Building virtual schools that serve

This Friday I have the honor of speaking at the British Columbia Digital Conference in Richmond, BC, Canada.

I will have the opportunity to share my Virtual School Manifesto in a talk titled Nine Essential Ingredients for Building Virtual Schools That Serve. The recent Agora Cyber layoffs demonstrate how broken the current model is, and how much we need to re-imagine virtual learning. My talk lays the groundwork for a different virtual -- one built on the right foundation and finding the right-fit students in an authentic and transparent manner.

But, I also wanted to take a moment and point out some of the other sessions going on during the conference that have the potential to be game-changers.

Jean Kloppenberg and Mary O'Neil are sharing their passion for helping students find their SPARK as they call it. They believe each student has at least (maybe more) one interest, one passion, one desire, that will propel them to engage deeply. It is our responsibility to help them find it.

Lisa Read will guide attendees through a session titled Meaningful Mentoring - Collaborating in Chaos. It is an exploratory session on how to leverage the expertise around you for mentoring -- a lost art in today's world.

Randy LaBonte will take us on a Walk on the Wild Side of Digital and teach us how Purposeful Use of Tech and Program Design Improves Learning.

Barb Goddard and Patty Golumbia walk us through a session on Digital Learning and the Anxious Student. Here we will learn ways in which anxiety in students can be managed and directed toward progress and gain.

It's not too late to join us in Richmond-Vancouver as it promises to be an enlightening time together.

houston@figment-consulting.com

Agora Cyber moving forward, last thoughts

Emails poured in yesterday and one theme was in essence, "what now?"

The damage has been done. The layoffs have occurred. The way it was handled was the way it was handled. The timing was the timing. So, we cannot change it. We cannot alter the past.

We can though alter the future by the way in which we handle today. Now is what matters most. And, now will be what allows the future to be different rather than a repeat.

Moving forward Agora must do the following:

Repair -- Restore -- Rethink

Agora leadership needs to work to repair relationships with families, students, teachers, and staff. Families feel betrayed, hurt, taken advantage of, and they are in pain. Students are confused. Teachers and staff that remain are afraid -- and operating out of fear never leads to sustainable success.

Agora leadership also needs to restore trust. It is sorely lacking right now from those that matter most. Trust must be the underlying foundation in any relationship. Restoration of it will take time and only actions will matter. Words no longer count.

Agora leadership must now rethink the future and build different -- not just what is built but how it is built. Transparency and even vulnerability must play key roles in the building of the future. If you want parents to be in this with you, if you want teachers and staff to be in this with you, then you must allow them to be in it with you.

Finally, to those who emailed me. Turn this circumstance into an opportunity and seize it for yourself. Choose yourself, and determine what you want most to do and be in life. I know the emotions of it all are raw right now and it feels unfair -- don't let them guide you though. Don't let your emotions drive your decisions.

When it is cold the one sure way to remove the cold is to bring heat. Thinking about how cold it is will not make it any hotter. Searching for a heat source, lighting a fire will bring heat. What happened and the emotions that go with it are the cold. Focusing on them will not make it any hotter for you. So, think and seek heat. Replace the cold with heat. You have the power to do it.

houston@figment-consulting.com

The K12 ship continues to go under water

Over a year ago I penned a blog (Why K12 will struggle) that stated if Agora Cyber pulled their management contract from K12 that the K12 stock would drop into the $13 range, perhaps even as low as $12. Shortly after it was announced that Agora was indeed pulling their management contract, K12's stock plummeted into that range. It is difficult to overcome a loss of 11,000+ students.

The silver lining at the time was K12 continued to provide curriculum to Agora under the new agreement reached. There was spin associated with this new arrangement but what was missed was that it was a temporary association. Within the next 2-3 years, Agora will pull their curriculum from K12 as they work to build their own (and while that is a mess, that is another story entirely).

A few months ago I wrote a blog The K12 ship is sinking and laid out some reasons why I believe they are on a steady decline.

As I write this, their stock price is $8.91 per share. My guess is they would love to see it in the $12-13 range that only a year ago was considered dismal performance.

So, what next? What does the future hold? Of course I can't say for sure but I can point to indicators:

1. Watch what happens when Agora pulls the curriculum

2. Pay attention to the potential closure of Tennessee Virtual Academy at the end of this academic year

3. Pay close attention to the California Attorney General's investigation into for-profit providers which includes K12

4. Watch for other virtual school boards either threaten to or actually pull their management contracts from K12 over the next two years

5. And, pay attention to the academic performance in Maine and North Carolina -- the narrative K12 has wanted to tell the past few years was they were in transition and now putting students first. Both Maine and North Carolina were launched with the new management in place so this will be the true test as to whether or not the transition was real or simply smoke and mirrors

Where there's smoke . . .

houston@figment-consulting.com

The K12 Inc. ship is sinking

They say the devil is in the details. The earnings announcement by K12 provided some interesting details, many of which were devils.

In response to the announcement I sent out a Tweet that said the same as my blog title for today: The K12 Inc. ship is sinking. It appears it stirred something within those who actually saw the Tweet because I had a flood of emails arrive yesterday -- on both sides of the argument.

In more than 140 characters, here are the main reasons why it is sinking.

1. The elephant in the room.

K12 management can talk all they want to about double-digit growth in international and private pay schools, and institutional and software sales (even throw in non-managed programs for good measure), but the elephant is managed schools and that is on the decline.

Enrollments in managed schools were down 2.2% in the three months ending June 30 when compared to last year, and down 3.9% yoy. Out of the $948 million in revenue, managed schools accounted for almost $814 million of that total revenue.

Last year K12 was able to increase revenue even with declining enrollment which was a job well done. However, that is not a long-term strategy, nor is it sustainable.

As we look to this academic year, they are already substantially behind in enrollments; Tennessee Virtual Academy will probably have to close doors next year which means a further loss in enrollments; and the states on the horizon (such as Alabama) do not have the population or momentum to provide any measurable increase in enrollments.

So, they are touting the revenue from sources other than managed schools. In fact, CEO Nate Davis referred to FuelEd as "the revenue driver moving forward."  But, when you add them up, they only total approximately $130 million in revenue. And, at their current rate of growth, it will take years for these entities to unseat the managed-school elephant that dominates their revenue stream -- which is on the decline.

Keep in mind, all of these numbers include enrollments from newly launched schools in North Carolina and Maine.

2. The legitimacy of the non-managed school growth is in question.

Agora Cyber Charter School severed their management ties with K12 last year. This means enrollments in Agora (over 10,000) shifted from managed schools to non managed schools. See Note 2 under the Enrollment Data. 

Non managed schools showed a 38.5% increase yoy in enrollments and a 36.4% increase yoy in revenue. Remove the average of 10,000 in enrollments from Agora from the equation, and non managed schools actually show a decline in enrollments yoy (along with revenue decline).

Why do I point this out? Agora's first step was to sever management ties with K12, just as COVA (Colorado) did a few years ago. What some are missing though is Agora's intent to sever curricula ties with K12 within the next two years -- once this final contract runs out. This means that the near-term horizon has K12 under the gun to replace 10,000+ enrollments in non managed schools just to remain where they are currently.

Commonly referred to as a false positive. Growth looks great on paper but in reality it was a mere shift in classification that accounted for much of the growth. Couple that with the impending loss of these enrollments, and the current positive has a glaring negative potential on the horizon.

3. Ongoing academic struggles of K12 virtual schools.

I mentioned earlier that Tennessee Virtual Academy (TNVA) will probably be shut down after this year -- it was only kept open by legal maneuvering this year so it is hanging on by a thread. It could stay open if it demonstrates a remarkable turnaround in academic success.

However, that is highly unlikely. This past year intense efforts were undertaken to improve the state test scores by TNVA students on the TCAP tests. The results were dismal. So, to expect a turnaround this year would be foolish.

My prediction is the recently opened schools in North Carolina and Maine will be under the gun this time next year because of poor academic results. Why? Because the K12 marketing machine has it wrong.

4. Marketing, messaging, and purpose is still off base.

In the earnings transcript, Nate Davis refers to the new K12 marketing strategy of using "data analytics to find those students most likely to succeed." He also stated the new messaging "will result in a student body better aligned to our core curricular strengths and therefore substantially more likely to gain academically over time and stay with the program longer."

Sounds pleasant and nice. But, I began this blog with the idea that the devil is in the details. So, let's see what details emerge when we uncover the "core curricular strengths" of this. The answer (and the problem) is found when Nate answers an investor's question related to the new type of student K12 is searching for through it's marketing efforts.

Nate's reply: " . . .centering around a campaign we call Uniquely Brilliant, communicating with parents that this program is about the individuality of your student, it's not my sitting in the classroom of verified students and everybody at the same age. This really is about your child's unique speed." (italics mine)

WRONG. The K12 virtual schools, especially at the high school level, are not set up around the child's unique speed. Remember, we used K12 high school for one of our children, so I have firsthand knowledge here.

I am not going to dive into what the messaging should be. K12 can call me if they are serious about recruiting the right students. Suffice it to say though, this ongoing off-based messaging will continue the trend of high attrition rates, and it still remains about the number of seats filled.

If K12 wants to attract the right type of students, then they need to become the right type of virtual school. There remains a huge disconnect between what is being messaged and what is reality once families enroll.

So, I end this as I began it. The K12 Inc. ship is sinking. It's not going under this year but it is taking on water.

At some point in the near future the K12 narrative they would like you to believe will be shown for what it is.

Then, perhaps we can get on with developing virtual schools that matter, ones that serve their customers the way they deserve.

houston@figment-consulting.com

Questions from readers on K12, Agora, TNVA, Connections, virtual learning, and more.

Since my Monday blog about K12 I have been inundated with emails, many of them posing some good questions. As I did previously, I thought I would answer them here. I do appreciate each and every person who takes time out of their day to read what I have to say -- whether they agree with my viewpoint or not is irrelevant. So, if you are reading this, thank you for taking time to do so. Questions (and comments) are always welcome.

Let's dive in shall we.

Q1: In your post about the problems K12 is having you referenced the core issue(s) they are not addressing but did not identify them. What do you think those core issues are?

I purposely did not mention them on Monday but have alluded to them in other posts about virtual schools overall. Would like to point you in the direction of my post Virtual Schools Manifesto: Nine Essential Ingredients for a more detailed answer.

Q2: Do you think the K12 stock price will continue to drop?

While I invest in stocks regularly I am not one to follow for advice on this. My belief though is it will mirror the overall stock market to some degree and continue to be a wild roller coaster ride. News out of North Carolina should help boost it temporarily, along with my belief that the Tennessee Virtual Academy will be renewed due primarily to the departure of TN Ed Commissioner Kevin Huffman late last year.

I checked this morning and it was in the $10 range which is lower than I anticipated it would fall. Investors have a much different measuring rod in terms of the success for K12, and it has little to do with academics (unless they impact growth and margins).

Q3: K12 and Connections Academy were approved recently in North Carolina to open up two pilot programs for the state. If they are as bad as you say they are, why are the leaders in North Carolina approving them to open? Perhaps you are missing something after all.

It is a fair question, and appreciated. I would say though that the legislature in North Carolina mandated the approval of two pilot schools to start in the fall of 2015 thereby restricting what the educational leaders could do. Only two respondents replied to the RFP that was sent out (K12 and Connections), so in effect, they only had two to select from in order to meet the legislature requirements.

Encourage you to read this article to see the dilemma this has created in North Carolina. Demand for virtual is great in this state, and I expect it to mirror Georgia to some degree. It's unfortunate more providers did not respond to the RFP.

Q4: In the Bloomberg article you said that your experience in Tennessee Virtual Academy was not good, and you pulled your kids out after the first year. Yet, TNVA continues to enroll thousands of students each year so clearly it is having some kind of positive impact in the state. Why were you so down on it?

What I shared in the article was only a portion of what I could have shared about our personal experience with TNVA. And, as I mentioned to the author of the article, it was not to say TNVA was not working for everyone, it was to share our experience with it.

We as a family embrace the virtual school concept and believe it has a vital place in the world of education. However, I do stand by my assertion that the current model is broken, and tweaks to the model will not produce adequate results. If they did, we would have seen it by now.

It is what I call the lost potential. Virtual schools are struggling to fulfill their original mission and purpose because they have tried to mirror the public school system. In doing so, they are losing out on the potential of what they could accomplish. One need only look at the landscape across the country and quickly understand it is hard to find a virtual school that is thriving. It's not too late though to re-imagine what virtual could be.

Note: The Bloomberg article referenced is from last year, and authored by John Hechinger concerning K12, and virtual learning.

Q5: I recently left Agora Cyber and things there are not good. The new people who have come in to run the school are, in reality, driving it over a cliff. Do you think they made the right decision to leave K12 and manage the school on their own?

Time is the true answer to this question. Time will tell us if the decision was the right one. Sometimes though we make the best decision we can with all of the facts we have, then we must work hard to make it the right decision afterwards.

Q6: Do you think blended will overtake virtual?

Emphatic YES. Blended learning (or flipped as it is sometimes referenced) is the new golden child in education, and will be for years to come. It is becoming the go-to solution for all educational ills.

At the end of the day though I hope it is more of an AND than an OR. Within districts we don't have to do blended or virtual? Why not blended and virtual? Why not blended, virtual, classroom, flipped, disruptive, and mobile?

Education has multiple issues going on which requires multiple solutions. Let's embrace public schools, charter schools, private schools, homeschool, and alternative schools with the understanding that the ultimate goal is learning.

And with that I will leave it for today. Thanks again for reading, thanks for writing, and thanks for caring.

houston@figment-consulting.com

Why K12, Inc. will struggle.

As I write this, K12 just today watched its stock value plummet over 5% in one day. Over the past three to four weeks, it has lost almost 25% of its value and is now resting in the $16s.

The question today is 'Why are they struggling?' Below are just a few of the primary reasons:

1. They lost their focus.

This began when they went public almost ten years ago and it has led to the crescendo we see happening now. For K12, the promise of revolutionizing the educational industry was replaced with meeting quarterly expectations and annual earnings per share and revenue targets.

They may like to tout "putting students first" but actions unfortunately paint a different picture. Their focus is, and has been for some time, on other areas.

2. The lost their visionary.

Founder Ron Packard severed all ties with K12 on June 30 of this year (except I assume for personal shares of stock). Having worked with Ron for almost 12 years, he had his shortcomings and faults as we all do. However, one area where he excelled was casting the vision of what K12 could be.

By doing this he was able to overcome ongoing issues with partner schools and continue relationships with them. Though he left K12 just a few months ago, his influence was diminished as far back as almost two years ago.

So, it is no coincidence that within the past eighteen months Colorado Virtual Academy broke off management relations with K12, Agora Cyber recently issued an RFP to sever ties with them, and K12-managed schools in California, Ohio, and other states are waiting in line to possibly do the same.

Why? The main reason is without Ron's impact, relationships with K12 have now become more of a business decision centered around school performance, management expenses, and P&L statements.

3. A multi-page report cannot overcome a headline.

Do a quick search for Agora Cyber, TNVA, CAVA@Kern, OHVA, or even K12 and you will see headlines spotlighting poor and even dismal student performance on state tests. You will also see efforts to close down Tennessee Virtual Academy (TNVA) and CAVA@Kern.

K12's response to all of this? Issued a multi-page report in an effort to counter the headlines.

First, in-depth responses tend not to overcome headlines (need proof - just watch the elections this year). Or, remember "if the glove doesn't fit, you must acquit." So, whether or not the evidence K12 presented in the report was accurate or not doesn't matter. Perhaps it is true that the longer students stay with K12 the better they perform (though that argument could be made in many schools) and perhaps it is true that Scantron tests are better measurements of student performances than state tests. None of this matters.

What matters is that the headlines are directing the narrative. And, those headlines are saying that K12 is failing. Until K12 schools can demonstrate strong academic performance on the state tests, it really doesn't matter if the report they issued was fifty pages, or five hundred.

All of this leads to the next question -- 'Will their struggles continue?' I would answer this with a strong YES. In fact, I predict that K12 is headed down a slope that will only get steeper increasing the rate at which they will struggle.

Watch for their stock price to nosedive into the $12-13 range (if not more) if Agora leaves. In addition, it will potentially create a cascade of other K12-managed schools following Agora's lead causing further erosion in value.

Tennessee Virtual Academy (TNVA) is in its last year unless it can demonstrate a level of academic performance that it has not been able to do during its entire existence. The TN Ed Commissioner has said that if they cannot meet the expected performance level he is closing their doors at the end of this academic year. Again, this will create a crescendo effect in other states where K12 is presently.

Finally, current issues in Tennessee, Pennsylvania, and other states could be obstacles in K12's efforts to expand into new states such as North Carolina, or expand enrollment caps in other states where it already operates schools. And I haven't even mentioned slowing growth rates in virtual school enrollments in many states (Ohio at .5%), increased costs, increased competition, unionization efforts of teachers in K12-managed schools, and the exodus of corporate staff.

Is it too late for K12 to change course? First, one would need to ask how strong the desire is to change course, or if there is one from the current leadership team? Or, is there an exit strategy involved that is playing itself out already?

It will be interesting to watch. Unfortunately, it will be the students and families who pay the real price.

houston@figment-consulting.com