This week, a group of investors made an offer to purchase Skillsoft and take the company private. Josh Bersin wrote an insightful blog post about the business case for acquiring Skillsoft. Given the fragmented nature of the learning industry, it is not hard to see the value in a strong brand with a solid sales and distribution channel that offers a ‘pipeline’ to customers through which a variety of future products could be moved. And gross profit margin around 90% don’t hurt the business case either.
But there are question marks as well. The Skillsoft deal offers a good opportunity to stop and reflect on the state of the learning industry and the trends that may impact its future. A good case can be made that these trends will weaken the market for traditional industry offerings such as learning management systems and pre-packaged content while (eventually) rewarding vendors quick to adapt and innovate.
Here are three trends that are reshaping the learning industry for both vendors and customers.
1. The merging of Learning and Talent
As enterprises mature in their talent strategy, the focus moves away from learning content and toward more sophisticated employee development strategies. Content is no longer king. Leading companies are now crafting employee development solutions built around a rich web of approaches that include company-specific competencies, just-in-time training, mentoring, collaboration, knowledge management and sophisticated performance measurement. Traditional learning tools and content do not play well in this new world.
Leading LMS companies such as Saba and Plateau have seen the writing on the wall and are now selling systems that merge learning and talent functions. Unfortunately, these new tools require new organization-side skills and best practices that are frankly just now emerging. Just when enterprises have finally begun to master the complexities of learning management systems, they now face a potentially steeper learning curve for talent management systems. In the short term, the lack of methodologies and best practices means a tough slog for vendors and customers. But there is little doubt that integration of learning and talent is the future.
The storyline for content vendors like Skillsoft is less certain. The next step up for many organizations as they merge learning and talent is a move from generic content to content that is tailored to the organization. The move toward organization-specific competencies is a challenge for content providers. The value of Skillsoft’s library of aging courses may diminish quickly in this new environment. To thrive, Skillsoft will need to adapt. A move toward industry-specific content might buy some time, but means a smaller audience for each course built. Nor does it solve the underlying issue, which is less demand for courseware in general and an increasing preference for company-specific content that ties into competencies, performance management and other unique elements of each company’s talent strategy.
2. The advent of rapid e-learning development tools
The content industry arose in an era where developing e-learning content was a daunting task. Even a few years ago, the common development metric for e-learning content was that it took at least three to four times as long as the equivalent classroom-based course. Combine this with the specialized tools and skill sets required, and farming out e-learning development or purchasing pre-built libraries was a no-brainer.
With the advent of tools such as Articulate, it is now trivial for an instructional designer with basic PowerPoint knowledge to produce a Flash-based e-learning module complete with simple animation synchronized to narration. Obviously, subject matter expertise and design proficiency are still an issue. But combined with the move toward customized content, the new generation of tools has fundamentally changed the economics of the build-versus-buy decision.
It doesn’t help that many commercially available e-learning courses are not particularly sophisticated from an instructional design perspective. Many are based on standard templates that are not particularly attractive. The learner interaction is often superficial and unrelated to learning goals. Assessment is weak and revolves around recall level knowledge. Usability is inconsistent at best and frequently poor. In short, off-the-shelf content providers (and some custom developers) have created a relatively low bar for in-house content developers to clear.
We see a three pronged content strategy taking hold at many organizations:
- An increase in in-house production of content for the growing set of topics where customization is desirable.
- The use of multi-pronged, non-course-based learning approaches for critical topics and skill sets.
- The continued purchasing of custom or off-the-shelf content where there is little in-house subject expertise or there is little value to customization.
This strategy makes sense for most organizations. And it’s relatively neutral for system providers. The de-emphasis on courseware is balanced by the increased ease of creating standards-compliant content where it makes sense. But the growth of the first two options comes at the expense of the third. So, the trend for content providers is not good.
3. Informal Learning
The move toward informal learning has been going on for some time and shows no signs of abating. This is an area where content providers have an advantage over learning system providers. Skillsoft’s Books24x7 acquisition is an example of how content providers can adapt to this trend by providing new types of content.
The problem for system providers is that the role of the system is often to track learning for performance assessment or compliance purposes. Almost by definition, informal learning cannot be easily tracked, nor in most cases is there any reason to do so. It is worthwhile to ask what the role of a learning management system is in a world where most learning happens informally. I have yet to hear a truly compelling answer to that question except to point out (rightfully) that there are many places where formal learning is still the best answer. The need for formal learning is not going away. But the mix is changing toward informal learning and performance support, which is not great news for system vendors, most of whom still rely heavily on the learning side of the business as they try to gain a foothold in talent management.
On the other hand, this shift does create an opportunity space for up and coming vendors and even nimble providers of traditional learning tools to offer innovative systems for informal learning. As with the shift toward merging learning and talent, the big barrier at this point isn’t the existence of tools. It’s that some of the most promising techniques, which are built around social networking and communities of practice, are hard to pull off in the real world. Building communities requires new skill sets, new processes, new policies and often culture change within the organization. Until strong best practices emerge in the industry, success with these tools will continue to be hit and miss and the growth of tool vendors who play in this arena will be painfully slow.
From a market demand perspective, it makes sense to see the learning industry as a late stage market where old revenue streams are starting to look long in the tooth. In Skillsoft’s case, it’s not clear if the new investors are really reading the tea leaves correctly and planning for major market shifts or if they are betting that an eventual economic rebound combined with traditional belt tightening and management tweaking will allow them to ride the old wave a while for a decent profit. In the end, we don’t expect tinkering to be enough. While LMS vendors have an obvious play in moving into the talent arena, the roadmap for content vendors is less certain. To thrive, Skillsoft and other content vendors need a new game plan that takes into account current trends.
The three trends outlined here create opportunities for industry players, old and new, to create new offerings and new revenue streams. The good news is that the winding down of one market leads to the emergence of another. The bad news is that technology evolves more quickly than organizations do.
Lost in the discussion about industry maturity is the issue of organizational maturity. Surveys like the one we published in CLO Magazine last year (found here) show that enterprises are still struggling with basic enterprise learning governance. This means that progress toward adopting new kinds of tools is bound to be slow and erratic. Even vendors that adapt quickly to the new landscape will face the challenges of any emerging market—immature technology, initial customer failures and slow growth. Success will require foresight, innovation and patience.
More importantly, vendors need to become adept helping their customers overcome organizational challenges as well as technical ones. While the near vacuum around governance, business process development and technology adoption is a short-term boon to consulting firms such as ours that specialize in these areas, the industry as a whole needs to focus on these topics to ease the transition to the next generation of learning and talent.
On the customer side, the emergence of powerful new approaches to learning and talent along with the advent of new tools provides a great opportunity. Forward thinking enterprises that embrace industry trends have a unique opportunity to distance themselves from the pack. While there will undoubtedly be some bumps along the road, the reward for organizations that master new approaches is huge. Already we are beginning to see success stories that promise to fundamentally alter the way organizations think about learning and talent.