10 Mar 2003  Research & Ideas

Education, Technology, and Business: What’s the Catch?

In a panel discussion on current and future business opportunities in the American education market, four entrepreneurs hashed out the pros and cons of entering this tricky sector. There are opportunities—for the daring and undaunted. HBS professor Alan MacCormack moderated this panel at the Conference on Social Enterprise held recently at Harvard Business School.

 

The intersection of education, business, and technology is a key nexus for those looking to affect the future of our children, our economy, and our nation, according to the four panelists at the recent "Education, Business, and Technology" session at the HBS Conference on Social Enterprise held on campus on February 22nd. The panel, moderated by Lumry Family Assistant Professor of Business Administration, Alan MacCormack, examined the $50 billion education industry, discussing the business opportunities and hidden pitfalls of entering this huge and complex market.

Why the education sector?

MacCormack opened the session by asking why, of all business sectors, the panelists chose this one. Kosmas Kalliarekos (HBS MBA '91), founding member and senior partner of The Parthenon Group, a strategic advisory company, and head of Parthenon's Education Center of Excellence, noted his cultural affinity to education, having been educated in four different countries. Also, education is the second largest industry in the U.S., although business schools don't give this much attention, said Kalliarekos.

A personal lifelong motivation to "fix the problem of educational inequity" was what led Ira Fishman in this direction. Fishman worked in the Clinton administration as Counsel and Director of the Task Force on Education at the Federal Communications Commission and founding CEO of the nonprofit E-Rate program that provides money to connect public schools and libraries to the Internet. By 2001, the E-Rate program had wired 87 percent of all K-12 classrooms in the U.S.

If we believe that educational performance is a result of investment, it hasn't paid off.
—Kosmas Kalliarekos, The Parthenon Group

John J. H. Kim (HBS MBA '93) spent his early career working in test prep for Kaplan, and became aware of the need for high quality repurposing and packaging of content for the school market. Beyond that, Kim was drawn to education. It's a huge industry with many challenges, as well as being "super important," he said. Kim is CEO of Ibis Holdings, Inc., which identifies opportunities in the education sector, and was recently also CEO of Chancellor Beacon Academies, Inc., a Miami-based company that develops and operates independent and charter schools.

The fourth panelist, Nereyda Salinas, Interim CEO of Youth Tech Entrepreneurs, was drawn to education as a way to make systemic reforms in the system that would ultimately address social justice and policy issues here and in developing countries.

Frustrating, but worth it

Given that education is such an attractive industry in terms of size and importance alone, there must be frustrating barriers that prevent many companies from entering the market, suggested MacCormack.

From Fishman's point of view, there is a frustrating "mismatch between a need for a business to operate on a budget, and the slow decision-making process" that happens in the education world. Added to that is the very expensive process of selling and marketing to schools, said Kim, whereby every sale is done in person. Kalliarekos commented on the massive confusion about the industry in general. "Is there an education industry?" he asked, noting the huge scale and fragmentation among the different segments including K-12, higher education, and executive education.

Interesting opportunities

Frustrating yes, but full of interesting opportunities to try new ideas and make a difference, said the panelists. The "baby boom echo" will create a fairly stable K-12 population of 55 million for the foreseeable future. The teaching profession itself will need to undergo radical changes, said Salinas, where teachers need more training—to use technology among other skills—and more support in terms of salaries, staffing plans, and resources.

We need a major social investment in training.
—Ira Fishman, past director of E-Rate

Kim sees this growth in terms of a need for more real estate: There just aren't enough schools and classrooms out there. He also pointed to the accountability/assessment arena as a place for new businesses to investigate. Kalliarekos concurred, pointing to a "sea change" in accountability and the huge business need to offer services and programs to help teachers stay on top. Parents will also become more involved as consumers, he added, creating a push for overall school quality to rise. Fishman saw this consumer aspect in terms of a cooperative model where parents, students, and teachers are all invested in the company/school's success.

Individualizing education, most likely via technology, is another important trend, said Fishman, pointing to research on the great variation in students' learning styles and thus the need to deliver content that specifically matches these needs. He sees the ability to easily deliver customized content becoming a solid reality in the two decades.

Investing in technology

Clearly, technology has many roles to play in education, said MacCormack. Where should it be invested, he asked the panelists, and has it failed us to this point?

First of all, we need to understand that "hardware is no good if it just sits in the corner," said Salinas, and we should focus on getting teachers ready to use it.

Hardware is no good if it just sits in the corner.
—Nereyda Salinas, Youth Tech Entrepreneurs

Fishman agreed, citing the fact that many teaching colleges don't use technology themselves. Technology is not part of the teaching curriculum, and many school administrators simply don't embrace technology. "We need a major social investment in training," in order to avoid the risk of technology not being used to its potential, argued Fishman. Schools must also break down the ways they teach, encouraging team teaching in the classroom and other constructivist models that sometimes use technology to build meaning in the classroom.

Kalliarekos said that he wasn't won over by technology yet: With a $50 billion price tag, he said he wanted to see the visible benefit. "If we believe that educational performance is a result of investment, it hasn't paid off," he said. "We have to look at the bottom line."

The 4th annual Conference on Social Enterprise, presented by the Harvard Business School Social Enterprise Club and the John F. Kennedy School of Government, was held at Harvard Business School on February 22, 2003.

Social Enterprise