Identifying and articulating the value added of an independent school education remains a critical task, comprising not simply the quality of education but the nature of the learning environment and the nature of our interaction and relationships with students, parents, and our communities. Relatively recent innovations in teaching practices/ techniques, technology, and the development of alternative educational opportunities in the public/private sector have led us to discuss the value issue with even greater urgency.
For most of our institutions, this conversation seems to be focused on quality, including the quality of our educational programs, and the intangibles that independent schools bring to education (e.g., environment, safety, lifelong relationships, values). Within the context of Clayton Christensen and the Christensen Institute’s work, I believe much of the innovation in our institutions would be viewed as sustaining innovations. Independent schools appear to be assuming that schools can sustain the current business model if we are educationally innovative and effectively communicate the “value added.”
I am not minimizing the importance or impact of recent developments in our schools. In fact, the innovative programs being developed in many of our schools are quite extraordinary.
Still, I am unsettled that our discussions have, thus far, not included a serious conversation about the possibility of a price-based disruption in our market. Educationally, our schools are developing rapidly and are pursuing significant opportunities to improve the quality of the experience we offer our students. It appears, however, that the innovations and enhancements (and/or replacements) are, financially, being layered onto the existing cost structure rather than altering the financial model in a meaningful way.
Although the economic disruptions of the past five years have caused much reflection and belt-tightening, they have not fundamentally altered the financial model of independent education, nor have they led to an open, industry-wide discussion about the viability of the current financial model.
Although there are many positive reasons for families to select our schools, it is also fair to suggest that a perceived lack of a viable alternative for their children is also a factor in the enrollment and financial stability of our institutions. Although this may not be an important factor for a segment of our families, it is likely an important consideration for a meaningful portion of our parents.
There are families in our schools who can pay the tuition, even as it increases, so long as they believe that there is sufficient value in the investment (wealthy families). Also, there are families for whom an independent school education is out of reach without significant financial aid (supported families).
Finally, there are members of our community who do not have the resources of the wealthy families but who still are called upon to pay the full-tuition rate (high-earner families). For these parents, tuition is a financial stretch of varying degrees, depending on their total income. Many of these families are able to fund tuition with relative ease, whereas many others make significant family sacrifices to finance their children’s independent school education. It is this segment of our population that I believe is vulnerable to a market-based disruption.
I believe that this vulnerability is, to some degree, the result of independent schools’ continuing efforts to enhance their value proposition. Recognizing that price will continue to rise, schools attempt to improve the quality of their programs and the student’s overall experience. Many of the innovations we are seeing in our schools today are reflective of that effort.
In Disrupting Class, the authors speak at some length about sustaining vs disrupting innovations. Essentially, they make the case that innovations in businesses that improve the quality, features, and performance of their products/services tend to be sustaining in nature. They are additive, both in the performance and price of the product/service. The actual performance requirements of their clients, however, tend to increase at a much slower rate. This suggests that at some point, a less-costly alternative that fulfills the needs of the client may undermine the existing business.
I wonder whether independent schools should be considering the susceptibility of our high-earner families to such a market disruption. Is there are segment of our population that would accept receiving 80 percent of what an independent school provides if the cost of that service were 50 percent of our tuition or even free?
It is not clear what the market threat will be, or how it might develop. Will the competition be from charter organizations, revitalized and enhanced private schools, or new forms of for-profit institutions? It might even be, as Matt Chandler has suggested, from small groups of parents starting their own schools.
Education is changing and, we all hope, for the better. The changes in philosophy, techniques, and technology are creating new challenges and opportunities. I am not convinced that taking advantage of these opportunities, as an add-on to the existing financial model/cost structure, will be adequate or sustainable over the longer term.
