5 insights on edtech market for small- to medium-sized school systems

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Jun 19, 2014

Just as companies often struggle to create compelling solutions for small- to medium-sized businesses, so, too, do education technology companies often overlook the priorities and circumstances of small- to medium-sized public school systems.

The disconnect matters because 50 percent of the nation’s 48 million students attend approximately 3,700 small- to medium-sized school systems, which are increasingly looking to design blended-learning environments and harness technology to better serve their students.

This week, we at the Clayton Christensen Institute released a report by my colleague Julia Freeland and Alex Hernandez of the Charter School Growth Fund to help clarify the technology problems that these school systems are facing and their hopes for what the solutions might look like. The report, “Schools and Software: What’s Now and What’s Next,” illuminates these challenges across four areas: academic software, business and operations software, software and data integration, and IT management and hardware.

Five findings stuck out to me.

First, there is no magic-bullet academic software that serves all students and schools in all use cases. Regardless of what vendors think or want, schools are cobbling solutions together from a variety of software providers. Predictably, because these products were built as proprietary solutions, they don’t cooperate. I don’t blame the existing vendors for this per se; were they to make them too interoperable at this stage in the market, it would very likely commoditize their offerings. But I do think it should serve as a wake-up call to vendors to build solutions for the actual use cases in schools and not for what the “ideal teaching and learning environment” should look like in their opinion. Creating interdependent and proprietary solutions and selling them into an intricately interdependent school system will always meet with resistance.

I also think the challenge of having solutions “talk to each other” suggests that we will ultimately see one or two platform solutions emerge at scale that have an array of built-in assessments to which upstart third-party content providers will be incentivized to write their software solutions to gain distribution. KnewtonKhan Academy, and Illuminate’s Activate armed with Summit Public Schools’ assessments are among the potential winners.

Second, I’m struck by how technology is moving from the fringe of school systems into the core. Online learning that often first served areas of nonconsumption is now serving core academic areas in these systems in blended-learning environments; the recent Speak Up 2013 survey said that more than 40 percent of school principals report using online learning for core subjects; technology drives critical business operations. Five years ago, it would have been quite difficult to find 30 school systems using technology for their core operations. No longer.

Third, the discussion between having software that is adaptable versus assignable—meaning teachers can choose what online activities students will tackle—represents a real challenge today. Ultimately, I think this could turn out to be a false dichotomy, as software can adapt to students but be transparent for students, teachers, and parents so that they can use also their judgment to make choices about what students should work on and so they can pick modules that will support students in building core knowledge toward tackling deeper projects. The report alludes to this end state as well and suggests that more transparent assessments and data reporting against not just macro-standards but micro-standards and competencies will help.

Fourth, the number of charter management organizations (CMOs) that are building their own operations and academic software is striking. This backward integration is perhaps unsurprising. At the outset of most new sectors, a well-functioning ecosystem with predictable interfaces between adjacent steps in the value chain is often absent. To be successful, organizations must integrate backward into steps not normally thought of as being in their core competency in order to be successful. With technology increasing in importance, but the use case not widespread enough yet for companies to create customized solutions that will do the job, school systems are raising capital and doing it themselves.

Fifth, the discussion in the business and operations software section and the software integration and data storage section brings into sharp relief the integration challenges that exist in schools—not just in interpreting data between content providers, but also in performing basic tasks around student enrollment, rostering, and teacher hiring to manage schools let alone generate useful insights for improving them. The school systems’ software maps that depict visually all of the software solutions a school uses show how complicated the information technology operations for these systems have become. The discussion of the “hub” platforms—the student information systems (SIS), human resource information systems (HRIS), and domain management or identity management systems—show not only how central these hub systems are in every school but also how they often become forces that constrain what is possible in a school. For those newer to the education technology space, they help show why many remain hopeful that a data warehouse solution—like an inBloom—will ultimately succeed. Many of the problems described are not unique to small- and medium-sized schools. But the problems are somewhat strange in that while small- and medium-sized school systems are small relative to big school systems, they still often have tens of millions of dollars in revenue—even as much of the revenue is locked up in what are essentially fixed costs. Even more to the point, their impact—in the time they require for manual integration efforts and the limitations they impose—is arguably more pernicious in halting the ability of educators to use data to help each student than in other sectors.

As Freeland wrote in her blog about the report, “the bad news is that solving for some of the information gaps and cooperation issues in the edtech market will be challenging. The good news, however, is that we have a pretty clear sense of what a strong set of early adopters would like to see, and we’ve highlighted a number of opportunities for entrepreneurs, existing companies, and investors to address.”

Now it’s time for people—educators, companies, and investors—to roll up their sleeves and start solving the problems. The solutions to these challenges represent big opportunities to improve education for all children.

Michael is a co-founder and distinguished fellow at the Clayton Christensen Institute. He currently works as a principal consultant for Entangled Solutions.