Terry Hilsberg e Learning

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State of play Asia: State of play Asia May 2001

Who am I?: Who am I? Government official in Australia 1975-1987 Economic policy Education and training policy Venture capitalist China, Japan 1987 – 1998 Review of Higher Education Policy in Australia 1998 “West Inquiry” Formation of NextEd late 1998

Who are NextEd ?: Who are NextEd ? Hong Kong HQ Offices - Australia,NZ, PRC, USA, UK, Malaysia Ownership – USA, HK, Australia Fidelity GE Equity JH Whitney Kerry Group Post – secondary education partners – 25 Universities from 10 countries Professional Associations from 2 countries Corporates from three countries Dedicated higher education delivery environment spanning 13 countries >200 awards, 1400 courses under contract Varying degrees of success

Themes: Themes Who is gaining market share in Asia? Disruptive technology = value chain contestability The University as a global extranet The market – still crossing the chasm What works today in Asia - Clicks and Mortar

A. Who is gaining market share in Asia?: A. Who is gaining market share in Asia?

Local entrepreneurs: Local entrepreneurs Asian H.E - Last 10yrs CAGR 10-25%p.a Provides context for differential growth by different types of providers Winners of market share Asian, mainly Chinese and Indian, entrepreneurs UK and Australian universities Growing but losing market share Domestic government funded H.E sector – notable exceptions Generally not scaleable USA uninvolved USA H.E sector – fat and happy and non-scaleable

Course price vs. volume- Asia: Course price vs. volume- Asia US$1K – 1K US$0.5K – 10K <US$0.1K – 100K Price elasticity of demand is high Income elasticity of demand is high Example of dilemma: UK e-University volume vs price vs market positioning ?

The Growth of Giants: The Growth of Giants Real price of H.E in Asia increasing at 2-5% p.a Suggests the “Honda” strategy Some giants emerging concentrating upon: Ownership of Student – via distribution Infrastructure Scaleable production Lesser extent, content Example NIIT – US$250M p.a/US$70M p.a profit c.f say UHK SPACE US$90M p.a neg. profits

B. Disruptive technology = value chain contestability: B. Disruptive technology = value chain contestability

Vertical Disaggregation: Vertical Disaggregation

Shifts in value chain ownership: Shifts in value chain ownership Disaggregation leads to contestability of the value chain Platform provision 10-30% < Content 10-30% < Student support 20-40% Marketing and sales 10-40% >

C. Market Still Crossing the Chasm: C. Market Still Crossing the Chasm

What works/is valued – H.E Electronic Delivery: What works/is valued – H.E Electronic Delivery Provider – Student working nicely in niche markets e.g Theology education Provider – Corporates where the $ are going works in some areas e.g multiple outlet TNCs Provider – Distributor – Student all education is local taking off, by far the largest market clicks and mortar sales and delivery

Slide14: Early Majority - Clicks and Mortar Mass markets Niche markets

D. The University as a Local node in a Global Extranet: D. The University as a Local node in a Global Extranet

All markets are local: All markets are local Qualified lead generation 60-70% via WOM or referral Purchase >$US5K decision – can often take 5 visits to a “place” Delivery F2F component to deliver non-education components

What are the students buying?: What are the students buying?

Example - Corporate: Example - Corporate 104 cities, 54 countries, <10,000 employees US$4M p.a E and T contract Content unaccredited and accredited – 10 universities Integration with corporate KMS 24X7 Total support Performance benchmarks, ISO9002 Academic, administrative and technical After sales support for two years

Example – Learning centre: Example – Learning centre STI – 120 centres in RP, China Formed by former President of UP system 80,000 students 20% p.a compound growth Training/UG IT Post graduate start up via buy in Franchising framework Strong central integration

Example - University: Example - University RMIT University Top Australian technology university Largest Australian international university >200 downstream distribution relationships Let a 1000 flowers bloom Master distributor consolidation Standard franchising framework Common Extranet infrastructure eCRM, SIS, CPS, PSS all common

1. Product – From JIC to JIT: 1. Product – From JIC to JIT New products/services emerging Personalization/ customization of product Move from just in case to just in time Quality guaranteed eCRM is king Prediction Dramatic new products being launched in Asia Cannot keep on throwing the same old stuff over the fence – not working other than at v. high price points

2. Production must be digitized: 2. Production must be digitized Customization, personalization and guaranteed quality Requires underlying: Digitized infrastructure Customer relationship management system Current situation Asian universities tinkering A few Australian universities are serious Asian private colleges advancing

3. Pricing becomes flexible: 3. Pricing becomes flexible Price and income elasticity of demand Strong basis for market segmentation Disaggregation of pricing Pricing principles Inelastic – testing/award and language Elastic – content Cost plus – labor intensive elements Price of content heading to zero

Conclusion: Conclusion Explosive growth – USA missing in action in Asia Disruptive technology = value chain contestability The University as a global extranet The market – still crossing the chasm What works today - Clicks and Mortar