COVID-19 - Education - CL Educate
COVID-19 has thrust a forced experiment on all of us. It has reduced the industry segments into two: Touch and No-touch. Many industries are forced to see themselves in a new light, or face crisis, if not extinction.
Education, fortunately, is executable in a 100% No-touch manner, unlike, say, travel, or restaurant, or movie theatre businesses. However, the premium educationis a touch-business, where the consumer pays for the socio-emotional needs, face-to-face time, and so on. That part of the business has been totally disrupted. And those who were entirely dependent on that model have been devastated by the pandemic.
At CL, we have been affected too; as the ‘touch’ business (through premium programs) was a large part of our value-chain. The online-enabled machinery took over the fulfillment part withoutany disruption. However, the new business developments on both sides (i.e., consumer & enterprise) have been restricted to only the digital services that are available.
COVID-19Impact: A Summary
In the last quarter, from January itself, the enterprise business had begun to get affected, while the consumer business sailed well until March. The second half of March, however, was a total wash-out.
FY2020-21 will be hugely impacted by COVID-19. Some elements (volume, no. of customers, EBITDA%) of the business are defensible vis-a-vis past numbers; whilemany other elements are not (such as, ARPU, revenues, physical services, and so on).
To provide a lucid account of the way we are viewing business, I have captured my thoughts under the following heads: Observations, Challenges, Opportunities, Strategies, andPredictions.
3 Observations
- Uncertainty is a reality
Exams are postponed, next semester start dates are unknown, universities have no clue how they will admit new students (or, how they will conduct internal tests & exams). This will be, in my view, the reality for the next 18 months. Yet, life has to go on. Every one -from the WHO to the country premiers and the business CEOs - needsto stay alive, alert, and agile to the unfolding situation.
- Wallets tightly held by consumers
The consumer spend is already seen to be tightening. Corporates and institutional clients have not only clamped down on their spends within weeks of the outbreak, but have also executed cost-cuts with no hesitation. The same behavior is slowly and surely becoming evident on the family & personal consumption sides, as well. This will lead to pressure on the prices of the products, as competing brands and services will want to maintain their businesses. In order to gain (reluctant) customers, they will be forced to lower their prices.
- Psychological factors are equally important
Behavioral economists are having a field day studying consumer behavior. Fear, uncertainty, joblosses, effects of lockdown, health risks, etc., are triggering strange and difficult-to-explain phenomena. Even after the lifting of the lock-down (officially), people have not rushed back to their old,‘normal’routines.
3 Challenges
- Growth (of touch business) is a challenge
Growth parameters will now have to be minutely viewed. Revenues & profits will be affected for the next financial year or two, at least. Our touch-business is not likely to revive for a minimum of two more quarters- not before Jan.-March, 2021 at the earliest, that is.
- ARPU will fall dramatically
Online consumer acquisition & delivery is a great position to be in, especially in education. However, the ARPU for a similar product is just about 25-40% of its offline counterpart. This will lead to revenue contraction, for sure. So, to ensure profitable growth, re-wiring of the organization is mission critical.
- Re-wiring of the organization, including the mindset
The greatest challenge for any organizational leadership is that ofdeveloping the appropriate mindset and mental-wiring for a specific battle. Online is an altogether different battleground. Digital native organizational thinking among the leaders, without losing the virtues of ‘EBIDTA POSITIVE GROWTH’ wiring is a massive challenge. Curiously, a popular oxymoron in business: “You are digital, or you are profit generating” no longer applies. We need -and want- to be both.
3 Opportunities
- Disruptive state is an opportunity
There is very little that could be called Business-As-Usual (BAU) since the onset of the COVID-19 crisis. Corporates, universities, governments, tutors, schools, individual parents & students are all feeling disrupted. The ones who are least affected, and who are alert, agile, and connected will seize this opportunity. It may lead to newer business streams, even as chaos prevails all around us. Kestone, CLMedia, CL, have all been encouraged and supported to be a player looking at today’s scenario as an opportunity.
- Basket expansion, with new focus and no addition capital
Entry barriers have further vanished in the forced experimentation period ushered in by COVID-19. Any independent entrepreneur in education can now go live (nationally, or even globally) with zero capital. The way to deal with this situation is to become a guerilla oneself, and gain product basket expansion in the (already) identified areas. Team & leadership time and mindshare are the only pivot that has occurred without additional capital.
- Building digital competencies
Newer skills, functions, roles, and strategies have now become mandatory. An alert response to the crisis has created opportunities to build newer digital competencies, along the whole nine-yards of education business -from leadgen, curation, and closure; to delivery and customer satisfaction. Many new digital products and services have been added to enhance the effectiveness in the COVID era.
3Strategies
- Defend the defensible
We are focusing on driving our energies towards staying financially healthy by assigning appropriate value to various metrics of our business. For example, profitability is more important than topline; return on capital is more critical than ever before. Similarly, pinpointing focus to stick to the core is being practised with renewed vigor.
- Unified & re-wired for the “no-touch” era
The pre-COVID legacy organization had two sub-parts: touch & non-touch. These operated almost like two distinct SBUs, even though they leveraged one another. In the new era, the touch activity has been reduced to zero; thus, leaving substantial scope for a rejig and re-wiring. This was converted into a conscious intervention; and a ‘Unified’ status has been put in motion.
- Focus & prioritize on cash and volume growth
Cash up-front leaving no collection effort, minimizing bad debt in the future, focusing on cash v/s billing are some of the short-term efficacy-led strategies implemented across all business units. Volumes, customers’ numbers growth, cash in hand are more premium than ARPU. In effect, could we defend or grow our market share and add to cash will be the focus for the financial year 2020-21.
3Prophecies
- Consolidations will play out
It is a tough batting track. The next 18 months will put the resilience and staying power of many a player to the sternest of tests. Start-ups, and even mid-sized players, are fast running out of cash. Newer businesses are there for the taking, but without the commensurate topline or profitability. That is not everyone’s cup of tea. M&A stories will play out too. International investors, with a specific mindset and time view, will look at opportunities in a smart way.
- Newer stars will emerge in the next 18 months
At the end of this tough period, some, with outstanding strategies and skills, will emerge as the new celebrated heroes. Could we be one of them?
- Education will have a new normal
One is not qualified to speak about other businesses. However, in education, the next normal will be a new one. All the stakeholders will have a say in it-be it the consumers, service providers, entrepreneurs, policy makers, and so on. Each will impact the rest.
What lies ahead is anybody’s guess. No Nostradamus is around. But this much is for certain -we shallface it with neither bias nor prejudice.