We read it everywhere.
eLearning is the next big thing.
"We believe eLearning will
prove to be the killer app on the Internet." US Bancorp Piper
"Corporate eLearning is one of the fastest
growing and, we believe, most promising markets in the education
industry... Investment opportunities in online pure plays should
emerge, as numerous eLearning companies are now preparing to tap
the public markets." WR Hambrecht+Co
"The next big killer application for
the Internet is going to be education. Education over the Internet
is going to be so big it is going to make e-mail usage look like
a rounding error’ in terms of the Internet capacity it will consume."
John Chambers, CEO of Cisco Systems quoted in a New York Times
article called "Foreign Affairs; Next, It’s E-ducation,"
Thomas L. Friedman. November 17, 1999.
"Just as investors have been richly rewarded
for their investments in B2B solutions providers...we believe
we are at the beginning of an enormous implementation of B2B elearning
content, infrastructure and services that has big potential for
investors." Thomas Weisel Partners
"The landscape of learning has never looked
more promising for companies in the business of education."
Bank of America Securities.
"Education as we know it is changing before
our very eyes. The new millennium will bring together the incredible
power of technology and the Internet into the world of education."
Credit Suisse First Boston.
What do I have to say? "eLearning
SchmeeLearning." You can quote me on that.
I don’t like hype, and there’s
a lot of it right now over this "new, emerging elearning
industry". First, it’s not new; second, it’s only emerging
for a limited number of innovative players; and third, I don’t
like the word elearning.
I’ve been elearning since I first
started using the Internet, and that was several years ago. Got
a question? Do a search on Alta
Vista. Need some news information?
Go to CNN.com.
What’s so hard about that?
Emerging? What’s emerging? A few
players in a few new categories to be specific. There are learning
management systems that help to manage the intellectual capital
in a corporation. There are systems that emulate classroom training.
There are communities for sharing and learning from each other.
There are applications that aggregate content and parse it down
to provide quick, instant answers to issues facing workers. There
is simulation for various business situations. And of course,
there are service providers that offer all the above on a completely
And "elearning"? Whoever
said that all we want to do is to learn? A few of us reach Maslov’s
level of self-actualization by learning something new every day,
but face itthe business
world is not about learning. It is about doing business.
This means producing, marketing, and ultimately getting customers
to use goods and services. If elearning can make people better
at producing and marketing goods and services, and help customers
get better use out of them, fine. elearning supports
business processes; it’s not a process unto itself.
So, all you elearning vendors and
gurus out there, get over it. elearning will make business better.
But it’s not about you. It’s about how you make something or someone
better or more productive. Think of yourselves as the "BASF"
for businesspeople. (Remember "we don’t make the plastic,
we make the plastic stronger?") elearning makes business
Nevertheless, is it all worth the
hype? I argue that there will be a few big winners. More will
come along for the ride.
In his new book Living
on the Fault Line: Managing for Shareholder Value in the Age of
the Internet, my colleague
Geoffrey Moore discusses, among other things, how companies gain
competitive advantage in the age of the Internet. He diagrams
how competitive advantage is an inverted hierarchy where each
lower layer provides a stronger basis for power in the marketplace.
© Geoffrey A. Moore, 2000.
Here’s Geoffrey’s explanation around
hierarchy should be read from the bottom up, as follows:
In high tech, competitive advantage begins with the categorical
advantage of a new technology over an older one. That is, the
highest form of competitive leverage comes from riding the adoption
of a new wave of technology as it displaces an older paradigm.
New paradigms rewrite all the rules of competition, making obsolete
all market positions secured in the prior generation of technology...
Value Chain Domination:
For this displacement to actually occur, the new technology must
be integrated into end-to-end systems that meet existing customer
needs. In the new economy, no one company is responsible for this
integration; instead, it is the end product of a value chain,
a voluntary alliance of companies coming together to create an
economic benefit for customers and to share in the rewards thereof...
Leadership: Initially the new value chains support a single integrated
market defined simply by the new category of product—the PC market
or the wireless phone market—but over time this one-size-fits-all
approach inevitably compromises the unique interests of specific
market segments. Where such compromised interests rebel, vertical
markets emerge and create opportunities for companies that did
not garner global value-chain power to gain local market-share
Disciplines: In competing for value-chain domination and market
segment leadership, companies differentiate in their execution
by prioritizing different value disciplines. One, for example,
might choose to emphasize operational excellence, seeking price
and quality advantage from highly efficient processes. Another
might pursue customer intimacy, seeking higher margins through
differentiated customer service. There are four of these disciplines—the
other two being product leadership and discontinuous innovation...
Finally, none of the underlying sources of power in the competitive-advantage
hierarchy can actually create shareholder value until companies
ultimately transform them into differentiated offerings. They represent
the surface of the model, the part that actually touches the customer....
companies that try to differentiate their offerings without building
foundations in the lower strata of the hierarchy are doomed to be
short-lived and undervalued.
Advantage for elearning Companies
Now, let’s look at this diagram
from the standpoint of elearning:
What’s the technology
wave? Actually, there are a number of waves, not the least of
which is the Internet. Others include wireless technology and
learning devices. New companies are attempting to leverage a discontinuous
innovation with product leadership to create new products.
elearning is a new category, no standard value chains have yet
been formed beyond those in self-contained vertical markets described
in #3 below. A number of players may emerge as big winners in
value chain domination, but several things have to be worked out
first. What categories will exist in the value chain? Will it
be the ones we mentioned at the beginning of this article: learning
management systems, systems that emulate classroom training, communities
for sharing and learning from each other, applications that aggregate
content, simulation training platforms, or service providers?
Or will it be a combination of these? Or will it be something
else? Mayber an even bigger question: Will these categories eventually
merge into a mega-category called indeed elearning, just as we
have seen happen in ERP with the merging of financial, human resources,
and manufacturing applications?
When the market matures, so dominant categories and players emerge,
we will begin to see some of the promises fulfilled. However,
I contend that most of the rewards will go to a few key players,
with lots of other companies going along for the ride.
Some companies are emerging
as leaders in specific market segments. Digital Think is strong
in providing hosted IT learning; eMind
is strong in professional training for accountants; PlaceWare
is gaining traction in remote-presentations for high-tech. These
companies have "crossed the chasm" by creating a self-contained
value chain and taking it to a specific market segment.
number of winning players in market segment domination will be
greater than those that dominate a value chain as in #2 above.
The good news for any player in this category is that they have
reached critical mass in at least one market segment.
As we go up the hierarchy to company
execution on value disciplines, we see more companies playing
this game, using some combination of discontinuous innovation,
product leadership, operational excellence or customer intimacy
as they attempt to achieve competitive advantage. But this may
not be enough.
Finally, when we look at most companies playing in the elearning
space, they simply have differentiated offerings and nothing any
deeper. It’s been said that in elearning "content is king,"
but in reality, while content is absolutely important, it’s at
the top level of the competitive hierarchy. And while it’s key
for any company to have a differentiated offering that ultimately
touches the customer, I would argue that 90% of companies in the
elearning space merely provide differentiated offerings and never
go any deeper into the competitive hierarchy.
Thousands of Companies,
but Only a Few Big Winners
Most companies are playing in the
top level of differentiated offerings by providing customers elearning
content or some other type of offering. Many are moving one layer
deeper by pursuing better company execution on value disciplines.
Some are beginning to make specific inroads into market segments,
and as a result are beginning to gain competitive advantage. But
the big prize has yet to be rewarded. The market eagerly awaits
the emergence of the gorilla (market leader) of elearning, or
at least, the gorilla of each of the several categories of elearning.
So where are we in the game? Let
me make the following observation, based on my own unscientific
methodology. (Note: this methodology is not endorsed by my firm
The Chasm Group!) A July 25, 2000 word search in AltaVista yields
75,111 responses for "enterprise resource planning,"
69,498 responses for "customer relationship management,"
but only 18,167 for "elearning." Draw your own conclusions.
Mark Cavender is a Managing Director
with The Chasm Group, providing market development strategy and
education services to the high-tech industry. Much of his practice
focuses on the elearning market. Write to him at firstname.lastname@example.org
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