Why Don't Training Businesses Scale?

Most of the skills training at the corporate level is either driven by a star trainer or a 3-4 trainer group that comes together whenever there is an assignment. Why don't training businesses grow to achieve good scale? Views of all you veterans will be insightful.

Excellent query, Navya. This is quite an important discussion as we have many trainers here who would like to learn about scaling issues related to the training industry. Please allow some time for our members to come forward with their learnings and experiences.

Regards,
Sid

Dear Navya,

This might sound like a downer, but this is how I have seen firms deciding on training vendors.

Each training need is defined by the firm, and the vendor, based on past programs primarily recommendations, are invited in. Cost and credibility of the training program, as offered by the vendor, remain a deal-breaker. Any celeb trainer/facilitator automatically adds to the training firm's credibility.

The training firms present their portfolio of services and identify the apt program for the firm.

Mostly then begins the negotiation period, where both the firms push the envelope as much as they can. Training firms offer after-training evaluation and support, up to 3 months. Firms push for more attendees and rule out a few capsules from the programs, primarily to optimize the cost.

A veteran in this field knows rightly how to tread this phase, as most of the vendors lose the project while negotiating.

Many training firms who may own a franchise to an international brand will offer their certifications which will add value to the attendees.

All of us would want to support new players. However, the challenge remains in winning over the decision-maker. Cartelization, that you mentioned, stems from the fact that these trainers have established themselves, through years, with the decision-makers. Their credibility is endorsed by the one who signs the check, and not just the functional teams.

I am certain there are many ways for the newbies to find a foothold. Here are my suggestions for your considerations:

Build your presence by offering certain capsules to your programs in open communities and domains.

Udemy offers this option for trainers virtually

Connect with the communities, both online and offline, where there is a high interaction of your target attendees.

Invite industry leaders to share their experience or knowledge at your programs.

Promote the learning and growth/development of your attendees and not yourself.

Offer free talks and certain capsules from your programs to your target corporates.

Speak at the colleges.

Quantify all these activities and put them on your site, along with the feedback from the attendees.

Advertising your program and PR will help, if only you have a budget for it.

Publishing articles in popular domains will help you remain in the public view. However, it might misfire if your competition tries to defame you.

These measures will take time but will establish you. Finally, a request never asks for an endorsement because we know you will be so good that it will automatically come to you! Go rule!

Thank you, (Cite Contribution), for your excellent inputs. I really appreciate your insights and encouragement. Your post clearly maps out the challenges for a newbie and what it would take to establish oneself.

My doubt is more broad-based - not just newcomers but even established ones - why don't we see a highly scaled-up training company or why do training companies not go on to become a 1000 or 5000 people organization? One reason could be that the trainers probably do not have enough incentive to stay together - I mean, the moment the company gains some size, good trainers would break up and form independent practices of their own.

Dear Navya,

You nailed it! Most trainers follow the path you shared; they start on their own, join a brand, and then once they are established, they return to their ventures. This creates competition. However, adding on to the ecosystem will need support features, such as decision-makers choosing different players and not sticking to brands. Trainers take a long-term view and remain patient. Trainees identify their needs and look out for options beyond the programs offered by their firms. The industry values learning and expertise along with certifications. I am interested in learning from our expert trainers and their views on this.

This seems rather similar to a law firm scenario - perhaps things can be learned from how they function. Like, for example, the concept of creating partners who share the profits. A little more research and brainstorming can bring forward a few other examples of how such organizations function.

Regards,
Sid

Dear Navya,

You have asked a question, "Why don't training businesses grow up to achieve good scale?"

Let me ask you what prompted you to make this conclusion? What kind of study have you conducted to reach this conclusion?

In training business, operational costs are low; therefore, the margins are high. Secondly, the initial capital investment is also less. Therefore, the ROCE is also very high.

Therefore, a large number of companies you will find have not crossed the level of Rs 10 million, though they have been in business for more than a decade. However, there is nothing wrong as profitability is high.

Nevertheless, there is merit in what you say. Training businesses do not grow because 99.9% of training companies in India are nothing but brokers. They just take the assignment from the client and pass it on to the trainer and take the commission in between. Obviously, there is a limit for any broker to grow.

To grow, one has to be inventive. To grow, one has to be innovative. To be creative or innovative needs a research mindset. This research mindset comes out of subject matter expertise and task motivation.

By writing the above paragraph, I may ruffle feathers of fellow trainers. However, this is the bitter truth. Check their websites, and you will not find anything ingenious. What research have they done? Nothing! In spite of being in business for years, what new things have they done? Nothing! What case studies of the success of their training have they given? Nothing! They teach leadership to others, but then what leadership have they shown to grow their organization? Nothing!

Of course, there are a few like Mr. Rajan Parulekar of Paradigm Trainers who have obtained copyrights for their programs.

In this forum, a large number of queries are raised. How many times have training companies come forward and solved the problems or given replies? Hardly any time. In this forum, there is ample evidence of their inaction. Where do these knowledgeable people go or where does their knowledge go when the queries are raised? Why have they remained silent? Check my following reply to what I say:

https://www.citehr.com/456194-leader...ml#post2045342

Partially, training heads or training managers are also to be blamed for this. I say so because they are just unable to separate the sheep from the goats!

While selecting any vendor, a simple question needs to be asked: "What are the assets of your company?" Every company, training or otherwise, needs to have (a) knowledge assets, (b) physical assets, (c) financial assets, and (d) intellectual property assets. Of these, the first one is very important. If it is a training company, the knowledge assets are supposed to be far greater. However, it is they who lack these assets most!

Lastly, India is still an immature market for training. Therefore, do not expect any training company to reach a level of 500 or 1,000. When it will become mature or whether it will become mature at all, only God knows!

Ok...

Dinesh V Divekar

P.S.: - In my above reply, I have written about others for not coming up with something new or not doing research. Then a question may come to your mind about my research. Yes, in my purchase programs, I have invented several new concepts. You will not find these on any website or book. Click here and you will find them in my profile.

@Sid: Yes, a law firm is a very similar model. Any service that is delivered by equally competent experts would have the problem of keeping the team together - having partners who share profits is probably one of the ways.

Another interesting example is Management Consultancy - it is also a service delivered by almost equally competent experts, but they have managed to grow mega global brands like McKinsey, BCG, Bain, etc. The question is, can there be a McKinsey or BCG in the training space?

@Dinesh: Thanks for your inputs. Different viewpoints make the discussion lively and insightful.

I agree, ROCE is high, profitability is high. Let's not confuse the issue - there is nothing wrong with low-scale, high-profitability training companies, but the question is, why don't we have mega-sized training companies?

As far as being innovative, inventive, or creative goes - while these are good attributes and, in a general sense, any successful entity can be called creative/innovative, there are several companies that do not invent new things, yet they are at a major scale (FMCG companies, media houses, real estate developers, etc., don't invent new things, yet they are huge). So, inventing new things is not a prerequisite for scale.

Please don't get me wrong. I too firmly believe that training organizations need to be creative to really achieve what they claim to achieve. All I am saying is that the lack of creativity does not completely explain the lack of scale.

Some training companies may act as brokers, but then they also outsource projects to training companies or trainer groups - why don't these entities scale?

Also, I don't agree with the assumption that brokers can't scale - Naukri.com, all matrimonial sites, travel booking sites (makemytrip.com), quikr.com, etc., are all "brokers" and they have achieved quite impressive scales.

While some trainers may be incompetent, lazy, or non-innovative as you suggest, there are also really smart and brilliant ones who work very hard and deliver effective training programs. I don't think trainer incompetence can explain the lack of scale of training companies.

It could be the business model, the way training organizations are structured, the way incentives are shared, or something else.

The last point you raised is very interesting. When you say the training market in India is immature, what exactly do you mean? Is the selection and deployment of training not mature enough, or is there not enough demand, or are the HR professionals not equipped enough to make the right decisions when it comes to training, or do training providers rely more on high-sounding words and less on actual skill upgrades? It could be any or all of these or even something not covered.

Your post touched upon a lot of highly relevant issues, and I hope as the discussion progresses, all of us will have a better understanding of the issue and the factors at play here.

Let me start with my credentials to contribute to this subject. My total experience is 60 years (and you can figure out the age). I have received innumerable training in varied fields; in turn, I have been training people within the organization and outside. I have worked for a training organization; I have been associated with persons working with training organizations as well as freelancers; I have also worked as a freelancer - all these in many fields.

Mr. Dinesh Divekar started in a line that was also in my mind, but he did not appear to go further with that, which was - "Let me ask you what prompted you to make this conclusion? What kind of study have you conducted to reach this conclusion?"

In my opinion, the subject raised by Coolnavya isn't so cool after all - sorry for the dig, but I couldn't resist it :) It is, I think, basically flawed.

a) To compare the strength of numbers with FMCG or Real Estate is comparing apples to oranges. The kind of activities involved are totally different.

b) But if you want to see a very large manpower in one organization for training, you have the Administrative Staff College of India, CII Centers of Excellence, Lal Bahadur Shastri Institute in Mussoorie, etc. If you do not narrow down your definition of 'training', what about colleges and universities, IITs and ITIs, IIMs, and syndicated coaching classes?

c) By its very nature, a trainer requires to be fairly well experienced. As is popularly said, 'those who can - do, those who can't - teach'. Seriously, trainers tend to be either those who have retired or are approaching retirement. At that point, they do not have an inclination to build a huge edifice but to push on for a few years. Some of them join together as a partnership (I have seen such) where their personal contacts are important for business. Some operate as freelancers.

d) If a training organization is to have a strength of 1000 or more, it will have to be mammoth, and the scale of operation very huge. Since it is not a regular running business unlike FMCG or Construction or manufacturing, it will be a huge risk considering the very high-level staff they will be carrying. Therefore, many firms providing services including consultancy tend to have a training wing as a part - which makes sense.

I guess now I have to wait for Coolnavya to tear my argument to shreds as (s)he has already done to others'. I have knowingly stuck my neck out and can't avoid the consequences now :)

R Ramamurthy

@Rramxx - Love the way you structured your points :)

And sorry if it seems I tend to tear people's arguments to shreds - not my intention at all :) I only want to expand my understanding of a question which has puzzled me for a long time.

I agree, we shouldn't compare FMCG with training organizations, that example was just to show that inventing new things is not a prerequisite for scale.

Agree, IITs, IIMs are huge but they are institutions awarding degrees/diplomas. Guess it's the word training that causes confusion - let me narrow it down.

The question was, why corporate training companies offering communication skills, sales skills, leadership, stress management, etc., do not scale up to be huge, why do most of the corporate training companies are either individual trainers or small groups.

Also, Mr. Rramxx, your points (c) and (d) give very valuable insights. A lot of trainers, especially the senior ones, may not have the inclination to go in for scale, and also, managing a top-heavy training organization would be a challenge. Another issue could be what does a trainer gain by being a part of a large group vis-a-vis working freelance.

I am sorry if my posts give an impression of someone who argues a lot, but then, real insights don't emerge till we keep a laser focus on what is relevant and how things are connected.

Thanks a lot for your reply :)