For-profit or Not profitable?

1. UNICON For-profit orNot profitable? Dec. 8, 2001 Dr.Thomas Moore

2. Agenda • Climate • Catalysts • Strategic intent • Structure • Market segments • Value chain • Results to date • Lessons learned (ours) Attendance

3. Climate • Dot.com craze • “gold rush” mentality • Predictions of enormous growth of E-learning • Private business schools beginning to be taken seriously • Fear of losing faculty talent to E-learning companies • First-mover advantage • E-learning recognized as a disruptive technology Attendance

4. Climate • Beginning in 1999, a series of investment reports began to forecast the huge market potential for e-learning solutions, • A U.S. Department of Education study stated the market for web-based training was expected to generate $5.5 billion in revenue by 2002. • WR Hambrecht Company Equity Research Report claimed that the on-line training market was expected to nearly double in size every year, reaching approximately $11.5 billion by 2001. • · The Merrill Lynch Analyst Report dated May 23, 2000, "The Knowledge Web", stated Web-based corporate learning was expected to enjoy explosive growth, measuring $11.4 billion by 2003, up from $550 million in 1998, representing a CAGR of 83%.

5. Performance demanded at the high end Progress due to sustaining technologies Product performance Progress due to sustaining technologies Performance demanded at the low end Disruptive Technological Innovation Disruptive Technologies Appeal to Low-end, Fringe, and Emerging Markets Time

6. Catalysts • The individual or group that drove the establishment of the for-profit entity • Temple University – “ Virtual Temple marks the university’s entry into a burgeoning field of online education that can potentially reach one billion students worldwide…..We need to get a piece of the action” Prof. Kontopoulos, Philadelphia Inquirer • eCornell – “Cornell has to decide whether it is going to play in this arena or let faculty leak out to other marketing opportunities” Prof. Streeter, Chronicle of higher education Attendance

7. Catalysts • The individual or group that drove the establishment of the for-profit entity • Temple University – “ Virtual Temple marks the university’s entry into a burgeoning field of online education that can potentially reach one billion students worldwide…..We need to get a piece of the action” Prof. Kontopoulos, Philadelphia Inquirer • Trustees • eCornell – “Cornell has to decide whether it is going to play in this arena or let faculty leak out to other marketing opportunities” Prof. Streeter, Chronicle of higher education • Faculty Attendance

8. Catalysts cont. • UMUC – “ The development of this company will enable us to break the traditional ‘thought-mold’ for the way educational providers compete in a commercial setting” Dr. Gerald Heeger, President Washington Business Journal • Duke – “Blair (Sheppard) is the entrepreneur who has developed this idea, who has pushed this idea, and who made this happen……in the next few years, there will be a lot of people trying to claim credit for Duke Corporate Education, but there is no question that this was Blair’s” Harvard Graduate School of Education case Attendance

9. Catalysts cont. • UMUC – “ The development of this company will enable us to break the traditional' thought-mold’ for the way educational providers compete in a commercial setting” Dr. Gerald Heeger, President Washington Business Journal • President • Duke – “Blair (Sheppard) is the entrepreneur who has developed this idea, who has pushed this idea, and who made this happen……in the next few years, there will be a lot of people trying to claim credit for Duke Corporate Education, but there is no question that this was Blair’s” Harvard Graduate School of Education case • Dean Attendance

10. Strategic Intent The underlying motivation for creating the for-profit entity • Create an independent entity that is responsive to the market • Attract new revenue to invest in infrastructure • Selectively recruit and provide incentives for faculty • Operate outside the university governance system • Create value from the university’s intellectual property Attendance

11. Strategic Intent The underlying motivation for creating the for-profit entity • Create an independent entity that is responsive to the market • Attract new revenue to invest in infrastructure • Selectively recruit and provide incentives for faculty • Operate outside the university governance system • Create value from the university’s intellectual property Attendance At Babson, to defend our current programs, and to develop new high-end markets

12. Emerging or continuing trends that will affect choice of executive education providers • Access to thought leadership • “Honest broker of talent” • Coaching and mentoring • Global reach • Use of technology • Cycle time • Alignment with business goals • Create value and business results Talent Process Attendance Impact

13. Current Perception of Provider Group Capabilities Business Consulting Corporate Schools Firms Universities I. Talent Thought leadership H M L Honest broker M M M Coaching L L M II. Process Global reach M H M Technology M M M Cycle time M H M III. Impact Alignment L M H Business results M M H Attendance

14. Current Perception of Provider Group Capabilities Business Consulting Corporate Schools Firms Universities I. Talent Thought leadership H M L Honest broker M M M Coaching L L M II. Process Global reach M H M Technology M M M Cycle time M H M III. Impact Alignment L M H Business results M M H Attendance

15. Structure ? • Corporation • Limited Liability Corporation • Not-for-profit Attendance • Outside funding? IPO? • Equity for faculty? • Tax considerations?

16. Market Segmentation

17. Value Chain Needs Assessment Content Branding Program Design Production Technology Support Marketing & Distribution Learning Mgmt. Systems Culture

18. Value Chain Needs Assessment Content Branding Program Design Production Technology Support Marketing & Distribution Learning Mgmt. Systems Culture INTEL MBA Babson Interactive Cenquest Intel Managers

19. Value Chain Needs Assessment Content Branding Program Design Production Technology Support Marketing & Distribution Learning Mgmt. Systems Culture INTEL MBA Babson Interactive Cenquest Intel Managers BUILDING BUSINESS ACUMEN Babson Interactive Indeliq Global Corporations Indeliq

20. Value Chain Needs Assessment Content Branding Program Design Production Technology Support Marketing & Distribution Learning Mgmt. Systems Culture INTEL MBA Babson Interactive Cenquest Intel Managers BUILDING BUSINESS ACUMEN Indeliq Babson Interactive Indeliq Global Corporations CORPORATE ENTREPRENEURSHIP BI Babson Interactive Foxfire BI and Nomura Black- board Global Corporations

21. Value Chain Needs Assessment Content Branding Program Design Production Technology Support Marketing & Distribution Learning Mgmt. Systems Culture ? INTEL MBA Babson Interactive Cenquest Intel Managers BUILDING BUSINESS ACUMEN Indeliq Babson Interactive Indeliq Global Corporations CORPORATE ENTREPRENEURSHIP BI Babson Interactive Foxfire BI and Nomura Black- board Global Corporations

22. Results Attendance

23. Learning Technology Adoption Gap* Amount Expected adoption rates (the hype curve) Learning technology adoption gap Rate at which marketplace has adopted learning technology Time *Based on Dataquest 1998 technology adoption gap The Hype Curve

24. Lessons learned (ours) • The need for a separate entity to develop • E-learning remains, however • For-profit status doesn’t guarantee agility • Faculty may prefer royalties to equity • Outside funding looks less likely and desirable • Being “us” is better than being “them” • Subsidized R&D, not major “cash cow” Attendance

25. Questions for you • Can a University develop major E-learning products without having the protection of a special entity? • Is there a sustainable business model for a separate entity creating E-learning for executive education?

26. Current Perception of Provider Group Capabilities Business Consulting Corporate Schools Firms Universities I. Talent Thought leadership H M L Honest broker M M M Coaching L L M II. Process Global reach M H M Technology M M M Cycle time M H M III. Impact Alignment L M H Business results M M H Attendance