Learning Technology: LMS, LXP, LMS/LXP, Skills Platform, Learning Platform, Authoring Tools, Third-Party Content Providers, EdTech (K-12, Higher Education). E-Learning tools. EDP, and the list continues.
Trust.
Customer support, technical support, meeting obligations presented before or as part of the signing, promises unfilled, survival one minute, sale the next, consolidation (albeit the numbers are very small), internal reorganization, stealth. It’s hot now, but not so much in a year or two or three.
NPS scores
Trust us. Isn’t it great about our score? Funny, they never mention detractors—an audience that usually goes out of their way to post about issues or tell others about problems—far more than those promoters.
Put it this way. You go to a hotel with great service, and then they ask you to post it on Trip Advisor. How many times have you done this? You go to a hotel, and it is a fiasco. Problems such as dirty rooms are always noted in these complaints. Where do you see them? Oh, TA or Yelp or lots of places. So much for NPS.
You are at a trade show, looking for a new system, for example, and you are pretty confident that something is wrong—whatever it is. How is that NPS now?
The Proof is in the Pudding
One vendor (name withheld) made a huge deal about a year or two ago around their NPS. Publicity abounds. Press releases to be found. All is happy. Happy, Joy, Joy, Joy.
Meanwhile, they had yet to turn a profit. The year comes to an end? Non-profitable. Privately? Re-organization is the first one. The following year? Another reorganization. Another miss out of profitability. Lots of sales should be profitable; acquisitions aren’t the play here (some vendors over-extend themselves OR are purchased by another vendor expecting higher returns, and it fails to deliver – SumTotal and the Skillsoft marriage, anyone?).
Something else is causing this—OR multiple items.
Are they going to tell you this? Not a chance. But you would think it’s not possible. Big sales. Big name. Big burn rate (burn means they are burning capital each month. It happened with Grovo. Dariling one minute, burn of 73 million eventually. Acquired by Cornerstone).
What I see with the Pudding (Dairy-Free Butterscotch is the best)
- Mismanagement plays a significant role here – I mean, if your company isn’t breaking X dollars based on expectations and client listing, and you have been around for more than five years, there is a problem. Something isn’t working. Sure, it can be the product itself; more often than not, though, it comes from the top. The goal for any vendor, regardless of platform, product, or service, is to generate business = more growth (hitting targets sales-wise) = more money. End goal? Profitability.
- Sales flatline for far too long – It is one thing that the vendor or vendors’ sales are flat – due to outside economic conditions or unexpected global events – i.e., the Pandemic. It is another thing when none of these issues exist, and the company’s sales are flat. Flat isn’t a good thing. Unless it is a pizza dropped by the gig worker delivering it to your house, okay, that isn’t good either. On the bright side, they didn’t eat a slice.
- Capital infusion hits the wall – There are way too many PEs and investment firms that jumped into the corporate learning space, especially around LMS, LXP, and learning platforms, with the belief of rapid growth. I see this often in a PE whose portfolio includes other software companies. They think a software company is the same as a learning system in terms of the tech angle. Thus, a huge market generates lots of business and growth. Oops – it isn’t that easy. Some of these folks think a system can rapidly scale from 5M to 25M within two years or even 100M in less than three years. Reality though? Doesn’t happen that way. This industry requires patience and time—something PEs rarely have. I’m giving you capital – I’m expecting a return on my investment. Already today, a few PEs have found out that this isn’t an easy thing to do. Surprise! Did you want a slice? I found it with some grass sticks on it. Uh, I’m unsure how that happened.
Capital Truth Scenario
Perhaps this has happened to you as a vendor. I’m quite confident that you never mentioned it to any of your clients, nor the ones you were trying to get. I mean, it doesn’t scream—come by my system.
The vendor (name withheld) landed capital (i.e., money!) from another source (I can’t recall whether it was an angel investor, investment firm, or some PE)—but they got capital.
They then went on a hiring spree for more salespeople.
Then the bottom happened. They (the vendor) missed quarterly targets. Not for one quarter. Not for two quarters, but three, with everything pointing to miss on the next quarter. Let’s see – new salespeople and quite a few at that + missed sales targets (which, since you hired more salespeople – one would assume you would generate more sales, but maybe those targets were unattainable, to begin with – then again, I wasn’t the CRO) = layoffs.
Yep, all those new salespeople – gone.
Restructuring
The industry is not the only one that experiences this; it is extremely common in the corporate world and even education (although restructuring isn’t the word used).
When they say “restructure,” you think “layoffs.”
Does it happen with every vendor? No. There are plenty, and I mean plenty, who have never undergone any restructuring. This is a good thing.
Yet, others have and will continue to do so. I would not be surprised (only because I have already seen it), that due to the current business environment, sales across the board are flat. Yes, there are vendors where sales are not flat, but I often hear “flat.” Kudos to those who are not seeing it and are growing. In the flat cycle right now, external circumstances are the big reason. Again, though, there are those who will stipulate it is due to external, in reality though, they were already flat or declining before 2024.
A vendor may not say “flat,” some say pipe freeze (pipe as in the pipeline, i.e., sales pipeline or prospects pipeline – expected to close but have frozen – or frozen – due to other circumstances that are beyond the vendor’s control. Nevertheless, a backup on the pipe (client deals taking too long due to the vendor – understaffed factors often, but mismanagement isn’t too far behind) can happen.
Can it lead to restructuring? Absolutely. If the pipeline is backed up (and you have a lot of salespeople) and it is due to the client freezing or holding back, well, that is one thing. However, if that isn’t the reason, eventually two things will occur (can be either/or): a. Missed sales targets and underperformance thereafter; b. restructuring—you need to tighten the belt, as they say.
Is restructuring limited only to learning system vendors? Nope. Third-party content providers, authoring tools, e-learning tools, and Learning Technology are all over the place.
Failing to be profitable doesn’t limit itself to one industry segment.
Restructure Scenario
There are plenty of examples around the restructuring impact (yes, people, but business-wise, it goes beyond the people), and thus there may be people who say, “Hey, be considerate of so-so losing their jobs.” I am respectful of that, which is why it is rare for me to state that X vendor is going through a restructuring. Even though I know vendors who have (in 2023), are in 2024 or are considering doing so. There may have been just one restructuring or multiple (again, this is not just in our industry; the corporate world’s streets are lined up with companies that went through lots of restructuring – and failed in the end).
The situation
A vendor (name withheld) – I learned that they had just laid off some folks (to me, layoffs mean restructuring). Reached out to the CEO – denial. Followed-up saying so-so says this happened. Next up? CEO admits but says something along the lines: successful companies always do this. Plus the company is doing great, hiring more people, blah blah.
I’ve never been a big fan of companies making layoffs while hiring new people (and this is not limited to our industry). There is just something off about it. If you are doing so well, why do you need to lay off? It’s often the adage that savings equals financial stability or growth.
As an analyst, I’m always concerned – in this case, within our industry.
AI, here we come
It’s already happening—the freeze. In talks with more than two dozen vendors who heavily use AI in the learning tech side, sales are flat or unstable. Not everybody is having an issue, as with anything, but those I spoke with mentioned it far more often than not. It was/is a common theme.
The freeze is due to those looking at AI for their companies and thus identifying AI learning tech vendors – i.e., learning tech vendors, where AI is at the forefront.
The shine of AI is off for the corporate world. Plenty of anecdotal evidence is out there (via various articles, which are nonindustry related).
The hallucination issue is cited as the number one reason. Unfortunately, for those thinking that hallucinations will be eliminated, say, by next year, it is unlikely. There is no timetable for removing fake or false information (hallucinations). Maybe it goes bye-bye; perhaps it never does (there are experts in AI who think this is probable). You can add dozens of LLMs and believe it will solve the hallucination issue, but it won’t. You can think it is only my content, thus I won’t have a hallucinations issue. Guess what? You will (well, maybe not you, but someone at your company will).
AI bias is of concern. I often see many really smart people who forget that AI is nascent. It’s super early. Issues, well, problems will arise—things nobody thought would happen.
Heck, a few weeks back, there was an article about McDonald’s pulling the plug on their AI initiative with 100 restaurants (maybe it was a bit over 100, but anyway). The article stated that the AI had problems with people who have accents. I had never heard of that before. I can’t say that perhaps it was due only to this specific LLM (developed by IBM, and not a great look, BTW) or if it happens with other LLMs out there or far more than people realize.
Speaking of brilliant people, I’m equally surprised at the number who ignore the strengths and weaknesses of the LLM or LLMs they choose. I’m not just talking about vendors here (which is of grave concern to me), but folks adding AI to their company without doing due diligence on the strengths and weaknesses, regardless of fine-tuning and adding guardrails.
On our side – the industry of learning systems and AI
It continues to be developed and rolled out. Equally, the knowledge level of CEOs and Managing Directors who oversee these companies and add AI—you would think they would know at least something about it. Yes, there are companies that have hired in-house AI experts or AI experts who know the ins and outs. But there are a lot of people, sales executives included, who are thus selling their system who know nearly nothing. Okay, nothing. Can you imagine a CRO not knowing something about the AI in their system that the company is pushing as a key focus or USP (Unique Sales Proposition)?
I understand why a CEO or MD wouldn’t know the ins and outs unless they were steeped in the knowledge and insight or even development aspects of it, but if you are talking to people about your system and you have zero knowledge of the AI in your platform or tech, then now is the time you should.
If your own people say that it is “accurate,” then what does that really mean? To me, this implies that it is always accurate, which is impossible.
One vendor ( who pushes AI-powered for their learning system) notes all the wonderful things it can do. Nowhere on the site does it ever say that any LLM (including their own) can produce fake or false information. I would think this is relevant. They also say they are “The AI-first learning platform.” This is funny because others out there say the same thing. A reason, BTW, to ignore any marketing spiel, including their comparison table – I assume the traditional software is a CD-ROM or a board game.
I decided not to mention their name—sorry, there is no free publicity here. Perhaps you know them already. Their pitch is LLM-agnostic, which, if you read my LinkedIn post this week, I noted will be a big term in the industry. Not the vendor’s name—the wordage LLM-Agnostic.
Bottom Line
Trust. Trust the economics of doing business. Trust the process—the cycle.
The support.
Most importantly, trust us.
We always deliver.
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