How Can You Turn Disruption into Opportunity?
As the world's largest K-12 educational publisher, Houghton Mifflin Harcourt faced a severe disruption in the marketplace for textbooks. Kids and teachers have been turning to digital devices at the same time school districts have been hit with budget cuts. HMH collaborated with Innosight to institute a reliable innovation process for meeting the demand for new kinds of learning products that prepare kids for the future.
The Boston-based firm traces its roots back to the beginning of books in America, publishing the likes of Hawthorne, Longfellow, Emerson, Thoreau and Twain. Nowadays, textbooks account for more than 90 percent of its revenue.
But education is undergoing tumultuous change as kids and teachers rely more and more on tablets and smart phones. "We're at a real tipping point with kids and how they learn, with teachers and how they teach, with principals in how they manage their schools," says Rita Schaefer, Executive Vice President at HMH.
Budget shortfalls mean that the market for bound textbooks is shrinking. The traditional business model of states allocating money to adopt print products has been disrupted.
"That said, there's still a strong need in the market to help students perform better," says Senior Vice President James O'Neill. "Everyone who reads the headlines knows that our students are under a lot of pressure to compete."
Organizing to Innovate
HMH had successfully created digital curricula for K-12 math and science. Its Fuse algebra and geometry apps for the iPad as well as its Science Fusion digital pathway have been heralded as groundbreaking.
But the market demanded much more, across dozens of product lines. So HMH turned to Innosight to grapple with the disruption in a more holistic way. "We couldn't really start this process on our own," says Schaefer. "So we went to Innosight to get the tools to have a reliable, repeatable process that we could instill in our people."
Led by Partner Kevin Bolen and Principal Alasdair Trotter, the Innosight team recommended a new way of organizing the company—around customers rather than products. The shift meant focusing on the needs of students and other stakeholders, rather than on the management of categories such as literature, math and social studies.
That would put HMH in a stronger position to build a pipeline of both print and digital products based around how education is changing.
Getting Closer to the Customers
Innosight's "jobs to be done" framework served as the new innovation playbook. The idea was to take a complete view of the many reasons why stakeholders in the system "hire" learning products.
This effort involved executives and Innosight team members spending time at schools to determine not only their learning and economic requirements but also their often unstated social and emotional needs.
In some cases, e-book readers and tablets have been shown to improve learning outcomes. But what other jobs could they fulfill?
The Crisis in Cleveland
In March 2011, the Cleveland School District was suddenly faced with a $47 million budget deficit. That meant closing some schools entirely while eliminating programs and laying off teachers in others. Under all scenarios, textbook purchasing would be cut.
Applying the learnings from Innosight helped HMH reframe its approach to Cleveland—by introducing itself not as a textbook publisher but as an educational partner that could help address multiple challenges.
By the fall, HMH had pulled its content onto the Nook, Barnes & Noble's color-screen e-reader, and launched a first-of-its-kind pilot project in Cleveland. Not only were the Nooks cheaper than a collection of bound books, but they made backpacks lighter. Giving kids new devices also made them feel as if the school system cared more about them during a difficult time. Teacher liked the e-readers better too. "It makes them feel like they're moving in a different direction," says Schaefer.
The Digital Transformation of Learning
But that's just the beginning. "What we're seeing now in the market are many different models for personalized learning and blended learning," says O'Neill. "And through our work with Innosight, we now have a process so we can be there to test and learn."
As HMH used in-market learnings to guide new products and business models, the company moved into the future with a powerful ally. In January 2012, Apple announced that HMH is a key partner in its digital textbooks initiative for the iBooks 2 platform on the iPad.
Based on the strength of both its newly refreshed print and digital product lines, HMH staged a turnaround that resulted in a successful IPO in 2013 (NASDAQ: HMHC). By 2015, HMH expects to get more than 50% of its revenue from digital learning products, up from less than 20% when the transformation process began in 2011.
"Innosight really were the teachers for us to think of our disrupted market as an opportunity," says Schaefer. "Where we were looking at it as blocking our future, Innosight helped open the doors to look at it as the opening we needed to help us get to the future."
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