The Disruption Illusion

The purported ripeness of the private education business model for serious disruption has been at the center of many a strategic discussion during the past 20+ years. A raft of serious entrants on the for-profit side have launched amid much fanfare on their side and handwringing on the nonprofit side. The best of the new players have tried using technology and scale to achieve sufficient economics to repay investors, yet to date their aggregate business performance is worse than even the airlines which, on net, have lost money since their inception as passenger carriers 80-something years ago.Jonathan Knee, writing in The Atlantic, describes some of the most visible and noteworthy for-profit education implosions, and apportions the blame to three factors:

• A failure to achieve scale;
• A failure to achieve scope; and
• Ego of founders and executives leading to ill-advised strategic decisions.

I agree with Knee on the scale and scope fronts. To truly have scale, geographic reach means nothing (and may actually be a problem) and geographical density means everything. Sharing services locally yields greater benefit that sharing then across hundreds or thousands of miles - and many services are just not sharable beyond a local radius.The major players have pursued breadth of scope as a virtue, and Knee notes that some of the few successful ventures are those with a more narrow product/service line. Indeed, it looks to me like the most success has come from firms that, in essence, vend services to existing schools rather than develop and manage the whole enterprise; e.g., food services, security, IT, etc.Knee points to the many joint ventures between for-profit K-12 providers and elite private universities as examples of hubris (my word, not his) on the part of leaders getting in the way of sound decisions. Maybe, to a degree, but the main driver behind such ventures has been a attempt to bathe the for-profit venture in the reflected glow from the Ivy or near-Ivy university, thereby adding a patina of credibility. Had this strategy enticed more high-dollar customers to open their parental wallets, we would be writing about it as a resounding success. But it didn't, and the problem seems to me to be less about ego than about trying to make an unappealing product more attractive and having the lipstick fail to hide the underlying pig.Even if one stops with scale and scope alone, we are left wondering whether, in fact, true disruption is possible without fundamentally changing who teaching and learning happen. Until we tackle that issue--and come up with an approach that cash-paying parents will salute with their money--education will remain stubbornly immune.