Friday, December 20, 2013

School Districts in a Business World

I attended a LearnLaunch K-12 Peer Learning Group meeting today where Teddy Rice, Co-Founder and President of Ellevation, spoke about lessons learned selling into school districts. Teddy had a lot of great things to say, but one point kind of stuck in my craw. He said that one of the key challenges is that school districts don't really compete against each other. To expound on this point, he explained that if JPMorgan bought a software program that saved them 1¢ for every $1,000,000 in transactions, you could be sure that Goldman Sachs would go out and buy the same software program tomorrow, whereas you don't see that same behavior amongst school districts.

I wasn't bothered so much by Teddy's statement that school districts don't really compete against each other, but by his conclusion that the lack of competition is what leads to slow or nonexistent uptake of successful innovations or proven best practices from neighboring districts. If that was the case, then you'd expect to see school districts stealing ideas from competing charter schools in their area, which is not happening. School districts compete head-to-head with charter schools and they do things to try to fend those charter schools off, but they don't steal ideas.

What struck me about Teddy's example is that, if a second software program showed up that also helped the bottom line, then JPMorgan and Goldman Sachs would be able to go out and buy the second piece of software without giving up the first. That isn't the case for a school district. For school districts, buying something new typically means giving something up. So unless a new innovation does the same job as an existing tool and can replace it at the same cost, adopting the new innovation will mean giving up an earlier innovation somewhere else in the system. It's a zero sum game and the pie doesn't grow.

JPMorgan and Goldman Sachs are able to keep adding tools to their arsenals, igniting a competitive arms race where steady incremental improvements compound over time, because their revenues and profits are growing explosively. Adopting an innovation that improves your bottom line gives you more resources to invest in the next innovation. If their revenues and profits were only growing at a constant percent each year, they would be considered stagnant and unsuccessful businesses. This is why Microsoft's stock price, despite new highs in revenue and profits each quarter, hasn't budged in over a decade.

This dynamic does not exist for public schools. An innovation that leads to an incremental improvement in student outcomes does not increase the resources you have to invest in the next innovation. This reduces the incentive for investing in innovation, but it also blocks you from making steady incremental improvements even if you are trying to drive forward. This is one of the external hindering factors that I will be analyzing for my strategic plan.

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