Building Blackboard, Part 1: Six Lessons I Learned Creating a Tech Company in the Higher Education Market

Time flies. It is the 20th anniversary of Blackboard’s founding in June 1997 and the Educom NLII Instructional Management Systems (IMS) retreat two months earlier. To mark the event, I recently gave a talk to the Arizona EdTech community on lessons for today’s education technology entrepreneurs, drawing on my experience co-founding and scaling Blackboard. Here are those lessons. In part 2, I’ll share some reflections on the state of eLearning and the learning management system (LMS) market 20 years later. So enjoy and stay tuned.

As genesis stories go, the co-founding of Blackboard twenty years ago lacked that single light bulb moment that tech companies, never shy to embrace a revisionist history, like to tell. There was no radioactive spider bite moment for me to relate. Implementing back office systems at universities that were spending millions on networking classrooms and residence halls caused me to question the absence of technology in the “front office” for teaching and learning.

Reading the book Accidental Empires, my favorite tech history, helped me to imagine that an academic system was more than just another enterprise application; it was an operating system or platform for instruction. (More on that distinction in Part 2.)

Discovering and joining the nascent Instructional Management Systems project convinced me there was real potential for what we now call learning management systems and an onramp for two 24 year olds — my co-founder Michael Chasen and me — to launch Blackboard LLC. And one year later, turning Blackboard LLC into Blackboard Inc., with Dan Cane, Stephen Gilfus and the rest of the CourseInfo team out of Cornell ignited the critical spark of talent and technology that set us on our way.

Instead of a single bolt of lightning, getting Blackboard off the ground involved a series of necessary but insufficient conditions, ideas, events and talent. A game of Jenga, in which you are adding and removing sticks at the same time. What now seems certain was remarkably fragile and contingent in the building.

Thanks to Ben Horowitz, Sam Altman, and others, today’s tech entrepreneurs are one click away from hard-earned experience about building a technology company. But advice on building a technology company in the education market? That’s harder to come by. I agree with John Katzman that the education market is different. And so as a nod to the 20th anniversary of Blackboard, here are some lessons I learned about what makes the higher education market unique. In this social sharing world, I’ll start with the punchline.

1. Universities really are unique social organizations. (So approach them differently.)
2. Features can become products, which can become companies. (Don’t be afraid to start narrow and own a lane.)
3. Never hire a magician for your trade show booth. (The market is evaluating you.)
4. Beware proximity to the instructional core. (There is a big difference between enabling vs. owning learning outcomes.)
5. Colleges and universities value what they pay for. (Don’t give things away free.)
6. Don’t blame the education market if you fail. (You need to be both radical and incrementalist.)

Now, for those who want to go deeper, read on.

Colleges and Universities Are Unique Social Organizations

While not the most original observation, the implications are easily overlooked. Colleges and universities are decentralized and “loosely coupled.”  Academic units often act independently, while faculty operate in relatively autonomous classroom environments. The purposes of education are many, meaning there is no one primary output against which to measure ROI.

The administrative apparatus is isomorphic to the academic side, dividing itself up into rigid professional categories and domains of responsibility — student life, registrar, academic affairs, career office — each with its own professional association, much like the faculty divide into their scholarly disciplines. Governance is shared, while accountability is diffuse. In large part, colleges and universities gain legitimacy by looking, feeling and acting like other colleges and universities. Combine these attributes with the fact that educational organizations shape lives and each life is precious, it’s not surprising that they are slow to change. (Other than that Ms. Lincoln, how did you enjoy the play?)

So what are the implications?  We learned a few key ones at Blackboard.

First, you need to shape your product strategy to respond to the organizational features I just described. At Blackboard we packaged learning management into three tiers. Since instructors are autonomous, we allowed them to create a CourseSite on Blackboard.com. We used adoption by faculty on Blackboard.com to drive sales of an affordable departmental or school-level license: all of the course instructional tools, but no enterprise integration or supra-course / multi-course functionality.

We didn’t monitor or enforce limits on the number of courses, faculty or students on the departmental license. Instead, we used adoption across departments to drive an enterprise-class license that added integration, more scalable database support, and functionality required to manage multiple courses, either as a faculty member or a campus administrator.

Equally important to our product strategy were “The Two Commandments.”  Actually, they weren’t called that very often, but we lived them as if they were sacrosanct. Ease of use and enterprise technology. We focused on these two strategic pillars with as much discipline as we could muster. The idea was simple. The winner of the LMS market would be the company with the most widely adopted platform. The key to enterprise adoption was winning the hearts, minds and usage of faculty. At a time when many universities ran different LMSs in different academic units, the platform that was sticky and caused the greatest revolt among the faculty if discontinued would be the one in pole position for the enterprise contract. And if you appealed to what the CIO needed to provision an LMS at scale, you’d seal the deal.

Our chief rival in the day was WebCT, which had a lot more features. If a university evaluated Blackboard and WebCT using a feature checklist, we lost most of the time. Our sales reps would scream bloody murder that we needed adaptive, multi-choice, fill-in-the-blank, discussion board polls (I hope that’s not a thing). But we’d say no. When the university evaluated platforms by having a group of faculty use both systems, we won most of the time. As a result, Blackboard achieved more adoption at multi-platform campuses. And by pairing ease of use with a focus on the enterprise technology concerns valued by the CIO — the actual buyer with a budget — we got the campus-wide mandate, which opened the door to additional products and services over time. The lesson? Work bottom up and top down. Treat the initial adoption as winning the battle, not the war. Plan for a protracted period of time until you are adopted at the scale, and with the economics, that your business plan optimistically expects up front.

Features Can Become Products and Even Companies

Another way in which universities are unique is in the lines they draw between functional departments. Universities don’t buy solutions for processes. They buy them for functions and departments, giving rise to a lot of narrow “point” products that may not at first appear to have an obvious path from feature to a broader value proposition. Nevertheless, beware crossing categories. Librarians buy library systems. Registrars buy course catalogue systems. Want to sell a career service?  Your buyer is the career office. If the problem you solve crosses categories, as many valuable solutions do, or your core constituency lacks a clear champion and buyer (like advising did until recently), you’re in trouble. You can swim upstream and try to bring together committees or task forces, but that’s an almost impossible route.

Universities also don’t like functional overlap. When your new product includes capabilities that exist in a product already adopted on campus, even if the capability is marginal to the new product’s value proposition, you invite problems. University administrators will object: “We already have that.”  It’s in our SIS.”  “That touches another department; we need to set up a committee.”  It is guaranteed paralysis.

The conventional wisdom is that many ed tech entrepreneurs are too narrowly focused, with ventures that are little more than features masquerading as something bigger and more impactful. But it is OK to enter the market in a focused way that allows you to expand over time against the broader opportunity. Starting in a narrow lane allows you to clearly align with a specific buyer and department in the org chart. At Blackboard, we worked hard to cultivate the CIO and director of academic computing as the buyer. We lucked out that those roles were ascendant. We framed the LMS category narrowly at first. For example, we purposefully drew boundaries on the breadth of what an LMS did in order to avoid category creep with the SIS.

As a result, Blackboard was dismissed as too niche. We told a story about the growth of eLearning. We told a story about being the platform for education. But most investors saw something different. They saw generic groupware-type features being sold into the relatively small academic market. They accepted that we were more than a feature, but they didn’t see a company. Take iParadigms as another example. If checking papers for plagiarism isn’t a feature, I don’t know what is. Turns out it also makes for one hell of a company, too.

One way in which we were discouraged from taking a narrow focus was in what our approach meant for the size of Blackboard’s addressable market. We were selling web course tools for $5K a year. Attain 75 percent market share of 4,500 universities, and our market opportunity would be a pittance. We were dismissed.

Nevertheless, we built up slowly through our product roadmap, from the first $5K license for a course tool to eventually standardizing as enterprise-class software at $50K or higher price points. We established relationships and a trusted advisor position to address the bigger market opportunity, which was eLearning and the rise of academic computing in higher education. If we started big and comprehensive I believe we would have failed. It’s better to risk being a feature or product to gain traction from a clear buyer and minimal product overlap with an entrenched player, and then grow from there.

Never Hire a Magician for Your Trade Show Booth

When Michael Chasen and I attended our first EDUCOM conference (or was it CAUSE?), we noticed that an SIS vendor, who shall remain nameless, made a professional magician the center attraction of their booth. Entertaining, but odd. The education market is relationship-driven and values authenticity. Especially when you are a start-up. They are evaluating and buying you. Your team. Your vision. Your values and passion. Oh, and they also are checking out your product, which can be difficult to showcase over the noise of a magician.

At Blackboard we invested heavily in events. (Our booth got so large at EDUCAUSE I think we debated adding plumbing.)  In today’s modern marketing technology world that may seem old school, even dumb, given the cost involved. I don’t think it is. The education market likes to meet:  by professional association, by region, by type. Conferences are where peer-to-peer engagement drives reference selling, perceived leadership and momentum. It’s where a start-up can stand out.

Circa 2000, when you walked into the Blackboard booth you were greeted by someone who had been at Blackboard for a while. They were clearly having fun and were fun to engage. They believed in what we were building and could communicate it fully. No passing you over to “the founder.” They all felt like founders. They knew the product. They knew your institution or the last one you worked at. They probably barkered you in by violating EDUCAUSE rules and filling the walkways with spectators for a demo (not a giveaway drawing!). They made their presence an extension of the brand, the mission and the partnership. Go to trade shows, and put your A team on the floor.

Beware Proximity to the Instructional Core

In most industries, a pretty smart strategy is to identify the core productive activity of the organization and improve it. The closer you are to that core and the more value you add, the more rent you can extract. This is tricky in education, in part for the reason I touched on earlier: colleges and universities strive to achieve multiple, sometimes conflicting, outcomes. But it’s problematic for another reason. The core of an education organization is instruction. It’s the classroom, and it’s learning. Yet selling against the proposition of improved learning outcomes is dangerous. At Blackboard we made a point to stay at least one degree away from the instructional core; we decided to be an enabler, not a driver.

Education is political, with many constituents: parents, faculty, administrators, accreditors, activists and others. Put yourself at the center of the instructional process, and you put yourself in the middle of the bullseye. Once upon a time Pearson operated under different brands that made the totality of what Pearson did less obvious. I remember when the Pearson brand could be found on fewer than 50 business cards, despite being a large and global education business. Also back then, Pearson generally operated as an enabler of learning. It was a tools and technology and service provider. Then Pearson became, well, Pearson, unifying all of its business under a common brand, with the consequence that Pearson was everywhere. And Pearson became about delivering learning outcomes. I admire Pearson’s integrity and chutzpah in holding itself to this standard, but the backlash they are weathering from all directions is instructive.

The closer you get to claim ownership over the teaching and learning process and the more you sign up for delivering learning outcomes, the more dangerous the path you take. You (your product) probably can’t drive learning outcomes in isolation. Learning outcomes are difficult to measure. I won’t say impossible, but I think the ed tech sector is way too enamored with the idea that there are disruptive learning technologies, and those technologies can create exponential value through delivered differences in learning outcomes.

The problem is not only that the state of education research is poor, reducing results to the predispositions of political stakeholders. It’s getting better and can be fixed. The issue is bigger than that. You see research on outcomes from learning technologies is almost never about answering the question, “Is this technology effective?” In education, it’s almost always about the question, “Under what conditions is this technology effective?”  Learning apps are not pharmaceuticals, raising your comprehension the way statins lower your cholesterol. Results vary by student, by teacher, by social context, by implementation, by a lot!

At Blackboard we committed ourselves to improving teaching and learning by empowering the instructor. We embraced the word “help.” Blackboard’s initial mission was to “help transform the Internet into a powerful environment for teaching and learning.” At Parchment, it’s to “help turn credentials into opportunities.” I insist on the word “help” over the objections of copy writers, who despise the way it weakens the punch. But as a third party, we are NOT the ones doing the work that matters. It’s the schools, universities and teachers. They are the heroes of the story. So think twice before putting yourself and your solution at the center.

Colleges and Universities Value What They Pay For

This one can be short and sweet. While it’s tempting to give away your product free of charge to get a pilot going, or overcome budget objections, don’t do it. I remember Casey Green describing the “higher ed handshake” as one in which the hand is open palm out. Universities often ask to get a product for free, promising to be a reference or case study. I do not doubt their sincerity, but rarely does it work out. In reality, universities implement and adopt what they value. If you want them to use it and make an impact (and be a reference), insist they pay for it.

Don’t Blame the Education Market If You Fail

While “It’s me, not you,” may explain why some relationships fail, it’s a cop out when it comes to explaining failure in ed tech. It’s us. It’s always ultimately us. Sure, we can complain about slow sales cycles and buyer shortsightedness. The market is fragmented and purchase does not equal adoption. The stereotype of the Luddite faculty member or status quo administrator is a tempting one to fall back on.

It’s our job as ed tech entrepreneurs to crack the code, and the code is crackable. When we do, the same dynamics that make the education market tough to scale equally make success so defensible and loyal. In recent memory, we launched Blackboard in 1997 and took the company public seven years later in 2004. Chegg was founded in 2005 and went public eight years later in 2013. 2U was launched in 2008 and became a public company six years later in 2014. Instructure was also launched in 2008, and went public seven years later in 2015.

Sure, these successes are notable in part because they are the exception in a market where most ventures fail to scale. And they each have their own story on what made the difference. But there is a balancing act that I think they all got right between continuity and disruption. Cracking the code in my humble opinion is about being a radical incrementalist.

I wrote an article two years ago explaining what I mean by radical incrementalism. You need to be radical in the way that most tech and social entrepreneurs naturally gravitate towards: seeking big systemic change. But you also need to recognize that the way change manifests itself in higher education is typically incremental: A leads to B, B to C and C to D. Rarely does A lead directly to D. We need to meet the university where it is, not where we want it to be. We need to go after big ideas with concrete, first order solutions.

Déjà Vu All Over Again

In short, building a higher ed technology startup is hard. Yes, even the second time around at Parchment, where I get to work with an incredible team to help turn academic and professional credentials into opportunities. I am grateful for all that I have learned and humble about the degree to which I actually practice what I preach. I hope these lessons are helpful. Back in 1997, Michael Chasen and I would rationalize that expertise was overrated. We didn’t know what we didn’t know, and our “fresh perspective” (read: inexperience and ignorance) allowed us to approach things differently. Now it’s twenty years later. And I have become what we mocked. A purveyor of experience and its virtues!

Please keep a look out for Part 2, where I’ll tackle what I thought the LMS would grow into, what happened, and what is still to come.

There’s always more to learn.