Making Vocational Education & Training a Profitable Business

1. Making Vocational Education & Training a Profitable Business Bruce Lim Senior Vice-President, Group Strategies & Alliances SEG International Bhd 10th July 2012

2. Contents • Definition & Scope • The Landscape for Technical and Vocational Education and Training (TVET) • The pillars of financial sustainability • Case study: SEGi experience • Reduce reliance on the Government • Diversifying income streams • Identifying Costs & Activities • Summary • Ends

3. Definition & Scope Getting a few points clear and out of the way before we begin

4. Definition & Scope (A) Technical and Vocational Education and Training (TVET) It cuts across post-primary, secondary and tertiary educational levels, and all sectors including formal or school-based, information or even apprenticeship.

5. Definition & Scope (B) Profits/ Profitable • The surplus remaining after total costs are deducted from total revenue, and the basis on which tax is computed and dividend is paid. It is the best known measure of success in an enterprise. • Profit is reflected in reduction in liabilities, increase in assets, and/or increase in owners' equity. It furnishes resources for investing in future operations, and its absence may result in the extinction of a company. Source: http://www.businessdictionary.com

6. TVET Landscape Is it worth investing or continue to invest in Technical Vocational Education & Training?

7. Jalani, Wan Mohd Rashid et al (2010)

8. Jalani, Wan Mohd Rashid et al (2010)

9. TVET Landscape • TVET is regarded as one of the most critical drivers for Malaysia’s transformation from a middle to high-income nation. • Malaysia currently has workforce of 12 million, of which only about 28% are highly-skilled, whilst 60% are employed in small and medium-sized enterprises (Malaysia, 2010, NEAC) • The ETP projected to create 3.3 million new job openings by 2020, of which at least 40% is expected to require technical and vocational education and training (TVET) qualifications (PEMANDU 2010).

10. TVET Landscape • Tenth Malaysia Plan (10MP), 2011-2015 places TVET as a critical component to support the country’s economic development. Only 10% of students enroll in upper secondary technical and vocational streams. In addition, more than 100,000 school-leavers join the labour market annually after 11 years of formal schooling without going through further education or training. • To support the ETP, seven (7) key initiatives under the NKEA for Education have been put in place to scale-up private skills training provision including promotion to foreign students under SkillsMalaysia INVITE and increasing number of TVET instructors.

11. SEGi’s Story A Snapshot of SEGi’s Journey & Financial Perfomance

12. SEGi’s Financial Performance

13. SEGi’s Roadmap • Operating under multiple brandnames (20 colleges & training centres) • Reliance on government projects • Reliance on government funds • Low ticket programmes • Focused on single markets • Consolidation into academic & training campuses • Strengthen single brandname – SEGi • Introduction of high ticket programmes • Recruitment drive overseas & non-bumi market • Repackaged and more new and niche programmes • Engagement with the industries • Moving into new markets (international, • fee paying and adult trainees) • Strategic alliances with other players.

14. Pillars of Financial Sustainability Ensuring that your business continues to grow and prosper

15. Pillars of Financial Sustainability Don’t make a one-off ‘hit & run” transaction. Build your business to grow & last.

16. 1. Sufficient & Sustainable Public Fund • Lesson 1: Do not be dependent on public funding. • Risks of policy changes & delays relating to launch of initiatives, processes, number of candidates, price vagaries that affects funding. • Risk of exposure to vagaries, inconsistencies and sustainability of Government funds and loans. • However, take advantage of various government dialogues, labs and initiatives that facilitates your business. • Treat Government funds & projects are “bonuses”., not your core business.

17. 2. Diversified Income Structure • Risk management against sudden upturn in policies or market; • Expansion Strategy to maximising growth & market share • Additional funds to existing activities • Funding new activities without external sources of support; • Create synergies & enhancing competitiveness; • Reduce transaction costs & leverage on economies of scale • Facilitating internal markets (keep students in the system for longer periods)

19. 3.2 Ansoff Matrix

20. a) Product Development • Expansion of faculty’s offerings • Cross offerings of modules amongst faculties • Introduction of new niche courses (culinary arts from F&B, medical tourism, etc.) • High Margin • Innovative re-packaging of products • Value-added support services (internship, job placements, Star trainers) • Dual awards (with partner bodies) • Flexible/ modular academic pathways • Online or blended mode of learning • Product Extension to a wider market • Post-graduate & higher levels of studies • Incorporation of flexible characteristics (e.g. flexible time-table, payment schemes, entry requirements (RPL) to cater to adult learning market)

21. b) Market Development/ Extension • Overseas Operations • Be careful with going head-on with capital expenditure. • Start with overseas licensing & franchising. • Get Government to facilitate and back you. • Franchising & Licensing of Products (Software) • Full of part offering of products in partner institutions/ centres abroad. • New Markets • International students. • Fee paying students. • Adult learners.

22. c) Diversification • Going downstream or upstream • Technical & Vocational Education Training (TVET) • Corporate training and Executive Development Programmes • Build a Training Hub • Property sale & management • Merchandising • Catering • Facility management • Related business • Subsidies • Research • Consulting • Labour Export

23. Balancing Innovation & Ambition To truly excel, simultaneously invest at three levels of ambition, carefully managing the balance among them.

24. Ratio of Balance? A Starting Point = Returns 70% CORE 20% ADJACENT 10% TRANSFORMATIONAL Allocation of resources suggested correlates with meaningfully higher share price performance. Innovation in transformation, despite its risks, pays the bills at the end of the day.

25. 3. Identification of Costs & Activities of Projects “Towards financially sustainable universities II: Diversifying income streams”, Estermann (2010)

26. Summary • Don’t over-depend on the Government • Look for other avenues of growth • Go for high-ticket programmes • Don’t compete – go for collaboration and alliances • Get government to back you up • Plot your growth, innovation and ambition strategies carefully • Balance your growth & innovation portfolio • Keep tabs on your costs & activities • Stay true to your DNA • Integrate diversification strategy into culture of company • Get new resources for highly innovative/ diversified ventures

27. Thank You