Pearson: Always Learning …Except in Digital Transformation
Pearson struggles to transform itself from a publishing company to an education technology company.
What do you think of when you hear Pearson? Textbooks? The standardized assessment you hate? You’re not alone. Pearson was once the dominant force in education publishing, and it has struggled to shed this image as it races to catch up to technological trends transforming education. Brand perception, however, is only one of the struggles Pearson must overcome to refocus the company.
Historically, Pearson focused on selling its services via B2B. Selling to schools and other education institutions is not easy. The sales cycle is long, requiring negotiations with key buyers and approvals from multiple administrative offices. Pearson needed to build credibility with institutions by focusing heavily on pedagogy and very little on the end user experience. Success in this type of sales cycle cultivated silos in the organization, where teams managed their individual P&Ls and found no value in cross-team collaboration. Sales and marketing teams were also focused on their individual products, resulting in specialized expertise and relationships, redundant systems and processes, and multiple brand strategies.
The winds of digital education, however, blew several changes into the industry. First, the cost of content decreased significantly as it became available online. Students could both buy textbooks cheaper online and access information available in textbooks at a fraction of the cost. Teachers could also access content online, decreasing the value of curriculum materials purchased through traditional avenues. This also represented a shift in the buyer, pushing education companies to think about whether direct to consumer would be a more effective channel for their services. In addition, the rise of e-Learning and MOOCs challenged the demand for traditional higher education, which facilitated the use of educational materials like textbooks and assessments, among other products. Higher education institutions have adapted to this trend by offering more digital products or services. Finally, the rise of technology has more broadly raised expectations of service, where user experience has become a powerful driver in purchasing decisions.
Pearson was positioned to address none of these challenges. Since the early 2000s, Pearson has attempted to adapt to market pressures with significant internal restructuring and acquisitions in education technology. To date, these have been largely unsuccessful as evidenced by its historic $3.2 billion loss in 2016. The two largest shifts Pearson has invested in are changing the core product offering from publishing to education technology and changing the business model from B2B to B2C.
Core Product Offering
Pearson wants to reposition itself as an ed tech company, offering all of its content and services through a single platform. Albert Hitchcock, Pearson CTO, has described his vision as the “Netflix of education”. In the historic model, as units operate independently, Pearson products are accessed through various channels and most Pearson products are not integrated with one another. In other words, as an education buyer, you may have to purchase the content or courseware (and often different subjects or types of content), assessment tool, learning management tool, etc. separately and data would not flow between the products. Many Pearson products even require users to have unique credentials. The low levels of integration can be traced back to Pearson’s growth in edtech via acquisitions. Hitchcock wants to use APIs to bridge Pearson’s various courseware and learning service offerings.
You might wonder ‘why would I even buy these tools from Pearson when I can get them for free elsewhere?’ Pearson’s response is quality. Even free resources need to find funders to maintain quality. Pearson is betting on its connections with pedagogy and focus on classroom instruction to offer quality content that institutions and individuals will continue to value.
Yet, this shift to being an educational technology company has been slow. Pearson has been trying to demonstrate focus by selling off businesses that don’t conform to its “digital transformation strategy”. It has experimented with so many digital offerings, including the Pearson System of Courses and virtual schools. These offerings have not demonstrated quality, but rather Pearson’s lack of expertise in successfully implementing digital services. The company needs to further develop its focus. Connecting a variety of products, most of which have duplicative experiences and purposes, via APIs will not automatically result in an integrated consumption experience for learners. Pearson should invest its attention to one product that offers the most comprehensive learning experience and is well differentiated from existing online digital platforms and MOOCs. All of the other Pearson tools should then be stripped down (to their differentiating offering) and integrated with this core product. In many cases, Pearson may have to swallow the reality that it is easier to rebuild the functionality into its core offering than to integrate. Without a North Star product, Pearson will continue to suffer from clouded judgment in determining standards and priorities for its products. Quality will be difficult to achieve if it continues to experiment with which digital experience will stick. Pearson can also begin to innovate on the experience if it focuses on one product (and business model). A good example of this is Google. All of Google’s services are an extension of its core capability in search and business model in ad revenues.
Business Model
It is no surprise, with its vision to be a platform business, that Pearson is now focused on building a direct to consumer business model. Its historic sales and marketing processes, however, have served as a significant barrier. To transition, Pearson has invested in building a global marketing function. Pearson hopes to build a strong corporate brand that consumers recognize and trust as their learning provider. Hitchcock has also supported the emphasis on customer experience by transforming the IT infrastructure at the company, mainly through consolidating ERP and CRM systems. The consolidation of internal systems will be particularly useful in pushing staff to reframe their success in terms of the customer’s holistic journey.
While their current efforts have been valiant, moving direct to consumer requires other operational changes as well. Pearson needs to move away from a step-wise process in development, where managers and editorial teams have too much power in dictating priorities. Development teams need to be provided with more autonomy and a ruthless focus on learning from and adapting to the customer. While quality in services is important, an overemphasis on pedagogy will prevent Pearson from iterating on products successfully, which technology companies must do to survive rapid change.
In addition, Pearson can encourage a culture of customer centricity (and hopefully also integration between products) by changing employee incentives. Again, with a core product focus, employees can be evaluated on the overall adoption and entire experience for a customer in the product, rather than just their individual contributions. Pearson should also aim to remove the vast hierarchy in its organization by judging product teams on their ability to centralize and coordinate with one another.
Pearson’s digital transformation will not be easy. This 172-year company is moving from a deeply rooted culture of successfully selling physical materials primarily to institutions to selling digital experiences to primarily individual consumers. Thus far, however, Pearson’s internal changes have not been radical enough to change the culture and focus of the company. Let’s hope that Pearson can educate itself on past failures and more rapidly adapt to the new way of learning.
Sources:
https://www.marketingweek.com/2017/11/29/pearson-digital-transformation/
https://www.cnbc.com/video/2016/04/29/our-digital-transformation-is-important-pearson-ceo.html
https://www.glassdoor.com/Reviews/Employee-Review-Pearson-RVW18807069.htm
https://www.strategy-business.com/blog/How-Pearson-Is-Reinventing-Global-Education?gko=e47ca
http://fortune.com/2015/01/21/everybody-hates-pearson/
Thanks for a great post! It really struck me to see how un-integrated Pearson is due to its growth through acquisitions, and really demonstrates the importance of alignment across products, channels and markets for a company when making digital transformation. Due to its large size and differing interests of each division, I feel that Pearson lacks the ability to focus and move nimbly. We have seen companies try to leverage its core competencies when transforming into adjacent fields, but Pearson’s capability in sales and marketing seems non-transferable for its new business model.
Very interesting post. It looks like Pearson are making the operational and organizational shifts necessary to build their digital capabilities in-house. Please check out this article: https://www.edsurge.com/news/2017-05-12-pearson-an-investor-in-knewton-is-phasing-out-partnership-on-adaptive-products
It is therefore interesting that you point that the changes they have made are not radical enough in the inside, because from the outside it looks like they are finally making the necessary moves and sending a big message not only to the outside but the people in their organization.