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Redefining the role of EdTech: a threat to our education institutions, or a strategic catalyst for growth?

Redefining the role of EdTech: a threat to our education institutions, or a strategic catalyst for growth?

by Chris Matthews, James Twaddle, Gill Cashion and Stephen Wu

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The global education landscape is being disrupted by technology and EdTech ventures. The Education sector is in the midst of a sector-wide transformation that is accelerating its transition into the digital age. COVID has turbocharged this change, pushing education institutions to turn to education technology, or EdTech, to continue operating throughout the pandemic. Moving forward, EdTech will continue to play a pivotal role in revolutionising education, both in Australia and globally, by challenging the boundaries and limitations of existing education models and approaches.


Education technology, or EdTech, is the application or use of technology to improve, enhance or transform education delivery and practices. For the purposes of this article, PwC has defined the EdTech sector in its broadest sense as any organisation working at the intersection of education and technology.

Globally, the EdTech sector has reached critical mass and is now estimated to be a US$250B+ market. EdTech ventures, their capabilities and offerings are now emerging from the periphery of the Education sector to become increasingly mainstream. EdTech is now encroaching on the domain of traditional Education powerhouses, including our global Universities, competing for the same learners by providing alternative learning experiences and pathways (e.g. online, micro credentials, stackable modules) that the traditional players have not provided.

Figure 1: Global EdTech Market Size (US$ billions, HolonIQ)

Graph 1

The Australian EdTech landscape is a thriving hotbed of innovation that will drive education forward

In Australia the story is no different, with technological innovation being at the forefront of Australia’s economic reputation. The domestic EdTech startup sector is now the second largest startup community in Australia, behind only FinTech, more than doubling in size since 2017. Growth in startup activity and innovation is expected to continue for the foreseeable future, as the sector grapples with what education looks like in an increasingly digitally enabled environment. This represents an opportunity to improve the overall delivery quality and relevance of education in the 21st century.

Our lives are increasingly digitally enabled and our education systems and approach should be preparing us for the world we live in today and into the future. However, the benefits for a geographically distributed country like Australia are even greater, where equity and access to education across the entire population, regardless of where you live, your family background or your socioeconomic status, has been a perennial challenge for governments seeking to lift the educational performance of the country.

Numerous studies from the OECD have established the direct link between access to high quality education and societal and economic outcomes. By harnessing the innovation within EdTech, we can enact intergenerational change by expanding educational access to enrich and improve the life trajectories for all Australians for generations to come.


Focusing in on post K-12 levels, there is significant innovation activity in the domestic EdTech ecosystem

K-12 is an abbreviation that refers to the kindergarten, primary and secondary levels of education. It is generally used to describe all levels of education prior to tertiary education. 

The post K-12 levels of education, which includes higher education, vocational education and training, corporate education, and non-accredited lifelong learning accounts for over half of Australian EdTech startups and is the focus of our analysis (see Figure 2). Australian EdTech startups are active across all segments of this market.

Graph 2

These startups have already driven significant innovation in the overall education ecosystem, including fully online delivery of education, digitally-enabled assessment delivery and virtual work integrated learning experiences. However, the focus of the EdTech ecosystem has more recently shifted towards different digitally enabled student engagement models across the education value chain - this includes pre-enrolment peer to peer engagement to support recruitment, “in-semester” student to student engagement and support models, and alumni to alumni mentoring and networking. Despite this significant activity, it is estimated that half the EdTech startup landscape is only subscale/early stage, indicating there is still significant innovation and disruption that is yet to be realised.

As institutions now look to rebound and transform in a post-COVID world, EdTech can support them to deliver on their transformational and strategic agendas

The COVID-19 pandemic ushered the world, including the education sector, into a period of ongoing disruption and uncertainty, and changed user preferences and expectations. Now, our education institutions are repositioning themselves for success in the post COVID world to ensure that they continue to be an engine of innovation, creativity and productivity. PwC’s “Fit for the new normal” report outlined three key questions that education institutions, especially universities, are currently grappling with as they seek to rebound from a period of unprecedented disruption:

  1. What is our purpose and differentiated proposition?
  2. How does our purpose determine our future activities and our size and shape?
  3. How will we develop the enablers for success in the new normal?

To really achieve true transformational change, it is imperative that education institutions not only transform what they look like and what they do, but also how they think and perceive the external world when planning the way forward. This includes the role of EdTech. With a growing number of EdTech startups seeking to disrupt the post K-12 education sector, our education institutions have a choice: seek to fight them off and build their own competing digital capabilities and offerings or find new ways to partner with EdTechs.

Education institutions have traditionally adopted the former option, preferring to compete, often at a disadvantage, against more nimble startups. These are usually in domains that are related to their core capabilities (ie. higher education award courses) but are distinct enough for them not to have a competitive or “first mover” advantage (i.e. micro credentials).

However, an increasing number of education institutions are now flipping this paradigm and redefining the role of EdTech in the broader Education ecosystem, viewing it as a pool of external innovation and opportunity that established institutions can leverage to drive future growth and innovation. This is not a new concept to the sector - over the last decade, an increasing number of education institutions have acknowledged the value EdTech startups can bring and have started interacting and engaging with EdTech ventures in ways beyond direct competition. However, most of these engagements have come about opportunistically, with few institutions systematically engaging with EdTech organisation’s across their value chain.

Graph 3

Education institutions seeking to partner with EdTech can unlock the most strategic value by leveraging EdTech to support the delivery of their strategy 

An institution’s overarching strategic vision and priorities should always be the primary driver behind any engagement with the EdTech landscape. By anchoring to internal priorities and objectives, this establishes clear boundaries on where and why the institution should engage with EdTech, focusing on the specific segments and sub-segments that can contribute the most to delivering their strategy and driving transformational change. Generally, this will resolve into one of four strategic motives for education institutions (see Figure 3):

  1. Enhance its existing product offering and value proposition to existing markets (market penetration) with cutting edge EdTech capabilities and offerings
  2. Developing new products into existing markets (product development) or
  3. Expanding existing products into new markets (market development) by addressing fundamental capability caps through partnerships with EdTech ventures
  4. Access completely new and diversified revenue streams (diversification) by spinning out internal capabilities or partnering with emerging ventures 
Graph 4

Depending on the institution’s specific strategic priorities, some or all of these motives will be applicable. Regardless, it is critical that the motive is clear from the outset, as this will be the ultimate guide that establishes the boundaries on where in the EdTech landscape they should engage and the clear “rules of engagement” that will enable them to bring a laser-like focus to engaging with the EdTech ecosystem.

Institutions should then openly and honestly assess their existing capabilities against these strategic motives to understand the key gaps or areas of improvement that they will seek to address. Efforts should be focused on areas where there are the most meaningful capability gaps that future roadmaps do not adequately address and where existing EdTech ventures can meaningfully support. Partnering with EdTech to enhance capabilities that are already market leading, or can be better addressed internally, will not realise incremental value.

Once institutions have established this clear perspective on the specific role that EdTech can play in supporting the realisation of its strategic vision, they can begin to systematically assess the EdTech ecosystem for attractive opportunities to embed and integrate EdTech capabilities into their core education offering. 


Partnering with EdTech doesn’t always mean third-party commercial service agreements

Understanding the most appropriate engagement model is as equally important as understanding how the EdTech opportunity will support your institution’s strategic vision and priorities. The first model that typically comes to mind when education institutions think about EdTech are the traditional commercial service agreement model - however, it is important for education institutions to understand the alternative models they can employ to ensure all potential opportunities can be appropriately considered as they arise. We have typically seen education institutions engage with EdTech ventures through three different mechanisms:

  • Commercial service agreements where EdTech ventures are contracted to develop or deliver an established set of products or services in exchange for an agreed fee - this can take the form of a simple license fee based on the number of users or learners, or a more complex revenue share arrangements for long term partnerships
  • Co-development partnership where institutions and EdTech startups partner from the early stages of the innovation process to co-develop a nascent concept, test and validate it with the market and subsequently launch a product or solution that does not currently exist in the marketplace
  • Full acquisition of the EdTech ventures to gain full ownership and control of the product/service offering, and the associated capabilities and IP - education institutions will often integrate these capabilities into their own organisation, or maintain it as a separate commercial entity that serves other education institutions as well as themselves

Each of these engagement mechanisms are suited towards different situations and have their own set of benefits and tradeoffs (see Figure 5). From our experience, answering the following 5 questions will guide your thinking and decision making on which is the best way to engage with EdTech:

  1. What strategic priorities and capability gaps does this opportunity address?
  2. How critical are these capabilities? (i.e. are they “nice to haves”, or are they fundamental to our strategy?)
  3. How urgently do we need to access these capabilities?
  4. To what extent can we build these capabilities internally in the short-term and long-term?
  5. What is our investment capacity and appetite? 

Key lessons for how education institutions can work with EdTech for mutual benefit

What next for a university seeking to take advantage of the EdTech innovation activity right on its doorstep? From our experience, our top three lessons for education institutions are:

  1. Treat EdTech startups and ventures as external sources of innovation, rather than competitors you need to challenge and defend against
  2. Adopt an “inside-out” approach by starting with your institution’s strategic priorities and internal capabilities gaps so you are crystal clear on the strategic purpose of partnering with EdTech
  3. Understand the different engagement mechanisms you can employ to partner with EdTech and be clear on when and where they are most appropriate, based on the strategic priorities you are trying to address 

If we got it right

The benefits that could be realised are beyond at an institutional level. There is no doubt that education institutions have a lot to gain by partnering with EdTech to support their strategic priorities. However, if we can effectively bridge the gap between the traditional education sector and the EdTech ecosystem, this could drive an education revolution that will: 

  • Improve student outcomes through more effective learning approaches and pedagogy 
  • Enhance the skills of our workforce through more relevant and digestible learning products 
  • Increase equity and access to education for the entire population, regardless of your postcode, nationality, or socioeconomic status 

The cumulative effect of these benefits is the enrichment of and improvement to the life trajectories for all Australians for generations to come. What is at stake here is not just better education institutions - it is a stronger economy and enriched society for all of us. 


About the authors

Chris Matthews is a Partner based in Melbourne and the National Higher Education Lead. Chris has deep Higher Education and Skills expertise, having partnered with over 20 education institutions in Australia to deliver successful change programs and educational outcomes.

James Twaddle is a Partner based in Sydney. James works on strategy and transformation in education and service industries. Areas of focus include capabilities-driven strategy, customer-centric transformations and helping organisations respond to disruptive industry trends. James started his career as an economist and holds a BCA (Hons) in Economics and Accounting from Victoria University of Wellington and an MBA (Distinction) from London Business School.

Gill Cashion is a Director based in our Melbourne office with over 10 years consulting experience partnering with Higher Education institutions, Governments and ‘For Purpose’ organisations to improve their efficiency and effectiveness. Gill works on strategic planning, organisational transformation programs including operating model design and investment case development.

Stephen Wu is a Manager based in Melbourne office and brings a deep understanding and breadth of experience with Higher Education clients. He delivers high impact strategic advice to support his clients deliver on their vision and mission by combining strong analytical skills with commercial pragmatism to business problem solving. His expertise and experience is anchored in strategic planning, growth strategy and business / investment case development across a range of clients across Higher Education, EdTech, Government and Consumer sectors. 

 

Contact us

Chris Matthews

Partner, Education & Skills, PwC Australia

Tel: +61 424 305 210

James Twaddle

Partner, Advisory, PwC Australia

Tel: +61 2 8266 3634

Gill Cashion

Director, PwC Australia

Tel: +61 428 284 915

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