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In this episode, Phil Hill and Jeanette Wiseman build on the Instructure Restructure blog post from last week.

Hosts:

  • Phil Hill
  • Jeanette Wiseman

Transcription:

Phil: Welcome to “MindWires Musings: Serving EdTech Straight Up”, where we throw caution to the wind and have a more relaxed conversation on the non COVID EdTech developments that are affecting higher ed. I’m Phil Hill, and with me is Jeanette Wiseman. Welcome, Jeanette.

Jeanette: Hey, Phil.

Phil: Are you looking forward to this new style of podcasts for us?

Jeanette: Well, I’m looking forward to my drink that I have in front of me.

Phil: What do you have?

Jeanette: I am drinking a Tom Collins today, which I know is old school, but I think people need to revisit it, especially if you do it the right way. Fresh lemon and a local gin that I’m drinking and some splash of water. Sparkling water. Very refreshing on a very hot summer day in Albuquerque.

Phil: I need to add Albuquerque to the list of all the places that have a local gin. Barcelona, London and throughout the world … and also Albuquerque now. So that’s good to know.

Jeanette: Well, it’s Algodones, which is north of Albuquerque, but a very nice, nice gin. What are you drinking?

Phil: I’m going to a little bit old school at least for California. I have a Pliny the Elder from Russian River Brewing, and it’s a classic West Coast IPA. You can get them a lot more easily now, but it’s just such a solid drink and always has been.

All right. So the big news this week and the blog post that is getting a lot of attention over the past two days is about the Instructure having layoffs. We’re assuming if you’re listening to this, and you want more details, go read the blog post. But essentially, 150 people are losing their jobs this week, primarily affecting Canvas now. And this has surprised me how much interest this blog post is generating. I mean, I knew that it would get interest, but the level of interest is surprising. There’s a lot of emotion out there, and a lot of comments online and various forms. It’s unfortunate that that’s how we’re kicking off this podcast, dealing with what’s a difficult story, quite honestly. But that’s what we’d like to cover today.

Jeanette: Yeah, well, I think it’s not surprising.

I think that there’s interest around Instructure, especially within the community, since it was such a community based LMS. And the change of ownership is a big deal. But also, there’s so many people losig jobs. It’s hard to not want to guess what’s going to happen next, and what is the future of the company when things have shifted so much from its origins.

Phil: Well, it’s unfortunate. Keeping in the line with this show we certainly want to raise our glasses to Instructure – a lot of the people that are losing jobs. I know it’s a tough time, but we certainly wish you the best. And the people who are still there, I know this is difficult, even on the people still at the company. So here’s to them.

Jeanette: Yeah, absolutely. It’s a great run. Fun company.

Phil: Well, they are. Talk a little bit about that. I mean, they’re fun company. What does that mean and does it even matter?

Jeanette: They were the first EdTech, at least LMS company, where it was special to go to their user conference. They made sure that everything was a lot of fun. It wasn’t really based on new features being rolled out. It was more based on Sexy Sax Man. Little shout out to Sunny Washington, if she’s listening, who was one of their original partner people that I worked with when the company was founded. It was a lot of fun. There was a lot of energy. They built a community from some of these really neat things they did. I mean, one of my first memories of its structure was also at the Blackboard World conference in Las Vegas, where they rented out a bar right in the middle of where the conference was taking place. And they passed out T-shirts that said something like ‘I went to Blackboard World and all I got was this Instructure T-shirt’, that was a really funny thing. They were tongue in cheek and they made people trust them, I think, with their honesty as well.

Phil: It’s more than just a surface level, fun, funny people. It gets to that point you’re making about the openness, the transparency, the honesty. And Michael Feldstein, he wrote a great post about it, that was referencing how their definition of open is different than open source or open educational resources, but it really gets it or got to the transparency of the company. ‘We’re going to tell you what we are what we’re doing. If we make a mistake, will admit it. But you can trust us.’ And to me, that really changed the dynamic in a pretty difficult environment because academics, educators, there’s a natural distrust of EdTech vendors, for profit vendors. And somehow these guys were able to put it so that there was a more of a transparency and a trust, a feeling that, ‘OK, you guys have our back.’ That happened out there, and that was a core part, if not the core part of the company’s success. So it’s more than just fun. It’s really gets to the transparency and trust.

Jeanette: Now, absolutely. I think there’s always been sort of a us against them. I think from an academic standpoint, we are looking at for profits. And I think Instructure was able to turn that around and make it that ‘we’re all in this together.’ And they were one of the first companies to do that. From what we’ve seen in the last couple of years, that culture has shifted somewhat. So this isn’t an overnight story. It’s not because these layoffs happened yesterday as we’re recording this. This has been the slow march towards this sense of the sea change over time. There’s definitely been a different culture experience when dealing with Instructure.

And it was very obvious to both of us when we were at the users conference this past summer, where the first day, particularly meeting with the executives, quite honestly, it was stunning how different the company culture felt and the difference in tone and openness that was out there. But on the other side, I felt a little bit different for the rest of the conference where I was meeting more with the rank and file, the engineers, the developers, the writers, the support staff. I didn’t get as big of a culture change feeling through the rest of the week, meeting with the rest of the staff, as I did with the executive team at the beginning of the week.

Jeanette: Unfortunately was at Schoology after that first initial day. What I experienced was ‘oh my God, this is InstructureCon?’ Because it was a big difference from what I had experienced in years past. But what we lost yesterday was a lot of those kind of rank and file that were really the front line to the customer. It would be hard not to imagine the customer experiences are going to shift somewhat and the expectations in terms of product. My assumption is when you lose that many people, things are going to are going to be different.

Phil: One of my arguments, although I can’t entirely prove it – there’s a little bit of connecting the dots going on right now – is that more than just the number of people gone, that there was an explicit message being sent by these layoffs as the new owners (and through the senior executive team) were establishing a new control. ‘That this is how a private equity firm works, and if you’re going to fit into our culture – which quite honestly is driven by spreadsheets, focusing on the bottom line profitability. If you can’t fit within this culture, and a lot of the old culture didn’t do it, there was a message of, ‘okay, we’re making a change in the culture now, whether you want to or not.’ I think there was a message being sent.

Jeanette: I’m sure. I mean, I think anybody that’s been part of a PE acquisition feels that right away. One thing to keep in mind is the engineers and the salespeople and anyone really working within an education company, a lot of times they’re smart guys and smart people, and they could be working anywhere. But there is an altruistic part of you that wants to work with an education. You feel good about it. I can remember one time traveling back in the days when we used to travel, and sitting next to somebody who was a potato chip salesman, listening to that conversation and just sitting back and going ‘I am so glad that I work in education.’ Now, I may not be paid as well as if I was working in another industry, but what I’m doing, I’m proud of.

And when an ownership with a PE firm takes over, that feeling sometimes is lost because it does become a numbers game. And this is a for profit company. And of course these things are going to happen. But the reason for maybe why you’re there is no longer really apparent, and I’m sure that was the case. PE firm takes over. They need to be profitable, and they’re going to make the hard decisions that probably won’t be made at the time within the company.

Phil: But that gets to what is a key question. I hear the right phrases when I talk to the interim CEO, who is really a Bravo person, who’s worked with them before, and I hear them talk about Instructure’s culture and higher education’s culture or education in general. But this really raises a question. Does Thoma Bravo, do they really understand what they have, and do they understand the importance of the culture at Instructure, but also the culture of education and what it takes to be able to break through and create the trust that they’ve had in the past? I wonder if the ownership understands this.

Jeanette: Understand may be the wrong word. They probably recognize it, but do they care? That’s what I wonder. Do they care that that was the culture that maybe led them to that place? That’s the question I wonder. They may not. And they probably don’t because they need to be profitable, and they don’t likely understand that these shifts are going to cause a ripple effect within the industry and within their customer base.

One thing that we’ve seen in the last year is that the customer base has been pretty solid at Instructure. Remarkably, they have never lost a higher ed customer, and that’s amazing in this day and age. We haven’t really seen the effect that Dan brought, the ex-CEO brought to that company. At the customer level, we felt it because that’s who we were interacting with. And we saw it in different ways, but we haven’t really seen at the customer level. I’m wondering how long it’s going to take.

Phil: You mentioned profitability. There have been plenty of complaints about Instructure. People for a while have been saying, ‘hey, these guys are buying their success. They’re not profitable, they’re just spending money and always leveraging the future on trying to grow.’ There’s a lot of people that are saying that this is a long time coming. That Instructure had to come back down to earth. That’s part of what’s happening. But the key question is, how will it affect their relationship with their customers? And will this work out? Will they actually become a more efficient, profitable company, but still maintain some level of that same relationship with customers moving forward? And that gets to a question, how does this impact the LMS market going forward? Let’s assume what we’re seeing is accurate as a starting point, that they have really cut deeply. It’s going to affect their product development. It’s going to affect their levels of support. And it’s going to impact the culture that they’ve built up over many years. So if that’s accurate, what’s going to be the impact on the market?

Jeanette: I think there’s openings for either a new company to come in, which we’ve seen some recently that seem to be making some inroads, or I just see a shakeup. I think that right now, if we look at the Big Four. Blackboard is not doing great, Moodle is still there, and there’s D2L. D2L has been successful over the last year, getting new adoptions, Finally. It’s sort of their game to lose at this point. They’ve been doing a great job in the last year. And I think we need to be watching them more closely than maybe we were wanting to, or we predicted we would be three or four years ago.

Phil: I had a question on Twitter along these lines that was asking, what about the health of the market, not just who does better than the other, but the health of the LMS market? To define what I’m interpreting as the health of the market, that’s one where competitive pressure leads to companies better serving their customers. In this case, better LMS and better support for higher education and K-12 institutions. At least on the surface, I think there’s a huge risk to the health of the market, because you have the leading vendor now in terms of growth (and certainly in North America) that has just cut pretty significantly and is endangering, or getting rid of, their previous culture that made them who they are. And we question whether the new owners fully understand the importance of that. But who is going to push them? And you listed the big four. Of the big four, I agree, I think D2L is the big variable here. The market will do much better if D2L comes on strong and takes advantage of the time that’s happening right now. I don’t say that as favoring one vendor over the another, I say that in terms of there needs to be competition pushing the market leader so that they don’t sit on their laurels and only pay attention to the bottom line. I think so much of the health of the market depends on D2L.

Jeanette: I agree with that absolutely, short term. As you’re saying those things, I was wondering – and not that we’re going to talk about COVID that much – but I think that the impact of COVID is that so many people who had not relied on the LMS are now using it all the time. They’re required to use it. It’s not just posting a syllabus anymore, it’s becoming the heart of what your classroom needs to be. And I’m wondering if in the next 12 – 18 months we’re going to see a lot more output of different elements of LMS, and different feature sets, and maybe a completely new type of platform that we haven’t even conceived of, that could maybe take over. That’s going to be better fit for how the LMS needs to be used today and how people are teaching online and distance.

Phil: Well, the LMS has been pretty resilient. Haven’t we heard a similar argument for that for years, if not more than a decade? And we’re still waiting for the Google Wave for, you know, a new concept.

Jeanette: That’s true, but this is a very different time. The other point is, is that not that many people were really using the LMS until four months ago. I’m just saying it “could” happen. It could happen where we’re going to see something different, which we are out of the UK right now. We’re seeing something that’s different that’s taking on.

Phil: Well, you could mention them by name.

Jeanette: I, I can’t if I couldn’t pronounce it. Is it Oolah?

Phil: Well now. Well I go with Aula [Owl-a]. Aula.

Jeanette: Ok. So that’s one of the toughest things. I can’t mention it but they have taken over. What is it?

Phil: Is it for Coventry University. Forty thousand [student] school.

Jeanette: That’s remarkable. And it’s a different type of what could be considered an LMS. But they have strong ideas, support, instructional design support, which is really needed right now. And they have a very different pricing model. And I notice some things within their platform, in their interface, where they’re tapping in to some cognitive design features that I haven’t seen before in an LMS. I think there are things within that that could shake some things out. Maybe a platform that hasn’t been released yet, that’s being worked on right now at some university, just like Instructure came to be it from BYU.

Phil: I think that is sort of the challenge for the Aulas of the world, and anybody else, is that the old market 10 years ago was different. Blackboard was complacent, it didn’t have that relationship with the customer, they were a feared and hated company in many respects. you can go after them. But now you have to out-Canvas Canvas. And doesn’t that make it a lot harder?

Jeanette: It could, except for Canvas, to me, it needs a little bit of a refresh. They’ve been resting on the fact that they were the market leader, I think, for a little while and that people loved it. And is that going to be enough in the next 24 months?

Phil: In our remaining time, let’s address some of the questions, since there’s been so much discussion online since the blog post came out yesterday. I won’t mention people by name – not trying to be critical, but . . .

Jeanette: That’s no fun.

Phil: I don’t have the comment in front of me, so I don’t want to mention that. But there was: ‘I always knew this would happen, and we always knew that Canvas would collapse, and then Blackboard would scoop them up and buy them.’ And to me, that’s a matter of, ‘OK, nine years ago, that argument might have made some sense. But now? Come on.

I mean, the issue with Instructure that we’re talking about, they got purchased for almost two billion dollars. And what we’re criticizing is a company whose ownership is going to make them profitable. You’re talking a two billion dollar company that might not be serving education as well. But you’ve got that type of value. Blackboard is not a two billion dollar company. They’ve sold off the most profitable part, out of Transact. They’ve certainly stabilized their debt, but they’re still losing customers left and right. That’s a ludicrous suggestion at this point that Blackboard has any power to do that.

Jeanette: Absolutely. Maybe the other way around. I mean, you may want to purchase Blackboard and fold it in. And I could see that potentially happening.

Phil: Another comment was somebody was saying ‘all of these cuts are too deep and this is going to be bad.’ And then somebody replied back to it, saying, ‘well, which would you prefer laying off 20 percent of the company or increasing canvas bills overnight by 30 percent?’ I tried to not be too snarky, but I replied back: “I wasn’t aware of those were the only two choices.” This line of argument misses the point that there are ways to do things. I certainly understand the need to become more profitable. The question is, what we’re going to be watching for, is did they cut too deep and did they ignore the culture in a way that it’s going to harm Canvas in the long run? It’s not like if you’re going to cut, you have to do it this way.

Jeanette: Well, first off, if there are no price increases or add on pricing that we see in the next 24 months out of Instructure, I will be shocked. I think that’s going to happen anyway.

Phil: Here’s a tougher one that maybe is a Tom Collins discussion for you. The shorter one along the lines of ‘in the end, this is what markets always do. They always strangle education.’ It sort of goes in the line that essentially all for profit EdTech companies are bad for education in the end. Let me put you on the spot. How do you respond to that?

Jeanette: I don’t agree with that. I mean, of course, there are going to be some for profit companies that are really just about the bottom line. And I think when you get into PEs, that happens a little bit more often than not. But you have to remember that companies are people. They’re just a group of people. And the majority of the people that are working in these companies really believe in what they’re doing. They believe in education and they believe in furthering teaching and learning. When you look at that, you can’t say that all for profit companies are out to get education. I just think that that’s not true.

Phil: I do think it’s a common argument or complaint, and it might even be a proxy argument that people might not even mean that literally. It’s a way to express their frustration about where money is going in education. When you have executives believing too strongly in disruption and not strongly enough in investing in educators themselves. If you view it as a proxy argument, I think there’s more validity there that we need to pay attention to.

Jeanette: I think that’s absolutely true. I know that coming from being a teacher and an instructor, it’s really hard when you’re working with students that are struggling financially, or with just different equity issues, and then walk in to a user conference or into an EdTech conference and see the money that’s being spent, that you feel like it’s being taken away from the student. I think that’s definitely true. But I still truly believe that there are a lot of really well-meaning people working with these companies. It’s when you get to the leadership level, if they’re willing to listen to the customers into what their needs are. And that’s what made a company like Instructure a different from a company like Blackboard when they first came out, was that they were willing to go in and listen to the customers and find out what they needed and meet that. It was still a for profit company, or tried to be a for profit company, in the same space. They just handled things really differently.

Phil: That actually is the part that worries me the most, is the fact that Instructure had a way to build up trust in this hard environment of EdTech, and that by them having the layoffs and by what’s happened to them over the past two years, and especially with CEO change and then the sale of the company, is it really gives ammunition for people who are going to say, ‘see, we never should have trusted these vendors.’ I’m more concerned about the loss of an opportunity to have a healthy relationship between vendors and schools.

Jeanette: Can I just say one other thing on that, though? Here is one thing that Instructure did remarkably well, is the way that they brought in a lot of third-party vendors to support their platform, unlike the model that Blackboard had, at least at the time, which was a very costly Building Blocks. You paid through the nose to be part of their system. Instructure really brought in, opened their doors up, and that was part of their openness that Michael had referred to, to allow all these third-party vendors to build upon and support users in a way that they weren’t going to. They were going to build their platform out to do that. And what worries me now is that these are usually other smaller companies. Some of them really are supporting individual and very specific needs for the customer base. I don’t know what’s going to happen to those guys. We don’t know what that model’s going to look like. Also, in 12 – 18 months, we’re under this new ownership. And if they’re going to be able to survive? And that’s sort of concerning because I was part of what made Instructure different.

Phil: Well, we have a lot to watch now because as we look at it, the LMS Market, for better or worse, it’s becoming more important. As you said, everybody’s using it right now. And the other risk of us mentioning COVID again, but with remote and online and hybrid classes – everybody is going to be using the LMS moving forward much more than they used to. This is really critical. And this news and what’s happening to Instructure is going to affect a lot more than just that company. Whether or not their move to create efficiency works or not. This is going to have an impact throughout EdTech. But thanks, Jeanette, for joining and for us having this conversation.

Jeanette: Sure. Cheers.