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 Forbes, The New York Times, and TechCrunch, and attracted venture capital and heady valuations.
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 have 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:
“Competition everywhere. Few entry barriers. Rising customer acquisition costs. And, interestingly, a resurgence has occurred among incumbent, traditional competitors who have learned how to operate direct to consumer themselves.”
The bootcamp industry exhibited the same pattern.
There were few barriers to entry. The underlying instructional models of many weren’t all that innovative, nor did they have a clear and enduring competitive advantage. And although the regulatory landscape posed some problems, it wasn’t enough to keep new bootcamps from appearing rapidly across the country in nearly every major city. A specific site, Course Report, emerged to keep track of the fast-evolving space.
And then customer acquisition costs became a sticking point—a direct outgrowth of bootcamps’ central value proposition: that they were “faster and cheaper” than a traditional degree. The result of the speed of the programs was that they churned through students faster, which meant that coding bootcamps frequently needed to fill new seats—particularly if scale was a goal; which meant paying to acquire students amidst growing competition.
But for the models to retain their value proposition and be profitable, the acquisition costs had to remain low enough, never mind the importance of making sure there was enough margin so the bootcamps could also invest in the actual programs themselves—the education and career support.
And then universities began to enter the space. Rarely were the colleges able to stand up their own entities; universities arguably struggled to hire the right types of faculty members with industry expertise as opposed to academic chops, and the up-front marketing expenses could be challenging. So, they instead partnered with start-up companies like Trilogy to white-label coding bootcamp programs out of their continuing education and extension schools and take advantage of their brands to lower student acquisition costs.
In the words of McGrath:
“The DTC flurry is a vivid representation of the transient advantage phenomenon. Even dramatic early success doesn’t guarantee a lasting advantage. It turns out, strategy 101 was a prescription that shouldn’t be ignored.”
This wisdom is just as true in the world of education as it is in the broader universe of direct-to-consumer businesses.
