US Economy and e-Learning in 2008

Here are my views in response to January’s Big Question from ASTD –

One of the leading e-Learning forecasts suggests that current size of the US market alone is close to $10 billion. Market has shown consistent growth over last 5 years. Forecast also suggests reasonably good growth for next 4-5 years (the entire forecast period).

In my views growth of e-Learning is the function of two important factors. Factor Number One is the competitive cost advantage and Second Factor is the enabling qualities such as enhanced reach and learning impact.

Typically training and development has a budget which is more sensitive to profits rather than revenues, particularly in case of mature industry domains. On an average, organizations spend 5%-7% of their profits and 0.5%-1% of revenues in learning and development. However, in times of economic downturn this spending is significantly reduced. Therefore, during the economic downturn while one factor is favorable to the growth of e-Learning in relative terms the overall reduction in T&D budgets have adverse impact on new and innovative e-Learning developments. Though these innovative ideas have significant learning impact, but during downturn they don’t find their place in the L&D budgets.

I am bringing this point to discussion as this has relevance with respect to suspected US recession. If US hits moderate recession it can have impact on the direction of e-Learning trend as well.

My trend predictions therefore are in the form of questions that we have to collectively answer in near future and are presented under two scenarios:-

Scenario I – Normal US Economy

If this scenario is continued, should we see the following?

1. Who doesn’t want cost reduction?

In any case whatever is the growth in US economy, increasing expectation of capital efficiency will force organizations to continuously reduce Cost/Hour of learning delivery. For most organizations while learning impact will be the key focus, strategic cost reduction will remain the absolute intent. As a result key officer responsible for L&D will be accountable to achieve bigger and bigger learning objectives (penetration and quality) within the available budgets. As a result I guess close to 75% of the e-Learning hours may be served by rapid content.

Don’t you think in that scenario rapid e-Learning will be the desired approach to deliver what “can be” (for achieving maximize penetration) by using rapid stuff- compliance trainings, process trainings, User Guide, Instructional manual material and may be much more?

2. However more impactful trend might emerge and particularly among the organization which have matured in accepting e-Learning- Those who have realized the true benefits of what “Content-Can-Do” to a learner. e-Learning proponents by now have been able to establish that for certain learning topics (and they may be over 10-15% of the overall learning hours) more instructionally sound content enable much better quality of long-term learning even compared to class room. Call it simulation, 3-D, Level- 3, El-2.0 whatever! What do you say?

Therefore this not only substitutes class room training but achieves better results to the learners. Though this content is very expensive and have a late break-even incase calculated on numbers of learning hours. Mature organizations would still move in this direction (what do you think?) as performance benefits immediately after receipt of such training are unmatched. Such organization, today realize that talent quality has to improve rapidly to create and maintain lead in business and that is a key driver of this trend.

Scenario II – Recession in US Economy

Picture will certainly differ in-case recessionary conditions trickles in. Here are my views:-

Lower revenues and lower profits for US corporations certainly means cut in L&D spending. However, I have strong views that e-Learning in relative terms is likely to benefit from recessionary conditions as it is a proven cost friendly alternative to a traditional class room.

In my views the share of e-Learning hours will increase to over 40-50% from current 30% due to two factors – lowered base of number of training hours (as expected during recession) and increased share of e-Learning as such.

Also due to improvements in technology infrastructure coupled with lowered data access cost, share of online e-Learning should increase from current 20-25% to 35-40%.

Companies which have matured-up will likely to continue to invest on e-Learning content of all types. However the late entrants will restrict themselves to rapid content only- a potentially very large market. This will adversely impact the growth of e-Learning 2.0 and all such high operating cost and high Capex learning investment.

To sum up my thoughts e-Learning industry in general has a great future irrespective of US recession.

However innovation in the direction of high impact content will take a beating if that happens.

“Class Room” will shrink at the cost of “Rapids” and “Rapids” will have to evolve to become much more beautiful and impactful.

(Ankit Jain is Head – HR & Strategy at G-Cube)