- COVID-19 has inspired a leaner, digital approach to children’s education
- The approach is shifting from services to products with curriculum licensing
- New model should facilitate a more orderly and efficient global expansion
When COVID-19 began shuttering schools across Southeast Asia in 2020, Singapore-based I Can Read (ICR), a children’s English language tuition specialist, was active across the region. Its private equity owner, Tower Capital, remembers the diversification across lockdown policy environments as a saving grace. Inside the company was a different vantage point.
“We were so exposed because we were in multiple markets, so the problems were amplified, and everyone was looking to HQ for direction,” Huang Yee Chan, CEO of ICR, said.
“Having a PE partner gave us comfort that we have a strong financial backer and partner. We were really looking at how do we preserve the business. We were not about to withdraw from any market if we didn’t need to. We had to think about accountability to our students, parents, and employees.”
In the end, geographic diversification served ICR well during the pandemic, with Singapore and Indonesia leading strong group-level gains even as markets such as Vietnam lagged. This was also a time of business model reinvention and digitalisation. Chan said revenue has improved 20%-25% a year since Tower’s investment.
The private equity firm acquired an approximately 55% stake in ICR for around USD 50m in 2019, when it was investing on a deal-by-deal basis. The company was warehoused during the raising of a debut fund, which closed on USD 379m in 2022. Value-add work began in earnest upon transfer of the asset to the fund in January 2021.
The investment is part of an education platform play called Ectivate, which also includes Singapore-based test preparation specialist Indigo Education. Tower benefits from Ectivate in terms of high-level learnings about education sector strategy, but the individual companies are built out as standalone projects.
Chan and two directors, Tong Yong Ngo and Aik Ping Tan, hold the balancing 45% of ICR. Tan is also the chairman of Ectivate and heads its edtech development unit.
“We deeply believe in this product [ICR] because there is enough evidence in the pedagogy and the efficacy of its curriculum. Our ambition is to take this to the rest of the world,” said Tower CEO Danny Koh, adding that this would involve adapting to a changed post-pandemic landscape.
“We did defensive moves during COVID just to make sure the business is stronger and to reduce attribution. We are now looking at more of an attack posture.”
Points of contact
ICR brands itself as the market leader in English language enrichment, catering to pre-school and primary school children across Asia Pacific and the Middle East. Its core value proposition is an approach to phonics based on blending sequences of word fragments and sounds rather than rote memorization of how to pronounce entire words.
Since Tower’s investment, the number of students has increased from 30,780 to 43,670. This does not include a small, separately owned Australian business called I Can Read that follows the same teaching method.
Tower’s ownership style aims to balance providing inputs as a high-level strategic sounding board and an on-the-ground operational partner. It has three seats on a five-strong board, including Koh, Xuan Yong Soh, a managing director, and Jonathan Ng, managing director for valuation creation.
Koh connects with management every two weeks to check in on team morale, while Ng spends two days a week with the company liaising on go-to-market strategy, product design, and logistics. Soh and Michelle Lim, an analyst, conduct monthly financial reviews, with Soh also engaging management separately on a weekly basis.
Ning Khang Lee, a vice president focused on value creation, was seconded as a project management director in February 2021, bringing a background in data-driven processes and artificial intelligence. He spends about 80% of his time at ICR.
“Ning Khang gets into the weeds of running through what the data says about our [literacy] programme for a marketing pitch we’re finetuning,” Ng said.
“He goes into details of working with the team to make sure, for example, they’re getting ready for the Frankfurt Book Fair in October. You need someone to think through booking the booth, who’s going, what materials we have to bring.”
Chan describes Tower’s contributions as largely strategic in nature, noting valuable connections with leading law firms and back-office practitioners like KPMG and PwC. The PE firm is currently sitting in on consulting sessions with McKinsey & Company about a US entry. A pilot deployment of ICR curriculum at two US schools is planned for the near term.
“Tower Capital’s perspective is always looking at what is sustainable, and do we have the right resources. As entrepreneurs, we tend to think we can conquer the world, and we don’t give enough thought to having the right people in the right place,” she said.
“We tend to be blindsided by things like organization capability development. How do we improve governance and be more mindful in terms of the macro developments that the PE world is looking at? Working with Tower gave us that perspective.”
Tower also advised on a category expansion via the acquisition of Singapore-based maths tuition provider Oodles Learning in 2022, a deal financed by ICR’s free cash flow. The company is exploring potential acquisitions of more brands and subjects relevant to its age group.
Embracing technology
Engaging with software providers has likewise driven product expansion in the form of ICR Heroes, a gamified pronunciation practice app, and an English as a foreign language reading app that is currently under development and expected to be online in three months.
Yuexuele, also known as I Can Read Chinese, is touted as a fun, interactive, and immersive curriculum. The programme is currently being soft-launched at three locations in Singapore and it is expected to roll out across Southeast Asia starting in August.
“Tower lets us focus on what we’re really good at, which is coming up with great curriculum and not getting distracted by creating tech departments within an education company,” Chan said. “We’re not tech people.”
Still, one of the most consequential digitalisation efforts acknowledges that ICR’s main target customers – millennial parents – are in their own way tech people. Following a deep dive into customer experience feedback with Tower, unmet expectations came to light about the company’s limited, text-based parent-teacher communications.
Ng said enrolment numbers remained strong, but students were staying enrolled for shorter periods – a symptom of parent dissatisfaction. The solution took the form of instant teach-parent messaging featuring video-based classroom activities monitoring, as well as general notifications and payment functions.
“We sat down with the ICR team and we aligned around the fact that we need to reduce the attrition rate of the students, and the way to do that was to launch a programme to improve the customer experience,” Ng said.
“We wanted to be much more proactive telling parents, ‘Your kid is at this level. You can practice this at home. The next lessons will focus on these kinds of sounds.’”
In some ways, this challenge was another spot-fire of COVID. When online classes stopped, parents no longer had a window into the classroom. Expectations, and therefore consumption patterns, had shifted.
Goodbye bricks
The most fundamental business change in this vein is an ongoing shift away from growth through brick-and-mortar expansions in favour of an asset-light curriculum licensing model.
The transition from services to product, conceptualised as a way of facilitating international expansion, was initiated pre-pandemic but stalled when borders were closed. The strategy’s reboot is expected to be major growth driver for the next two years, especially at private schools, where government approvals for the ICR approach will be less of an obstacle.
Advantages versus opening new physical learning centres include lower capex requirements, no real estate costs, and fewer problems related to securing an appropriate local partner in an unfamiliar geography.
“When you look at the B2B route through curriculum licensing, yes we still need to look for partners such as distributors, but we think that universe of partners is easier to identify, partially because most of the distributors for books and education content exit today,” Ng said.
The partner challenge was most clearly illustrated in a stymied expansion to Oman. ICR had been invited to set up shop in the country by an interested counterparty shortly before COVID, but disagreements about how to navigate the lockdowns soon flared.
“We went back and forth with our partner for several months and given the distance and the fact that we couldn’t travel, it was a deeply frustrating conversation,” Ng said, adding that the experience highlighted the advantages of curriculum licensing. “It’s difficult to build trust in that kind of environment.”
ICR pulled out of Oman last year but continues to target the Middle East in Saudi Arabia, Dubai, and Qatar. Chan observes that Qatar is similar to Singapore in terms of affordability, small population, and its potential to be a springboard for expansions around the region.
Entries in the Middle East will most likely be curriculum licensing-focused, although brick-and-mortar expansions remain part of the global game plan.
The establishment of new centres in new markets going forward will be more strategic rather than opportunistic in nature and likely to be pursued through a master franchise model. Japan, Korea, and Taiwan, in addition to the US, are priority targets. South America is on the radar. In Indonesia, there are plans to expand a strong presence in major cities to tier-two and tier-three cities.
During Tower’s investment period, the portfolio of physical centres ticked down from 150 to 148, even when including the addition of 14 Oodles locations post-acquisition. During the same period, curriculum licensing clients increased from three to 23, only one of which is for Oodles’ curriculum product, called onSponge.
Business savvy
Further international expansion – whether via centres or licensing deals – will be dependent on a buildout of the sales team, which has been at reduced strength since COVID. There are currently only four professionals working on business development, including Chan and her senior directors.
Sales recruiting is therefore a focus issue for Lee, and there are plans to hire 2-3 more professionals in the foreseeable future, according to Chan. Part of their duties will be to ensure that teachers in expansion markets where there are curriculum licensing arrangements are properly trained to implement the ICR method.
The number of staff, including teachers, at owned centres has increased during the Tower hold from 428 to 495 even as the footprint has receded.
Meanwhile, the academic team, which oversees teacher, curriculum, and e-learning development, has tripled to 12, not including separate teams for Oodles and Yuexuele. This reflects the increased focus on curriculum licensing and digital products versus traditional in-centre teaching.
“Prior to last year, the academic team mostly supported centre operations, coaching teachers to deliver the key messages of the pedagogy and coming up with new exercises to help students. But when you’re developing product, someone needs to become product owner,” Ng said.
“You have to think about how you’re going to support the distributors in terms of explaining the pedagogy and making it understood by potential customers. That whole product development ends up falling on the lap of the academic team.”