Educational Software Business Plan

Third Degree I.D. will focus on four e-learning markets– the corporate, educational, healthcare, and government sectors. While it seeks business from companies and institutions across the United States and abroad, it will make a concerted effort to develop long-term local and regional clients.

Third Degree I.D.’s target customers are the upper-level management of companies and institutions who are charged with the day-to-day operations of e-learning implementation and delivery.

5.1 Competitive Edge

Third Degree I.D. provides its clients the personal touch that large, proprietary systems vendors are ill-equipped to deliver. There is no universal recipe for a “good” instructional design. However, all effective instructional solutions share similar ingredients: a dash of market opportunity, a pinch of business goals, and a generous helping of user requirements. As its name implies, Third Degree I.D. is committed to “interrogating” the relevant stakeholders to determine the appropriate mix of ingredients.

Better questions yield better results. Third Degree I.D. will ask probing questions and deliver superior instructional solutions.

5.2 Marketing Strategy

Third Degree I.D.’s marketing strategy for the first year requires that the company:

• initiate as many personal contacts as possible
• demonstrate excellence with every personal contact
• identify six to eight key clients, and “win them over” through demonstration of expertise with limited initial client investment
• provide excellent custom development services with enthusiasm and a personal touch
• make a name for the company.

Identity Issues
The first year of operations will present a marketing challenge for Third Degree I.D. The partnership and identity are newly formed; therefore, the company is relatively unknown in the marketplace. Although the founders have significant experience and many contacts within the e-learning and new media industries, they have worked mainly for corporate or institutional employers during the course of their careers. Therefore, Third Degree I.D. won’t benefit from immediate name recognition.

The challenge is mitigated somewhat, for name recognition isn’t especially prevalent among custom content developers in the industry—even among those who have been successful in the marketplace for years. Brandon-Hall surveyed over 200 chief learning officers, e-learning managers, and training directors to discover that the majority couldn’t name more than five custom content companies.[1]

Selling Services
Another challenge stems from the nature of the business. In the first year, Third Degree I.D. will focus chiefly on marketing and selling instructional-design services, although the long-term plan is to obtain revenue from content re-packaging and re-licensure, at which time the focus will shift from selling services to selling products. Services are traditionally tough to market, as clients are wary of spending money for intangibles. They are more likely to buy from a well-known business that offers “good enough” service than to take a chance on an unknown organization that might provide exceptional service.

Photo processing is a suitable example. Many consumers routinely have their film developed at the local drugstore, despite the fact that they are often dissatisfied with the quality of the printing, the speed of the service, etc. In spite of their concerns, most consumers continue to use the drugstore’s service, rather than taking a chance on a non-chain photo lab, a mail-in service, or any of several less familiar options.

Selling Instructional Design (I.D.)
The nature of the service provided by Third Degree I.D. presents yet another challenge in that “instructional design” is not exactly a household term. Although many organizations have experimented with e-learning, the field is still very young. Best practices are in their infancy, and every organization does online education a bit differently.

The market is dominated by a variety of course management system (CMS) and learning management system (LMS) vendors, each claiming their products will revolutionize the industry. Despite their lofty claims, most of these systems service providers are ill-equipped to help clients with their most daunting task—that of organizing, restructuring, and enhancing their content to provide meaningful web-based instruction.

Clients are overwhelmed by the choices and confused by the options.

Part of Third Degree I.D.’s strategy is to capitalize on that frustration as well as on the growing awareness of companies and institutions that they actually need instructional design services, especially the services of those who design and develop for the e-learning niche.
In February 2004, Brandon-Hall published “Custom Content Developers: Comparative Analysis of 97 Outsource E-Learning Providers.” The study highlights and evaluates the best-known custom content development vendors in the e-learning marketplace.  These are, arguably, Third Degree I.D.’s most traditional competitors. However, it also pays to consider a source that would normally be the last place one would look for competition—the clients themselves. When faced with unfamiliar tasks, clients often try to “do it themselves,” rather than take a chance on outsourcing services, which are traditionally difficult to quantify and measure.

To succeed in this environment, Third Degree I.D. will demonstrate, through cost analysis, that outsourcing content development to a well-equipped development house with streamlined processes is generally more cost-effective than in-house development.

The Personal Touch
During the first year of operation, Third Degree I.D. will focus on developing relationships as a conduit for sales. Rather than mounting an advertising campaign that promotes a faceless service, the founders will strive to make as many personal or “insider” contacts as possible. According to Brandon-Hall’s custom content report, the majority of the companies surveyed “chose their outsource partner through simple ‘word of mouth or they selected companies that were in close geographic proximity to themselves.”[2]

Fortunately, Third Degree I.D. operates in a city that is known for its relationship networking. The founders have established and continue to establish their credibility among potential clients, particularly in the higher education and high-tech corporate sectors.

Higher Education Clients
All of the company founders have worked for at least one institution of higher education in Savannah, and the company CEO, who has a 10-year employment history in Georgia at several colleges and universities, plans to extend that experience to another Savannah-based university in August. The potential clients for which personal contacts exist include:

Georgia:

• Armstrong Atlantic State University (Savannah)
• East Georgia College (Swainsboro)
• Middle Georgia College (Cochran)
• Georgia State University (Atlanta)
• Georgia Tech Regional Engineering Program (Savannah)
• Savannah College of Art and Design (Savannah)
• Savannah State University (Savannah)
• South University (Savannah)
• University of Georgia (Athens)

Other States:

• LaSalle University (PA)
• Matanuska-Susitna College (AK)
• Methodist College (NC)
• Tennessee Board of Regents Online Degree Program (TN)
• Thomas Edison University (NJ)
• Saint Thomas University (FL)
• San Diego State University (CA)

Another strategy of Third Degree I.D. is to read about and research the higher education e-learning market continuously. There will be no “cold calling.” Instead, institutions will be approached when there is a natural context for doing so. Institutions in likely need of instructional design products and services include those with high-volume e-learning programs, troubled or ineffective e-learning programs (that may be “on probation”), or ambitious curricula rollouts. Current candidates include:

• American InterContinental University
• Drexel eLearning
• eArmy U
• Penn State World Campus
• University of Maryland University College
• University of Phoenix
• University of Illinois at Springfield

Other potential higher education clients may be non-American institutions wanting to establish themselves in the U.S. e-learning market and wanting to utilize designers and developers more familiar with regional accreditation and compliance standards. Countries with high-volume e-learning establishments, such as Canada and the U.K., stand to save substantially on design and development costs, as well.

Corporate Clients
While Third Degree I.D. wants to build its reputation in education, it appreciates the need to keep a balanced client portfolio. Recognizing that industries fluctuate and that corporate e-learning is the sector predicted to show the largest growth, the company will work to establish a number of corporate relationships, as well, approaching potential clients through appropriate forums, and via a context that clarifies need (such as a news article or press release announcing a potential client’s new e-learning infrastructure). Third Degree I.D. has already begun to market its products and services to local companies—and particularly high-tech companies–through a number of forums, associations and businesses, including:

• Advanced Technology Development Center (ATDC)
• Coastal BETA
• Coastal Venture Investment Forum
• The Creative Coast
• OnPoint Digital
• Savannah Economic Development Authority
• Savannah Entrepreneurial Center
• Small Business Chamber of Savannah

It has begun to announce its products and services to the national and international communities through national and international e-learning forums and associations, including:

• eLearning Europa
• Eduventures
• The eLearning Guild
• World Wide Learn

Third Degree I.D. has already secured some limited “spec” work from the University of Ceramic Tile and Stone through The eLearning Guild.

Healthcare Clients
Healthcare represents a small, but growing market (relative to the corporate and educational e-learning markets). Clients that are likely to develop e-learning infrastructures are large, university-affiliated hospitals that do a good deal of teaching and research. Third Degree I.D. has already established contacts with the University of Chicago Hospitals Academy and is planning to contact several of the local Savannah hospitals, one of which is Memorial Health, a “medical university” that has been listed as one of the “100 most wired hospitals” three years in a row by hospitalconnect.com.[3]

Government Clients
Like healthcare, government e-learning is demonstrating some growth, especially in sectors where training is mandated by law. The recent Forecast of Contract Opportunities for FY 2004 issued by the Department of Homeland Security features a number of projects that will require training that is flexible, mobile and cost-effective. A number of the projects are also based in Georgia and South Carolina.

New and Key Clients
While Third Degree I.D. seeks clients who have established e-learning programs and wish to improve upon or extend them, many of its potential clients (particularly the local clients) will be forging ground in unfamiliar territory as they move from traditional educational and training environments to the e-learning arena. They will be uncertain about the benefits of e-learning and protective of their subject-matter expertise. They will be wary of third-party content developers claiming to have the “answer to their prayers.”

The founders of Third Degree I.D. recognize the cautious environment they are likely to face and have realistic expectations for the first year of operation. The general goal is to establish a limited number of key clients and provide high-quality services and exemplary products. Key clients are best characterized as clients with genuine e-learning ambitions who are considering a number of large-scale projects and will require some training and maintenance. Key clients would be returning customers.

To acquire key clients, Third Degree I.D. is prepared to take limited-scope development projects at a reduced rate to prove its capabilities. For instance, the company may offer to develop a single course in a certificate program “at cost,” with the goal of winning a more lucrative through the demonstration of superior service and an exemplary product.

Seeking Excellence
Third Degree I.D. will strive for excellence in all personal encounters and development transactions because it recognizes the validity of “the butterfly effect.” In much the same way chaos theorists posit that a butterfly flapping its wings in Brazil can affect global weather patterns, entrepreneurs know that a single client meeting handled with passion, enthusiasm, and excellence may be the catalyst for many future successful business dealings.

Looking Ahead
After the initial year of selling predominantly services, Third Degree I.D. will reposition itself to market the products it has developed both as a result of the service deliverables and some in-house research and development. The central product is the “learning object,” a Flash-based course enhancement that raises the level of course engagement and interaction levels and raises the bar in the e-learning industry. The learning objects bring together high-quality instructional design with compelling, state-of-the-art media design. The objects are also exceedingly flexible, eminently re-purposable, and remarkably scalable.

Because the learning objects are likely to be copied quickly after their release, Third Degree I.D. will need to prepare a special campaign to become “the name” in reusable custom content development. The company will:

• write press releases
• get featured in articles and on websites
• register keywords with major search engines
• approach CMS/LMS vendors and professional organization about linking to our website
• advertise in industry-specific publications
• register with RFP exchanges
• investigate/initiate strategic partnerships
• attend trade shows (as exhibitors)
• present our solutions at conferences and seminars.

As the market demonstrates its needs, Third Degree I.D. will begin to narrow its focus, optimizing those products and services that are most useful, beneficial, and cost-effective. The company will invest in a market research strategy utilizing a number of evaluation and survey techniques to assure its understanding of the market and its staying power within that market.

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[1] Chapman, Bryan. “Custom Content Developers: Comparative Analysis of 97 Outsource e-Learning Providers” (Brandon-Hall Marketing Series, 2004) <http://www.brandonhall.com>.

[2] Chapman, Bryan. “Custom Content Developers: Comparative Analysis of 97 Outsource e-Learning Providers” (Brandon-Hall Marketing Series, 2004) <http://www.brandonhall.com>.

[3] Hospitals Connect. “100 Most Wired.” <http://www.hospitalconnect.com/hhnmostwired/archives/100_most_wired.html>. 

5.3 Sales Strategy

Third Degree I.D. promotes its products and services via its website and advertises strategically via portals and publications devoted to e-learning and distance education. Additionally, the company solicits likely customers through direct mailings targeted toward businesses or institutions that are planning large online program rollouts or that are experiencing accreditation problems related to e-learning.

5.3.1 Sales Forecast

While business began in May 2004 and will intensify through August 2004, September 2004 is the partnership’s first month of official operations. The sales forecast (from September 2004 to August 2005) represents a year of operations.

For the purpose of this plan, we treat our development costs as our staff costs. The only direct cost of sales listed here is software packaging, which we project at 5% of the sale price. Although this effectively brings our direct costs to zero, it reflects the fact that all three founding members will, in fact, be directly involved in the development of our products. Our staff costs are laid out in the Personnel Plan. On average, we’ll markup our development costs by 50% to set the final price.

During the first year of operations, all our sales will come from new content and curriculum development. We will strive to make this content re-usable and subsequently re-package it to meet the needs of additional clients. This should decrease our overall development costs in future periods. We plan that 25% of cumulative previous years’ sales will come from such re-used content.

The table below summarizes our sales forecasts.

5.4 Milestones

Our milestones for the initial period are summarized in the table below.