by Kristin L. Allen
In August, Amazon entered the retail grocery market. Its goal: transform the economic value chain associated with traditional bricks-and-mortar grocery delivery. Its plan: expand its scope, differentiate its product, cut cost by integrating grocers and customers into its larger e-commerce platform, and lower consumer prices. As Jeff Wilke, CEO of Amazon World Consumer, said, “And this is just the beginning – we will … continuously lower prices as we invent together.” Traditional grocery chains’ market value dropped 8 percent overnight.
Education and grocery stores are different industries, but both have much to learn from Amazon. Like traditional grocers, public education’s business model is based on a command-and-control, geographically-based, product delivery system that has worked the same for decades. Both take advantage of technology to improve their business model, but in different ways. Grocers use technology to minimize product delivery cost to the store, squeeze 2% profit margin from high volume sales, and compete on price. Public education uses technology to expand and enable its administrative state, increase cost, and compete as a geographic monopoly. A recent study by EdChoice reports that between 1992 and 2015 the number of Virginia K12 students grew 24%, while the number of teachers grew 32% and administrative staff grew 50%. Over the period 1992 to 2014, Virginia per pupil expenditure (in inflation-adjusted dollars) grew 26% and teacher salaries declined 7%. Public education has a lot it could learn from Amazon. But, will they?
Amazon’s disruption of the grocery industry is possible because, in a free market: competitive advantage depends upon product differentiation and the lowest cost to deliver the value proposition; firms that provide complementary or substitute products are allowed; and competitor barriers to market entry and exit are low. Unlike public education competitors, Amazon entered the grocery industry without being required to build a chain of brick-and-mortar stores, which were required by law to serve a specific zip code, nor were they subject to compliance with ubiquitous and ever-growing requirements imposed upon them by the industry they disrupted. Instead, Amazon bought the physical infrastructure and replaced the entire market channel of delivery with a highly cost-effective e-commerce platform that connects customers directly to differentiated, high-quality products, at a lower cost.
A similar positive disruption in public education is possible, if the barriers-to-entry are eliminated and parents are allowed to choose their child’s mode of education. One example is Summit Public Schools, a charter school, founded in California in 2003. Like Amazon, Summit flipped the education business model on its head. The student is placed at the top of the education model, not the bottom. Administration is automated through a customer resource management (CRM) system. Teachers devote at least 200 hours per year mentoring and coaching, and students’ time is used differently. Mark Zuckerberg, Facebook’s CEO, not only has invested in the school but partnered with Summit to build the CRM system, which he offers for free to 501c3 organizations interested in starting a school. Parents, teachers, mentors, and coaches are connected to their student through the CRM and know what is planned and what has been accomplished against mutually agreed goals, at any point in time. Students spend 16 hours a week building knowledge using online resources. Students work at their own pace. When they think they have mastered a concept, they take a 10-question self-test. If they answer 8 questions correctly, they move to the next topic. Knowledge is applied during the week in “project time,” where cognitive skills like problem solving, communication, creative thinking, writing, and speaking are taught through investigation, labs, seminars, papers, and presentations.
The Summit model is scalable, inclusive, and effective. Today, nine schools are in operation, serving 2,500 students in grades 6 through 12. Eighty percent are non-white; 42 percent are low income; and 12 percent are English language learners. Per pupil expenditure is $7,000, compared to Virginia’s $11,745. Ninety-six percent of Summit’s graduates are accepted to four-year colleges.
If Virginians want educational outcomes like Summit’s, they must demand that elected representatives remove the barriers to entry for non-traditional educational solutions. One cannot put new wine in old wine skins. The gubernatorial elections in November offer an opportunity to start this process. We have two choices: one whose written policies support education innovation and one who thinks more public education spending will produce a different result. It is time to choose carefully.
 Scafidi, B., “Back to the Staffing Surge,” EdChoice, May, 2017. [ https://www.edchoice.org/research/back-staffing-surge/ ]