If you spend some time perusing Chris Dede’s faculty page at Harvard’s Graduate School of Education, you’ll find there’s very little that he hasn’t researched. He has a particularly wide-ranging and curious mind with a knack for collaboration and somehow making everybody forget that he’s the smartest person in the room—until, every once in a while, he says something that just utterly stops the conversation.
Whether your interest is AI/ML, VR, social learning, teacher training, or something else, chances are good that Chris has thought about it and is ready to have a fascinating conversation with you about it.
I’ve been thinking a lot lately about beating the odds. Not by being lucky or tough or heroic, but by recognizing the errors that we make when calculating odds of success based on assumptions and pattern matching. Assumptions can be wrong. Patterns might not apply. Inevitability is often a wall with cracks in it. Sometimes, if we can see the cracks, we can find our way through to the other side. This is important to remember at so many difficult moments in life, including when we try to change a system like education that seems unchangeable.
A dear friend recently told me about one of Instructure’s secret weapons in beating the seemingly overwhelming odds that they would become just one more failed LMS startup on the giant trash heap of failed LMSs. It was one I hadn’t heard about or noticed before. This surprised me because I have been a student of Instructure’s secret weapons. Like many other students of EdTech, I was convinced that an LMS startup breaking into what was then a static market was virtually impossible. I was taken completely off-guard when they not only survived but eventually knocked Blackboard out of the top spot.
So I spent a lot of time studying Instructure to understand what I had missed. I learned many lessons. The company leadership didn’t have just one silver bullet. They employed many strategies and benefited from the luck of timing. I have written multiple posts about these factors. I thought I had cataloged them all.
I was wrong. I missed a big one. One that I could have seen based on evidence that was accessible to me at the time. As a species, we gain so much value out of our ability to pattern match that we sometimes have trouble seeing beyond our confirmation bias to see that the “odds” we are calculating are based on a pattern that doesn’t apply.
What—or who—is the deciding factor?
At the time that Instructure came on the scene, LMS selection decisions were led by, and often made by, CIOs, who compiled the lists of requirements and had a great deal of latitude to impose their will. At that time, most LMSs were hosted by the campuses and the IT folks could always come up with some technical reason that other stakeholders were not in a position to dispute. LMS sales processes, therefore, were long and expensive affairs that involved a lot of checklists and, often, wining and dining of CIOs. The LMS company that had the best CIO sales force, which was a capital-intensive capability, would win most of the time. Blackboard had the money and a really good sales team that was finely tuned for those sorts of enterprise sales. Therefore, they won a lot of sales. It seemed like an insurmountable barrier, especially for a small start-up that was known for snarky T-shirts and PR stunts whose primary audience was clearly not CIOs.
In retrospect, it should have been obvious. Instructure deliberately ignored the existing LMS selection structure and created an alternative one. They saw that the percentage of faculty who were making meaningful use of the LMS was rising. They saw the frustration among faculty with the teaching tool that had often been chosen by the IT staff. And they understood the power faculty had on campus if only they could be activated.
Instructure fomented faculty rebellion. When they set up a party across the hall from the famously over-the-top BbWorld conference and gave out T-shirts saying, “I cheated on Blackboard with Instructure at BbWorld,” they were targeting faculty who, by and large, had a very different reaction to a conference that felt modeled after Oracle’s than their campus CIOs did.
As Instructure gained traction, evidence mounted that strategy became more than just a PR campaign—if you were open to seeing the signs. While the most common and popular talks at other LMS conferences were variations on the theme of “We migrated to a new LMS and survived the experience,” the most popular sessions at Instructurecon—for years—was how to organize faculty committees that could take more control over the LMS selection process.
I missed that trend, probably because I would have dismissed such talks as sideshows. They didn’t match the pattern I knew. Procurement processes didn’t change. And they certainly didn’t change in response to a few user sessions run by some upstart vendor.
Today, heavy faculty involvement in LMS selection processes is the norm. It’s hard to say how much Instructure created that change, accelerated and shaped change that was ready to happen, or just rode the wave. It was probably a bit of all three.
Regardless, the larger point is that the odds we place on success are heavily shaped by our assumptions. And sometimes those assumptions run so deep that it’s hard to even see them. They’re like the air we breathe. Nor are odds—and common wisdom—meaningless. We thrive as a species partly by employing heuristics to simplify complex and time-sensitive problems. Averages tell us something. They can tell us a failure rate in an easy-to-understand format, for example. They just don’t tell us why the failure rate is what it is. As my father likes to say, if you put your head in the oven and your feet in the freezer, on average you’ll be comfortable. So if you’re going to beat the odds, you have to understand what you’re facing, why the failure rates are so high, and how you can change the equation.
Another challenge with beating the odds is that, whatever you may think about your opportunity, others will be applying the usual heuristic. Others whose support you may need. So even if you’ve figured out a way through the problem, if the people whose help you need don’t believe you, then you’ve got a problem. To maintain sanity and hope, you have to look at that perception problem as just another part of the wall. There are often cracks in people’s judgments and willingness to take a risk. They are not entirely consistent. Look for those inconsistencies. Try to understand them. Often there are deeper rules operating below the surface. Those rules can be the key to finding your way through a wall of “no.” Sometimes it’s direct persuasion. Other times it’s figuring out a way to go around them until you have strong evidence. Instructure didn’t try too hard to directly persuade CIOs. They stirred up a mob of faculty with torches and pitchforks to show up at the door of the CIO’s office. (By the way, torches and pitchforks are often very persuasive tools, especially if you can get somebody else to carry them for you.) Maybe there was no way for Instructure to persuade CIOs to try a new, relatively untested platform with features whose advantages the techies didn’t understand. Fine. Persuade the people who do understand and who can have an influence on your behalf.
Don’t think it will work? Well, that’s probably the biggest wall of all. Self-doubt. Sometimes things are impossible. Sometimes we will fail at solving absolutely critical problems that we throw our whole selves into. But we always fail when we give up. If you see a path and your task is important enough to you, then you have to pursue that path. You have to. Otherwise, what are you here for? What’s your purpose?
Beating the odds, and accomplishing the impossible, often requires us to mercilessly throw out our assumptions and relentlessly hunt for even the tiniest hints of cognitive dissonance that may point the way toward a path that averages and conventional wisdom miss. When facing a dauntingly complex problem, like systemic change in the ways that educational institutions operate, getting out of the tight spot we’re in can seem impossible. The trick is in training ourselves to see the cracks in the wall of inevitability and then believing what we see. Whatever others may tell us.
Don’t forget, folks: This week’s Blursday guest is University of Maryland Global Campus’s Greg Fowler. Greg represents the next generation of great university presidents. Having served significant tenures at both WGU and SNHU, he is now president of one of the older great public online universities which operates in a very different context than the other two.
We’re starting to crank up the Blursday schedule with some great guests. The next three are spectacular and I have more in the pipeline.
Here are the first few:
Thursday, May 26th 4 PM – 5:30 PM EST: Instructure’s Chief Experience Officer Melissa Loble. Melissa is a sharp observer of all things EdTech and a fun person to talk to. She knows both the ed and the tech parts. (RSVP)
Thursday, June 2nd 4 PM – 5:30 PM EST: UMGC’s President Greg Fowler. Greg is the kind of thoughtful, people-oriented, and forward-thinking university presidents that you wish there were more of. Having worked for a long time at SNHU, he’s now moved on to lead the (very different) University of Maryland Global Campus. (RSVP)
Thursday, June 9th 4 PM – 5:30 PM EST: Harvard Graduate School of Education’s Timothy E. Wirth’s Professor in Learning Technologies Chris Dede When I first met Chris on an advisory board for Macmillan, we both said, “How is it that we haven’t met before?” That’s the spirit of EEP and Blursdays: to meet people you don’t know but should. Chris is a superstar in EdTech-related research (among other things) and is an incredibly nice guy. (RSVP)
More guests are on the way! Come join Blursdays, have some fun, and maybe learn something useful.
The last year has been an interesting journey for me in the world of venture capital. I had come in contact with it in various ways before but not nearly as intimately as I have as the co-founder of a start-up. While I’m still very much a novice in the space, e-Literate has always been about sharing what I’m learning rather than what I know. At this point in my journey, I feel I have learned enough to take an earnest first stab at analyzing the changing EdTech venture capital market and making a few suggestions.
I freely admit that this post is motivated partly by my direct experience as a fairly new founder and that it is self-serving in the sense that it reflects the ways in which my partner and I have thought about building our company.
Context and trends
The venture capital world is currently experiencing turmoil similar to (and somewhat tied to) the turmoil in the public stock markets. Companies that VCs invested in are becoming less valuable. Since it’s not at all clear that we’re at the bottom of that trend, investing in new companies now is tricky. And many of the investors in the market now have never faced an environment like the one we’re in now. Venture capital has had a remarkable decade-long bull run. The mid-level VCs, and even some of the general partners, were not in the game 22 years ago during the dot-com bust.
At the same time, higher education is also in uncharted waters. The effects of the pandemic were weird. Enrollments were down. But not equally everywhere. Increased adoption of EdTech was enormous. But not necessarily the products that folks expected to be big hits pre-pandemic. We don’t know what will happen with blended and online learning. I personally expect that it is here to stay almost everywhere. But in what balance? Will the technologies remain the same, or will they shift as schools move out of emergency remote teaching mode and focus more on brand and quality? What does it look like on residential campuses? Will students still pay for housing? Is the answer to that question different in different segments?
We are facing an economic slowdown and possibly a recession. As unemployment numbers revert to historical norms, will we also see the normal historical trend of education enrollment increasing counter-cyclically? It seems like it should, but I’m not sure. And will we see a move to more alternative credentials? I don’t know.
All in all, it’s a challenging environment in which to make risky investment decisions.
In the larger VC world, the flight to safety means investing in more profitable and less risky companies. And trying to buy these companies at a bargain. I suppose it’s roughly equivalent to stock market investors buying large-cap value stocks that pay dividends. And also like investors in the public markets, VCs are holding onto more cash.
But every sector is its own world with its own investment risks. Does flight to quality mean the same thing here as it does elsewhere?
Yes and no
The universal rules are (1) play it safe overall, (2) keep your powder dry, and (3) be ready to jump on underpriced opportunities. These apply everywhere, including EdTech. But what does it mean to play it safe in this sector, and how does one identify underpriced opportunities?
It’s hard for VCs to pick good bets in EdTech even in normal times. The sector is incredibly complicated, the buying processes are not rational, and sales often take a long time and a lot of effort without any clear signals of how likely a company is to make the close in the end. It’s also hard to tell from the outside if a company that makes its first five customers happy will attract its next 50.
On the other hand, we’ve already seen some seismic shifts in education over the past few years and there are reasons to believe that changes will continue. A sector that was very static for a long, long time is suddenly changing at a pace I have not seen in my lifetime. There’s good reason to believe that changes will continue and may even accelerate. That’s how punctuated equilibrium works.
Later stage investments in EdTech, particularly in higher education, are often companies that have co-dependent relationships with universities that are desperately clinging to the status quo. So, for example, any company that helps a university sell more enrollments without requiring them to fundamentally re-examine how their current activities and expenses align with their mission have tended to do well up until now. But if external forces are creating a situation in which colleges and universities have to change anyway in order to survive, then those “safe” bets may become less safe, not only because of financial conditions but also because of fundamental changes in the needs and priorities of universities.
I won’t make too much of this chart here because doing it justice would require significant research and a separate post. That said, it’s worth noting for comparison that the NASDAQ composite is down about 13%, the price of Bitcoin—the currency, not the stock—is down about 30%, and the S&P Cryptocurrency Broad Digital Market Index is down about 53% in a one-year time frame. Every stock on this chart except Pearson and LTG has underperformed the NASDAQ. Instructure is down about as much as Bitcoin. D2L is performing slightly better than the broad crypto market, while Coursera, Chegg, 2U, and Zovio are all significantly worse.
The stock market chart isn’t an apples-to-apples comparison since this post is about VC investment rather than public stock trading. Nevertheless, Phil’s chart does raise more general questions for EdTech writ large: What does “flight to quality” mean in EdTech investing? What should (particularly higher ed) EdTech investors be looking at and thinking about as they try to make “safer” bets?
At the moment, most investment is on pause. Think about your own stock portfolio. Who is buying in this market? VCs have the same problem. The level of uncertainty is giving them pause. But that won’t last forever. How will VCs think about investment when they think it’s time to put money in again? And how should they?
Think about infrastructure
While investing in general—both public and private—always tends to be something of a fashion industry, EdTech has always struck me as being particularly vulnerable to fads and sex appeal. While I readily admit I have a poor grasp of sex appeal of any sort, this has always puzzled me. What are professional investors putting their money into right now in the public markets? Commodities. Nothing says “sexy” quite like copper and lithium, am i rite?
I understand that, in a market where the workings of the purchasing institutions are Byzantine and hard to analyze, thinking about macro trends is just easier. The intersection of micro-credentials and workforce seems like it should be a thing. Chatbots have a lot of general utility. Universities need help finding new revenue sources. But betting on these trends without understanding the underlying processes and obstacles is problematic. You can’t be a sophisticated investor in electric car stocks without understanding at least a little bit about the supply chains for the lithium used in the batteries, the microchips, and so on.
Educational infrastructure is as important as it is boring, particularly in times of rapid change. I’ll give you three examples.
First, before the pandemic, most people thought of Zoom as the thing they had hoped WebEx or Google Meet would be when they first tried those web conferencing apps. It wasn’t a revolution. Just a relief. Certainly, there was plenty of evidence in education that web conferencing wasn’t considered a big deal. Back in 2010, Blackboard CEO Michael Chasen acquired the two dominant education-specific web conferencing apps: Wimba and Elluminate. It was considered a bold move, buying up the only two major entrants in the product category. The two were rebuilt into one product, branded as Blackboard Collaborate and, eventually, rebuilt a second time. It sold…fine. To Blackboard customers. It certainly didn’t do well enough to change Blackboard’s fortunes. Not in 2010 and not in 2019. Fast-forward to the pandemic and Chasen decided the next big app is going to be…Blackboard Collaborate. Only built on Zoom. And in short order he was able to raise $164 million to fund it.
Note: I wrote the first draft of this post before Chasen’s new company, Class Technologies, announced that it is buying Blackboard Collaborate for $210 million. While that development merits its own post, the main takeaway for the purpose of this one is that Chasen was able to raise a new investment round to make that purchase.
Anyway, this story is one of buzz riding on a real infrastructure trend. Zoom is obviously the infrastructure. Reliable, easy, scalable webconferencing suddenly became a necessity in education. The trend was there. It was visible. Zoom’s education revenues soared. So Chasen’s new company, which adds Blackboard Collaborate-like features to Zoom, got tons of investment money. Because it’s the Zoom of education! Time will tell if his company turns out to be a good bet or just gilding the lily. The more important lesson here is that the underlying infrastructure—Zoom—which everybody thought of as a niche product—suddenly became incredibly important when circumstances changed rapidly. As painful as pandemic schooling was, it would have been vastly worse without webconferencing that mostly just worked.
The second story is alternative credentials. Universities have awarded certificates for a very long time now. You know who hasn’t kept up? ERP vendors like Oracle and Ellucian. It took them a decade to be able to handle both degrees and certificates. And when I say “a decade,” I mean the last one. Come to think of it, it was more like 15 years.
Were there upstart competitors that could handle alternative credentials? Yes. But they couldn’t handle all the other stuff that the traditional ERPs do and anyway, switching costs for ERPs are incredibly high. So colleges and universities with certificate programs often ran (and still run) two separate systems; one for regular degrees and one for alternative credentials. It’s incredibly expensive in dollars and person/hours.
Do you think that this state of affairs has slowed the pace of colleges developing alternative credentials?
I do.
Third—this one is top-of-mind for me and my Argos colleagues—there’s the textbook industry. Everybody loves to beat up on the big publishers and label them as failures. That is fair by several different measures. VCs are allergic to challenging them because of Knewton, which was a massively costly failure, and a generation of other courseware companies that didn’t produce the payoffs their investors were hoping for, including Acrobatiq, CogBooks, Smart Sparrow, FlatWorld Knowledge, and Boundless, among others. And yet, private equity seems to love this sector and is making a lot of money in it. Furthermore, whatever the failings of the incumbents may be, a lot of smart people have tried and failed to knock them off their pedestals. Their durability despite their flaws tells us something interesting about the strength of their value to their customers at some level. But again, a lot is changing quickly in the market. What is the essential function of these businesses that makes them infrastructure? Where are they failing to meet needs? And what’s changing that may open up new possibilities for providing infrastructure in a better form?
Whenever you see higher education institutions failing to do something that you think is obviously valuable or tolerating pain that they shouldn’t have to put up with, there’s a good chance that barriers exist under the surface that will not always be visible to VCs. Removing these barriers isn’t easy, isn’t sexy, and can’t always be solved with products and services. But sometimes it can. Not as a magic widget that suddenly makes everything work but as a communication or workflow tool—as infrastructure—that enables humans to work differently. Find the problem underneath the problem. You can only do that by talking with the people who throw themselves against that brick wall repeatedly, trying to crash through it. Talk to the university folks who are tasked with doing that which should be possible but apparently isn’t for some reason.
Quality EdTech companies show a deep understanding of how their customers work and the obstacles preventing them from achieving positive change at an inflection point for their sector. And this quality of thinking isn’t necessarily going to come through in a pitch deck because it requires a conversation about context that the investors often don’t have.
Think about the Great (college) Resignation
It’s hard to disentangle all the various causes of enrollment drops and assign percentages to them. But zooming out to the bigger picture, it seems clear to me that many students are engaging a kind of soul searching similar to people who are participating in the Great Resignation. For a long time now, workers haven’t been happy. Maybe their pay is too low. Maybe they live someplace they don’t want to live. Maybe their job is unsatisfying. But they have tolerated it.
Until they didn’t anymore. Some reached a breaking point. Others found unexpected opportunities in the new economic landscape. For still others, it was a combination of both.
I think a similar change is underway with college. Many more students are more practical-minded than my generation was. They think about cost. They think about value They think about job prospects. They think about balancing campus life against other things they care about.
They think about what they want from college.
When I was in high school, I didn’t think at all about alternatives to going directly to college and I didn’t think too deeply about what I wanted from my college experience other than…a college experience. I thought a little bit about big versus small, far away versus close, and price. But not too much about any of those things.
Today’s students want effective, affordable education. And we know many of them need a sense of connectedness to succeed, even if they are in a physical classroom less often (or not at all). In the new world, only the very top tier of college brands will hold up without some re-imagination (and even they won’t be completely immune to the pressure to be seen as innovators). My evidence for this claim is admittedly anecdotal; I hear it from family, friends, and colleagues. While I’ve been skeptical about this trend until recently, the level of noise that I’m hearing convinces me that we’re finally entering the early stages of a turn.
Moving forward, quality EdTech companies will increasingly focus on efficacy, affordability, and quality of connection for students as central to their value proposition, because these features are rapidly becoming central to the value propositions of colleges and universities. Quality companies will also recognize that the Great Resignation is hitting faculty and staff too. Any product that can make their work experience more humane and increase college workers’ connectedness with their colleagues is a win. It makes the product sticky.
Think about company health benchmarks differently
I’ve already addressed one dangerous assumption: The EdTech companies—and business models—that have done well in the past will continue to do well in the changing environment. A second one is that risks go down as companies reach seven-figure revenues and become profitable (or at least show strong cash flow). These benchmarks go hand-in-hand with VCs’ high comfort level with enterprise sales models. All else being equal, it seems likely that investors will double down on these metrics during this time of uncertainty.
Here’s the problem: Enterprise EdTech has a massive growth gulf that most EdTech companies—and product categories—fail to cross. Most get stuck in the range of between $10 million and $50 million in annual revenues. Think of lecture capture companies. ePortfolios. Learning Object Repositories. Clickers. Learning analytics. Courseware platforms. [Fill in the blank.] Yet these product categories got funding before either plateauing or fizzling out.
If an EdTech entrepreneur starting a company today wants to live long enough to get to sustainability, what’s the best strategy for getting there with VC money? You pick a trendy niche where you can quickly get a few early adopters. You don’t go for anything that addresses deep problems or is complex to explain. Instead, you solve an immediate and obvious pain point. You don’t take time to think too deeply about the differences among institutions that make the market you can actually reach much smaller than it appears to be. You choose an enterprise license model to generate significant revenues from your first customers, even if it means slower growth later. Meanwhile, you under-invest in your product so you can afford to live on those revenues for a while. Instead, you focus on sales. You try to get pilots and small license deals. You do whatever you have to in order to win those deals, including building features that only one client wants. (But you build them cheaply because even enterprise licenses don’t pay much in EdTech.)
It’s hard to avoid building an EdTech startup with these parameters if you want to live long enough to hit the benchmarks for venture funding, particularly in today’s environment. But to reach those benchmarks, the chances are very high that you’ve designed your business in a way that will never, ever cross the chasm.
Investors need better quality signals. There is no magic bullet, of course. Part of the solution—it pains me to write this as a founder—is lower valuations. But another part is to think about the counterproductive incentive structures in the current system that discourages practices that enable companies to build for real growth. Pattern matching may not serve you as well as you think, particularly in a time of rapid change. Investors could benefit from getting a little outside their comfort level and looking for different signs that a company will continue to have legs, three, four, five years after closing their A round.
Quality EdTech companies design and build for the long haul. They think deeply enough that their solution should surprise you at least a little bit. They show their work with stories about a demonstrated need from customers and prospects that suggests product/market fit across multiple segments and stakeholder groups. (This requires a balance between focus and growth potential that is often non-obvious.) They think about how to avoid, or at least mitigate, the enterprise sales model’s pitfalls that are particularly difficult in education. And they have a plausible story about how they’re going to get enough cash flow and growth to get to profitability, even if it will take a while.
There will likely be significant burn rates early on, but not out of a push for revenue growth over profits. Rather, quality companies push for proof of scalable product/market fit over profits. That’s even more true today than it has been in the past. The big winners in a changing educational market will have to play the long game, particularly if they intend to help universities improve affordability, effectiveness, and connectedness for today’s (and tomorrow’s) students. It’s a structural characteristic of this particular market. While investing in early-stage companies carries inherent uncertainty, the complexity of the EdTech market means that underinvesting in early-stage ventures dramatically increases poorly visible risk at the growth stages that are traditionally viewed as “safer”. The data in A- and B-round EdTech companies, like revenues and customer growth, can be misleading because of product/market fit scaling challenges. Certain sectors, like energy and pharmaceuticals, are obviously capital intensive from early on. EdTech is (incrementally) more capital-intensive than may be obvious from the outside.
At least, that’s my sense of the situation. I’ll be curious to hear how much of this rings true to the professionals.
Intrepid EdSurge reporter Rebecca Koenig published a piece a couple of weeks ago called “Employers Claim to Value Alternative Credentials. Do Their Practices Match Their Promises?” It delves into a Society for Human Resource Managers (SHRM) research report called “Making Alternative Credentials Work: A New Strategy for Human Resource Professionals.” I recommend reading the article and reading the report itself if it interests you.
I haven’t written much about alternative credentials, partly because I’ve been waiting for patterns to become more evident to me. Oddly, my recent post about Web3 in education catalyzed my thinking about the credentials topic. In both cases, proponents want to decentralize power structures by using technology to make centralization less necessary. But while decentralization can be facilitated by technology up to a point, it is also limited by the nature of humans as social animals.
Four ideas of “alternative credentials”
One of the problems we currently face when discussing alternative credentials is that there are (at least) four distinct ideas of what we mean by the term which are poorly differentiated in our discussion. While these different meanings are not necessarily incompatible, they aren’t automatically complimentary either. We risk confusion and mistakes if we aren’t clear about which drivers we are most concerned about when we talk to each other about them.
Folks like SHRM—a society for human resource managers—are concerned about companies being able to find the workers they need by increasing the talent pool and more precisely filtering for the actual skills they need. The current state of affairs, particularly for entry-level jobs, is that companies typically use degrees as crude proxies for competencies and then assume they’ll have to invest in a lot of on-the-job training with new employees. For SHRM’s constituents, skill-focused certifications from MOOCs, boot camps, and other sources potentially provide them with both more job candidates and more precise information about which candidates are likely to be able to hit the ground running.
The second group of alternative credential advocates is primarily concerned with affordability and equity. They want to help students for whom the cost (in both money and time) of a traditional college education is out-of-reach find their way to a living wage and a decent life. If students can get a decent-paying job with a certificate and then move up the pay ladder over time by getting additional credentials that can stack up to something more substantial. This group focuses on middle-skill jobs like electricians, dental hygienists, or paralegals. Interestingly, community colleges are increasingly active in this space. “Alternative credential” is not synonymous with “alternative provider.”
The third group focuses on white-collar jobs but more from the student’s perspective. They might be providing additional certifications to workers with undergraduate or even graduate degrees who want to advance in their careers. For example, a software engineer who wants to get into AI might take a MOOC micro masters program. On the entry-level side, the focus is on talented but vocationally-minded students who want to jump right into white-collar jobs. Unfortunately, even though this is a tiny part of the alternative credential picture, it gets a lot of hype, has an outsized influence on the conversation about the space, and is often tainted with Silicon Valley libertarian techno-utopianism. The stereotype is the teenage hacker who is intelligent and experienced enough to skip MIT and go straight to a job at Google. This stream of conversation is colored more than a little by libertarian techno-utopianism. “College is for losers. Go build a startup instead.” This is particularly unfortunate because it leads to us valorizing and privileging students who would probably do well no matter what over those in genuine need of an economically viable path to a decent career.
Then again, sometimes people use “alternative credential” to refer to a technological solution like a digital badge specification or platform. As with Web3, I have often heard optimism that these sorts of decentralized and democratized digital interchange formats will somehow facilitate one or more of the visions of alternative credentialing above. How is less clear. In fairness, some of the folks working in this space are trying to solve various problems, some of which are both concrete and realistic. But there can be an air of Web3-ish hype around digital badging as if somehow having a technological tool for issuing credentials will magically lead to a world in which education is “unbundled.”
While I’m laying out these different meanings of “alternative credential” because different readers will come to this post with different preconceptions about the term, I’m going to be focusing in this post on a problem that all of them have in common, which is the tension between “alternative” and “credential.” To what degree can the authority behind a credential be easily transferred to alternative providers? And to what degree can technology facilitate that decentralization?
What is a credential, anyway?
Before we talk about “alternative “credentials,” we should talk about what a credential is and where its utility comes from.
There was a time in the history of humanity before credentials existed. People didn’t need them. Wolfgang was the village blacksmith. If you needed blacksmithing done, you went to Wolfgang. He didn’t need a diploma. If your village had two blacksmiths, you asked around. Most of your fellow villagers would know the pros and cons of using Wolfgang versus Dieter. But by 1506, maybe your tiny hamlet of Munich grew to be the capital of Bavaria. ((Guilds existed in some form at least as far back as ancient Sumeria.)) There were too many people and too many blacksmiths to keep track of. And maybe too many blacksmiths for a healthy blacksmithing economy.
When human settlements grew large enough, craftspeople would typically begin to organize themselves into guilds. They helped control the problems of large-scale competition such as price wars, scam artists, or bad workmanship that might harm the profession.
Guilds used various tools to gain this economic power (some of which were less savory than others). One critical tool—not only for guilds but for human civilization—was certification. Guild membership often came with quality standards. As the guilds grew ever larger, they even created career paths that distinguished among skill levels, e.g., apprentice/journeyman/master. The guild certification became a proxy for asking around about Wolfgang versus Dieter. If Wolfgang was certified by the guild as a master blacksmith while Dieter was only a journeyman, that might help you decide without looking for references. And if you were a young male thinking about your career path, you had an idea of what your life and earning potential could be like if you apprenticed as a blacksmith.
Interestingly, one translation for both Latin words “collegium” and “universitas” is “guild.” Colleges and universities started as guilds that certified experts in various areas of scholarship like law and theology. And in meaningful ways, these organizations retain characteristics of guilds today. Establishing trust in alternative credentials is a bit like finding a way to establish trust in a strange blacksmith who hasn’t been guild-certified. In fact, the word “trust” is central to everything. Which quality signals can I trust?
How “alternative” can we get?
Early guilds benefitted from being closely tied to—and governed by—the vocational practitioners that benefited from the certification of expertise they provided. Modern colleges and universities have become somewhat unmoored from that for both good and bad reasons. But remember, the value of the guild credential comes from the credibility of its source. Trust in the credential-issuing entity is a proxy for the credibility of more direct evidence of competence. The idea that anybody can create a digitally readable badge doesn’t democratize credentials. And attaching direct evidence or competence as part of the digital package only matters if folks want to—and have the time to—look at that evidence. This might or might not happen when the job screening process has been narrowed down to a few candidates but definitely won’t with 50 or 100 candidates.
In fact, there’s very little in the alternative credentials world that is clearly new. Alternative credentials themselves are certainly not, as the SHRM report points out:
The alternative credentials marketplace is not new. According to Preetha Ram, former CEO and co-founder of OpenStudy.com, “Postsecondary certificates, professional certificates, university extension courses, etc. have long co-existed with universities and colleges….”
For example, tech companies like Oracle, Cisco, and Microsoft have sold credentials for decades.
I would argue that we effectively have had a functional digital badging system for quite some time as well. It’s called a “résumé scanner.” If I’m an IT professional with a Cisco certification, I’m overwhelmingly likely to have something like “Cisco CCNP Data Center Certification” printed on my résumé. And if the hiring manager has listed that certification as a job requirement, their résumé scanner will be keyed to pick that up on candidate résumés. If the Cisco “badge” serves as a meaningful trust proxy to the humans involved, it will likely be picked up and transferred digitally. The badge is digital in roughly the same way as a printed QR code.
The most significant barrier to the growth of alternative credentials is trust in the credential-issuing proxies. Technology can make trust-building easier, and it certainly can make working together easier once trust is established. But it probably can’t replace human trust in this case. The kind of trust we’re talking about is first-pass. It’s the kind that helps employers trim down many candidates that they don’t have time to evaluate in the first place. For that reason, having a digital credential with attached artifacts showing the student’s work doesn’t help here. When the current employer requirement is “must have a BS in computer science or equivalent,” the “equivalent” being offered must be expressed in a form that is both more trustworthy regarding the employer’s actual requirements and equally fast and easy to evaluate. It requires human trust-at-a-glance. The same level of trust that leads an HR manager to say, “Scan the résumés for ‘Cisco CCNP Data Center Certification.’”
Perhaps a more fleshed-out concrete example will help.
Allied healthcare
Healthcare is interesting because it has many middle-skill jobs and necessarily has a lot of credentialing. I will be drawing my example from the “Medical Billing and Coding Careers Guide 2022” page on Nurse.org. I encourage you to go to that page and read it in its entirety. It’s not long.
The gist of it is to provide career paths for people who are interested in starting as medical coding and billing specialists:
For reference, while the Springfield Technical Community College (STCC) here in Massachusetts provides a two-year associate’s degree in medical coding, they also offer a one-year certification program. The total cost is about $7,000 before financial aid. So this is a good, flexible way for somebody who doesn’t have a lot of money or time to embark on a career—with a national average salary of about $44,000. (It’s $48,000 in my state.)
Where could you go from there? The guide offers several possibilities. For example, you can become a medical coding auditor with “several years of experience as a medical coder” and a medical coding auditing certificate from the AAPC. The average salary is about $95,000, which is quite a jump. What is AAPC?
AAPC was founded in 1988 to provide professional certification to physician-based medical coders and to elevate the standards of medical coding. Since then, AAPC has grown to more than 200,000 members worldwide and now offers 28 certifications encompassing the entire business side of healthcare.
So AAPC is an “alternative” credential provider. They provide the certification exams and, separately, certification training. They were founded in 1988. Cutting-edge stuff. Joking aside, I have to wonder how long it took for AAPC’s credentials to become so widely recognized and accepted within the healthcare industry. It probably wasn’t instantaneous.
Other career paths are less straightforward. If you want to become a medical coding manager (average salary: ~$85,600), you would need several years of experience, a certificate from either AAPC or the American Health Information Management Association (AHIMA)—another “alternative” credential provider—plus some management experience.
I’ve put “alternative” in scare quotes because I doubt that AAPC and AHIMA are viewed within the medical industry as alternative credential providers in the same way that, say, coding boot camps are. The more trust (and authority) the credential provider has accrued, the less they are viewed as “alternative” providers. Which is the point.
A few implications
After all this, I’m not sure I have any deep insights. But here are a few ideas to chew on:
Alternative credentials will tend to grow and proliferate at human speed, not technology speed.
Organizations that already have trust within an industry will be much better positioned to build alternative credentials.
Alternative pathways, like the ones described on Nurse.org, exist but are more plentiful in some fields than in others and generally harder to find than they should be.
Digital credentials are not an obvious route to faster proliferation of alternative credentials. (Even if they are Web3 credentials.) They might be a route to faster propagation of alternative pathways.
This is just a brief reminder that we’ll be restarting Blursdaystomorrow, 5/5 at 4 PM ET with George Siemens. We’re still figuring out the move from our old platform to Engageli. In particular, the old platform used to send out invitations with calendar meeting planners. I don’t know about you, but I need one of those to get anywhere I’m supposed to be.
So here’s a little RSVP button that will also give you a meeting planner for your calendar:
Bonus: We will debut the new Blursday theme song, written and recorded by Argos Education’s very own Eric Hilfer.
