Ray Henderson

A Letter to Our Clients

Over the course of the year, I enjoy a large quantity of anecdotal feedback on how we’re doing – emails, client meetings, Tweets, etc. – but it’s our client satisfaction surveys that give me the best overall view of our progress. These are the numbers I look at to see how well we’re doing. In the spirit of 2011 review, I’ll share news of the direction in those surveys, alongside a couple of key milestones we reached this year in the digital content and open education areas. I’ll also preview some of the news you can expect from us in early 2012.

Improving the Experience

Since I arrived at Blackboard we’ve made the improvement of our product and service quality a tremendous focus. We needed to be much better in these areas, and we committed a great deal to the effort with more staff, resources and new programs. By far, this has been the biggest priority for us as a company during my time at Blackboard.

The latest results from our independent surveys show dramatic progress. Client satisfaction levels have continued an upward trajectory. In nearly all areas we survey it rose sharply in 2011, and now rests at the highest levels we’ve seen since our measures began. These include our responsiveness as a services organization, the transparency of our business dealings, the stability and quality of our products, and the total value we provide to the institutions we serve. 

Hearteningly, the sharpest rise was in the number of clients that would recommend us to a colleague. While we’re not yet reaching the absolute goal I’ve set for these marks, this is a welcomed affirmation that our clients are witnessing the benefits of our improved focus on fundamentals and execution in doing what we say we’re going to do.  It’s no surprise that the curve showing the percentage of clients renewing their relationships with us is trending positively as well. Both buoy the spirits of our team as we embrace 2012, and ready for market further expressions of what’s been seen in recent years.

Our next step in openness – The “Share Button”

Openness is a tricky term in ed tech these days. Some think it’s over-worked by marketers eager to align with a positive meme. We’re pleased to be judged by the facts about what we’re becoming, and what we’re enabling for our clients and in the industry relative to what’s been done previously by any firm. We’ve shown consistent and energetic support for open education standards, for opening of our platform and the data that resides within it, and for interoperability with other platforms whether commercial or open source. 

In the final quarter of the year we unveiled our latest direction under this heading of openness. At EDUCAUSE we made news about openness in two ways. First, we demonstrated native support for Open Educational Resources (OER) in our CourseSites learning platform and laid out a vision for how this would reach to all instances of the Blackboard Learn platform. Second, we retroactively modified licensing terms to ensure our clients greater latitude in using their investment in our platforms to expand their reach into their learning communities, however they define them. 

Neither of these moves had immediate financial gain for Blackboard. In fact they will have some negative financial impact on our licensing revenues. But what attracted us to both of these moves was that they could better align us with the mission of the educators we serve. One of my mentors, Tim O’Reilly, left a most lasting impression on me with his advice that building a great company is about “creating more value than you capture.” I hope that these investments in openness and others to come will be viewed as examples of that spirit growing within Blackboard.

Learning Platform & Learning Content:  Better together.

In 2010 we made a bold statement about our desire to innovate in the use of learning content within learning management systems. Our initial partnership with McGraw-Hill won lots of attention, and this year we’ve expanded the effort in partnership with all of the major publishers in the education space. In 2011, we also delivered in the form of a real solution, at scale: over 700 institutions have activated a Building Block that lets instructors and students access McGraw-Hill tools and titles inside Blackboard Learn. The effort brings a fundamental change to an area that hasn’t changed in a decade. It’s the most elegant form of integration between platform and content in our industry, and we’ve done it across hundreds of titles and with highly used products like McGraw-Hill’s Connect™.

This month brought our first wave of external feedback in the form of a user survey showing that 95 percent of participants in our field trials found the integration to represent a “significant improvement” in their experience with this product. In a world where consumers expect their tweets to magically appear on their Facebook pages, it’s easy to understand the expectation that their learning content be blended into their learning platform experience. It’s also a mark of achievement for industry partnership around educator needs and collaboration to implement using open standards for content and systems integration.

The Year of Mobile

We’ve had lots going on in the LMS space, but 2011 was also a transitional year from a product standpoint. It’s been a long time since Blackboard could be viewed as just an LMS company. But this year the concept of Blackboard as leading provider of a multitude of products and services across the institution was strengthened through a number of examples. New versions of our Blackboard Connect and Blackboard Collaborate products saw significant adoption. And we introduced major new capabilities with Blackboard Analytics and Blackboard Student Services.

But the most striking example is in the mobile arena. I think our work in mobile is the most innovative and thought provoking that we produced during the year. And it’s a great example of a new product set that was delivered rapidly, but with solid execution in scale, quality and support.  It’s not surprising to see the strong adoption as the market for mobile learning and mobile services applications take shape. Or to see the Campus Computing survey confirm some of these strong gains in share as experimentation in the field shifts to real use.

Peeking at 2012: Learning Analytics, and a New Look for Blackboard Learn

Going forward, we won’t let up on our efforts to continually improve our fundamentals. But this year we’ll also open a new focus on innovation in some important areas. We’re working on a number of items in the social/mobile/analytical realms that you’ll see from us in 2012, but I’ll preview here two important items we’ll be rolling out in the first few months of the year:

• A comprehensive new design for Blackboard Learn: We’ve accepted what I think is fair criticism for product design that hasn’t evolved rapidly in recent years. In a market with increasingly sophisticated consumers of user interface, this matters greatly.  News of a major modernization effort for our UI has been leaking out of our beta program, and demand is high for the reveal. Our most beautiful new product release ever is about to appear. Nicknamed “The Ocho” by our team, Blackboard 9.1 Service Pack 8 is nigh. Its curves and conventions are all conceived for 2012.  But importantly, while the surface will sizzle, the underlying metaphors will remain familiar to the many millions that use our product daily. It’ll be available for all this quarter after some final tuning based on beta feedback.

• A new product for analytics: We’ve just concluded a fantastic year of growth for our analytics product line, and now have over 150 clients using our product in production. The native interest in a pre-packaged application with out-of-the-box integration with SIS frameworks proved to be just as intriguing to our community as we’d hoped. Participation in our beta program for our latest module for the analytics suite, Blackboard Analytics for Learn, has been robust. We’ve confirmed that this product is providing learning leaders an unprecedented view of learning activity, and that it’s making it easier for them to set and measure learning goals at enterprise scale. The general availability of this product will be announced shortly.

Hopefully this note gives you a sense for how we’re doing, and what’s to come in the year ahead. There’s much we’re not ready to mention yet. But suffice it to say that I think it’s gearing up to be our best year of delivering innovations in the products and services that we offer, and sustained development of the openness and transparency that you’ve come to expect from the Blackboard that we are becoming. As always your comments and perspective are welcome—drop me a line at ray@blackboard.com.

Cheers,

Ray

Statements regarding our product development initiatives, including new products and future product upgrades, updates or enhancements represent our current intentions, but may be modified, delayed or abandoned without prior notice and there is no assurance that such offering, upgrades, updates or functionality will become available unless and until they have been made generally available to our customers. 

 

 

Going, Going, Gone Private

Corporate Update: After months of media coverage about a potential go-private transaction for Blackboard, last week we closed the deal. Blackboard is once again a private company, owned primarily by Providence Equity Partners. Net effect? Our ownership is made up of a much smaller group of people who share a much more closely aligned idea of where we want to go as a company.

A First Strategic Impact – Blackboard deepens its K-12 bench: I’ve noted in an earlier post that one of the things that attracted us to Providence was their experience investing in education companies. One area of particular interest to us was Edline, a highly regarded purveyor of K-12 education platforms in use at over 20,000 schools in North America. Our team had actively sought a partnership with Edline to assist us in our own growth in K-12. We’re big fans of Edline’s learning community management platform, and its excellent school portal and parental communication tools. And Providence has been seeking to extend Edline to support more advanced learning management, online collaboration, and mobility support. This is the basis for our first major event as a private company. With assistance from Providence, Edline is now a part of Blackboard and significantly strengthens our K-12 forces and offerings. More importantly, we’ll improve the value of the Edline offering to our K-12 clients sooner and with greater quality than could have otherwise occurred.

The Executive Team remains, but we have a new Board: The ownership structure for the company has changed, but the executive leadership team has not. Michael Chasen continues to serve as our President and CEO and as a director on our new Board. The rest of us are all continuing in our familiar roles, save for an expansion of the team to include Edline’s leader, Rick Noble. Our new board also includes the two Providence Equity team members who sponsored the investment in Blackboard, Peter Wilde and David Phillips. Our new Board Chair is Steven Alesio, formerly a CEO of Dun & Bradstreet and division president at American Express. Charles Gottdiener, also a Managing Director with Providence and formerly chief strategy officer at Dun & Bradstreet, rounds out the new Board. Peter and David bring a wealth of experience in education company management and strategic development, while Charles brings his perspective on long-term corporate strategy, corporate development and value creation. And already I can see that Steve will bring us much wisdom from his executive leadership with two highly trusted brands. He’s focusing first on ensuring we sustain upward trends in client satisfaction with our service levels. A close second is ensuring that we’re accelerating product innovations to market for the long term benefit of our clients. I think our clients will appreciate these points of focus on their behalf. 

The Mission at Learn and our Back to School Performance against it: I’m now midway through my third year at Blackboard, during which I’ve tried to convince the world that Blackboard Learn is undergoing important changes. Our mission begins with service and a highly public commitment to create an experience of service that truly differentiates Blackboard Learn. It extends to how we conduct business, how well we listen, how well we design policy to reflect the values of the educators we serve. And especially how transparently we communicate about our decisions in this regard. Translating our mission into tangible product terms, we are re-engineering the LMS for its second decade with a real reverence for the time and delight of those who use it, the risk management of those who operate it, and the perspective on learning that institutional leaders who deploy it are more challenged to provide.

I’ve leaned on words to help me describe our vision, but the news of our deeds tells the tale about what’s really happening in Learn. Our back to school performance this year provides hard evidence of the changes in our business stemming from our mission. One statistic that pleases me well: we now resolve a higher percentage of service tickets on the same day they’re submitted than we cleared in a week just two years ago. I’ll reinforce that the scale involved is thousands of clients, in over 60 countries, and includes most of the largest and most mission-critical systems for online learning on the planet. Our managed hosting delivered an exceptional experience with 100 percent uptime in our datacenters around the globe, and less than 2 percent of more than 1,000 hosted clients experiencing any form of downtime. And as the vast majority of them are on our latest product version, with the latest service pack, this speaks well to the improving stability of our products. So our refinements are delivering real results. The blemishes that remain require refinement, and my team knows where and why with greater precision than ever due to wholesale changes in how we approach our work.

Providence impact on the Mission: I’ve been asked often in recent weeks what influence Providence may have on our strategic direction, and whether we’ll need to reduce investment to pay debt that’s been added to our balance sheet in this transaction. Especially in this climate of extreme risk avoidance, you can be sure that we have structured the debt so that our cash flows can support our repayment obligations without significant changes in how we budget for development and organic growth (and you can bet the banks have done their homework too!). Were it not Providence behind us, and the billions in committed capital they have at their disposal, our ability to invest in the future growth of our business could have been limited by a wide range of market forces beyond our control. But with them, and their commitment to invest for the long run, we’re restrained only by the quality of the opportunities we find and the limits of the vision we develop for our role in education.

Just as before, there will be areas in which we reduce investment, and there will be areas where we intensify it; but you can be sure that these decisions will be driven by long term expectations about what’s best for the business and our clients. Providence shares our belief that sustained execution and refinement in our core products is the best way to preserve and grow the investment they’ve just made. And I’m pleased to say that the type of progress in execution within Blackboard Learn I mentioned above fits squarely with the investment thesis at Providence. The improvements are paying off in improved satisfaction and growth. Providence believes as I do that the best days for Blackboard client experience are in front of us.
   
Forthcoming Announcement on Openness: A first test of our mettle as a private company is coming up next week at Educause, the major education IT show in North America, which is the latest stop where I’ll be sharing news about our new product innovations. But perhaps even more importantly, I’ll provide an update about how our vision about openness is evolving, and announce some new contributions to educators coming from Blackboard. For those of you attending EDUCAUSE, I speak on Wednesday, 11:30 a.m., in room 119B. I’ll also share an update on our news here on Wednesday or soon after. 
 
As always, feedback welcome here and at ray@blackboard.com.

Cheers.

Ray

 

Steve Jobs

I began a blog an entirely different topic as news of Steve Jobs passing arrived.  My fingers left the keyboard of my MacBook to grab my iPhone, where I saw the news. I switched off my smart playlist in iTunes, selected a few Dylan and Beatles tunes to repeat, and spent much of my day reading tributes and considering this man’s impact. 

It was hard not to be struck by the breadth and sincerity of comment by the iconic entrepreneurs of our day. Richard Branson called him “the entrepreneur I’ve most admired.” Bill Gates said Steve’s impact would be felt for generations. Larry Ellison agreed, saying he thought Steve would be the only Silicon Valley exec to be remembered widely in 100 years. Larry Page credited Jobs for his focus on user experience as a central inspiration for Google. Mark Zuckerberg said Jobs’ work changed the world. Rupert Murdoch called him “simply the best CEO” of his generation.   

These ovations from our business leaders speak volumes, but they seem to miss something about the impact of this man and his influence on our culture. It was the iPod and iTunes that finally brought home to me what Marshall McLuhan meant with his thesis that the medium is the message. The medium has become an extension of ourselves, personalized almost without limits to suit our tastes and express our aspirations more than any medium before. Perhaps only the web itself has had a more profound impact on not only how we consume information, but what we consume, and the variety of what’s available to us.  Job helped to establish a new ecosystem for information, and a new expectation of accessibility that’s truly changed world culture.

Perhaps the parting “but wait, there’s just one more thing” that Steve leaves us with will be the impact he’s had on our rubric for evaluating the tech products we use, and who we allow to become our most celebrated tech visionaries and leaders. He’s stretched those rubrics from “well designed” or “efficient” to products of such quality and elegance that they produce real delight in their use. The products he delivered were truly “disruptive,” with swaths of deadwood in their wake, and utterly beyond the iterative fare that tech marketers apply that label to so easily. And no one that aspires to leadership in a technology company can look at the outpouring by his employees without awe—he inspired his employees in ways that truly changed lives. In all, may our meditations against his yardstick bring both greater humility for those that aspire to lead, and greater passion for getting it right by those that do.

 

Blackboard's Next Chapter

This post marks the end of a self-imposed quiet period while Blackboard’s Board of Directors considered “strategic alternatives” for the company. As a member of the company’s senior management team I was understandably asked not to speak freely on the topic, so I held my tongue until I could share something more substantive.

First, I’ll confirm the news: Subject to shareholder approval and regulatory reviews, we have agreed to be acquired by an investor group led by Providence Equity Partners, a private equity firm with a portfolio of education companies and a great expertise in our industry. We expect the deal to be finalized later this year. Details can be found in our press release. Until the deal closes we continue to operate as a public company. Following the deal we continue to operate as Blackboard Inc., but as a privately held company.

Second, some perspective on the financial underpinnings and their implications.  Since 2004, Blackboard stock has been publicly traded, with shares owned by some thousands of holders, with the highest concentration of shares held by a few dozen institutional investors. The focus of most institutional investors is predictable revenue, and rock-steady growth. And so we made best efforts to respond to them accordingly, with precision focus on our quarter-to-quarter earnings and on the impact of our business decisions against analysts’ investment models for our stock.  Our care was rewarded, and this public form of ownership benefitted Blackboard well over these last seven years and allowed us to better scale our offering to clients. 

Private equity now provides us an alternative ownership model that’s more agile.  For starters, firms like Providence include very experienced investors willing to hold highly concentrated portfolios. They’re often willing to take longer-term perspectives and assist management in capitalizing on the most strategic opportunities for growth and impact in their industries. Providence brings a deep bench in understanding of the global education marketplace, and arrives to the fight very well informed about today’s market dynamics.

It’s natural that news of this magnitude would raise questions for our clients. Will there be sudden changes to policy, pricing, or strategy? It is our plan that the key strategies that brought us here will continue to guide our path. Critical to our success in recent years has been our focus on Blackboard’s performance on the fundamentals, sustaining the steady improvements we’re making in support responsiveness, openness, transparency, and quality. I envision no change in our underlying commitment to these fundamentals. And I’ll reassure you that we expect our pricing practices to remain within historical norms for the foreseeable future.

Providence shares our vision of improving the education experience for our clients, and of the mission critical role our platforms and services play in teaching and learning today. While we’ve yet to fully explore alignment of our ideas, we begin with similar macro views about Blackboard’s prospects and the broad scope of our future opportunity to help create education impact. I think it’s fair to say there’s strong shared belief in the importance of mobile education and a growing institutional demand for analytics. It’s also fair to say both parties believe K-12 and global markets deserve investment, and provide strong potential growth for Blackboard. Finally, we’ve discovered alignment in views about the importance of the shift from print to digital education content, and that Blackboard can catalyze this trend to the benefit of our clients. 

So I think this is a positive development for our clients, and a positive one for Blackboard. In the end our job is to balance interests of both our clients and investors, and these balances are best achieved with a view to the long run. I’m confident that the new arrangement will improve our alignment, and provide us both improved agility and additional wisdom in confronting what comes along the way.

Cheers,

Ray

 

Forward-Looking Statements

This blog post contains forward-looking statements, including those regarding the proposed transaction.  These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including but not limited to:  the ability of the parties to consummate the proposed transaction in a timely manner or at all; the satisfaction of conditions precedent to consummation of the transaction, including the ability to secure regulatory approvals and approval by Blackboard’s stockholders; successful completion of anticipated financing arrangements; the possibility of litigation (including litigation related to the transaction itself); and other risks described in Blackboard’s filings with the Securities and Exchange Commission, including its most recent Form 10-Q.  All forward-looking statements are based on management’s estimates, projections and assumptions as of the date hereof, and Blackboard does not undertake any obligation to update any forward-looking statements.

Additional Information and Where to Find It

Blackboard intends to file with the Securities and Exchange Commission (the “SEC”) a proxy statement in connection with the proposed transaction.  The definitive proxy statement will be sent or given to the stockholders of Blackboard and will contain important information about the proposed transaction and related matters.  BEFORE MAKING ANY VOTING DECISION, BLACKBOARD’S STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT CAREFULLY AND IN ITS ENTIRETY BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.  The proxy statement and other relevant materials (when they become available), and any other documents filed by Blackboard with the SEC, may be obtained free of charge at the SEC’s website at www.sec.gov.  In addition, security holders will be able to obtain free copies of the proxy statement from Blackboard by contacting Blackboard’s Investor Relations Department (i) by mail to Blackboard Inc., 650 Massachusetts Avenue, NW, 6th Floor, Washington, DC 20001, Attn: Investor Relations Department, (ii) by telephone at 202-463-4860 or (iii) by e-mail to Investor@Blackboard.com.

Participants in the Solicitation

Blackboard and its directors and executive officers may be deemed to be participants in the solicitation of proxies from Blackboard’s stockholders in connection with the proposed transaction.  Information about Blackboard’s directors and executive officers is set forth in Blackboard’s proxy statement for its 2011 Annual Meeting of Stockholders, which was filed with the SEC on April 21, 2011, and its Annual Report on Form 10-K for the year ended December 31, 2010, which was filed with the SEC on February 18, 2011.  These documents are available free of charge at the SEC’s web site at www.sec.gov, and from Blackboard by contacting Blackboard’s Investor Relations Department (i) by mail to Blackboard Inc., 650 Massachusetts Avenue, NW, 6th Floor, Washington, DC 20001, Attn: Investor Relations Department, (ii) by telephone at 202-463-4860 or (iii) by e-mail to Investor@Blackboard.com.  Additional information regarding the interests of participants in the solicitation of proxies in connection with the transaction will be included in the proxy statement that Blackboard intends to file with the SEC.

 

 

Community Colleges, Dev Ed, and Innovation

Recently, the U.S. Department of Education launched a series of regional summits at community colleges. The goal? To identify promising practices for increasing completion at community colleges. In announcing the summit series, Ed Sec Arne Duncan reinforced that community colleges will need to lead the way if we’re serious about the administration’s goal of leading the world in degree attainment by 2020.

I was pleased to note that several Blackboard clients were on the list to host one of the summits, including some that we’ve spoken with regarding a new initiative we have underway to impact an area crucial to attainment: developmental education. It’s another in a line of examples I’ve blogged about recently where we’re expanding our vision and looking to solve some larger problems in education in partnership with our clients. They’re all examples of a new form of innovation taking root in our organization as we rethink how we can better serve educators by considering new ways to tackle some of the biggest challenges they face. 

Blackboard Developmental Education: Close observers of trends in student preparedness for higher education can affirm that we face a crisis in this country.  The percentage of students who require developmental instruction prior to college level work in the college core of reading, writing, and math is staggering.  In our focus grouping with community college presidents and provosts, we routinely hear figures ranging from 40 to 90% of incoming students requiring developmental studies in at least two of these three. This is a massive challenge in finding qualified instructors at the hours these increasingly non-traditional students need.

Our response: we recognized that one of our largest clients, K12 Inc, was delivering instruction and individualized tutorial services in these exact areas. They were doing so in the K-12 markets to traditional students. But the learning objectives for the two audiences are similar. They’re offering them online, with highly qualified instructors, in some of the most tightly watched and regulated markets in the industry, and a great value. And they’re relying on Blackboard’s learning delivery and collaboration platforms to do so. So we’ve entered a partnership to create a totally new solution for co-sourcing the developmental coursework that’s such a challenge to education. We’ve had very strong interest, and we’re now beginning our first pilots of the product. (Interested parties: drop a note to Zach.Johnson@blackboard.com)

I look forward to input and reactions from our clients or the industry, especially as related discussions around completion continue this week in New Orleans at the annual meeting of the American Association of Community Colleges. Feel free to drop me a line at Ray@blackboard.com.

Cheers,

Ray 

Statements regarding our product development initiatives, including new products and future product upgrades, updates or enhancements represent our current intentions, but may be modified, delayed or abandoned without prior notice and there is no assurance that such offering, upgrades, updates or functionality will become available unless and until they have been made generally available to our customers.