By Scott Olster, editor
FORTUNE -- When people talk about the future of education, it often triggers visions of an iPad in every student’s hands, classes monitored—or even taught—by robots, and teachers lecturing via webcam to hundreds of thousands of pupils at any given moment.
Some of this is already happening in one form or another. Without a doubt, technology will be a crucial part of the future of education. The market for mobile education—which encompasses everything from e-books to courses delivered to tablets and learning management software—is currently worth $3.4 billion, according to a 2012 study by GSMA, an association of mobile operators, and consultants McKinsey & Co. The market, which includes device sales like Apple (aapl) iPads and Google (goog) Android-based tablets, is expected to be worth $70 billion by 2020.
But despite all the hoopla over gadgets and new software, the future of education really hinges on the shifting roles of teacher and student. “The main shift is away from what I’ll call a teacher-in-classroom-centric model,” explains Scott Benson, a program officer at the Bill & Melinda Gates Foundation. Instead, Benson says students will learn at their own pace, using software that adapts to their strengths and weaknesses. In other words: aided by emerging technology, the teacher-student relationship—and the classroom itself—will be remade. That is the coming education revolution.
Instead of lecturing at the front of a classroom, a teacher would monitor students’ progress and assist those who are struggling on an ad-hoc basis. A teacher will, ideally, be free to let advanced students do their own thing and pay more attention to those who need help.
“With this new method and capability, all of a sudden you could see a teacher handling many more students,” says Lloyd “Buzz” Waterhouse, president and CEO at McGraw-Hill Education (mhp), which, along with publishing competitors like Pearson (pso), is racing to build digital products that fulfill this vision of the future. (Not to mention ensure they aren’t disrupted out of a business model.) “All of a sudden, the productivity could double or triple.”
On Tuesday at the CES tech conference, McGraw Hill Education revealed a set of new adaptive learning products for college students, most notably a "SmartBook" that changes based on a student's individual needs, arguably a first in education. This approach, often referred to as “personalized learning,” has picked up steam over the years. It is partly based on research conducted around 30 years ago by University of Chicago educational psychologist Benjamin Bloom. In the early 1980s, Bloom observed that students who engaged in one-on-one tutoring performed significantly better than those who had a typical classroom experience.
But hiring a tutor for every single student is not possible, so a whole slew of tech startups, publishers, and educational institutions have poured significant energy and money into placing digital courses into classrooms across the country that simulate the kind of one-on-one tutoring that can adapt to an individual student’s needs.
We’re getting closer, but we’re not there yet. “If I were the head of a 1.1 million student system, it’s not like I could pick a single model; we are by no means near that,” says the Gates Foundation’s Benson.
The Gates Foundation has invested just under $9 million in a program administered by education nonprofit EDUCAUSE that will allow 20 schools to figure out a solid, financially sustainable way to achieve personalized learning as part of a program called Next Generation Learning Challenges. All of the schools awarded grants will use some combination of digital and traditional instruction.
With billions of dollars in potential business from schools and universities, education companies have plenty of incentive to get in now. But it goes beyond just digital textbooks and apps. For many of these companies, the educational business battle to come will center on student data.
Ideally, every move a student makes in a digital course will be tracked and analyzed to not only change a program to meet a student’s current needs, but to track a student’s progress—and determine their educational needs—not just during a given course, but throughout their lives.
“Collecting data, having a student profile that goes from kindergarten through professional [life] is where we want to invest,” says Jay Chakrapani, general manager in charge of digital products at McGraw Hill Higher Education. So, as the concept of “finishing school” at college graduation goes by the wayside, many consider the kind of data collection project Chakrapani is talking about the holy grail for the education business.
“The old model of getting educated in four years and coasting for the next 40 years” is growing increasingly less relevant, says Andrew Ng, co-CEO and co-founder of online education startup Coursera, which offers free online courses from universities like Stanford, Princeton, and Duke. “In the 40 years we continue to work, tech will allow us to continue to learn in a way that wasn’t available.”
The companies that can keep pace with students throughout their lives—offering the right products to them each step of the way—will likely own the future of education.
A shorter version of this story appeared in the January 14, 2013 issue of Fortune.
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