Friday, October 3, 2014

Reader questions on my recent K12 post

I recently posted a blog discussing a few main reasons why K12, Inc. will continue to struggle. I spent over eleven years with the company, opened the State of Georgia for the company where it now serves over 11,000 students, and assisted in the opening of 14-15 other states, along with developing marketing strategies, consumer outreach efforts, marketing partnerships, and more.

I share this because one of the first questions I received on my post was "did I leave on good terms?" The answer was, and is, yes. I look back with fond memories of my time spent with K12, impacting hundreds of thousands of lives, and making a difference in education. What I lament is the direction K12 took when they went public, and what I call the lost potential of what K12 could have been. But, there were no hard feelings upon leaving and I am grateful for my time spent with them.

As expected, my post generated some insightful questions. Normally I simply answer them directly but this time I thought I would share some in a post, along with some of my answers. And, for those who did send along questions -- thank you.

Someone once said, "I am full of questions, short on answers, yet have many opinions." So, feel free to take my answers as opinions.

1. Are you saying the main reason K12 struggles is because they went public?

Actually no. My belief is there are many little reasons that add up to be a main reason. Going public was and is a key reason because it transferred their focus from the customer to the investor. Public companies struggle all the time with serving two masters -- customers and investors. The great ones find ways to support both -- but they seldom do it all the time. The Walt Disney Company is sitting at an all-time high in stock value, and pleasing billions of customers via movies, theme parks, products, etc. However, stroll down memory lane only 30 years ago and the story is a different one to be told.

Or, look at Starbucks. It took the return of CEO Howard Schultz to right the ship that had quickly gone off course when he stepped away. So, the struggles of K12 are not isolated to them simply because they went public. However, it should come as no surprise that quarterly reports to investors interfered with long-term decision making that is best for the customers - in this case the students.

2. You say they are not putting students first but failed to give any specific points of reference. What would you point to support your claim that they are not putting students first?

Such a fair question. Let me point you in several directions:

A. The primary issue at hand, the prime directive you might say, is student test performance. Yet last January the CEO was given a substantial raise. And, one might argue that it was deserving in terms of added responsibilities (Nate had assumed some of Ron's responsibilities), or you might argues as K12 did that it was justified because Nate's salary was below a few other K12 executives. Perception is reality and this demonstrates where the priorities appear to be.

B. Next, again recall the prime directive is the lack of student performance on state tests. However, K12 proceeded to release late last year educational apps, and a curriculum dedicated to pre-K children (embarK12). While there is nothing inherently wrong with expanding product lines, in what ways do these products help their existing families? How will educational apps improve test scores? How will a pre-K product improve student test performance in middle school and high school? How much time did product developers have to take in order to build out these product lines and could that time have been better spent putting existing K12 students first?

C. Finally, look at the underlying argument from K12 in the annual academic report. It states the longer students stay in one of their schools the better they perform on state tests yet they spend very little money on retaining students. The enrollment center at their Herndon office takes up an entire floor (hundreds of people), they recently opened a new enrollment center in Tennessee to much fanfare, yet their "Customer Care" team has very few members and a non-existent budget. Yes, they may call it a Family Support Center, but one simply has to read the fifth paragraph in the story to understand the families they are supporting (prospective students).

3. Do you really think if Agora leaves it will have that kind of impact on the K12 stock?

Agora constitutes approximately 14% of K12 revenue according to their annual report. Last year they reported over $900 million in revenue -- while this demonstrated yoy growth, it also has begun to show signs of slowing. First quarter results are due out soon and it will be interesting to see how they compare to last fiscal year's first quarter.

And, if you listen to the investor call related to last fiscal year, the positioning has already begun. What I mean here is their CEO, Nate Davis, is anchoring the thoughts toward K12's desired move to a more blended learning model going forward, perhaps in anticipation of the Agora situation since this was in response to a question related to Agora's anticipated departure.

In addition, as I mentioned in my blog post, I believe Agora is the lead that will allow others to follow. It would make it easier for Ohio Virtual Academy to do the same thing if they have a roadmap from their neighboring state.

Then, what would this do politically to K12 in other states such as North Carolina (where they are attempting to be one of two providers selected) or Tennessee (where the TN Ed Commissioner has threatened to close TNVA due to poor performance).

4. Why are you so intent on being negative toward K12? Think about the thousands of families they have helped.

It is such a great question and yet I believe a distinction is needed. Sharing news that is negative does not make the one sharing it a negative person. The news of student performance, Agora leaving, TNVA closing, COVA separating, and market value decline of over 15% are all negative, yet they are all true and well-documented.

Predicting a large stock price/market value drop upon the departure of Agora is based on the history of the K12 stock, statistics, behavioral economics, and common sense.

And I do think about the thousands of families K12 has helped over the years and in no way am I implying that K12 has done nothing positive. Heck, I was a part of it for over eleven years. However, my thoughts quickly turn to what I refer to as lost potential -- what about the thousands of families they could have helped had they maintained their original course? What about the thousands of families who exited out the back door of the schools because more attention was spent on the ones coming in the front door?

My intent is not to be negative toward K12, or any other provider. My intent is to transform virtual/blended education so it can fulfill its original promise. I have seen it from both sides (professionally and personally) and I intend to spend my time developing learning experiences that truly put the students first, engage them in personal ways, and launch them into their next endeavor.

5. What would a virtual school look like if you built one from the ground up?

Thanks for asking this. For a quick answer, it would not mirror what is currently out there. However, for a more in-depth answer, I would ask you to stay tuned. In the meantime you could peruse many of my blog posts to capture a glimpse of what I would build. However, I am working on a blog post dedicated to this idea and intend to publish it soon. Or, I have been invited to write for several online publications, and may end up sharing it there instead. Not sure just yet where it will end up, but I will let you know and hope you will provide your comments to what I post.

These were just a few of the questions submitted to me after my K12 post and I thought it best to share my answers in this format because they were all good and fair questions.

I launched my consulting firm last year to focus on the idea of serving customers in remarkable ways. And while I work with clients in a variety of industries, my passion is in the world of education -- specifically virtual and blended.

What is out there is not working and tweaking it will not achieve better results. I believe there is a better way, a transforming path (or in today's parlance -- a disruptive path) that can build a virtual/blended school from the inside out. The product should be the story, not the marketing. The existing students and families should be the priority, not the prospective ones. I am currently working with some providers across the country that grasp this concept and we are in the process of building something remarkable -- something worth talking about.

Thanks for reading. Promise the next post won't be so long.

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