that sensation of humidity you experience just before a huge thunder and lightning storm comes along and clears the air. The result is certainly going to be quantifiable and like it or not – a storm is coming to this village fete, maybe one big enough to drench every stall.

Unless edtech SMEs find more ways to work together, even some big guys could find themselves being washed away.