In emerging markets, the digital transformation of education is gaining traction, and all stakeholders can benefit if they seize new opportunities for collaboration.
Unlike many other sectors, education has come a little late to the digital dance.[1] But after the initial hype and subsequent disillusionment of mostly modest learning outcomes in the early stages of educational technology in recent years, McKinsey & Co. report that the sector is entering a new phase.
With the compound annual growth rate of education and training expenditure projected at 7 to 9 per cent globally over the next few years, and with only 2 per cent of overall education spend designated as digital, private companies have invested an estimated $4.5 billion in education-technology companies in 2015.
In response to the massive demand for more affordable and modular education—fueled by the projection of one billion more digital-native millennial students worldwide over the next 20 years[2] —and pressure on funding sources, many disruptions in education have focused on creating lower-cost digital supply systems.
McKinsey & Co. believe digital’s potential in the education and training sector is more far-reaching, and points to a transition to a digital lifelong learning and training ecosystem.
To understand that opportunity better, they’ve found it useful to examine the changing nature of both supply and demand in multiple education segments. Exhibit 1 depicts a simple framework identifying six dimensions of change. The upper half is linked to moderate degrees of change.
Micro-credentials and badges can undistort demand by allowing learners to assemble their own modular learning pathways rather than requiring them to rely on bundled certificates, diplomas, or degrees curated by educational institutions. Similarly, the unbundling of learning content through open educational resources, crowdsourcing of content, and virtual delivery of teaching and tutoring disintermediate the supply and thus reduce costs. The provision of physical learning spaces is also disrupted, with many inner-city coworking hubs and labs providing flexible access to infrastructure.
Exhibit 1
In addition, areas of previously unmet demand due to supply constraints—for digital capabilities, individual tutoring, career counselling, remote proctoring, and so on—see the emergence of new markets and specialised providers.
The lower half of the supply-demand framework highlights opportunities for extreme disruption. The setup of new value chains for the supply and cloud-based delivery of online courses and degrees is dramatically shifting supply-side economics. Digital solutions are starting to offer equal or improved learning outcomes at a much-reduced cost.[3]
At the same time, the power of big-data analytics enables the creation of new value propositions, not only for adaptive or personalised programming but also for competency-based and customised delivery and funding models as well as global digital degree programs. Finally, the strong network effects, both on the demand side of users and the supply side of educational-content providers, boost the opportunity for hyperscale platforms that tie these innovations together.
The prospect of a digitally transformed global education market potentially dominated by only a few hyperscaling platforms might seem more of a bane than a boon to many. These fears are understandable considering recent experiences with rapid digital disruptions in other sectors. In the music industry, for instance, the unbundling of albums into downloadable MP3 files and personalised music-streaming services has made music consumption more flexible and cost-efficient. Yet some would deplore the commoditization of the artistic effort, with the customer relationship now handled by large-digital-platform players.
Still, we see three main reasons to be optimistic about the widespread adoption of digital education. First, we see digital education as the best opportunity to provide access to quality education and training to large, historically excluded populations around the globe. Second, modular digital education is establishing itself as the most suitable format for developing fluid digital skills at scale. Finally, an integration of digital learning across segments, institutions, and employers, combined with big data, predictive learning, and talent analytics, creates an opportunity to overcome existing stubborn drop-off points in lifelong learning and education-to-employment pathways.
The economic opportunity of this integration is large: online talent platforms could raise global GDP by up to $2.7 trillion and increase employment by 72 million full-time-equivalent positions.[4] 2015’s LinkedIn acquisition of the online-learning company Lynda.com is emblematic of this trend. In addition, major educational platforms like Coursera, edX, and Udacity have recently expanded their networks to address critical education-to-employment gaps, especially related to 21st-century job skills in emerging markets.[5]
Exhibit 2
1K-12 - Vocational - Higher Ed - Professional/Continuous; Formal - Informal; Local - Global.
For a variety of reasons, the education sector has been lagging behind other areas in fully embracing digital technologies. We see five key factors that will shape the look of the future and determine the speed of the digital transformation in education:
The digital transformation in education is gaining traction, and new solutions are emerging with enormous potential for economic and social benefits. In particular, the integration between new hyperscaling education and online talent platforms provides an opportunity for digital lifelong learning journeys across segments.
While many developed countries can build on the long tradition and reputation of their educational system and institutions, emerging markets are catching up fast in an era of digital globalisation. Capturing this opportunity will require new forms of collaboration on key issues to bootstrap and speed up the benefits to all stakeholders.
This article was originally written by Jan-Peter aus dem Moore who is an associate partner in McKinsey’s Dubai office, and Stefano Martinotti who is a partner in the Johannesburg office, and full credit goes to McKinsey, who published this article over a year ago. This article has been reprinted for the purpose of education.
