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In August 2017, Amazon entered the retail grocery market. Its goal:
transform the economic value chain associated with traditional
bricks-and-mortar grocery delivery. Its plan: expand its scope, differentiate
its product, cut cost by integrating grocers and customers into its larger
e-commerce platform, and lower consumer prices. As Jeff Wilke, CEO of Amazon
World Consumer, said, “And this is just the beginning – we will … continuously
lower prices as we invent together.”[1]
Traditional grocery chains’ market value dropped 8 percent overnight.
Education and grocery stores are different industries, but both
have much to learn from Amazon.
Like traditional
grocers, public education’s business model is based on a command-and-control,
geographically-based, product delivery system that has worked the same for
decades. Both take advantage of
technology to improve their business model, but in different ways. Grocers use technology
to minimize product delivery cost to the store, squeeze 2% profit margin from
high volume sales, and compete on price.
Public education uses technology to expand and enable its administrative
state, increase cost, and compete as a geographic monopoly. A recent study by EdChoice[2]
reports that between 1992 and 2015 the number of Virginia K12 students grew 24%,
while the number of teachers grew 32% and administrative staff grew 50%. Over the period 1992 to 2014, Virginia per
pupil expenditure (in inflation-adjusted dollars) grew 26% and teacher salaries
declined 7%.
Public education has a lot it could learn from Amazon. But, will
they?
Amazon’s disruption of the grocery industry is possible because,
in a free market: competitive advantage depends upon product differentiation
and the lowest cost to deliver the value proposition; firms that provide
complementary or substitute products are allowed; and competitor barriers to market
entry and exit are low. Unlike public
education competitors, Amazon entered the grocery industry without being
required to build a chain of brick-and-mortar stores, which were required by
law to serve a specific zip code, nor were they subject to compliance with
ubiquitous and ever-growing requirements imposed upon them by the industry they
disrupted. Instead, Amazon bought the physical infrastructure and replaced the entire
market channel of delivery with a highly cost-effective e-commerce platform
that connects customers directly to differentiated, high-quality products, at a
lower cost.
A similar positive disruption in public education is
possible, if the barriers-to-entry are eliminated and parents are allowed to
choose their child’s mode of education. One
example is Summit Public Schools, a charter school, founded in California in 2003.
Like Amazon, Summit flipped the education business model on its head. The student is placed at the top of the
education model, not the bottom. Administration is automated through a customer
resource management (CRM) system. Teachers devote at least 200 hours per year
mentoring and coaching, and students’ time is used differently. Mark Zuckerberg, Facebook’s CEO, not only has
invested in the school but partnered with Summit to build the CRM system, which
he offers for free to 501c3 organizations interested in starting a school. Parents, teachers, mentors, and coaches are
connected to their student through the CRM and know what is planned and what has
been accomplished against mutually agreed goals, at any point in time. Students spend 16 hours a week building
knowledge using online resources.
Students work at their own pace. When they think they have mastered a
concept, they take a 10-question self-test.
If they answer 8 questions correctly, they move to the next topic. Knowledge
is applied during the week in “project time,” where cognitive skills like
problem solving, communication, creative thinking, writing, and speaking are
taught through investigation, labs, seminars, papers, and presentations.
The Summit model is scalable, inclusive, and effective.
Today, nine schools are in operation, serving 2,500 students in grades 6
through 12. Eighty percent are
non-white; 42 percent are low income; and 12 percent are English language
learners. Per pupil expenditure is
$7,000, compared to Virginia’s $11,745[3].
Ninety-six percent of Summit’s graduates are accepted to four-year colleges.[4]
If Virginians want educational outcomes like Summit’s, they
must demand that elected representatives remove the barriers to entry for
non-traditional educational solutions. One cannot put new wine in old wine
skins. We have two choices: one
whose written policies support education innovation and one who thinks more
public education spending will produce a different result. It is time to choose carefully.
[2] Scafidi, B., “Back to the Staffing Surge,” EdChoice,
May, 2017. [ https://www.edchoice.org/research/back-staffing-surge/ ]
