Opportunity in an Age of Disruption

Technologies used in new business models have disrupted almost every sector of the economy. Many are now beginning to discuss when disruption will come to independent schools.

The answer, of course, is that it has already happened; in areas such as admissions, college guidance, and learning content, there are disruptive innovations that are changing the experience of and within independent schools. But disruptive innovation also poses what appears to be a more existential threat to many independent schools themselves in the form of new schools — so-called micro-schools — whose costs are dramatically lower because they leverage technology to control noncore expenses.

We say that the emergence of these new schools leveraging technology “appears” to be a threat because we also believe that these changes in the educational landscape, if viewed in a different light, actually offer a historic opportunity for independent schools. Allow us to explain.

True disruption happens when a new player enters the market to serve customers who cannot afford the core product. For example, in the 1950s, ’60s, and ’70s, only some companies had access to computing in the form of mainframe or minicomputers, which cost hundreds of thousands to millions of dollars. When the first personal computers came out in the late 1970s and early ’80s, it opened computing to an enormous new market, but because the early offering was not very powerful, most mainframe and minicomputer companies were unconcerned. Throughout the late 1980s and early ’90s, however, PCs became so powerful, drove costs so far down, and addressed such a large audience that fewer and fewer consumers needed a mainframe over time. Today, the mainframe, as we once understood it, is obsolete.

For a long time, independent schools have competed in an expensive game against public schools that charge nothing. Today, many independent schools are accessible only to the wealthiest families, who remain willing to pay ever-increasing tuition prices. Schools that manage to keep tuition steady may even find themselves at a peculiar disadvantage; many parents see price as a signal of quality and are wary of a below-average sticker price.

But an entrepreneur starting a school from scratch sees the situation from a very different perspective. There is a huge untapped market of parents who would be drawn to independent schools were the cost not out of reach. These parents are seeking choice for the same reasons any wealthy parent does: they are either looking for a better school climate with more individualized attention or fleeing the accountability-driven public school system. By creating a school that has a more reasonable tuition price — not too expensive but not too inexpensive either — our entrepreneur can offer an educational experience at, say, $18,000 to address a much larger audience.

The choice of the number $18,000 is not accidental. To understand why, let’s look at the core costs of an elite independent school in an expensive city. Imagine the expense of each teacher is $100,000, including benefits; with a student-to-faculty ratio of 10:1, that’s $10,000 per student. The basic facilities are another $2,000 per student, as is recruiting expense. The textbooks (or their electronic replacements) are another $500, and athletics are another $500. All in all, these core expenses are about $15,000 and pay for an experience critical to a school’s mission and identity (the rest is technology and a small profit). Trying to reduce that cost is counterproductive; it would be cutting bone.

When we think about how technology can transform education, we usually emphasize its capacity to improve teaching and learning. To be sure, a technology-driven, blended-learning approach can enhance pedagogy in a number of ways. Today’s students are also increasingly accustomed to calling on asynchronous content whenever they want to learn something, and teachers can make coursework emotionally relevant by embracing the way that students consume information today. The case for moving to a blended-learning approach extends beyond the mere mastery of academic knowledge and skills. The workforce of the future will require the workers of tomorrow to be fluent just-in-time learners¹ who seek badges and certifications for learning new skills throughout their careers. Schools cannot predict exactly what workers will need to know in 20 or 30 years, but they can prepare their graduates to be flexible learners who can successfully acquire new skills as they become necessary.

But the opportunity to have a revolutionary impact comes when independent schools use technology, and the services it enables, to create new schooling models that rethink or cut away the ancillary services that drive up costs and over-serve many would-be customers of independent schools who balk when tuition goes well beyond that $15,000 core. A stripped-down model — perhaps introduced in affiliate schools in less-advantaged neighborhoods — could attract an entirely new audience to independent schools.

Will these new, less expensive independent schools have the same outcomes as traditional independent schools? Over five or 10 years, we will find out through a large set of metrics, including student, parent, and faculty satisfaction; college admissions (and performance once there); and even alumni giving. If the stripped-down models delight families and generate good outcomes but underperform their traditional peers, the experiment will still open the door to doubling or tripling the impact of independent schools. If they fail altogether, this will prove how essential the ancillary services are that independent schools provide. And if they produce outcomes commensurate with our traditional schools, we may rethink some of the services that drive up costs.

What is clear, though, is that many independent schools are currently in an unsustainable arms race with each other to be all things to all families — and, as a result, are adding noncore services at unsustainable rates.² With a nimbler model that preserves the core, schools could instead make innovative pedagogy the key area where they differentiate themselves in a market not known for transparency around outcomes — and drive results that delight customers over time.

Freed from much of the regulation that holds back public schools — of both the district and the charter variety — independent schools are ideal laboratories for innovation. The next generation of them will decide whom they want to serve, iterate constantly on how they teach, and evaluate their outcomes rigorously. A few forward-thinking schools are already identifying focus areas in their pedagogy. BASIS focuses on strict academic work, whereas Acton Academy emphasizes entrepreneurship — the school even launched the Children’s Business Fair, at which students launch their own start-up businesses, doing everything from developing a brand to creating a product that serves customers. Another model, AltSchool, strives to create “T-shaped learners,” students who cultivate deep skills in one area, but also broad knowledge across disciplines. None of these models is for everyone — and that’s OK. Each has a clear worldview that will appeal to some parents and be effective for certain students, thereby allowing them to carve out a distinctive place in the market. Having their model and niche clearly defined also helps them know what services they need to provide and what services are nice-to-have extras, but does not help them improve against their core mission — and therefore may drive up costs that, over time, families may not be able to pay.

The question facing independent schools today, then, is not whether these sorts of new school models should be created and whether parents should have the choice to pay to send their students to them. That is happening. Disruptors like BASIS, Acton, and AltSchool are offering innovative models at far lower cost than many independent schools.

Notes

1. See John Katzman, “Technology and Just-in-Time Learning,” EdSurge, October 26, 2014.

2. In Chicago in 2015–2016, the median tuition for NAIS-member schools is $18,953. By contrast, the tuition at Greenfields Academy (an Acton school) in Chicago is $13,450. Between 2009 and 2015, the median tuition at NAIS-member day schools nationally rose by 21 percent and is now more than $21,000.