I’ve been following Degreed since it was only about 30 people big and the development team was basically squatting in borrowed space in downtown Salt Lake City. Their approach to the market was different enough to make me sit up and take notice. From the beginning, they have had a very distinct vision: to make sure that no individual – or company – becomes irrelevant due to lack of new skills.
Over the years, I’ve kept a close eye on Degreed. They've made it easy by being very frank with us analysts about their roadmap, and they’re consistently one of the most focused technology vendors I talk to. As the LXP market has grown up around them, they've managed make a name for themselves in the space while still retaining the focus and vision they started with – something I admire, particularly given the market and investor pressures they surely must face.
So I wasn’t surprised at all when they acquired Adepto. Adepto, like-minded and mission-driven, provides functionality that complements and even rounds out Degreed’s skill measurement offerings by helping organizations both see knowledge and skills of their employees and by providing additional skill information through jobs and projects details, not just courses. This acquisition gets Degreed closer to their vision.
I sat down with Chris McCarthy (CEO of Degreed) to talk about his plans for Degreed’s latest acquisition. As always, it was a frank and enlightening discussion that clarified a lot. It also reinforced my initial reaction to this acquisition: I like it.
Degreed’s virtuous employee development cycle (our words, not theirs)
Degreed’s purchase of Adepto rounds out their ability to do 2 things: acquire more data about the employee and contractor skills, and tie that data to opportunities (jobs, gigs, projects). We think that this additional functionality has the ability to create a virtuous employee development cycle – something we haven't seen elsewhere.
Today, approximately 30-40% of employees access existing learning technologies at least once a month. This is hardly consumer grade, and it indicates passivity in learning – learning for learning’s sake, as McCarthy puts it. While learning for learning’s sake isn't a bad thing, in a world where needed skills change rapidly, employees accessing learning once every 2 months (if we’re being generous) likely doesn’t develop the skills organizations need to compete.
Dipping into learning every couple of months also doesn’t help organizations (and the tech that serves them) understand what employees are trying to learn, which makes it harder to direct them to resources and activities that will help them learn and grow.
Degreed is addressing this in a couple of ways:
User Interface: With Adepto’s functionality that ties skills to projects and jobs, the user interface is being redesigned in a way that will bring the reason for learning to the forefront. Instead of a “Netflix, eat what you want” mindset, the new interface focuses on the goals the employee may have. For example, addressing skills gaps for a job you may want; being considered for a project; or switching careers. The new design will put the employee's goal front and center, and the system will recognize it and provide help and guidance for achieving that goal.
[The news interface] will be one single experience for the employee; you can actually go in and define your learning goals. All of the learning content and things that can help you are in one place, personalized to you. You can measure your skills as you improve on them and represent them so that they are being surfaced for potential opportunities. They’re tied to jobs, projects and other opportunities on the basis of your skills.
To put it succinctly, Degreed’s new interface aims to answer the question all employees have: “What’s in it for me?"
Data: A strong interface and personalized experience encourages employees to use the system, which in turn creates more data points, which in turn are fed back into the system to make it better, more personalized and more useful.
It also puts Degreed in a good position to actually become a system of record for skills data. Its acquisition of Adepto, along with the work it has been doing on integrating with other sources for skills data (HRISes, social networks, LMSes, and external content and certification providers), will make it, if it’s successful, a perpetual and virtuous cycle for collecting and using data on an organization’s skills and knowledge.
Degreed is also investing in increasing the size of their data scientist team, and improving their reporting and analytics functionality, making the data even more useful.
Degreed as a next gen talent platform
Stacia and I have been talking about learning, career, performance, even engagement, converging in the hearts and minds of people leaders. Why? It turns out that it is difficult to develop someone until you understand their career goals, how well they’re performing, and if they even want to learn and grow. While many of the talent platforms we see contain these pieces, some of them fail to provide a logical, helpful, cohesive experience, and we think the market is ripe for next generation ideas – ones that are data-driven and employee (rather than HR) focused.
With the acquisition of Adepto, Degreed moves past serving the L&D market exclusively. It has assembled the functionality to be that next generation talent platform. They have a strong LXP; they have partnered with LearnUpon to provide LMS functionality to their clients; and they have upgraded their skills measurement capabilities. If the world of HR truly is converging on itself, these pieces will allow a different kind of talent management – one that likely serves the employee and the organization better.
With the Degreed LXP, the LMS partnership [with LearnUpon], and now the skills measurement products we now have this complete skills product which is inclusive. It really is a talent product. All three of those things work tightly together, but any one of them could be the entry point into a new client that we choose to work with, which earns us the right to be able to expand the relationship with them over time.
Frankly, I am interested to see what’s next.
Degreed as a grown-up
Despite almost 7 years in business and just over $153 million in funding, Degreed is still considered a start up by many. While funding and longevity are by no means a guarantee of future growth, Adepto helps them grow up some more. How? Two ways:
First, Adepto, based in Australia and the UK, increases their global market presence. While Degreed has done a lot to increase its global foot print (according to McCarthy, Degreed grew business outside of the US from 3-4% to over 30% in just a few years), the Adepto acquisition adds visibility, client service and technical resources on the ground to service local and global clients, a little gravitas, and maybe some new channels to tap worldwide.
Second, the Adepto acquisition moves Degreed from a single product to two products. While Degreed has experienced ridiculous growth (100% a year) in recent years, McCarthy rightly points out that that kind of growth is unsustainable without a second offering. Adepto not only provides them with a second offering, but also new entry points into the human capital tech market – something that will facilitate growth and ready them for a talent platform play (assuming I’m right).
When you add to that the care with which Degreed appears to both choose and handle its acquisitions, the company probably has legs.
We got so lucky with Pathgather, to compete against somebody so ferociously head to head and actually really like each other is kind of cool. And I give them a ton of credit. Our client retention from the Pathgather acquisition was 140% and the employee retention is pretty high, I think it's like 70%.
The reason I flew to Australia last week and back in two days is because I wanted to have one on ones with every single person in [Adepto’s] office and get to know them and tell them they could hold me personally accountable if we screw them up or don't do what we say we can do.
Nutshelling it, we don’t think Degreed is going anywhere.
Despite how much I like this acquisition, I still see potential challenges. The first is that Degreed once again finds itself in a situation where they need to educate the market. Leaders don’t necessarily think in terms of virtuous employee engagement circles or skill measurement software. The fact that they are new concepts means that Degreed will need help leaders understand what it can do for them, how their organizations will need to change to accommodate them, and what line item in the HR budget should be allocated for them. They can do it; they did it for the LXP market. But I think it will be equally as challenging.
Secondly, as Degreed goes about redefining what a talent platform is and what it should do, they’ll be fighting quite a bit of momentum. Business has largely been done the same way for the last 100 years, and most technology accommodates and perpetuates those systems and processes. While we’re already seeing work being done differently, people doing the work handling their careers differently, tenure in organizations shrinking, overall careers becoming much more flexible and elongated, all of which challenges current systems, the momentum is great. We imagine that Degreed will be fighting against a pretty strong current.
Finally, this is Degreed’s second acquisition in the last 18 months and they continue to grow quickly. That’s a lot of change for an organization of this size to handle. It brings to mind potential questions about focus, differing priorities.
Despite these challenges, we like this acquisition. We think it’s good for the human technology space in general, we think it’s good for Degreed’s clients, and we also think it’s good for the future of Degreed.
We’d love to hear what you think too!
Dani is Co-founder and Principal Analyst for RedThread Research. She has spent the majority of her career writing about, conducting research in, and consulting on human capital practices and technology. Her ideas can be found in publications such as Wall Street Journal, CLO Magazine, HR Magazine, and Employment Relations. Dani holds an MBA and an MS and BS in Mechanical Engineering from BYU.