Saturday, November 20, 2010

"Where there's mystery, there's margin"

A couple of days ago Bob Frankenberg spoke to Westminster's chapter of Delta Mu Delta, the business student honor society.  Bob is the Chair of Westminster's Board of Trustees, a venture capitalist, and an innovator in computers and networks who has been involved in most of the major shifts in computer memory and networking in the past 30 years.

His talk focused on the need for students to keep learning throughout their lives in a society where the half-life of information and skills is about 4 years.  But among his pieces of advice was this; "Where there is mystery, there is margin."

The mystery/margin insight is not a new one of course.  Anyone who innovates in a business has discovered a mystery--how to shrink computer memory, for example--and made money off it, because by understanding the mystery that others don't, they are able to supply products that others demand.

But that formulation got me thinking about my previous post on making money on learning.   Educational entrepreneurs, by and large, are focusing on a single mystery--how to deliver schooling to a bunch of students in a way that makes money.  And they do it, by and large, through enrollment and systems management improvements.  So, if a school can enroll more students, or deliver schooling at lesser cost, then they can make money.  (Or perhaps more accurately in the k-12 environment, they can capture more of the education subsidies that make providing schooling financially feasible.)  This is the insight of nearly all of the new educational ventures that have sprung up in the past decades--the University of Phoenix, for example, or Green Dot and KIPP schools.    The biggest effort in this direction comes from the Gates Foundation, which is focused on improving the access and completion systems that get kids from high school into college.  Their attention is turned to the huge systems--community colleges especially--that school millions of students each year. Now in each of these instances, lots of learning takes place, it is true.  But the essential business model is around schooling, not learning.

I have no interest in criticizing any of the above innovations.  Their work is important and their successes meaningful.  But I do want to think more about the learning mysteries. So what are they?

1. How do you engage students in learning who are not engaged in schooling?
2. How do you reach those potential students?
3. How do you provide that learning in a way that is inexpensive enough to be welcoming to low-income students and families, but remunerative enough that you can make money off the learning?
4. How do you ensure that learning takes place?
5. How does that learning translate into the credits and degrees that the learners will need to show the educational and employment systems?

How do you provide learning that makes money by responding to these mysteries?  Here are some thoughts:

1. While there are tons of  people (many of them young) who hate school, most of them love learning about something.  For many of them, that something lies in the arts and humanities, or in sports.  They love music, or art, or writing, or dance or video games.  Or they love skateboarding and snowboarding and football and martial arts and dance.  Most schooling-focused efforts place these passions on the margins so they can focus on an academic core.  But a learning-focused effort would start with arts, humanities, and athletics, not think of them as a distraction.

2. Learning is an intensely social, relationship-focused thing.  Or at least, the sorts of learning above are like that.  So whatever solution you choose, it cannot be simply based on learners sitting alone watching clips on YouTube or taking classes on MIT's OpenCourseWare, or taking online courses.  It is not that learning fails to happen there, just that it is deficient learning.  or put another way, learning in isolation and schooling are close relatives.

3. The two key fixed costs in schooling are physical facilities and personnel.  (These are the major fixed costs outside of education, as well.) Innovators outside of education have gotten around these costs by using technology, it is true.  But they have also gotten around them by using franchises and distributorships.  Learning lends itself to this model as well.  If, for example, you want to find a business that reaches across ethnic and class lines, take a look at Amway or NuSkin.  They have representatives everywhere, who make money on selling but also on inviting new distributors into the system. If you want the reach of learning to be broad, and to get into communities where a representative of a college cannot speak authentically, then a distributor/franchise structure works better than building schools.  And it resolves some of the personnel cost issues associated with schooling.

4. Because learners will need to translate their learning into credentials, the formal evaluations of learning ought to be done in part using tools that help with that translation.  Here I am thinking about AP, CLEP, IB, and other sorts of tests that are accepted for college credit.  Such an approach both allows for systematic measures of quality across distributors and helps work around the accreditation problem and leads students into the formal systems of schooling, which I hope it is clear, I believe have substantial value. (Or put another way, a student can learn through a passion for video games, but cannot be learned unless s/he can do math and understand history and know how to learn and how to become what s/he hopes to become.)

What does this look like in the real world?

It starts with places that already make money (albeit only a little) on learning--people who offer piano lessons, or teach art, or host writing groups.  Martial arts studios and driving schools.  Their offerings expand and become more sophisticated so that they attract teens and 20 year olds.  The learning places then expand their offerings more to include formal instruction leading to AP tests.  So a music school would eventually offer music theory courses, a game shop eventually graphic design, etc.  As students succeed with those passion-specific tests the schools expand to offer more traditional topics--English or History example--that could also be assessed through standardized exams.

The central value would be in the connection of what are now disparate efforts.  The company--let's call it Play and Learn--would build a network of people offering the intro lessons.  It would also provide curricula, training, and the business infrastructure.  As learners became more sophisticated, their learning would be more centralized--so that Play and Learn corporate would offer the direct instruction on AP preparation, sparing the piano teacher from having to become an expert on music theory. That higher level instruction could easily be delivered remotely, with open content materials.  At the same time, expansion of the company be distributed--either through franchises or distributorships.

As students progressed pricing would rise (this is already the pricing model for these learning on the margins sorts of places), with substantial fees associated with the AP or other college credit granting exams, since they provide a cost -savings over having to pay tuition for college classes.

Let me close by saying that for me the ultimate benefit of this model is not financial but social and educational.  We know that there are millions of people who do not get the education they need because schooling does not work for them.  And we know that colleges and universities lack the capacity to serve all of those people who need college educations.  And we know that nearly everyone is passionate about learning something, and that such learning provides personal satisfaction and public good.

Any takers?

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