EdTech Product Diversification

Case prompt

Client goal: Our client is Alpha, a banking software manufacturer based in Belgium. They have approached us to ask for help with a proposed new business venture.

Situation description: Alpha is a software company which builds manly custom network security solutions for banks. They are known for the quality of their platforms and would like to capitalize on that. Recently Alpha has noticed the growing EdTech market and would like to attempt a new venture in this direction. They would like to build an educational platform that would help high school students apply to universities, both locally and abroad.

Study: Alpha has approached us to understand what are the key factors they need to consider in going ahead with this project

Comments

After presenting the case prompt, the interviewer should go put the questions to the candidate in the order indicated below and wait until the question posed is answered before moving on to the next one

Question 1

Alpha has a pretty good understanding of the technical aspect of building such a platform but is unsure how to monetize this idea. They would like us to brainstorm a bit and come up with a suitable business model. What could this look like?

Question 2

Alpha is keen to explore multiple sales channels but is not particularly interested in a joint venture at this moment. However, when investigating potential clients we’ve discovered that other EdTechs all have their own proprietary platforms and are not so keen to invest in ours. What other potential clients can we identify or how can we incentivise EdTechs to make the transition to our platform?

Question 3

Let’s look at some numbers. Alpha believes it would need to invest 2m EUR in developing the platform and would have annual maintenance costs of 100k. Alpha can capture 6% of a 20m EUR market in Belgium alone in the next three years. Will Alpha make a profit at the end of this period?

Detailed solution

Question 1

Alpha has a pretty good understanding of the technical aspect of building such a platform but is unsure how to monetize this idea. They would like us to brainstorm a bit and come up with a suitable business model. What could this look like?

Candidate: So can I confirm that the issue here is the business approach that Alpha should take with this new project?

Interviewer: Yes indeed

Candidate: Ok, thank you! The way I see it there are three options here: for Alpha to start the project themselves, for them to partner with an educational provider in the market (as a joint venture) or for them to attempt to sell the product to one of the existing educational providers.

In terms of capabilities, since Alpha is a software company I believe we can rule out starting and EdTech themselves. I would hypothesize that while they would have the technical knowledge and personnel, they would be too far lagging in the university-admissions area (consultants, industry understanding) for it to make sense to invest.

I believe the best way to go would be to either attempt to sell the platform or partner with an existing provider. I would like to examine the potential candidates or clients in both of these scenarios as well as the expected costs and revenue potential for each option in order to determine which would be the most viable strategy

Interviewer: That makes sense.

Question 2

Alpha is keen to explore multiple sales channels but is not particularly interested in a joint venture at this moment. However, when investigating potential clients we’ve discovered that other EdTechs all have their own proprietary platforms and are not so keen to invest in ours. What other potential clients can we identify or how can we incentivise EdTechs to make the transition to our platform?

Candidate: That’s a very interesting problem. So the question is how can we incentivise potential EdTechs to buy our platform but also where else could we also sell the platform?

Interviewer: That's correct.

Candidate: In terms of new potential clients, I believe there are two options: schools that want to make sure they get their candidates into good universities as well as universities that want to attract new students and want to make sure they have the best preparation resources. In both these cases, the market can be expanded to outside of Belgium as well (albeit there may be tweaks necessary on the platform).

In terms of incentivising EdTechs, we could offer either a more competitive price than the cost they are currently paying to keep up their own platforms or better quality. Cutting costs could come from the platform being on Alpha’s servers, which would remove the need to pay for servers/have their own, and from reducing maintenance costs which EdTechs might associate with the platform. The better quality could come from more features that the platform has, a better user experience or both.

Interviewer: That all makes sense

Question 3

Let’s look at some numbers. Alpha believes it would need to invest 2m EUR in developing the platform and would have annual maintenance costs of 100k. Alpha can capture 6% of a 20m EUR market in Belgium alone in the next three years. Will Alpha make a profit at the end of this period?

Candidate: We can make the following calculations

The total market share= 0.06 x 20m = 1.2m

1.2m/3 = 400-100k = 300k profit yearly

300k x 3 = 900k

The investment would not be profitable.

Interviewer: Could you tell me how long it would take before Alpha would recoup its investment?

Candidate: Provided the profit remains roughly the same this would be 2m/ 300k = a little over 6.5 years