Don’t Discount Student Acquisition Costs When Building ‘Disruptive’ Business Models in Education

The Flaw Behind Coding Bootcamps Attempt to Disrupt Higher Ed

In the 2010s, coding bootcamps caught the higher education world’s imagination. The movement sparked both excitement and fear.

General Assembly, Galvanize, Flatiron School, Dev Bootcamp, and more were written up in media outlets like the New York Times and Tech Crunch and attracted venture capital and heady valuations.

Photo by Desola Lanre-Ologun on Unsplash

At the Christensen Institute, we wondered if they might disrupt universities’ master’s degree programs. In some cases, they may still be well positioned to do so, as several coding bootcamps have evolved to now work directly with companies to upskill and reskill their employees or added apprenticeship programs.

Yet the initial bootcamps model was predominantly direct-to-consumer. These entities were created during the same period that business guru

Rita McGrath

described recently in her post, “The Rise, and Fall, of the Direct-to-Consumer Model”:

There was a brief period in the early 2010’s when a new business model – dubbed “direct to consumer” emerged and threatened to upend established incumbents.  A decade or so in, the assumptions underlying the model are in tatters and we’ve come to realize, as we always should have, that Strategy 101 still applies.

Companies like Casper and Harry’s epitomized the trend. McGrath’s analysis of why companies like Casper lacked enduring disruptive value also reveals the central flaws in coding bootcamps’ initial direct-to-consumer models.

As she wrote:

“Let’s start with strategy basics. In order to create a profitable business, you need to have customers who are willing to pay more than it costs you to create whatever they are buying. To scale and keep that profitable business, you need some way of staving off imitation and matching on the part of competitors, in other words, a barrier to entry, as Michael Porter told us decades ago. If you don’t have a barrier to entry, competitors can offer something similar, often undercutting your price, particularly if they didn’t have to make the investments in learning or R&D that allowed you to create the business in the first place. In novel circumstances, it’s easy to forget that this iron law applies.”

What ended up happening in the bootcamp space? In McGrath’s words about the direct-to-consumer space more broadly—words that happen to also describe what happened in the bootcamp sphere: