Building a business case for e-learning

By Tony Kypreos / February 2003

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Learning from E-history

"E-learning, surely it's another doomed-to-fail e-thing," many are saying. It's churned up waves of hype, numerous inflated ROI projections and grabbed headlines, but it will inevitably lead to less than adequate results for those gullible enough to launch headlong into such uncharted waters. Right? Well, maybe…but only if we fail to learn from previous e-ventures that wasted so much time, effort, and money.

But before we go any further, we should spend a little time reminding ourselves of the reasons behind the successes and failures of previous forays into e-space.

E-finance

Almost without exception, every bank now has an online facility for its customers to securely access personal account information online and carry out basic transactional tasks. Many sites could certainly do with better information architectures and general usability improvements, but they've generally succeeded in providing a valuable service to their online audiences The pre-eminent reason for their success is the fact that, as a communication channel, the Web is ideally suited to self-service financial tools.

E-community

Clearly demonstrating good online community-building principles of content quality, customization and personalization potential, and current activity indicators, Excite (post the Excite@Home fiasco) is now thriving again. Craigslist is another notable success story: With its simple text presentation and grassroots mind-set, it's now used by a million unique visitors per week. It is one of few such sites that has crucially succeeded in tackling the revenue problem and now commands $45 to $75 per ad for its main draw, the job postings.

Too many online communities have been built with a less than adequate understanding of what users really want and how readily they will appear, return, and contribute (especially financially) to community life. With over-inflated traffic projections, the "if you build it, they will come" fallacy has left many forums, chat rooms, and business wallets empty.

E-commerce

Amazon's model has so far proven to be reliable though their investors had to accept several years of selling every unit at a loss. Seeking a faster path to ROI, companies have often tried to sell goods too expensively over the Web—running against basic laws of supply/demand. Convenience may be desired by many, but not at any cost.

Delivery

A number of companies selling through their Web sites have found that solid online systems didn't help when their real-world processing and fulfilment systems broke down, resulting in late or undelivered orders. On the Web, reputations—and sometimes whole businesses—can be destroyed overnight.

Servers, Pipes, and Downtime

Because of the highly specialist nature of the technical systems involved, every company inevitably has to place a high degree of dependence upon various partners. A failure at any point in the line can lead to catastrophic results. In June 1999 the auction site eBay experienced a 22-hour server outage; during this time eBay's stock dived from $135 to $47, wiping out $5.7 billion of market capitalisation.

And Then There's the Online Customer...

Web users are undoubtedly the most critical and intolerant audience in the world. The medium allows and encourages them to be this way, allowing them to skip to a competitor's "store" in seconds. If they find any part of the experience confusing, or just too slow, they readily vote with their mouse...and click out.

All site developers must have a good grasp of Human-Computer Interaction (HCI) as a fundamental issue. Many sites still fail to make clear exactly how the user must proceed in what should be very simple online processes. Usability, intuitive information architecture, and visual presentation are all crucial to the customer's experience. Confusing layouts, undesired interruptions, and reams of text will quickly drive users away.

Although established brands are always going to draw the attention of an online audience, the democratic power of the Web levels the playing field so that even the biggest brands will not succeed if their sites don't provide good experiences for their audiences.

The degree to which users are prepared to trust the system, providing credit card details, etc., must not be overlooked. After well-publicized cases such as that of PowerGen's major security breach—which made hundreds of customers' credit card details publicly accessible—online users have clearly been left with questions of trust.

Summary of Failure Factors

In order to learn from the past we must understand the reasons for failure:

  • Unsuitability of the Web as a delivery channel for the particular service
  • Unrealistic revenue projections
  • Lack of understanding of the intended audience and what they actually want from the Web
  • Badly developed interfaces, unintuitive design
  • Unreliable or inadequate servers, connectivity etc.
  • Unreliable partners—including real-world fulfilment (where appropriate)

Conversely, the sites that have really succeeded have gone beyond just providing a useful service to becoming an integral part of the user's daily/weekly activity.

And so to E-learning

Perhaps not surprisingly, many of these same issues influence the success or failure of an e-learning program. You need to add elements such as good instructional design, rather than just "delivering the content," but you still need to ensure you're making the grade on the above e-critical issues. Be sure to check the basics:

  • The training channel: Is the Web actually a suitable medium for the particular type of training you wish to carry out?
  • Revenues: Is there a sound revenue model?
  • Marketing: Now will you promote and publicize the products/services well among the intended audiences, even if they are "internal audiences"?
  • Product Development: Have you developed products that the market demands?
  • Matching technology to different learning styles.
  • Partners: Do you have reliable partners from content creators to site hosting?

E-learning's own history can provide us with numerous examples of projects across all sectors, some of which have been clearly successful, but others less so.

Certainly, there have already been some notable e-learning project failures. You may have about the School of Dentistry at UCLA, which spent around $750,000 over five years developing their online courses only to find that their intended audience was much happier spending far higher fees for real-world lectures.

A number of e-learning pioneers have sought, and struggled, to capture the consumer market. Hungry Minds faced mounting debts and resulting cut-backs before their eventual acquisition; HighWired's hopes of advertising revenue failed to materialize; Fathom, which has received tens of millions of dollars of investment, will be closing its doors in April 2003. The University of Phoenix Online, on the other hand, now has a $3 billion market capitalization. Clearly they have got that elusive formula right, but their offerings were built over time, not overnight. Likewise, Cisco's internal e-learning programs are now highly regarded but Cisco too will testify to the steep learning curve they've had to endure on the way to their successes.

ROI

Even though there are numerous pitfalls to be avoided, the business case for e-learning does look compelling. The economic drivers behind e-learning are well documented, and as Fred McCrea, an analyst for Thomas Weisel Partners has said, "the real selling point is an ROI that's tangible and immediate."

Software developer iPlanet E-commerce Solutions reduced their training budget by 40 percent within a year of deploying three DigitalThink training modules for the company's 800 sales representatives worldwide. Even back in December 2000 one video-based e-learning program alone saved Cisco around US$600,000.

In order to calculate these financial benefits, the tangible results of training must be evaluated and a monetary value assigned to each. These could include:

  • Reduction of training costs: travel, accommodation, facilities and materials
  • Reduction in time to market by educating sales-force faster
  • Reduction of staff turnover; having the next level of training always available creates an environment of perpetual challenge and encourages the development of a learning culture.
  • Reduction in downtime (time to find and receive relevant knowledge/training)
  • Increased productivity (units produced, items sold, forms processed, tasks completed)
  • Increase in customer satisfaction as reflected in an increase in repeat sales
  • Increased customer retention
  • Improved quality (less scrap, less waste, less rework of product, fewer defects)
  • Attraction, development, and retention of better employees
  • If the system also allows for knowledge-capture, then a figure should also be assigned to the corporate knowledge retained.

Beyond Monetary ROI

We can all cite dozens of projects that appealed to the CFO, with their projected cost reductions, time savings, and increases in revenue. But there are a number of other valuable, measurable returns that must also be accounted for to gain a more complete picture of the true impact of any training program.

Kirkpatrick's "Four Levels of ROI" helps provide a framework for such an evaluation, identifying the indicators of positive change for both the individuals and for the company itself:

  • Level I: Reaction—How meaningful or enjoyable the training was, how the employee plans to use the lessons learned
  • Level II: Learning—How well the employee learned the information or skill presented
  • Level III: Behavior—The degree to which the employee applies what he or she has learned
  • Level IV: Results—Including increases in productivity and efficiency, decreases in absenteeism and occupational accidents, and decreases in customer complaints, etc.

To complete this model, Philips has added a 5th level of ROI to provide a percentage figure for the returns compared with the figure initially invested:

  • Level V: ROI—Monetary value of the produced results compared to the cost of training.

The Business Case

Without attempting to provide a detailed process for the development of a business case (for such, see Saul Carliner's article "Build a Business Case For Online Learning Projects" and Brandon Hall's "E-learning Guidebook") there are a few critical factors that should be spotlighted.

The business case must contain convincing plans for successful implementation and deployment. Without getting too bogged down in detail, it will need to identify the key factors that will ensure success. Capital expenditure figures and ROI projections must be included and, where possible, should be based upon the results of pilot or forerunner projects—clearly stating what will be measured to prove level of success of the larger roll-out.

Ensuring the Project Succeeds

Once the business case is defined and agreed, there needs to be a thorough Training Needs Analysis (TNA), covering:

  • Skills Gaps Analysis (actuals versus optimums)
  • Technical environment
  • Current learning practises
  • Expected or required implementation period
  • Projected administration requirements
  • Staff motivations, preferences etc.
  • Identification of key agreed and measurable success criteria

However urgent corporate e-learning may seem to be, don't launch a major campaign to revolutionize your organization's learning practices until you've carried out smaller scale projects and carefully analyzed the results.

It's also vital to consider issues of motivation (Keller's ARCS model is a good start for this), the prevailing company or department culture, ongoing course development requirements and expectations, and the ongoing staff and administration requirements. All these factors go towards establishing the company's readiness to deploy e-learning.

The Loneliness of the Long Distance Runner

E-learning, to date, has focused its attention on the "empowered learner"—the individual who is now able to organize and align every aspect of the learning arena to their own specific requirements and preferences. In the real world, however, much of our learning occurs in very social settings and it is precisely these social and collaborative aspects of learning that we need to re-introduce into the mix. Academics such as Professor David McConnell of Sheffield University, UK and Professor Richard Yelle of New School University, NYC have been focussing on this area, exploring how new technologies can unlock greater educational potentials.

With an increasing number of collaborative tools on the market to help facilitate such "social" interactions, we're all in for some more fabulous experimentations and no doubt a few more disasters—but, after all, we're learning.

Conclusion

Most importantly we must learn from the past mistakes others have made in e-centric projects. During the initial planning stages of any e-learning system, it is essential to get input and support from key stakeholders in order to effectively build a solid business case.

When starting out on the planning and deployment of any company-wide e-learning system, focus on and learn from projects that are small and achievable until you're sure you're ready to build big. By following a proven procedure and ensuring that it accounts for your real situation (discovered through detailed Training Needs Analysis (TNA) you can significantly increase e-learning's ROI. But a truly effective program does not finish with a successful deployment; you need to continually build a "learning culture" through facilitating social and collaborative learning scenarios.

CASE STUDY 1: Clifford Chance

The Initiative

At Clifford Chance, a London-based law firm, an innovative initiative using digital video took the practice's training courses online for trainees and lawyers in the Finance and Capital Markets practice.

Implementation

Developed by senior education and IT executives in the practice, the online training system is one of a number of e-learning initiatives by the firm, and is an overall approach to education, training, and career development, using an enterprise-wide LMS.

Available through the company's intranet, trainees and lawyers are able to download onto their desktops over 35 hours of presentations, in the form of animated slides containing a video of the presenter, relevant materials, and links to relevant intranet and Web sites. The online presentations are now in the process of being re-compressed for the purpose of streaming over a new Web platform.

Costs

The project did not have a specific budget and was developed in whatever time was available. Existing systems could be utilized and integrated. New streaming server for delivery of the digital video content.

Future Developments

The practice aims to have around 100 hours of streamed presentations available to all lawyers in the London Finance and Capital Markets practice, and many more worldwide. The presentation content is also available on laptops, training-room PCs and CD-Roms, for use by employees when in remote locations with no Web access. Other parts of the practice are now hoping to develop a similar program.

CASE STUDY 2: Danske Bank

The Initiative

Danske Bank, Scandinavia's largest bank, wanted a training solution for their senior account executives in strategic management—enabling them to take a more consultative role with the bank's B2B customers. Maersk Data A/S carried out a training needs analysis and by understanding the daily routines and where their knowledge could generate better business results, an instructor-led course was built. Based on the ILT success an e-learning online solution was developed to provide a high-quality and scalable training solution.

Implementation

Maersk Data developed a 14-page modeling tool to convey key knowledge on strategic management which was then integrated in Danske Bank's IT system and was made available through the bank's intranet.

The scalable system provides users with a tool to enable structured dialogue with B2B customers and places an emphasis on the understanding of strategic business analysis. The e-learning course with updated content has been successfully rolled-out to all account managers, supplementing and complementing their existing offline training program.

The modeling tool and e-learning training has created measurable business results including increased customer satisfaction, improved customer acquisition, and increased job satisfaction; it has also improved the data that the bank uses for risk management purposes.

Costs

Total costs for the solution were less than (EUR)250K and the positive business results more than made up for the investment in improving senior account managers knowledge and skills on strategic management.

Future Developments

Due to the good business results thus far, the system will be rolled out further into other training area and functions within Danske Bank, and will also be developed for business-to-consumer purposes as well.

Furthermore, the concept is now going to be the driving concept in the new HR strategy in order to ensure that training does deliver measurable business results and thus becomes an investment rather than a cost.

CASE STUDY 3: Bluewave University

The Initiative

Bluewave recognized the importance of implementing its own in-house e-learning initiatives in order to effectively reinforce its position and service offering in the e-learning solutions marketplace. The University is not only a demo of the company's e-learning capabilities, but also provides a live "test bed" and ongoing focus group for the development team.

Bluewave required a simple, flexible system to quickly bring the workforce up to speed with organizational change, new initiatives and service offerings, and key industry issues (such as Web site accessibility).

Implementation

Bluewave has used a small scale LMS for its 100 employees across four global locations. With this in place, Bluewave is able to log all participation in online e-learning courses, as well as the company's ongoing offline, soft-skills training program.

The courseware, consisting of various re-usable learning modules, was built in-house with bespoke content and Macromedia's Flash technology.

For remote working and training purposes, the system is accessible by any employee from any location with Internet access.

Costs

To get the system up and running and the first learning module live:

  • IBM X Series Server-(EUR)4.8K
  • Systems administration time-approx. (EUR)16K
  • Course creation and development time-approx. (EUR)63K

Future Developments

Bluewave is planning to make the learning modules available to client and prospect audiences.

Collaborative learning is now a focus for development. Using Macromedia Flash MX, Bluewave will build on the technology's ability to deliver live feed transfer of information, including video, to create virtual classroom environments.

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