Responding to the Market

ALTO held its annual conference in San Francisco in 2016, with high profile keynote speakers and opportunities for the leaders of the industry to get together and exchange ideas during the roundtable and panel sessions. The 2-day event was also designed to maximise the networking potential of having prominent industry players in the same room during the Speed Dating and the less formal social events. According to participants, the conference was hugely beneficial for both agent and school participants and some quoted the event as “the best industry conference they have ever attended”.

The gray rhino

With the aim of addressing “the challenges that business owners and senior managers are facing in a turbulent economic environment”, guest speaker Michele Wucker, author, founder and CEO of Gray Rhino & Company opened the ALTO San Francisco conference with a compelling analysis of business responsiveness to market needs and threats.

Wucker’s talk, ‘The Gray Rhino: How to Recognise and Respond to the Obvious Dangers We Ignore’ explained how the greatest dangers companies face are often right in front of them and therefore reaction to them can be dangerously sluggish. Gray rhinos are different from ‘black swans’, which are the unknown unknowns!

Wucker used numerous examples from the political and corporate realms, including the tightening of visa control after 9/11 and the relative threats of terrorism and GDP growth. She also referenced car giant GM’s decision not to make a simple alternation to an inexpensive ignition switch – the cost to the company of not doing so massively outweighed the cost of acting.

Wucker broke down the process of facing Gray Rhinos as:

  • Denial – how do you react to what you don’t want to hear?
  • Muddling – preventing problems before they get to crisis level.
  • Diagnosing – prioritising multiple problems or Gray Rhinos.
  • Panic – the reason for bad decisions, but also a motivating force.
  • Action – ultimately turning threats into opportunities and deciding on who does what to resolve the problem.

Specific industry examples of Gray Rhinos were sourced from the floor and included:

  • currency/interest rates;
  • product evolution (polling students to find out what they want);
  • demographics;
  • visa regulations;
  • channel costs (and working together across schools and agencies to reduce them);
  • costs of technology;
  • rising costs of student acquisitions;
  • teacher unions;
  • innovation (investing in products that no one else was thinking about on a trial and error basis).

Let’s hear from the panel

These examples were discussed in more detail in a subsequent industry panel, ‘Responding to the Market’, moderated by Jean-Marc Alberola of Bridge Education Group and made up of:

  • Inaqui Alvarez, Valdes – Astex SA;
  • Tony Froggatt, Kaplan International;
  • Andrew Mangion, EC English Language Centres;
  • Marie-Claude Svaldi, ECCOS Educational Consulting;
  • Mauricio Pucci, Information Planet;
  • Selim Dervish, Top Study.

Government regulation and policy was dealt with first, with various panel members noting that changes in policy decisions and funding have come with changes of personnel (eg. KASP in Saudi Arabia) and austerity priorities (eg. in Spain). Meanwhile in the US, the level of scholarship grants have almost led to complacency, though not so in the UK where there are many different sponsors.

Visa/Immigration policy was an inevitable talking point. It was generally felt that the industry was doing a better job of lobbying governments in terms of policies impacting on pathway operations, but not so well in the ELT market. It was suggested that companies partner with others to lobby and use trade associations as well as good immigration lawyers to present an effective, united front.

Exchange rates were another consideration for the panel and it was suggested by Mangion that the industry doesn’t really know what they are going to be and should therefore set themselves free from the worry: “It is what it is,” he said, adding that balancing product portfolios in terms of destinations and currencies was wise.

Terrorism was briefly discussed and the general consensus was that the industry was bigger than the ongoing threat and had overcome previous difficult times as well.

After a break, the session turned to industry maturity. It was generally agreed that, in a cyclical business, discounts quickly become lower prices and that a ‘race to the bottom’ was not a good thing. One audience member, an agent, noted that if schools were offering high discounts that was often a warning that the school wasn’t profitable, in which case, why work with them?

The mutual reliance, and tension, between schools and agents was also touched upon in a candid exchange of views. Frogatt at Kaplan said that having ‘Super Agents’ resonated with Kaplan, because it was a massive undertaking to take on loads of different partners rather than having one master agent in each location.

It was acknowledged that agents in some markets were concerned by schools with aggressive direct marketing operations. A discussion about what to do with active lead referrals from social media followed and it was noted that lead generation was becoming more expensive; conversation rates are low and there is a risk of losing students to competitors; companies that sell leads into universities are now moving into the language market.

Frogatt questioned the situation where a full commission is paid for a lead which has already cost a company to generate in the first place, and Mangion declared, “We work through agents, simple as that.” But he suggested, “If marketing reports are adding value, then there should be some form of cost”.

US market trends

As well as deep-diving into industry issues, ALTO welcomed David Hoverman from Parthenon Group EY (Ernst & Young) to give an overview of the international education market and discussed the evolution in pathways markets in more detail.

Hoverman explained that since the GI Bill in 1944, which included measures to deal with education of returning soldiers, higher education has grown almost every year since… until recently. He said that in the past, providers could say that the following year would bring more enrolments and that they could charge more than inflation each year and no one would object. “None of these things are true anymore.”

2011 was the cut-off point for growth and the trend has been down every year since, Hoverman said. This is a pressured situation that has seen fees rise faster than inflation and discounts (scholarshipping) rise at a dramatic rate (private non-profits have discounted on average by 46-47%).

This is in the context of prices rising faster than income, pension costs rising, real estate costs rising, and so on.

Schools are feeling the pain, remarked Hoverman, with their credit ratings downgraded by Moody’s. This has occasioned a big expansion of pathways into US education institutions as a way to plug the gap.

As well as taking more students out of country (pathways), more schools are taking students out-of-state, to a dramatic extent in some cases, with the University of California receiving much criticism for this.

Then there are the online learning programmes, particularly at for-profit schools that offer online flexibility for adult learners. Out of a total of 20 million US students (full and part time, full time accounts for 15 million), 6 million take at least one course online.

Online education is an interesting market and the US is far more developed than other key international education destinations: online programme managers are partnering with colleges and hosting a virtual online university on their behalf. The revenue share is upwards of 50% and the benefit to the online companies that they get to use the college’s brand name.

Finally, he pointed to other new rises in “boot camp” style education and a shift towards marketing “competency-based education” too; this is being advertised as faster and cheaper than a four-year bachelor degree.

The return on investment is great, with graduates doubling their salary within a year, making it worth the loan, he said. Vendors provide the technology and their valuations are high. They are now registering 500,000 students, so very much on the map.

Dealing with disruption

Professor Vikas Shah delivered a high-energy, thought-provoking presentation on dealing with disruption. Acknowledging that language education and travel are going through significant disruption, with volatile global markets, the threat of international terrorism, challenging international border policies, and the growth of low-cost digital competition.

In preparation for the presentation he interviewed numerous high-profile leaders in the world of academia including Professor Carl-Henrik Heldin (Chair of the Board, Nobel Foundation), Sal Khan (Founder, Khan Academy) and Dr. Andrew Hamilton (President, NYU) asking them questions such as:

  • What is the purpose of education in society?
  • How are universities being disrupted?
  • How does digital sit alongside conventional in the education world?

Although varied in their backgrounds and locations, they were all united on two themes:

  • Education is about helping people lead a good life through the acquisition of knowledge;
  • Innovation, technology and education have always stood side-by-side so that while technology can change the way we learn, it will never replace physical presence at an institution.

Attendees split into groups and looked at significant disruptors and how we could challenge them and turn them to our advantage. This complemented the earlier session by Wucker and gave delegates the opportunity to delve deeper into our ‘Gray Rhinos’. A good deal of attention was given to the fact that while online education may never replace conventional, physical delivery, we all recognise that to maintain our competitive advantage we need to figure out a way to work with it.

Some quick video highlights

Take a trip down memory lane and watch our event clip.

ALTO Conference San Francisco 2016 from ALTO on Vimeo.

See you next time?

The overwhelmingly positive feedback from participants confirmed that senior managers at a decision-making level can learn a lot from each other and help each other by discussing pertinent industry issues and sharing their experiences in an open idea exchange that ALTO facilitates at its events. As one of the participants commented, “The feeling [at the conference] was that of a family looking out for its members, making sure they were all armed with success tools to overcome a tough time in the industry.”

Read more testimonials from participants at the conference (hyperlinked flyer); find out more about ALTO’s upcoming events and register for membership here.

If you are an ALTO member and would like to watch the recorded conference sessions, please login to the members’ area and go to ALTOSF2016 video files.

2017-08-16T19:27:00+00:00
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