Welcome home to CL Educate! Thank you for joining forces to further build CL as the most trusted and innovation-driven education services company over the next decade. This is my first ‘satyaspeak’ as a listed entity. Hence, it might be a slightly longer one for which I seek your indulgence. You are welcome to read my earlier pieces on my blog – www.satyaspeaks.com
Our Core Purpose
Very early on in our entrepreneurship journey, about 15-16 years back, we sat down to define our raison d’être – aka – to outline our core purpose. After many years of being on the ground and post a few weeks of reflective sessions, our core purpose was clear: “Enabling youth to realise their potential and help their dreams come true”. I am glad to see that this has not changed in the last decade and a half. Every single action by 1000s of CL-ites every day is aligned to this purpose.
Along with the sacrosanct core purpose, our core values – ROOHI – Risk Taking, Openness, Ownership, Honesty & Commitment and Innovation continue to hold us in good stead.
The only unchanging aspect of our business is our purpose and our core values. This has remained a magical potion of entrepreneurship for me.
Our role models
Even as we wish to become a role model company for entrepreneurs, we have focused on learning valuable lessons by tracking some of our role model companies including HDFC, Infy, Google and GE, to name a few. As you know, GE has entered-exited-bought-sold over a 100 businesses since inception, to be good enough to celebrate 125 years of entrepreneurial journey this year. HDFC and Infy are closer-to-home role models that have attained leadership, high governance and high stakeholder returns. As a consumer brand, we would love to emulate FMCG companies in 3-5 years’ time on the ROE parameter.
In short, we would like to emerge a winner as we move into the next phase of our journey.
Our business: CL101 for you
I wish to share with you some of our understandings that have come about from managing a premium education services company in the last two decades. These are:
1. Seasonality –
We cater to the career and life dreams of young adults and youth in every family – from the bottom of the pyramid to the top high net worth families. Each product has its own seasonality. At an aggregate level, we have smoothened this out through product diversification.
2. Different markets move at different speed –
Many new opportunities arise when the admissions or recruitment criteria change or when new careers take birth or gather mass and momentum. For example: MBA in early 2000s, Law for the last 5 years, Banking and PSU in the last couple of years and so on.
3. Our performance cycles:
There is a term in CL called ‘exam year’ as a parallel to ‘calendar-year’ or ‘financial-year’. We track our business on exam-year basis not just on a monthly basis or a quarterly basis. That is, CAT 2017 and CAT 2018 can be sold in a month and they move at different rhythms. In that sense, this is not strictly a Q-on-Q driven business.
4. Immediate and Direct linkage to events:
Examinations, festivals, elections, etc. affect our business calendar more often than not. For instance, even as I write this note, the class XII board exams are underway. The CBSE exams finish this year (due to Elections in UP, Punjab, Goa etc.) only by the third week of April (unlike March every year). All the crash programs admissions for entrance examinations like Law, HM, BBA, IPM(IIM-Indore) move into April as parents like their children to focus on XII Board exams before shifting their attention to the entrance exam crash courses. Similarly, new batch launches for various exams are linked to the announcements of exams, PSU / Bank vacancy exams, and so on. Shifts of revenues by 30-60 days is quite normal.
5. Managing Headwinds and tailwinds:
Headwinds and tailwinds are integral to every flight. We believe we have learnt the art of making the tailwinds count even as we have withstood and beaten the industry performance during headwinds. For instance, our MBA tailwinds led growth was a 25X (2002-7), Law has grown a 100X (2004-2015) and enterprise business has grown 10X since 2009. On the other hand, when MBA headwinds played havoc (2008-2013) with most players, we managed to still grow 5X as a company due to our proactive diversification strategy.
6. Entrepreneurs driven:
In a curious way, CL Educate is an entrepreneurial eco-system that thrives on the energy, creativity and ownership of young entrepreneurs. The core business is built on the franchisee model (biz partner, in our parlance) which drives CL in over 100 locations. The core team focuses on R&D, technology, academics, brand, biz planning and reviews. The entrepreneurs drive their business to the best of their judgement with full focus on customer acquisition and deliver delightful fulfillment.
At the same time, CL Educate also has looked at new verticals by acquiring new start-ups by young, dynamic and creative entrepreneurs. Our entry into newer businesses through acquisitions of hidden pearls is now an acknowledged part of testprep industry in India.
I would like to move from CL Business101 to sharing some perspectives on how we plan to bring growth at CL.
Our growth mantra: Asset-light & Technology-led
The singular growth mantra will be to focus on knowledge/career services that have these attributes. We think there is a terrific future for these services. Organic, as well as inorganic, occur to us equally well for their own specific and compelling reasons. We will continue to pick the option that has superior chances of success in shorter time and that enhances growth and ROE.
1. Knowledge products growth engine: special focus
Segments such as IAS, GATE, Engineering, and CA are Knowledge Product (KP) segments. Growing these organically and with select inorganic integrations will be one of the key initiatives as we move forward. The delivery mechanism for KPs has to be tech-backboned, driven and scalable. The ETEN acquisition, once complete, will provide this backbone for CA and IAS. We will add more over the coming quarters as this gathers volume.
2. Research services:
The second year NIRF rankings of universities and colleges have been released. This movement of focus on research in India had triggered our majority stake acquisition in Accendere, the research incubating and services company. We have also launched the academia-industry research collaboration platform in Sep 2016 (www.wainconnect.com). We believe that this could be our significant growth driver. Arguably, Wainconnect has a potential to work with universities and corporations far beyond Indian shores at the next stage of growth.
3. Ed-Tech, ML, NLP, MOOC: our ‘MOAT’
Technology-pedagogy-learner outcomes (TePeLo) are the three dimensions of any effective innovation in education services. All three have to be blended appropriately to effect business growth in a sustainable way without losing sight of unit-economics and profitability. We believe that CL has this secret sauce. Our supported and curated start-up, 361degree minds, will be our vehicle for Ed-Tech led disruption over the next few years. 361DM is a nexgen curated-MOOC that understands the TePeLo equation very well along with a no-compromise attitude to unit economics.
Our internal research and tech-work led by Sujit is focused on AI, NLP, RPA, etc., and we will make it work in our industry at the same speed at which it is being discovered in other industries and other Geographies globally. From a business perspective, this will broaden and deepen the ‘moat’ and will improve profitability steadily.
4. Capital reallocation: Exit from Asset Heavy businesses
This is just a reiteration rather than a new resolve. Our exit from asset heavy K12 and the release of funds will enhance two things favourably – additional capital available for growth in our core business and also enhance the management bandwidth. We look forward to these affecting CL Educate’s performance measurables noticeably. The release from K12 would be about Rs 50 crores this year. We hold about 44 percent in the new K12 services company into which CLEIS has folded in. This is a profitable entity already and will not seek any more capital from CLEducate. We see our complete exit from this over the next two years when the capital is raised by this entity for its own growth. The sale of our Greater Noida campus should release about Rs 45 Crores in the coming 12 months.
In sum, we see a decisive exit from all asset heavy businesses and focus on asset-light services part making a visible impact on CL. As I wrap this blog, I wish to share one thought that has been my North Star for long.
Jack Welch, the celebrated GE leader, has said that an effective entrepreneurial leader works between 33% and 66% of data sufficiency. He has opined – “You are a clerk if you want more than 66% relevant data and you are a gambler if you are decisive with less than 33% of data”. We, at CL, action this. An entrepreneur, similar to a sportsperson, plays by staying anchored in the future and yet totally focused on the ‘here and now’ (present). Yet, analysis and reflections serve as valuable inputs to improve oneself and to not repeat a mistake again. We have always owned our decisions regardless of their successes or failures. We have had our fair share of errors in the last 2 decades. Looking back, a small percentage of our decisions hit the bull’s-eye but they have hit big time. But to minimize the impact of the rest of the decisions, we move in short but decisive steps and we quickly call it off when we see the need for course corrections. We constantly work to make that percentage better by staying rooted and staying open to feedback. We intend continuing in this spirit.
At the same time, we would like to build our reputation for our uncompromising ethical business practices and corporate governance standards as that alone is the saviour at all times – good as well as bad. Business outcomes may not always be in our control, however, a strong foundation based on intellectual honesty is. As I mentioned at the start, we are influencing the next generation, we are educators, knowledge disseminators and guides to those that are the future so a commitment to good governance in paramount.
As I conclude this version of ‘satyaspeak’, I would like to reiterate our welcome message. I would also leave you with an invitation to contribute proactively by contributing anything that you may have to offer. Remember, ours is a simple business and you, in your own way, are a CL Educate in your own world – i.e., enabling the career of a youngster to the best of your abilities.
Welcome to CL Educate.
Satya Narayanan R