The workforce education technology space is shimmering with opportunity.
Training employees on new job skills is hardly a novel concept — but the pandemic era has created new urgency around it, for three reasons in particular. Employers are realizing their staff is missing many critical job skills of the future. Millions of people have lost their jobs and are looking for new ones. And the US higher-education system is faltering.
For entrepreneurs who can connect these dots, the prize is a piece of the education technology (edtech) market, which was valued at $76.4 billion in 2019 and is poised to hit $285.2 billion by 2027.
Already, businesses that provide workforce education are reporting increased demand. Edtech unicorn Guild Education, whose clients include Walmart and Disney, said it's seen a 25% uptick in employee participation since March. Meanwhile, tech bootcamp Fullstack Academy, a subsidiary of Zovio, is on track to have double the number of university partners it expected to have by the end of 2020, Zovio said.
This is a chance for entrepreneurial thinkers to make a real impact — and potentially make a lot of money in the process.
Most employers are confronted with skills gaps
A February 2020 McKinsey & Company survey found that 87% of more than 1,000 employers said they're either experiencing skill gaps in their workforce now or they expect to have them in a few years.
Some businesses have started addressing those gaps.
In 2019, Amazon launched a $700 million initiative to train employees in non-technical roles on technical skills. Companies like PwC, Verizon, and Accenture followed suit with similar proclamations. "We will not leave you behind, said PwC's global chairman Bob Moritz. "I can't guarantee you the specific job that you have or want to have. But I can guarantee you you're going to have employment here."
In July, Google announced its Career Certificates program, which allows any American to learn in-demand skills like data analytics and project management from a current Google employee. Google said it will consider a certificate the equivalent of a four-year degree.
Offering these training programs is a way to find new sources of talent. A 20-something living miles from Silicon Valley, for example, might have what it takes to be a data scientist whiz, if only someone would teach them how to analyze data.
And by giving their employees these critical job skills, employers are ensuring that they maintain their competitive edge. Guild said it's calculated a $2.85 return on investment for every $1 invested in employee education. The Lumina Foundation, meanwhile, partnered with Accenture on research into talent investment and found that Cigna saw a 129% return on its education program ($1.29 saved for every $1 invested).
Many workers are feeling hopeless about their job prospects
In the US alone, the pandemic recession has cost millions of workers their jobs. In certain industries — think hospitality or food service — it's all but impossible to find a new one. In other industries — think healthcare and some areas of retail — there are significantly more job openings. But unemployed workers may not have (or may not feel they have) the requisite skills for those roles.
That's where there's opportunity for innovation.
During the pandemic, Guild launched a program called Next Chapter. Some employers that partner with Guild offer retraining to employees they're laying off or furloughing. Other employer partners — Instacart is among them — try to place workers from this talent pool in open positions at their company.
Demand for these kinds of programs will only increase as the line grows starker between industries that made it through the pandemic or didn't, and as relatively new fields like telemedicine explode in popularity. That leaves opportunities for entrepreneurs who can connect workers, schools, and companies in novel ways.
Colleges and universities are looking for a lifeline
Many schools are scrambling to figure out how to stay financially afloat. A corporate partner could be a lifeline. They'd pay the school to educate their workforce on specific skills, at a time when fewer recent high-school graduates are attending and paying tuition.
My colleague Bradley Saacks and I previously reported on the buckling of the higher-education system during the pandemic. The gist is that the business model underpinning it wasn't very sustainable to begin with. Colleges and universities depend on students' tuition dollars. But since the onset of the pandemic, many students have opted out of the college experience. Many are afraid, either of contracting the coronavirus on campus or of taking on massive debt just to sit in their childhood bedroom and stare at a computer screen all day.
So while elite institutions like Harvard or Princeton — which have both cultural cachet and deep pockets — may survive this crisis, second- and third-tier schools may not. Startups backed by venture capital and private equity may be able to help.
Zovio founder, president, and CEO Andrew Clark said colleges and universities turn to tech startups because they generally adapt to change more speedily than centuries-old institutions. Edtech partners can provide some "agility," Clark said, which comes in handy if a school wants to offer coding courses or microcredentials to stay competitive.
Guild works with schools including the University of Arizona and the University of Florida, where employees at Guild partners can take classes like digital marketing and earn certificates or credentials like master's degrees. Another edtech company, InStride, which grew out of the partnership between Starbucks and Arizona State University, works with ASU and the City University of New York.
There's room for public funding, too
To be sure, there are reasons why entrepreneurial interventions might not work. As Natalie McCullough, Guild's president and chief commercial officer, pointed out, we're in a recession and budgets are tight. Not every company will be convinced — at least not immediately — that it's worth paying to retrain their employees. Per a recent MIT paper, companies are often reluctant to invest in retraining because employees may take their new skills and run to another employer.
In some cases, publicly funded retraining programs may be a more apt solution, since the government is more or less indifferent to which specific employers people work for. But, as Lola Fadulu argues in The Atlantic, federal job-training programs have largely been ineffective, at least partly because the course material has little to do with the skills employers need.
Publicly funded workforce education may be more successful in conjunction with private initiatives. In the Harvard Business Review, Albrecht Enders, Lars Heggstrom, and Rafael Lalive highlight a successful Swedish reskilling program that relied on partnership between employers like McDonald's, a university, and the Swedish government. "No individual company, industry, or government sector was capable of managing this challenge by itself," the authors write.
As for McCullough, of Guild, she said solutions like Guild's have opened up career pathways for people who might have assumed their prospects were limited — especially during a pandemic.
"It's sort of a silver lining moment to what's happening in the rest of the economy," she said.
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