First coronavirus and now the power law

August 6, 2020
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When physical locations become irrelevant it changes a lot of dynamics in many businesses. It kills business models and removes the advantages the local players had.

It makes less sense to buy from your local provider if you can get the same solutions from a global source or the leader in the field.

Power law already works in many industries. Hollywood and books are examples where very few top talents reap most of the monetary gains in the industry. The distribution tail is long but it does not matter that much because most of the people cannot make a living without a supplementary income. Ask any author or actor in your circles.

This is now the reality with many industries. Let’s focus on education as an example.

If you’re not attending your school physically anymore why should you enrol in your local school? Why not shop around and select the very best you can afford globally?

As an oversimplification we could unbundle a school degree into these components:
– content (content creators and lecturers)
– curriculum (curated content)
– customer support
– brand (degree)
– retail packaging of content (volume discounts from the content creators)

If you’re a rockstar educator in your narrow niche and you have the best possible content for students why would you limit your potential to a single school?

You could as well sell the course to many schools and with the online learning platforms you need to rearrange course delivery for remote methods anyways. The temptation is high to become a known-brand and appeal directly to the students. If you become famous among the students they start to have negotiation power over the school. They do not want just any educational content but they want the content from the known individual educator.

In a similar manner, the value proposition is not exactly clear with remote schooling, as is the case with business conferences we discussed earlier. Remote and online changes the behaviour and dynamics.

The world becomes flatter and the very best become very appealing to many. When the natural local oligopoly of schools is removed the competitive situation tilts drastically towards the consumer, the student. This starts with the private schools and higher education first but ripples down to all levels with time.

It’s harder to justify local alternatives if they are not up to bar with other choices. No one wants to provide inferior education to their children if better options are available.

I used education as an example but other industries are facing the same fundamental issues. Have you stopped to think and question everything?

Watch out for power law and the global competition. It’s not a level playing field for everyone. The best thrive and the rest survive.