2U Inc. (TWOU), which offers online training programs, has for many years, been changing its business model. The new strategy, 2U management claims, would boost operating performance, capital allocation and increase liquidity.
The 2U company has been built on the creation of high-quality and full-scale online programs for higher education institutions for a long time. In each program created jointly with the partner university, the organization spent several million dollars and then the university launched the program under its own name and set the price itself. For 2U, this meant the delayed generation of revenue and high risks associated with the program’s likely failure. The management therefore agreed, a few years ago, to modify the operating model and to reduce the number of university programs produced according to the old model. 2U invests instead in the development of short technical courses.
The company made two acquisitions to build the new direction: Get Smarter (a business that creates short online courses) and Trilogy (a provider of professional courses for it professionals). These courses allow 2U to produce results much faster, and the demand for short programs in recent years has been higher than for university courses. That is why, for 75 higher education institutions, the organization also provides different forms of educational courses not related to earning a university degree. For adults who want to develop their abilities without wasting money and time, such training services are an enticing option.
The new business model may be a big growth point for 2U, as even before the COVID-19 crisis, there was a major crisis in higher education in the US. Even with a university degree, the high cost of schooling, as well as the challenge of finding a job, has caused many people to rethink their attitude towards having a conventional education. According to the National Research Center for Student Knowledge Exchange, in the fall semester of 2020 in the United States, the number of first-year students enrolled decreased by 16 percent year on year. Additional threats are generated for universities by technology firms providing alternative educational programs in the fields of technology, marketing, media, etc.
Against this context, 2U’s emphasis on short-term training and retraining courses may be a good solution for long-term development. The coronavirus has further increased the adoption of non-traditional educational routes, so 2U as an operator of a large number of short-term courses will become the beneficiary of a new trend.
2U Inc.’s (TWOU) stock was worth $32.45 at close of the session on Friday, having risen by more than 35 percent since the beginning of the year.