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The Exchange

The Examined Life

New Oriental Education's Stephen Zhihui Yang on Preparing Students for the modern business world.

For those who are unfamiliar, describe New Oriental and its mission.
New Oriental is the largest private education service provider in China and a very well known brand name both in China and overseas. Michael Yu founded the company in 1993 and since then we have been striving to deliver a great study experience to millions of New Oriental alumni.

Our mission is to be the trusted one-stop education service provider to Chinese families, and to inspire our students to improve their lives and help shape their independent personalities. We also want to expand their global view through a lifelong commitment to studying and learning.

Why is New Oriental's focus on K – 12 students important and how does it help their educational development?
The K-12 business is a core part of the one-stop service of New Oriental (NYSE: EDU) and it’s a huge market - it’s possibly the biggest education market in the world at 55 billion dollars this year with growth projected at 14% or 15% going forward. Typically, a Chinese student spends 12 years studying and preparing for a two-day, very competitive life-determining exam called the ‘college entrance test.’ New Oriental Education. Even though we are the leader in this market we only have a one to two percent share, which is why we want to focus on it. We have many learning centers all with what we believe to be the best products, content and teaching experience, especially for our online-offline model. Our goal is to help our students study more efficiently and get the highest academic results.

Can you explain the “online-to-offline” model and how it serves the business?
The online-offline model is the central part of our three-pronged approach to our education delivery strategy. The first is the online-offline, we call it the “O2O,” the second is online only, and the third one is minority shareholdings in third-party online education companies.

The O2O is the core piece but we add a lot of the online elements to make the study and teaching aspects more efficient than the traditional teaching style. For example, before enrollment, students need to have an online test so we can understand their level of aptitude in different subjects. Then, during classes, students use an answering machine to respond to questions posed by their teachers so after the class they can do their homework online.

Our iCloud system is recording millions of students’ study behavior so parents are able to track their children’s study habits and results almost in real time. With the O2O integrated system, students can study more efficiently and we can strengthen and improve their learning experience. We are the only educational provider in China that has the O2O integrated education system, which differentiates us from our competitors.

Which areas of study are the most in demand?
There are three: the first is the K-12 after school tutoring business, the second is the overseas consulting business, and the third is the pure online study. For adult vocational training the pure online is the most popular.

"We have many learning centers all with what we believe to be the best products, content and teaching experience...our goal is to help our students study more efficiently and get the highest academic results."

Are there new courses of study that you will be launching soon?
Yes, we plan to provide non-academic courses going forward such as different styles of dance, vocal training and singing and Taekwondo. We hope that students will develop even more skills from these and hopefully have some fun in the process.

It has been 10 years since your IPO on the New York Stock Exchange. As a public company, what lessons has New Oriental learned in that time?
Since we started the K-12 business 8 years ago, we have tripled our learning centers from 250 to 750, which I think was too fast. It was an over-expansion and at times we lost our way by losing the confidence of our students and devaluing the teaching experience. By 2012, we changed our strategy from “occupy the market” to “harvest the market.” We refocused on improving the teaching quality and strengthening operational efficiency, which I believe is crucial to future success. An educational business shouldn’t be grown too fast, so it’s a lesson we learned and now we are running the business properly to ensure success.

What does the future hold for New Oriental?
Going forward, I think we will refine and update the product as much as we can and improve the operational efficiency to create more value for both our students and our shareholders.