Are districts the right customer? Not necessarily, if you’re trying to disrupt the system

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Aug 28, 2013

A few weeks back Gee Kin Chou—former Oakland Unified School District’s Chief Technology Officer (CTO)—published a thorough checklist on Edsurge about how to market new products to school districts. Chou challenges entrepreneurs’ tendency to bemoan the sluggish bureaucracies that clog the edtech market. Instead, he argues, startups need to do a better job of knowing their customers in district offices. He points out pressures that CTOs face: for example, they may be politically risk-averse, beholden to a specific set of district priorities, or tied to a spending calendar. He suggests that new companies tailor their approach to these circumstances by timing their pitches accordingly, researching districts’ priorities, and offering products that can address multiple areas of need within districts rather than one-off solutions.

Chou’s points are well taken. Talented edtech entrepreneurs often risk building great products without understanding the channels of distribution that will get those products into the hands of teachers and students. It’s also refreshing to get a glimpse into the often-opaque technology procurement process in large districts.

But helping startups navigate entrenched bureaucracies may not play to their competitive advantage and could stymie a new technology’s disruptive potential. First, new entrants can rarely compete head on with big companies already dominating the education technology space and serving demanding customers like big districts. Second, our theory of disruptive innovation illustrates that a new technology is unlikely to disrupt the current system by approaching it through traditional channels of procurement and adoption to serve existing customers. If districts are simply perpetuating factory-based classroom models, then they may be interested only in technology solutions that support, rather than disrupt, the traditional model.

On the first point, our theory demonstrates that new entrants can rarely outcompete industry giants in battles of sustaining innovation. A sustaining innovation targets demanding, high-end customers with better performance than what was previously available. Because this entails making a better product that sells for higher profit margins to their best customers, the largest, most established companies have powerful motivations to fight sustaining battles against new entrants—and they have the resources to win.

Disruptive innovations, in contrast, don’t attempt to bring better products to established customers in existing markets. Instead, disruptive companies get their start by targeting areas of nonconsumption, where they face no direct competition, and where new customers are less demanding or demand something different. For example, Sony didn’t start out competing head on with RCA, whose customers demanded the state of the art tabletop radios powered by vacuum tube amplifiers. Instead, Sony’s first product was a low-cost and relatively crummy pocket transistor radio. Despite these radios’ relatively poorer performance, teenagers—nonconsumers who otherwise couldn’t afford a tabletop radio and wanted to listen to music on the go—were delighted to buy the crummy, inexpensive alternative. Once Sony had this foothold, it was only a matter of time until it was able to improve its technology to delight the more demanding customers RCA had originally monopolized.

Nonconsumption is a tricky concept in education because we live in a country where children are required by law to attend school. But pockets of nonconsumption do exist: take tutoring, for example. This remains one area where savvy entrepreneurs could offer low cost alternatives to students who otherwise couldn’t afford high-touch tutoring (some of you may recall the New York Times’ look at Hong Kong’s private tutoring craze last week, where students can purchase an hour of tutoring for about $13 USD). Just like teenagers delighting in the chance to finally own their own radios, for many students the alternative to low-cost tutoring is nothing at all.

So who is the customer to get to know in these scenarios? Although school districts may be a potential customer for some tutoring programs (take, for example, Los Altos School District’s partnership with Khan Academy), this remains relatively rare. Instead, customers for low-cost tutoring products might be parents, mentors, afterschool providers, or students themselves. Importantly, none of these customers is directly accountable to perpetuating the traditional education system, which means they will not require that the technology fit the old mold of traditional schools and classrooms. The theory illustrates that once companies get a foothold here, they are better positioned to improve their product over time to serve the more demanding customers in district offices, but along a new performance metric that disrupts the traditional school model.

Other areas of nonconsumption pop up where schools can’t provide something like Advanced Placement or foreign language courses; online-learning companies are starting to target these opportunities. For these, Chou’s advice might prove helpful, as many districts and schools are hiring online providers to supplement their course offerings. However, recent cuts at Florida Virtual School may be an early signal that as online offerings grow and pose a greater threat to districts, these online education entrepreneurs may have to find other channels to reach students.

Chou’s article is a refreshingly transparent portrait of the procurement process in a large urban distract. Writing like this may be a first step to unlocking new opportunities for entrepreneurs pursuing sustaining innovations in education technology that cater to our existing paradigms of teaching and learning. And some districts may be looking to supplement their offerings in a way that welcomes disruptive technology at the margins.

Still, districts’ progress in moving to student-centered models remains slow, and as Chou himself admits, CTOs are beholden to a variety of forces that tend toward the status quo. Entrepreneurs aiming to create a disruptive technology that focuses on student-centered learning might not heed his advice yet. Instead, they’d be better served to look to areas of nonconsumption and get to know the customers there.

 

Julia is the director of education research at the Clayton Christensen Institute. She leads a team that educates policymakers and community leaders on the power of disruptive innovation in the K-12 and higher education spheres. Be sure to check out her new book, "Who You Know: Unlocking Innovations That Expand Students' Networks" https://amzn.to/2RIqwOk.