Friday, May 13, 2005

Why public schools may never serve the needs of poor students

Large organizations have grown to the size they are because in the past they served a core constituency very well. The organization aligns with its best customers through a value chain of vendors and employees. This value chain has a cost structure targeted at delivering the most profitable products to the best customers. The chain typically is very good at incremental innovations to improve value delivered to these target customers. The chain typically is not very good at meeting the needs of customers that are not in the target segment.

Markets are dynamic, and as they mature, some customers are not well served by the status quo. In some cases, an entrepreneur will identify how to deliver s simpler, cheaper, more convenient solution to these customers that creates a new, growing market. In some cases this new value proposition is so powerful that eventually it overthrows the original value chain. Think of Wal-Mart overthrowing Sears, and the PC overthrowing mainstream computers.

I have been involved in lots of companies an advisor, manager, and investor. I have been on both sides of this phenomenon, in the market leader that was being challenged and in the emerging company that was doing the attacking. Often the cost structure of the market leader makes it extremely difficult to serve these now customers with a cheaper, simpler, more convenient solution and still make money.

As the challenger becomes more successful and inflicts pain on the leader, people inside the leader become anxious and disparaging about this new emerging threat. You hear that these new customers just don't get it. They are unsophisticated. That the new upstarts are screwing up the market. That they are cockroaches. The customer is to blame for the problems the leader is experiencing.

Then you hear that the company just needs to work harder. Let’s get back to basics and focus on our fundamentals. Six sigma and other testing regimes are installed. But these leading companies will never succeed in this new market, no matter how hard they work or what they measure, unless and until they develop a new value that can be effectively delivered to these new customers.

I have come to believe that a similar phenomenon occurs in public education. The paradigm of the existing system is that schools will have considerable assistance from well educated parents in helping students with homework and studying at home. In South Carolina, half of students will not graduate from high school on time. If your family does not meet the educated, middle class paradigm the school was set up to serve, you tend to fail.

What is the answer from the public schools? Not that their paradigm does not serve students well who are not from educated, middle class families. Large organizations rarely admit that is the problem, rather they blame the customers. The parents of these children are to blame, because they are not involved with their kids in the way the schools are designed to work. Schools just throw up their hands in resignation; we can not meet the needs of these students because the parents don't get it.

What is the real problem? Just like Sears did not know how to serve customers in Bentonville, AK, existing public schools do not know how to reach students not well served by the status quo. This is where entrepreneurs are the most valuable in our society, creating new value to serve emerging markets of customers not well served by the status quo.

We desperately need school choice to unleash the power of entrepreneurs to meet the needs students failing in the current system. The entrepreneurial process is very difficult, with lots of starts and stops before someone finally gets it right. It is unrealistic that a system tuned to serving educated, middle class families is ever going to meet the needs of underserved students on its own, no matter how much money we spend or how much measurement we do.

When we place our bets, which we do every day with our tax dollars, let's bet on the educational entrepreneurs.


Tim said...

I've just reviewed a study that supports some of what you say about lower-income students, but disputes the notion that private schools outperform public schools once demographic differences are accounted for. I'd like to hear your thoughts:

Swamp Fox said...

See summaries of analyses of school choice programs in Milwaukee and Florida posted at:

Full studies can be found at:

I'll be back with more of my personal thoughts.

tim said...

I didn't review the Florida study fully, but the Milwaukee review you cite again leads me to questions about the achievement gap between high-SES and low-SES students. Since the Milwaukee program is specifically for low-SES students, and Greene finds that the voucher students are graduatiing at even higher rates than the students in the "selective" public high schools, it seems to me it's worth looking at further.

Greene's Milwaukee review doesn't really examine one of the central tenets of market-based reform - that competition improves public schools - though the Florida stuff you cite seems to look at that question. Thanks for the information.