Focus 2006 What should NEKIA do to enhance member competitiveness in the changing market over the next three years?

NEKIA Board of Directors

Winter Meeting

February 25, 2003

Washington, DC

Topics

Background Retreat, Annual Goals, Focus 2006

Context Industry/ Market Trends in 2006 Implications Members’ aspirations, NEKIA’s

focus Strategies Options for Action Action Discussion, Decision and Next

Steps

Background

Retreat: Process Stuff

Start positioning yourself now for what you anticipate the market conditions will be like in the future.

Focus on a time frame within which you can most effectively get something done

Recognize the “fact-based” threats and opportunities in the market.

Understand your own strengths and weaknesses and build from there.

Background

Retreat: Trend Stuff

Increased de-centralization of k-12 funding decisions Increased emphasis on results measurement Increased competition/involvement from private

sector Increased use of technology in administration and

teaching-learning Expanded choices/options in the delivery of

instruction More outsourcing of components of schooling

Background

Retreat: Jim’s Reflections NEKIA members are undergoing dynamic changes in

management, identity, product & service development NCLB will have a schizophrenic effect on k-12 market:

market-driven for solutions, compliance-driven for results.

NCLB & ESRA stimulates greater demand for members’ products and services that are grounded in SBR..

An industry is defined by a group of organizations with similar products that seek to penetrate a market.

NEKIA should be a function of its members’ vision for the future as well as its members’ most immediate survival needs.

Background

NEKIA Goals:What is guiding our current work?

1. Government Relations---31%

2. Membership Development---6%

3. Industry Leadership---19%

4. Capacity Building---13%

5. Member Services---17%

6. Organizational Development---15%

Background

Focus 2006: Within NEKIA goals, what should we aim to do in

three years?

1. Help ensure survival by: Shaping federal policy (#1)

2. Enhance members’ competitiveness by: Shaping federal policy (#1) Influencing industry development (#3) Building members’ capacity (#4)

3. Strengthen financial viability of NEKIA by: Generating new revenues (#2, #6) Providing top quality cost effective services (#5)

Context

5 Market Trends Areas Through 2006

1. Public Funding

2. Private Funding

3. Nature of Demand

4. Types of Suppliers

5. Political Influences

Context

Education Budgets

Federal Significant growth unlikely with budget deficits, even less

likely with war Continued pressure to eliminate programs of interest to us Continued pressure towards fewer programs and more local

discretion as to use

State Continued budget crisis and more likely to fall than rise

Context

Foundation Funding

Historical growth of 3-5% per year Substantial decline in foundations’ stock market

earnings Large grants ($1+ million) are relatively rare Small portion of funds available for new

commitments in any year Funding insufficient to counter Federal trends

Context

Foundation Funding

0

50100

150200

250

300350

400

1996 1997 1998 1999 2000 2001

Foundation Giving forSchool Improvement

Context

Nature of DemandNCLB & ESRA as Market Shapers in 2006

Number of schools in corrective action could be as high as 24000 (3x higher than this year)

Many more schools on the cusp will be desperate for help

Schools will want more support that focuses on specific population groups

Districts will want help in implementing corrective action provisions including supplemental services, school choice, re-constitution.

Context

Nature of DemandNCLB & ESRA as Market Shapers in 2006

Districts and states will want more help in assessments, alignment, data management

High poverty schools will use “school wide” provisions to re-allocate Title I funds to new types of programs and services

There will be high demand for SBR services and products

There will be a lot of turmoil and confusion

Context

Supply---Outsourcing Districts and states will continue to “outsource” their

support needs. Market-oriented suppliers/providers will aggressively

compete to build substantial revenues and capture greater market share.

New trade associations will form (eg EMOTA, NCSA) to strengthen position in market and shape federal policy.

New types of partnerships of suppliers will be created to help fulfill corrective action and SBR requirements.

Smaller, start-up providers will be bought out or dissolve.

Survivors will diversify, rapidly expand, commercialize and go global.

Context

Broad View of Suppliers 1999-2000

Secondary (9-12)

Elementary (K-8)

On-Site Services

Off-Site Regionaland

National Tutors

Off-SiteIndependent

Tutors

Video Disc

Videocassette

DistanceLearning

Satellite TV

Software

Secondary

Elementary

Offthe

Shelf

Sco

ring

/In

terp

reta

tion

Cu

stom

Tests

Sch

oo

l Ma

na

gem

en

t

Curr

icula

rC

om

pre

hen

siv

e

Textbooks Third-PartyInstructional

Services

ElectronicMedia

SupplementalMaterials

AssessmentProducts

Sch

oo

l M

gm

t.

SchoolReform

$2.4B $1.8B $1.5B $1.4B $0.5B $0.4B$0.3B

Total =$8.3B

0%

20%

40%

60%

80%

100%

Segment Growth Rate 5% 13% 18% 8% NA 57% 57%

1 Year CAGR13% Growth Rate = 11%

7%

Growth Rate = 17%

Growth Rate = 12%

Growth Rate = 4%

Growth Rate = 21%

20%

12%

Context

School Improvement Suppliers’ 99-00

T ess er ac t

E xce l Ed u ca t ion C en te rs

N o bel Le a rn ing C o m m u n it ie s

S A BIS In te rn a tiona l

B e acon Education Man agem ent

A d vantage Schools

N ational H er itage

T he L eona Group

E d ison P roject

Other

C CCA udrey-Co henO n wa rd to Excellence IIN or th east ern I ll in ois U niv ers ityC om mu nity for Le arning

M iddle S tar tS choo l De velopm ent ProgramE ffe c tive Sch oolsD ep aul Univ (Urban)

H OSTSA dvan tag e L earning System sV ent uresA VID

H ig h Sc h oo ls tha t W or kAc ce le ra ted Sc ho o ls

C or e Kn owl edg e

L igh tsp an

Different W ays of Knowing

C oalit ion o f E s sentialS choo ls

Dire ctInst ruc tion

B er ns te inC e n te rs

Tu rn in g Po in ts

U rb an Le ar ni ngC e n te rs

Modern Red S choolhouseOutw a rd B ou nd

A TLA S

Co -NectAm erica's C hoice

Roots & W ings /Success for A ll

Othe rCI NA R

C on n ec tedM a th em atic s

Pro j ec t

First Steps

Co ope ra tiveIntegrate dRe ading &

Co mpo sit io n

Breakthroughto L iterac y

Re ad in gRe co very

Natio nalW ritingProje ct

Ot her

HOST S

K aplan

S ylvan

S chool Mana gement Com prehensiveSchool Reform

Cu rr icu larRe form

T hird Pa rt yO n-s it e

Se rv ices

$408MM $21 4MM $7 2MM $64MM

To tal  =$757MM

0 %

20%

40%

60%

80%

10 0%

G ro wth R a te : 5 7 % 7 3 % 2 0 % 7 %

1 Ye a r C AG R5 0 %

*

NASDC Design Teams

Purchases of School Improvement Services

0

200

400

600

800

1000

1200

1400

1996 1997 1998 1999 2000 2001

Foundation Giving forSchool Improvement

School ImprovementService Purchases

Context

Political Influences on Market-2004 Election & Beyond

Education will decline as a domestic priority compared to the economy and home land security but will remain in the top five.

Deficits will keep overall education spending increases relatively low and will be a major campaign issue.

Bi-partisanship in NCLB implementation will disappear with Dems focusing on failed policy and Reps focusing on success stories. LEAs and SEAs will get caught in the crossfire.

School improvement and choice will be lightning rod campaign issues in 2004 thus creating greater federal pressure to demonstrate effectiveness of the current Administration’s NCLB implementation plan.

School improvement and R& D will take on added importance in “battle ground” states (eg Ohio, Florida, Pennsylvania) leading up to ‘04.

NCLB implementation will likely continue on current path up to ‘ 04 election but there may increased pressure to relax AYP provisions thereafter.

ImplicationsWhat the trends suggest about NEKIA ‘ s work over

the next 3 years Members need good market data in order to anticipate the

specific types of services LEAs and SEAs will require in three years based upon AYP timeline.

NEKIA needs more intelligence about the industry, particularly regarding the size and shape of the market and what other suppliers/providers are doing to expand their share .

Members will need to continue to give high priority to cultivating strong working relationships with SEAs and LEAs both for political and future marketing purposes.

Members will need to make SBR features a standard part of all products and services.

ImplicationsWhat the trends suggest about NEKIA ‘ s work over

the next 3 years (cont’d)NEKIA needs to consider providing marketing support to

Members who are competing (or wanting to compete) on the open market.

Members who want/need to compete on the open market will need to develop market-oriented operations and cultures within their organizations.

NEKIA advocacy for current programs will need to continue to be a holding/defensive action as negative pressure mounts from the current Administration.

ImplicationsWhat the trends suggest about NEKIA ‘ s work over

the next 3 years (cont’d)NEKIA and its members need to visibly promote their non

partisan posture and strategically cultivate balanced support from both parties in Congress.

NEKIA needs to be prepared for the development of new education trade associations that will likely be competing with NEKIA for federal attention, funds, and members.

We all will need to give priority to building new types of partnerships and attracting new members to strengthen our individual and collective competitiveness.

OptionsFour Different Directions that NEKIA Could go

1. Study Explore the range of possibilities: Convene a task force of

members (or hire a consultant) and conduct more market research into market needs and industry competition. Use November retreat to review report and make decisions.

2. ActPilot a specific project: Identify a workable venture such

as contracting with a publishing house (or build our own with consultants) for marketing NEKIA member services and products. Convene a task force to manage the process for two years.

OptionsFour Possible Directions that NEKIA Could go (Cont’d)

3. ReactContinue on current path: implement this year’s work

plan, explore new relationships and possible ventures on a less focused basis. Be prepared to respond to opportunities that might arise through the Executive Committee.

4. Pull BackFocus only on immediate needs: Discontinue industry

development component of work plan and give exclusive focus to government relations and communications.

Options

#2 Act (Examples)

NEKIA Project Individual Member

Collective of Members

Washington Office

Capture 20% of Foundation Funding for School Reform

Develop Foundation Targeting Strategy

Support NEKIA advertising in Chronicle of Philanthropy

Sponsor conference for foundation leaders

Capture 10% School Improvement Market

Business Plan for product/service dissemination

Share expense of basic market survey/study

Conduct RFP/ Manage study

Start NEKIA Publishing House

Identify products services for national marketing

Establish standards & review materiaIs

Recruit vendor, administer contract

Discussion

Assessing the optionsFocus 2006 Objectives

1.Study 2.Act 3.React 4.Pull Back

Ensure members’ survival

Enhance members’ competitiveness

Strengthen NEKIA Financial Viability

Where Do Members Want to Be?

To what extent should the size and source of members’ revenues change?

What do members offer in exchange for revenues that’s different from today?

How has the members’ customers base changed? What is the nature of members’ relationships with

the other actors? Federal, state, district, school, other R&D outfits, for-profit providers, etc?

Options 3 ways to Strengthen NEKIA’s

Financial Viability by 2006

1. Increase Membership

2. Offer More Services to Existing Members

3. Offer Services to Non-Members

Opportunities to Increase Revenues (Examples)

NEKIA Objectives

NEKIA Functions More Members

More Services

Non-Members

Shape Federal Policy

Reporting

Lobbying

X

X

X

X

X

Improve Public Perception

Public Communications

Influencing Opinion Leaders

X

X

X

X

Enhance Competitiveness

Market Research

Benchmarking

X

X

X

X

?

?

Questions for Discussion

Where do the trends leave members if over the next three years we act as we have up to now?

Can we change the trends? What can we do to thrive under this scenario? What do members need to do to get there? How can NEKIA support them? Can Washington Office provide support in ways

that enhance its financial sustainability?

Actions Steps to Create Change

NEKIA Change Objective

Individual Member

Collective of Members

Washington Office