Chris Dixon of a16z wrote a great blog post recently called “Full stack startups.” The following post is about how the full stack approach could be applied effectively to education.
The basic premise of the full stack approach, in my words, is to recreate and compete instead of selling to. Chris describes the full stuck startups in more detail:
“Suppose you develop a new technology that is valuable to some industry. The old approach was to sell or license your technology to the existing companies in that industry. The new approach is to build a complete, end-to-end product or service that bypasses existing companies.”
Chris lists Tesla, Warby Parker, Uber, Harry’s, Nest, Buzzfeed, and Netflix as examples of full stack startups.
Some benefits of going full stack:
a. More upside. Instead of just helping the incumbent with just one component of their business, and reaping that component’s sized reward, a full stack startup has the opportunity to reap all the reward that the incumbent reaps.
b. Better product experience because of deep integration.
c. Sales and adoption cycles. Full stack startups don’t need to sell to slow technology adopting industry incumbents. Selling to industry incumbents can be especially challenging in situations where the technology would actually “eat” their own jobs, and/or where the company or decision maker doesn’t have incentive to improve that aspect of their business.
Full Stack Education
Per the above benefits and use cases, it seems education is particularly ripe for full stack startups. Here are a few reasons why:
a. Communication gap hinders product experience. Schools and students don’t know exactly what employers need. The result, in some cases, is an oversupply of labor in some fields and an undersupply of labor in others. In addition, reports have shown that some employers believe some universities don’t teach the necessary curriculum for graduates to be hire-able. The communication gap results in economic waste because the school is teaching things that aren’t valuable, the student is learning things that aren’t valuable, and the employer has to re-teach/teach more.
b. Misalignment of incentives hinders adoption. Selling (for example, an app that would help students learn) to schools or teachers is tricky because schools and teachers aren’t directly compensated for what students learn or how much they can earn. Schools are compensated based on enrollments.
Why Education is Different
There is one reason why I believe education requires a slightly different approach, and it’s one thing that it seems many edtech entrepreneurs and investor miss: Jobs are the top of the education stack.
It’s hard to start a full stack school that is immensely valuable and/or competitive because:
a. Information wants to be free. We have the internet. It’s already very cheap and easy to learn almost anything, so it’s hard to compete on the basis of teaching. In addition, a university doesn’t only provide a student with information, it provides them a degree that indicates their hireability to employers…
b. Credentialing is the key component. The vast majority of the population learns so they can get a job or a better job. The way to get hired is to be attractive to employers. (most) Employers are currently attracted to candidates with degrees from top schools, not from the internet. Unless the school is accepted by employers, it’s value to students is limited, regardless of how much the student actually learns.
The Education Stack
Below are the primary components of the education stack:
- Funding (student loans) – gov’t, private lenders
- Teaching – schools
- Credentialing – schools
- Recruiting – recruiters, employers
- Assessment – employers
- Training – employers
The whole education stack combines into one component of the stack of most companies in most industries — Education is as much a component of a stack as logistics or marketing are. For students, a job is the final component of the education stack.
Each of these components are massive industries. Some edtech companies are serving individual components of the stack. Many will fail because they are not full stack.
What is Full Stack Education?
A full stack education company might not look like a school at all. It could look like an employer, a lender, a school, and/or a recruiter all rolled into one. Here’s why this would be valuable:
a. Hiring. Just like a taxi company could compete on the basis of better logistics technology, an employer could compete in it’s respective industry based on better hiring or training.
Instead of spending all the money on recruiters and still providing training on top of what candidates have already learned, why not skip the recruiter, educate someone from scratch. The cost savings in terms of lower wages and/or recruiting fees could outweigh the cost of training. The employee would benefit because they don’t have to pay for college and aren’t crippled by the corresponding student loan debt. Economic benefits would be achieved by all because of the matching of curriculums. Incentives between students and school/employer would be aligned because employers are directly affected by the student/employee’s education in terms of productivity and effectiveness .
b. Recruiting. A full stack education company could be compensated contingent on hiring like a recruiter is. Students should be hesitant to pay large sums of money for alternative forms of education if they’re going to school to get a job because if employers don’t value that credential, the education is nearly worthless.
c. Lending. A lender needs students to get a job or otherwise earn money so they can pay back their loans. Schools could lend to their students with their massive endowments. Employers could wave tuition fees altogether.
A full stack education company should be more than just a school. Students’ “product experience” would improve as a result the alignment of incentives and communication. The full stack education company could reap massive “economic benefits” by outperforming it’s respective industry and/or cost savings on recruiting/assessment and/or training. And industry incumbents (schools, recruiters, and/or lenders) could be completely bypassed.
You may also be interested in my post “Why Corporate Innovation Teams Should Launch Universities.”
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