Disruptive Innovation is Not a Theory: It is Reality

I am very excited as I write today’s post.  I’m excited for my friends/colleagues who wrote Disrupting Class, especially my friend (and co-author of the book), Michael Horn.  I have spent the past 2 1/2 years talking about game-based learning as an example of disruptive innovation, and have shown how Clayton Christensen’s theory applies to game-based learning.  And today, I get to tell you that the theory is, in fact, reality.

About 18 months ago, I was invited to participate in a roundable discussion about the future of higher education textbook publishing.  The moderator asked the “loaded” question:  “where do you see the industry five years from now?”  I told the group, which included prominent representatives from all of the major textbook publishers, that I didn’t know what the next promising “widget” would be, but that it would NOT be developed by any of the companies present.  Time after time, history has shown us that transformational innovation, or “disruptive innovation,” is not possible from inside an incumbent organization.  These organizations will either partner with, or acquire this innovation once the innovation has achieved some level of “critical mass” or long-term viability.  This evidence is irrefutable.

And recently, I spoke on two separate occasions about how to build an innovation ecosystem around games and education.  Unless the conditions are created to foster the establishment of a game-based learning “ecosystem,” the only alternative will be for the relatively few products that exist in the marketplace will be to partner with or be acquired by a large textbook publisher, who continue to monopolize the K-12 distribution channel.  And that is exactly what has just happened.

Tabula Digita, the creator of a first person shooter game to teach algebra, was the trailblazer in this space.  They were one of the first companies to secure venture funding, and it took them nearly three years to do it.  After a cumulative investment of more than $15 million, they recently announced that their $4.9 million Series C round was funded by three major players:  Ascend Media Ventures (their Series A investor and first VC to fund their company), Intel Capital, and, most importantly, Pearson Education. 

While the exact equity stakes are of course not known at this time, the story outlining the evolution of their partnership probably went something like this:

  1. First, there was a distribution deal, where Pearson could do some experiments and learn not only how well-received the product was in the classroom setting, but more importantly, how it could incorporate it into its portfolio of offerings in a complimentary, not cannabalistic, manner.
  2. Second, it took the opportunity to get to know the people and leadership behind Tabula Digita to see if the companies could co-exist amicably. 
  3. Once no.’s 1 and 2 above were satisfactorily met, Pearson then went for the kill.  Although this time, because they still are not 100% convinced that game-based learning has reached critical mass, it mitigated risk by allowing Intel Capital to join the round. 

 

Their public comments about the deal indicate that the future objectives are to create a portfolio of game-based learning products so that Tabula Digita becomes the premier game developer for the K-12 environment.  Because of firsthand experience seeing how difficult it is for established media companies to integrate disruptive innovation into their organizations, I am maintaining a high degree of skepticism that this relationship will ultimately be successful.

However, Pearson took the logical next step, a precedent-setting next step, and I, for one, will be following this situation with great interest.

Looking at it from Tabula Digita’s perspective, I just want to tip my cap to its CEO, NT Etuk, with whom I  have met years ago, and congratulate him on successfully steering his company into a very strong position.  His shareholders, especially those who invested in the very early stages, should be highly optimistic that a final “liquidity event” is not that far away. 

A long and winding road indeed.  I just hope that this won’t be the end of innovation in game-based learning, but merely the beginning.

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