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Innovators Worth Watching: Degreed

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Nov 1, 2017

Welcome to our “Innovators Worth Watching” series, spotlighting interesting and potentially disruptive players across a spectrum of industries.

During a time of heightened geopolitical instability, seemingly weekly natural disasters, and one of history’s most worrisome data breaches, one innovative ed tech company posted its strongest sales quarter yet. Degreed, a rapidly-growing online learning platform, established several new partnerships and took on dozens of new corporate clients in fields ranging from retail clothing to space exploration. Most importantly, the company launched Degreed Skill Certification, an alternative credentialing pathway that cements Degreed’s bold ambitions to “jailbreak the degree.”

Degreed aggregates externally produced learning content into its online platform. Users can access formal and informal learning experiences including online courses, articles, podcasts, books, and more from thousands of providers, all in one place. The platform also helps learners track and share their learning, and see what mentors, peers and thought leaders are learning. Anyone can open an account for free, and businesses can purchase Degreed for Enterprise, offering these benefits to employees and leveraging the data to better manage learning across the organization. Users and clients have responded positively. In an internal client study, 94% of employers agreed that Degreed was helping to build a more productive learning culture.

These successful services laid the foundation for the new Skill Certification offering. For a fee, any user can obtain skill certifications in over 1,500 skills by submitting references and written evidence of skills they already have to Degreed. Using a panel of experts, machine learning applications, and a credentials framework developed by the Lumina Foundation, Degreed determines the user’s skill level and generates a corresponding credential.

The implications of broadly understood, skills-based credentials that span multiple industries are potentially enormous. “When someone poses the question, ‘tell me about your education,’ you answer with your college degree because it’s the only universal language we have,” said Degreed CEO David Blake. “The market wants to speak the language of skills, but thus far there hasn’t been a lingua franca. We want to facilitate the reality of finding that common language.”

Degreed thus appears to be a successful and growing business. But is it disruptive to higher education—and potentially the college degree itself? We put Degreed to the test with six questions for identifying disruption.

1. Does it target people whose only alternative is to buy nothing at all (nonconsumers) or who are overserved by existing offerings in the market?

Yes. From an individual user’s perspective, a nonconsumer is someone who would learn new skills and/or acquire related credentials in order to accomplish some job, such as earning a promotion at work, but is unable to access traditional learning and credential providers like colleges. Overserved consumers can access college, but would gladly avail themselves of a faster, cheaper solution. Both groups of individuals could hire Degreed to make progress in their specific circumstances.

From an employer’s perspective, a nonconsumer is an employer that doesn’t provide education as a benefit due to lack of access to learning providers, whereas overserved employers would prefer simpler, cheaper arrangements than what they have with their current learning providers. Between the Degreed for Enterprise platform and the skill certification product, such employers can turn to Degreed to get these jobs done.

2. Is the offering not as good as existing offerings as judged by historical measures of performance?

Yes. Degreed certifications are neither backed by prestigious universities nor accredited. Traditional accredited credentials, such as college degrees and many professional certifications, revolve around seat time in curricular pathways designed by tenured professors and industry experts. The Degreed Skill Certification process, on the other hand, is time- and modality-agnostic. It relies on users providing evidence of their skill and references who vouch for their competence.

3. Is the innovation simpler to use, more convenient, or more affordable than existing offerings?

Yes. The process for earning a traditional degree involves enrolling in and sitting through multiple college courses, navigating the financial aid process, and taking formal examinations, even if you are already skilled in that field. That’s assuming you can afford the whole experience in the first place. In contrast, learners seeking a Degreed Skill Certification can obtain these skills in the course of their jobs or through other organic, informal modalities. For those learners, the certification process is substantially shorter, and users only pay for the certifications they need at $179 per skill.

Degreed also serves employers directly. Degreed for Enterprise helps clients manage their multiple vendor relationships with learning providers, aggregating their content in one place. Degreed also offers its FlexEd program, in which employers give employees a flexible spending account for learning. Employees can then purchase content outside the employer’s existing subscriptions and manage their account in Degreed’s platform.

4. Does the offering have a technology that enables it to improve and move upmarket?

Yes. Degreed’s online platform interfaces with multiple learning providers and tracks most forms of learning. This platform also digitally stores skill certifications in the user’s profile, reflecting how users “own” their portable skills and knowledge as they change employers and life situations.

Crucially, a machine learning based process allows Degreed Skill Certifications to scale in volume and variety, automatically refining itself over time. As digital credential standardization progresses and more employers accept these alternative credentials, Degreed will be well positioned to assess capabilities in several industries.

5. Is the technology paired with a business model innovation that allows it to be sustainable?

TBD. Degreed has inserted itself into a new value chain altogether. The skill certification product charges per credential, as opposed to charging per enrollment. The machine learning component leads to decreasing marginal costs per credential, whereas traditional higher ed’s fixed costs increase as they grow their student body, building new dorms and hiring more faculty. The major question now is whether employers will also participate in this value chain.

6. Are existing providers motivated to ignore the new innovation and not feel threatened by it at the outset?

Yes. Accredited degree providers compete largely on prestige. The more prestigious the institution, the more valuable the credential. These institutions are unlikely to feel threatened by a competency-based certification process for unbundled, individual skills. They might start to notice if employers increasingly accept these skill certifications, but by then it may already be too late.

It will be interesting to see who purchases Degreed Skill Certifications, and the extent to which this credential catches on. If learners can bypass traditional higher ed and make it in the workforce using these credentials, and if employers fully buy into this new value chain, then Degreed shows considerable disruptive potential relative to traditional college degrees.

The demand for lifelong learning and for a universal, skills-based language will only grow, and Degreed has already made important theoretical contributions to the field. If employers latch onto these certifications and Degreed continues its impressive trajectory in facilitating and signaling a continuous learning experience, it will take a lot more to slow it down than what this last quarter threw at it.

As a research assistant on the Christensen Institute's higher education team, Richard helps investigate novel business models in postsecondary education, professional development, and lifelong learning.