K12 Online Education Transformation Competitiveness Report: Who Will Be The "King Of Transformation"

Research team: innovation education research group of the 21st Century Economic Research Institute, research group leader: Wang Feng, member of the research group: Qian Yiyun, Cao Xiaoxiao, Li Xinyue

The office of the Central Committee of the CPC Central Committee and the State Council recently issued the opinions on further reducing the burden of students' homework and off campus training at the stage of compulsory education (hereinafter referred to as the "opinions on double reduction")“ "Double reduction" will change the ecology of K12 online education industry.

K12 online education company needs to transform in positioning, business and technology. In terms of positioning, off campus training is a beneficial supplement to school education and has public welfare. In terms of business, senior high school counseling, quality education and adult vocational education are the three major transformation directions, with a market scale of 360 billion yuan. In terms of technology, artificial intelligence technology will surpass live broadcast technology and become the main technology driving force of K12 online education.

The online education market will not disappear, but will face the problem of how to continue to develop and transform. According to the general theory of enterprise transformation, the report selects the main indicators of online education industry, and tries to investigate the transformation competitiveness of ten head online education companies, including XRS online school, ape tutor, homework help, vipkid and spark thinking.

Transformation Competitiveness: live large class mode to maintain competitive advantage

Transformation competitiveness is the result of comprehensive factors such as the current teaching mode adopted by K12 online education company, the reserved human and capital resources, the verification of business model before the introduction of "double reduction" policy, and the market space of new business after transformation“ "Double reduction" has different influence on different teaching modes of online education, and the transformation competitiveness of different companies adopting the same teaching mode is also strong or weak.

The main teaching modes of K12 online education include live class, one-to-one, online foreign teachers and Enlightenment interactive class“ Before the introduction of the "double reduction" policy, only live large class classes and online foreign teachers companies have made profits, which can be considered that the business model has been verified. For different teaching modes, the influence degree of "double reduction" policy from strong to weak is: online foreign teachers > enlightenment interactive class > one to one > live large class class class.

Live broadcast of large classes

Live large class class mode is the mainstream mode of K12 online education of discipline. Live broadcast can bring better learning experience than recorded broadcast, and large class class class can better amplify the famous teacher effect than small class class and one-to-one. After reforming the teaching time, the live large class mode can meet the policy requirements of "double reduction".

● one on one

The one-to-one online education companies in the discipline category have closed down one after another, and there are only 1-to-1 leaders left in the head companies, and the losses are serious. This shows that the business model has not been verified. Once the capital stops "burning money", the sustainability remains to be tested. The one-to-one model requires a large number of lecturers. After the price is limited, the profit space will be narrowed, and the organizations with insufficient operation capacity will be difficult to continue. The one-to-one model is difficult to guarantee standardized teachers, and the problem of teachers' compliance is prominent. In the stage of compulsory education, after the discipline training is positioned as a public welfare undertaking, a large number of talents will withdraw from the industry, and the problem of teacher supply will be aggravated.

● enlightenment interactive course

Chinese, mathematics, English and other subjects will be suspended, only fine arts, calligraphy, science and other quality-oriented content will be allowed, and not allowed to exist in the form of online courses, only in the form of "box" to enter the family education scene, the market space will shrink sharply“ Before the introduction of the "double reduction" policy, the enlightenment interactive course was operated in the form of recording and broadcasting courses and guidance. The user stickiness was low, and the head company suffered serious losses, and the business model had not been verified.

Online foreign teachers

Foreign teachers will not be allowed to teach live overseas, and online foreign teachers' courses will be changed into online classes for domestic foreign teachers and Chinese teachers. On the one hand, the supply of foreign teachers will be greatly reduced. On the other hand, the preschool users will disappear, and the online foreign teachers industry may not exist independently. Instead, it will be integrated into K12 online education company to become a service to meet the specific needs of users.

At the specific company level, the transformation of K12 online education company will follow the general law of enterprise transformation, and follow the paradigm of "resource capability structure production" (RCSP), that is, according to the internal resources and capabilities, the external environment of the industry and other factors, through the process of industry search and optimization, Establish the competitive advantage of the enterprise itself.

According to the RCSP paradigm, the report sets some indicators for the transformation of K12 online education companies, and evaluates the transformation competitiveness of current head companies in the form of star rating.

Positioning Transformation: Transformation of "burning money" industry to public welfare industry

The off campus training has the attribute of public welfare. The off campus training institutions of compulsory education online and offline disciplines need to be registered as non-profit organizations. After registration, it will also restrict the industry of conscience from the aspects of related party transactions and price restriction to become an industry for profit.

Since the birth of Beijing 101 online school in 1996, online education has been operated as a company. In some places, although the online school branches of Beijing No.4 Middle School and Beijing 101 online school are registered as private non enterprise units, they are not online education institutions. Their main business at the time of establishment is to sell online school recharge service cards and carry out offline off campus training“ After the implementation of "double reduction", online education non-profit institutions may appear for the first time in China.

Non profit private schools are forbidden to obtain school running income. In the past, this provision was in vain because the sponsor could transfer the income of running a school through related party transactions.

The regulations on the implementation of the law on promotion of private education, which will come into effect on September 1, 2021, stipulates that private schools implementing compulsory education shall not conduct transactions with interested parties, and requires strengthening the examination of related transactions of other private schools. This means that K12 online education company, which carries out primary and junior high school business, should be registered as a non-profit organization, and can not obtain school running income, and cannot transfer school running income in disguised form. For online education companies that generally introduce venture capital and require high return on capital, business value disappears.

Off campus training institutions can also organize training after school from Monday to Friday. The practical significance is only to maintain business stability, gain time for successful transformation and retain talents. In addition, government guided price will be implemented for Discipline Training. Once the operation capacity is insufficient, financial loss will be caused. Therefore, it is the best choice to gradually reduce and give up the subject training business of compulsory education.

The transformation direction of compulsory education discipline training is to help school education《 Opinions on vigorously strengthening the construction and application of online education and teaching resources in primary and secondary schools put forward the idea of exploring the establishment of a mechanism of "government led, social participation, competition and selection"《 Education informatization 2.0 action plan proposes to actively encourage enterprises to invest funds, provide high-quality information products and services, and realize diversified investment and collaborative promotion. The off campus training institutions can not rebuild an education system, but give up the training orientation and provide technology and resources for in school education.

"Double reduction opinions" clearly put forward that discipline training institutions should not be listed for financing, and capital operation is strictly prohibited. This means that online education companies that have been listed in the United States and Hong Kong need to divest or delist the off campus training assets of compulsory education subjects.

In recent years, K12 online education market has developed rapidly. According to frost Sullivan's statistics, the size of China's K12 online education market has increased from 3.2 billion yuan in 2015 to 67 billion yuan in 2019, with a compound annual growth rate of 114.7%. Under the influence of the new crown pneumonia epidemic in 2020, K12 online education market will grow explosively, with a scale of about 168.7 billion yuan.

After the implementation of "double reduction", the online education market such as compulsory education discipline training, preschool education, online foreign teachers, taking photos and searching questions will shrink or disappear sharply. K12 online education company must expand new business. According to the report, senior high school counseling, quality education and adult vocational education are the three most easily transformed tracks, and have a large market space. Combined with the third-party data, the market scale of the three major tracks can reach 360 billion yuan.

Senior high school counseling in business transformation

According to the "double reduction opinions", senior high school can still organize training in national legal holidays, rest days and winter and summer holidays. A survey shows that more than 80% of high school students in Beijing accept off campus training or tutoring; But the quality of traditional offline training institutions is mixed. K12 online education company can maximize the famous teacher effect and improve the market share. In 2020, there will be 24.94 million students in ordinary senior high schools nationwide, accounting for 13.8% of the total number of junior high school students. Due to the high market penetration and high price of senior high school counseling, according to frost Sullivan data, the market scale of high school counseling is about 30 billion yuan.

The future strength of the company is determined by the battle for famous teachers

Taking the senior high school lecturers of the summer vacation courses in 2021 as the index, we can find that gaotu classroom attaches the most importance to the high school market, and the number of teachers who are on the shelves is the largest, accounting for 75; There are 37 teachers on the shelves of Netease Youdao excellent course, accounting for 58.7% of all teachers on record; Since 2020, there has been a certain flow of teachers in ape counseling. Many high school teachers who have taught for many years have left or transferred to teaching and research, but there are still 70 teachers on the shelves; Due to the large number of subjects, New Oriental online has the least number of teachers, accounting for the smallest proportion of all registered teachers.

Famous teacher is a common feature of high school curriculum in head company, but different companies have different strategies for teachers. XRS and New Oriental are the "Whampoa Military Academy" in the domestic and foreign training industry. They have been sending talents to the outside world for many years, but their strong brand appeal and teacher training ability can guarantee the talent supply. Most of the senior high school teachers in XRS online school and New Oriental online come from the internal system, mainly from offline schools. XRS online school pays attention to the cultivation of young talents. It recruits a large number of outstanding graduates from Tsinghua University and Peking University every year, and the number of senior high school teachers graduated from Qingbei is the largest.

Other head companies have introduced a large number of talents from XRS and New Oriental. In addition, they have also introduced talents from other well-known training institutions and public high schools. Ape tutoring introduced the most teachers from public high schools. Gaotu classroom has the largest number of teachers from off campus training institutions, and the teaching experience is generally rich.

On the whole, the group of senior high school lecturers of the head K12 online education company presents the characteristics of high education, graduation from famous schools, rich experience and outstanding teaching achievements. The strength of each school is hard to distinguish. In the future, the mobility of famous teachers will increase, which will directly break the balance of the company's competition.

In fact, there is still a vast space for the high school market. K12 online education company can open up the new industry chain of college entrance examination from the products and the secondary vocational students market from the user groups.

Both the front and rear end of the industry chain of the new college entrance examination can make efforts

The market demand of the new college entrance examination industry chain includes:

High school schools in the pilot areas have implemented the shift system, and the demand for teachers in chemistry, biology, ideological and political, geography, information technology and other subjects has increased, so it is difficult to supply enough high-level teachers in the short term; The importance of comprehensive quality evaluation in the new college entrance examination is promoted; The demand for candidates to fill in the application forms and career planning is increasing.

The corresponding product supply space is as follows:

K12 online education company can cooperate with high schools to deliver teachers, teaching research and provide teacher training and other services through double teacher class and special micro class; It will become a special market to provide courses and services for students' comprehensive quality evaluation; After the completion of the college entrance examination in 2021, XRS online school, homework help and gaotu class have launched courses and activities for college entrance examination voluntary filling, and ape guidance has launched the college entrance examination voluntary filling system, which provides data analysis for candidates based on AI technology; In the future, college entrance examination volunteer consultation will be integrated into career planning services and become a regular course in senior high school.

The long neglected "blue ocean" market of Secondary Vocational Students

In 2020, there will be 9865 secondary vocational schools in China, with 6.2756 million students and 16.2814 million students. The number of students in school accounted for 39.4% of the total number of students in senior high school in that year. Under the policy that the ratio of general to vocational education is about the same, the secondary vocational students in our country will still maintain a large scale in the future.

According to the survey of China Development Research Foundation, most of the secondary vocational school students are the losers in the high school entrance examination, and their basic cultural knowledge is particularly weak. Secondary vocational education should not take employment as the only guidance, but should pay attention to the accumulation and all-round development of students' basic knowledge, and implement the same level of education in senior high school. At present, the development channel of vocational education has been smooth, and the proportion of secondary vocational students entering higher vocational colleges is no longer limited. In the future, Chinese, mathematics, foreign language, information technology and other basic cultural disciplines in secondary vocational schools will be strengthened and become the content of vocational education college entrance examination, which provides a broad market for the off campus training of secondary vocational students.

Quality education in business transformation: innovation depends on technological progress

Serving the development of students' comprehensive quality is an important theme of "double reduction". According to the statistics of iResearch, in 2020, the market scale of China's online education for children and children, which focuses on quality education, will reach 63.2 billion yuan, with an average annual compound growth rate of 102% in the past three years.

After the "double reduction", the development opportunities of online quality education include:

After the reduction of discipline training, quality training will fill its market space. With the entrance examination of art and physical education, labor education has become a "compulsory course", quality training will become a rigid demand, and the market penetration rate will be increased.

Online education company has rich talents, resources and technical reserves, and has built a mature teaching and research, teaching, counseling, marketing center, which is conducive to the smooth realization of business transformation.

Online quality education generally adopts the mode of "recording and broadcasting class + practice + tutoring". The teaching time is compact, the practice and guidance can be carried out anytime and anywhere, without fixed time, and the user experience is good.

Recently, online education companies have launched quality-oriented courses such as drama, eloquence, puzzle, go, and learning ability. The development direction of online quality education is as follows:

In order to retain preschool users and develop new products, online quality education needs to change the product form of online teaching“ On the one hand, it can weaken the course label and emphasize the practical ability; On the other hand, family education scene can be cut into to create more categories.

There is a huge market space for entering schools. The "5 + 2" after-school services generally carried out in primary and secondary schools need to introduce external high-quality education resources. There is also a mature business model for entering the school, which can provide stable income.

At the beginning of the implementation of "double reduction", K12 online education companies have launched programming courses one after another, and a broader stem track will break out. On the one hand, stem education is close to discipline education, which helps to improve academic performance. On the other hand, the quality of offline STEM Education is uneven, which gives online institutions opportunities to reverse the trend.

The development of online quality education largely depends on the progress of technology. Artificial intelligence and big data technology can help improve the experience and effect of calligraphy, music, art and other courses, and help to form a standardized evaluation method, and further strengthen the rigid demand of quality education. With the breakthrough of AR and VR technology, wearable devices will be applied to science and technology, sports and labor practice courses, so as to break the barriers of online learning.

Vocational education in business transformation: positioning the new blue ocean of lifelong learning

The market of vocational education is broad. According to the data of prospective industry research institute, the market scale of online vocational education is increasing year by year, and the market scale will increase to 271.89 billion yuan in 2019.

Non diploma vocational education mainly includes it, accounting, public examination, postgraduate examination, teachers, driver's license, medical qualification certificate, practical language, etc. The scale of a single market is limited, but users can sign up for multiple courses. Therefore, most online vocational education companies build a one-stop learning platform to amplify the effect of famous teachers by live broadcast of large classes.

Online education companies need to expand the target market from vocational education to lifelong learning, so as to innovate products and expand user groups. Innovation methodology lies in "breaking the boundary":

Break the boundaries between the line and the line. Live large class teaching mode can enlarge the effect of famous teachers, APP question bank and dictionary can be used to learn in fragmented time. Online vocational education companies also need to obtain customers offline, build user community and carry out operation activities.

Break the boundaries of to B and to C markets. It is not only beneficial to their own growth, but also to the competitiveness of employers to accept vocational skills training. It will be more and more common for employers to buy vocational skills training for new employees. Online vocational education companies should open up to B market and develop customized courses.

Break the boundary between academic and non academic education. Online vocational education companies should promote the reform of higher education, build a platform, introduce high-quality resources, introduce advanced courses and technologies for colleges and universities with weak educational resources, promote mutual recognition of credits between universities and platforms, and break the "wall" of colleges and universities.

Technology transformation: artificial intelligence becomes industry booster

The development of online education is inseparable from the progress of technology. In the past five years or so, the head K12 online education company has formed its current business model with the maturity of live broadcasting technology. Artificial intelligence is another important technology. In recent years, artificial intelligence technology mainly serves its own educational scenes, such as recognizing students' facial expressions to analyze their participation in class, recognizing students' gestures to strengthen the interaction of live courses, recognizing students' voice to analyze and correct their English pronunciation, etc.

Online education technology will also transform with the transformation of online education positioning“ After the implementation of "double reduction", off campus training is positioned as a beneficial supplement to school education, which means that there will be a large number of live courses in compulsory education stage, and the school will become the main position for students to learn. Accordingly, live broadcast technology will continue to develop, but online education artificial intelligence technology will usher in greater development.

Off campus training will no longer be another education system outside the national education system. Instead, it will work with government departments, schools and social organizations to build a new digital education public service ecosystem of "platform + education", realizing the mutual communication, connection and opening of teaching platform, resource platform and management platform, and providing intelligent teaching, resource sharing and resource sharing for the whole network, whole scene and whole process Digital services such as distance learning, network joint school, precise help and so on.

In the smart classroom, VR / AR supported teaching has a deeper sense of immersion and richer interactive means. Teachers' teaching will be supported by multiple devices, and students' learning data will be collected automatically. Project based learning can overcome the disadvantages of "cramming" teaching method, and students' personalized needs can be better met under the precise teaching.

In the family, the application of artificial intelligence technology in education hardware can connect students' homework, review, self-study data with classroom data, and form a closed-loop of personalized learning.

In the off campus training institutions, AI and VR / AR can support the practical teaching outside the cultural courses, thus greatly enriching the off campus training market（ This paper is an excerpt from the Research Report on transformation and development of K12 online education.)