Culture Collision: Lessons to be learnt from a failed public-private venture

In late 2012, a socially-aware private company called Quad Learning partnered with two community colleges to pilot a new programme dubbed “American Honors.”

The scheme was supposed to be a win-win, aimed at helping academically talented community college students to overcome the challenges of transferring to more selective four-year destinations. But just six years later, by fall 2018, the programme had fallen apart and Quad Learning dissolved American Honors for domestic students.

On the surface of it, the idea was a recipe for success – a US$40 million investment in the venture-backed private entity, willing colleges wanting to help their students, and an important socially-conscious principle at its very core.

So what went wrong? And what can future ventures learn from Quad Learning’s mistakes?

Before we answer that, let’s rewind a few years to get a better understanding.

Started in 2012, American Honors ran honors programmes at community colleges, complete with additional counselling and other services. On top of that, it helped gifted students transfer to selective four-year colleges known for their competitive nature.

The initial results appeared encouraging. By 2014, American Honors was working with 650 students at seven two-year colleges. From there it had lofty ambitions of serving 3,000 by 2016 but sadly, it never hit that target.

Instead, by 2017, it began shifting its focus away from domestic students toward recruiting students from overseas. By the time Quad Learning was sold in November 2018, reportedly for “a fraction” of the investment capital it had raised, American Honors was working exclusively as a “pathway” programme for international students, which it remains today.

It’s an interesting area and one that despite American Honors failure, still has eager participants looking to cash in. Given the interest a study was commissioned, prior to the company deciding to sell, and conducted independently.

The report, entitled “American Honors: The Life and Death of a Public Private Partnership”, examines what went wrong, where the flaws were, and crucially what could have been done differently to produce a different result.

These partnerships are likely to keep coming, as more for-profit companies show an interest in partnering with colleges and schools and the popularity of the public-private partnership continues to boom.

If done correctly, the benefits can be significant, producing a win-win for both parties involved. After all, colleges are starting to feel the pinch and are commonly turning to these companies to provide college services at a lower, more competitive cost.

In many cases, colleges can see cost-effective improvements and even an increase in student success. And yet such private-public partnerships fail as often as they succeed.

In an attempt to avoid squandering this valuable opportunity, the report, which was funded by a three-year, US$600,000 grant from the Bill & Melinda Gates Foundation, tries to understand where American Honors went wrong and condense that wisdom into bitesize advice for any ambitious venture-backed businesses looking to enter into the world of higher education.

Do your research

The report found that Quad Learning had drastically underestimated the complexities of colleges and how they operate. This includes everything from course and curricular design, to the admissions and credit articulation processes.

While research into these fundamental features of any education provider appears a sensible place to start before entering a partnership, it appears not every company takes the time to do it.

The report strongly advises companies wishing to enter a public-private partnership to first gain a deep understanding of the inner workings of their target colleges’ current academic and administrative processes.

It’s likely, regardless of what industry you are in, that this expertise will not be available in-house. In this case, the report recommends companies seek outside help, whether that’s recruiting a co-founder or senior executive who has extensive work experience in the college sector, or forming an advisory board comprised of community college leaders, administrators, and faculty.

The report points out that, while Quad Learning did, in fact, employ advisors in the design of American Honors, their eagerness to get to market likely resulted in them not incorporating the advice and instead rushed out the final programme design.

Patience and understanding are key

Time and time again in collaborations between academia and industry, we hear complaints that they just don’t share the same language. The two are very different beasts, working towards different end goals.

While a startup with lofty ambitions is quick to action and operates under a culture that is more cutthroat and resolute, education institutions are concerned with reaching the expectations and needs of their students over the long term.

The systems work very differently. Academics often take considered decisions and need to seek numerous levels of approval before proceeding. This is in direct contrast with startups where speed is equated with progress and productivity.

They have very different motives. Startups can be unstoppable in those first intoxicating growth months, whereas academics are likely to question the motives of for-profit entities and ponder whether the costs will pay-off in the long-term. Decision-making tends to be deliberative, consultative, and relatively slow.

These concerns need to be adequately resolved before the partnership proceeds otherwise there is risk of insufficient buy-in and scaling across the college.

“As disaffected faculty at these colleges network with colleagues across the country, they may propagate their negative perceptions of the company, which in turn may undermine the company’s ability to expand to new colleges,” the report reads.

Patience is the crucial key ingredient in the initial stages of any partnership – something many startups lack.

To assuage some of the concerns of well-meaning academics, the report suggests for-profit companies consider incorporating as a non-profit or as a public benefit corporation, leveraging startup funds from impact investors.

Giving an example, some companies set up programme-related investments that are designed to generate social impact and are not necessarily expected to produce market-rate financial returns. This allows them to boost their social impact rather than profit maximisation.

Know your audience

A fundamental flaw in Quad Learning’s approach was that they didn’t have a full understanding of their customer base, especially the factors that motivate students to attend a certain college.

According to the report, this is a common mistake of many companies entering into the education space.

In some cases with American Honors, their ambition to recruit new students to the programme likely ended up sabotaging those students’ college careers, drawing them away from a standard four-college alternative.

This clash of cultures between the business need of recruiting new students and improving students’ college career appeared to be in direct opposition of each other.

The report advises that any external entity seeking to partner with colleges needs to:

“Have a thorough understanding of the current behaviours of its target population, to map out how the theory of change and business model interact for this population, and to ensure that the theory of change and business model will complement one another rather than undermining each other.”