Open Markets and their Implications for Business Model Strategy

By: Kay Plantes

Kahn Academy is in the process of disrupting the long-staid textbook publishers market and K-12 education. This school is a stellar example of how any business today can thrive by capitalizing on trends that are opening markets for non-traditional competitors.

Imagine being a 4th grade teacher with a class of 25 students with widely different levels of math aptitude and competency. How do you challenge the most adept students? How do you help the laggards without boring the stars to tears?

The only practical option seems to be to teach to the middle.

That it, unless you and your principal are lucky enough to have discovered Kahn Academy, which is in the process of disrupting the long-staid textbook publishers market and K-12 education. Kahn Academy is a stellar example of how any business today can thrive by capitalizing on trends that are opening markets for non-traditional competitors.

Kahn Academy was started by a Salman Kahn, a hedge fund manager and brilliant communicator, an educator with a passion for teaching math and other lessons to kids. He developed effective on-line math lessons to help his younger relatives, which then went viral because they worked for learners. Teachers caught on. Education philanthropists discovered the wave, made significant financial donations, and the Academy was born. Its mission is “changing education for the better by providing a free world-class education to anyone, anywhere.”

Teachers, school-based and home-schooled students, and adult learners have access to 2,100 (and growing) short education sessions on math, science, history and finance. Software tools serve the purpose of a back office, enabling a teacher to track student progress and learning needs.

Five market trends are enabling Kahn’s rapid adoption:

Melting barriers to entry

For decades, K-12 textbook publishers with large sales forces had one of the most protected markets in the country. No more. Educational material from small publishers easily reaches teachers today, thanks to the Internet. As a result, Kahn Academy’s small team is displacing a giant, able to deliver better and cheaper solutions to school systems desperately in need of more value. Is it any surprise that McGraw Hill and Pearson—leaders of K-12 and college textbooks respectively—have invested in a start-up that will enable them to offer interactive touch-screen textbooks on Apple’s iPad?
Business implication: Are the barriers to entry built into your business strategy in danger of collapsing?

Micromarkets matter

The problem with education is that every student is a market of one, yet textbook publishers take mass-market approaches in creating tools to educate them. Digital learning tools enable modularization and branching, which means they can better meet each student’s unique needs.
Business implication: What micromarkets are underserved by your effort to gain scale and therefore open to disruption?

Best value wins

Salman Kahn’s material creates learning, which is why its use grows. In today’s open markets, the most valuable solution wins. Why? The transparency of information and melting of barriers-to-entry, both enabled by the information age, make it easy for customers to find and acquire the best solutions for their needs.
Business implications: If you cannot offer unique, hard-to-copy benefits, you will be forced to compete on price. When that happens, only the lowest cost solution earns acceptable profits?

Higher-value roles emerging

A recent National Public Radio interview with a teacher revealed how Kahn Academy transformed her role from presenter of material to a coach helping each student optimize his or her learning. Similar changes are happening in every profession, from doctors to home security companies. For manufacturers today, being a service provider is of higher value than being a mere maker of products.
Business implications: Are you defining your role and your company’s role correctly? What role delivers the most value?

Ecosystems count

Kahn Academy has built a supportive ecosystem of partners who care deeply about its mission and enable the success of its “free education” business model. My guess is that Kahn Academy will become a platform where devoted knowledge giants in all fields can contribute their insights to enhance children’s learning.
Business implications: Today, the success of your organization depends upon whether you have outside champions and partners helping to advance your solutions or linking you to another successful ecosystem. How supportive is your ecosystem?

Why should early American history be taught to students across the U.S. from teachers who lack the storytelling skills and knowledge of historians like Joseph Ellis, author of Founding Brothers, a book that deepened my already strong love for my country? With today’s technology and open markets, the teaching of American history no longer has to be as boring and (based on recent assessments) ineffective as it has been.

Why should any customer be served by anyone but the very best resource for meeting that person’s unique needs? Therein lies the terror and excitement of today’s open economy.

By Kay Plantes