Pearson goes bold, acquires Connections Education


Sep 15, 2011

Pearson announced today that it is acquiring Connections Education in a move that should reverberate across the field of online learning and the education world more broadly.

Tom Vander Ark wrote an insightful blog about the acquisition today that I recommend highly.

In short, I agree with Tom on several parts of this, and, in what shouldn’t be a surprise to anyone who reads our work, agree with him that the shift to digital learning is happening much faster than most realize—and that this transaction should raise that profile.

There is also no question that Pearson appreciates this shift to digital learning—and I would argue appreciates it more than any incumbent education business does. Tom’s insight that Pearson was willing to cross a line into supporting and operating schools that they had historically avoided because they recognize the rapid and accelerating growth of online learning (signaled in Connections’ consistent 30 percent year over year revenue growth) I think is right. The implications of this step are also interesting, given the strand that Rick Hess and I and others have been exploring through AEI’s series on the role of for-profits in education.

The challenge for Pearson now is can they manage the “innovator’s dilemma” properly and maintain their leadership in this industry, or will they have acquired a disruptive company only to let the mainstream business take its assets and kill its distinctive processes and priorities. Pearson continues to acquire interesting assets; the challenge is to get the structures and business models right from the acquisitions—something that isn’t easy, but we’re learning more about how to do in smart ways. Pearson appears keenly aware of the opportunity and odds of success at least.

Lastly, this should open up more room for education entrepreneurs. First, the exit for Connections—$400 million in cash—is a good one at least in monetary terms, which should encourage more investors to enter the space. Second, as this consolidation now occurs in the space, I suspect this may open up more headroom for some education startups in the near term.

On the road to digital learning, it’ll be interesting to see what happens next.

Michael is a co-founder and distinguished fellow at the Clayton Christensen Institute. He currently works as a principal consultant for Entangled Solutions.