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3 EdTech Vendor Traps
July 6, 2014 - 9:00pm

As edtech companies move from the startup to the operational stage they tend to fall into 3 traps:

The Customer Responsiveness Feature Trap:

In this trap, an edtech company is actually trying hard to do the right thing by their customers (by us!). They are trying to listen to what their customers want and be responsiveness by introducing new features.

The problem is that letting customer feature requests drive the product roadmap is in fact a recipe for total disaster. Particularly in a software platform it very easy to focus too much energy on new features, while neglecting the work necessary to evolve the core product. Individually the time necessary to meet a request for a new feature is not that great, but taken collectively this work can take up all the time that should be spent evolving the core.

The anecdote to the customer responsiveness feature trap is to be extremely transparent about both the feature roadmap, the development cycles invested in feature updates (as a proportion to core platform evolution), and the status of community feature requests. Creating a shared understanding between vendor and customers that all feature requests will be transparent, and that the company investments and rational behind what they choose to invest in or not will also be transparent, can go a long way towards avoiding this trap.   

Transparency is hard work. There will be lots of pushback both on the marketing side and the customer side. Be brave.

The Growth and Acquisition Trap:

The growth acquisition trap is when an edtech company decides to build or buy platforms that are adjacent to their core business.   

This usually happens when an edtech company sees a demand for a product or service, and decides that they have the talent and abilities to fill this need.

The growth and acquisition trap is encouraged by the pressure to diversify and increase revenues.  The edtech company understands that they have invested huge amounts of dollars in their brand and in acquiring their first set of customers, and thinks that these investments can be leveraged in this new adjacent area.

The push to grow platform and service offerings to new edtech areas is understandable.  My advice, however, is to be very cautious before investing in developing or buying a new product or service.  

The time and capital requirements for this new venture will almost always be underestimated.  

The competitive difficulties in succeeding in this new business will be under-appreciated.  

The amount that the core business will suffer when attention and resources go to this new product or acquisition will be underrated. 

A better choice will often be to partner with an existing company.   Share the risk and the revenues.  Have the discipline and faith to stick to your core business.

The Sales Trap:

The 3rd edtech company trap, the sales trap, happens when a disproportionate proportion of time, energy, and dollars are devoted to acquiring new customers.

There needs to be a balance between creating new business, and maintaining existing accounts.

Unfortunately, this is hard to do - as so many edtech business models depend on getting to a certain number of customers.  

Educational sales cycles are very long.  Higher ed is a really tough market to sell into.

All the pressure will be on getting new customers, and all the rewards for the sales professionals will be about closing the next deal.

The problem with a sales first approach is that existing customers begin to feel marginalized.  We thought that all the attention that we received in the sales process would be indicative of the relationship that we would have once we became customers.  We were wrong.

The solution to the sales trap is, I think, setting realistic pricing.  

Your edtech service, platform or product should be priced at a high enough level that supports continued engagement and collaboration with your customers.

In my experience the price of the service/platform is only one variable in the adoption decision. There is more latitude, I believe, to price at a realistic point that enables the sort of collaboration that we crave as higher ed customers.

Setting higher initial prices, and sticking to these prices (refusing to fall into end-of-quarter discounting and private deals), will require lots of long-term thinking and the backing of your investors. I encourage you to begin these discussions.

What edtech vendor traps do you see?

What has been your experience either from the customer (higher ed) or the vendor side of the edtech equation?

 

 

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