Disruptive Innovation and Independent Public Schools

Famed business-school thinker Clayton Christensen was splendidly profiled in The New Yorker a few weeks back, which set me to reflecting on his influential meditation on K-12 education, Disrupting Class, the 2008 book (co-authored with Michael Horn and Curtis Johnson) that startled the edu-cracy with its bold prediction that half of all high school courses will be delivered online by 2019 and its explanation that technology will produce the “disruptive innovation” in education that previous reform efforts have failed to bring about. As I read the profile, though, I couldn’t help but wonder if the more disruptive force in education is lower-tech and already more widespread than Christensen himself realized.

“Disruptive innovation” is his seminal insight, perhaps better summarized in Larissa MacFarquhar’s profile than in the education book itself. “How was it,” he started wondering, “that big, rich companies, admired and emulated by everyone, could one year be at the peak of their power and, just a few years later, be struggling in the middle of the pack or just plain gone?”

He figured it out by closely observing the steel industry. The huge American steel firms (U.S. Steel, Bethlehem, etc.) were challenged and gradually undone by small, nimble producers that Christensen calls “mini mills,” which began by producing low-end products (“rebar”) that the big companies were glad to quit making because they weren’t very profitable anyway. Now bear with this long quote from the profile.

As soon as the integrated mills fled upmarket, it was just low-cost mini mill fighting against low-cost mini mill. So what were these poor suckers going to do? One of them looked upmarket and said, “Holy cow, if we could make better steel, we could make money again!” So they attacked the next tier of the market. And the integrated mills? Man, were they happy to wash their hands of that business….The sensible thing for big companies to do was to pursue higher margins, or to wait until a new product’s market became visible enough to be analyzed and large enough to be interesting—but by then it was too late. Meanwhile, the big companies kept doing what they were supposed to, listening to their customers and improving their products in ways that mattered to those customers, until they had improved them too much, climbed so far upmarket that they sailed right off the upper-right-hand corner of the graph, adding more features and power and degrees of perfection than anyone could possibly use, and by that time the bad, cheap, low-end product had improved to the point where it could finally appeal to the big companies’ customers, and the big companies failed.

In the world of steel, the “mini mills” were the disruptive innovation that transformed the industry—and put many of the big old firms out of business. (Once-mighty Bethlehem Steel, for example, went bankrupt in 2001.)

Christensen tells similar tales of transistor radios sinking Zenith and RCA, of low-price Toyotas nearly doing the same to GM, Ford, and Chrysler, and many more. The disruptive innovator was able to do things that, at the time, didn’t make sense to the traditional operator—and eventually stole its market.

Back to our K-12 education system. Christensen and colleagues don’t suggest that it’s going out of business but they do say it will be transformed by a pair of disruptive innovations: technology (online learning, in particular) and a shift to “student-centric” learning.

You can already see this starting to happen, if perhaps a bit more slowly than they forecast, and it’s mostly a good thing (though some of today’s online products are shoddy and being used in questionable ways).

But something else is happening, too, that is apt to be just as profound, and it’s something that Christensen sort of pooh-poohed. It’s the emergence of K-12’s own version of mini mills in the form of independent public schools of choice. These could turn out to be as disruptive, and ultimately as devastating, to traditional education systems as those crummy little Sony radios turned out to be to the vacuum-tube behemoths and as Honda was to Detroit. These upstarts may not put the districts out of business but they’re definitely capturing market share and, in some places, hollowing out the enrollments (and revenues) of the “legacy” operators.

Charter schools (5,000-strong and growing) are the most obvious examples but they’re not the whole story. Think, too, of STEM schools. “Outsourced” schools within “portfolio” districts. Parent-trigger schools. The more radical forms of site-managed schools. Technical-vocational schools. Lab schools. Sometimes alternative and magnet schools. The list can be extended.

They’re no longer just one-offs, either. They’re networking—CMOs, EMOs, “recovery school districts,” “chancellor’s districts”—and they’re being systematically replicated by a growing number of organizations, both local and national. A dozen or more cities already find the aggregate enrollment of these education mini mills nearing (or even exceeding) that of the traditional school system. (Think of D.C., New Orleans, Albany, Dayton…)

The authors of Disrupting Class were well aware of this phenomenon and saw it as useful but not central to the key innovations they had identified. “As we approached the study of education through the lenses of our research on innovation,” they wrote, “our instinct was to frame chartered schools as disruptive innovations, but upon reflection that was not correct.” Rather, they said, charters are “sustaining” innovations, in that they may do things somewhat differently but “their intent is to do a better job educating the same students that districts educate.”

It’s not clear to me why this disqualified them as disruptive innovators, particularly if they’re successfully invading the markets of traditional providers and capturing more and more customers (and usually doing it at lower cost to the taxpayer, though this also makes their job harder). If, in essence, they’re functioning much as mini mills did within the steel industry.

They have another similarity, too: they started with “rebar,” i.e., mostly with the kids that the traditional providers (education’s “big steel”) weren’t much profiting from—poor and minority kids, hard-to-educate kids, fussy kids, dropouts and would-be dropouts, kids with low scores on state proficiency tests, sometimes youngsters with special needs. And while the districts weren’t exactly glad to see those students leave—they took money with them and eventually cost jobs—they were somewhat relieved, too. In places with fast-growing enrollments, the independent public schools also eased pressure on facilities and capital budgets.

That’s not to say the traditional providers welcomed competition. They (and their employee groups) much preferred quasi-monopolies and almost everywhere did all they could to make life difficult for these new rivals. Sometimes, however, they were shrewd enough to compete back, trying to offer their clients the kinds of programs the innovators were offering, and in a few cases (e.g., Joel Klein’s New York, Tom Boasberg’s Denver) even endeavoring to harness the power of this disruptive model to prod their own systems to do a better job of serving their customers.

Education’s mini mills haven’t always done a great job. Lots of charters, for example, need to improve their services and their products—and, if they do, they will almost certainly go “up-market,” too. The implications for education’s “big steel” could be profound.

-Chester E. Finn, Jr.

This blog entry originally appeared in the Fordham Institute’s Education Gadfly Weekly.

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