So far the Creative Destruction series have covered Financial Services, B2B Media and STM Publishing and Legal Publishing. Today we start on Education.

Writing about education is hard. We all have an opinion based on our own experience being educated. For many parents this is an issue of great importance. Teachers have their own insights from the daily hard work to educate our children. Policy-makers, economists and business leaders know that education is the main driver for value creation and and innovation. In many cases these opinions are fiercely held. Education matters a lot to all of us. I am conscious of treading lightly on this subject.

(Photo Credit: my_new_wintercoat on Flickr)

How Big Is The Education Business?

Big. According the National Center for Education Statistics;

“Nearly 50 million students are heading off to approximately 99,000 public elementary and secondary schools for the fall term, and before the school year is out, an estimated $543 billion will be spent related to their education.”

The $166 billion we spend on lawyers is much less. So we do have our priorities right!

According the National Center for Education Statistics, we spend:

“about $8,900 at the combined primary and secondary education levels and about $24,100 at the higher education levels.

There are 4,352 colleges, universities, and junior colleges in the United States.”

The Educational Publishing Business

According to an article in the Washington Post:

“Estimates of how much students spend on textbooks range from $700 to $1,100 annually, and the market for new books is estimated at $3.6 billion this year. Between 1986 and 2004, the price of textbooks nearly tripled, rising an average of 6 percent a year while inflation rose 3 percent, according to a 2005 report by the Government Accountability Office. In California, the state auditor reported last week that prices have skyrocketed 30 percent in four years.”

Double the rate of inflation for for 18 years! This is hardly digital economics at work. No evidence of Moore’s Law at work here! This echoes the complaints about price increases that we observed in the STM and Legal publishing markets.

This is what the Wikipedia entry on Textbooks calls a “broken market”:

“The textbooks market does not operate according to the same economic principles as a normal consumer market. First, the end consumers (students) do not select the product, and the people choosing the product (faculty) do not purchase the product. Therefore, price is removed from the purchasing decision, giving the producer (publishers) disproportionate market power to set prices high.
This fundamental flaw in the market is blamed as the primary reason that prices are out of control. The term “Broken Market” first appeared in Economist James Koch’s analysis of the market commissioned by the Advisory Committee on Student Financial Assistance.
This situation is exacerbated by the lack of competition in the textbook market. Consolidation in the past few decades has reduced the number of major textbook companies from around 30 to just a handful. Consequently, there is less competition than there used to be, and the high cost of starting up keeps new companies from entering.”

Cost Is Not The Only Issue

Cost pressure will drive change at one end. The funding squeeze at all levels – primary, secondary, higher, public and private – is intense. Nobody wants to cut teacher pay or increase class sizes. Anybody who can drive down textbook costs without reducing effectiveness would be a hero.

But cost is not the only issue. Printed books are NOT the ideal medium for textbooks. Printed books are ideal for novels and other narrative forms that are designed to be read from start to finish. This is a “lean back” experience (like TV) and the book is the ideal form factor.

Textbooks on the other hand are a “lean forward” experience like the web. You use them as a reference and you are as likely to go up and down and across as you are to go linear. In other words, you use links! There are many form factors – laptops, smart phones, tablets, projectors – that are better than the printed book.

Lower cost AND better. It is a reasonable bet that digital text books are the future.

The question is, why is it not happening as fast as logic would dictate?

Education Is Very Change Resistant

For many reasons, it is really, really hard to effect change in eduction. Just ask some really smart, driven and rich folks like Bill Gates and Michael Bloomberg who have tried!

So the kind of projections that we see in other markets along the lines of “the future is coming fast, disruptive change is happening” tends to look a bit funny a few years later.

There are changes that may happen in the textbook publishing market within the confines of an educational system that remains fundamentally the same. But it is also possible that some more fundamental changes may be coming to education.

What Happens To Educational Publishing When Education Itself Has Been Hacked?

Fred Wilson and his colleagues at Union Square Ventures have created a wonderful conversation (via a blog and an unconference) around the subject of “hacking education“. I am quoting Fred’s conclusions wholesale below, but urge anybody who is passionate about education to look at the original post and, even more important, the great comments from some very smart people who are passionate on this subject.

“The event has just ended and my head is buzzing with so many thoughts.

We will post the entire transcript of the event once the stenographer gets it to us. That usually takes about a week. In the meantime you can see about twenty pages of tweets that were generated both at the event and on the web by people who were following the conversation and joining in.

But here’s a quick summary of my big takeaways:

1) The student (and his/her parents) is increasingly going to take control of his/her education including choice of schools, teachers, classes, and even curriculum. That’s what the web does. It transfers control from institutions to individuals and its going to do that to education too.

2) Alternative forms of education (home schooling, charter schools, online learning, adult education/lifelong learning) are on the rise and we are just at the start of that trend.

3) Students will increasingly find themselves teaching as well. Peer production will move from just producing content to producing learning as well.

4) Look for technologies and approaches that reduce the marginal cost of an incremental student. Imagine that it will go to zero at some point and get on that curve.

5) The education system we currently have was built to train the industrial worker. As we move to an information driven society it is high time to question everything about the process by which we educate our society. That process and the systems that underlie it will look very different by the time our children’s children are in school.

6) Investment opportunities that work around our current institutions will be more attractive but we cannot ignore disruptive approaches that will work inside the existing system. Open courseware, lesson sharing, social networks, and lightweight/public publishing tools are examples of disruptive approaches that will work inside the existing system.

7) Teachers are more important than ever but they will have to adapt and many will have to learn to work outside the system. It was suggested at hacking education that teachers are like bank tellers in the 1970s. I don’t agree but I do think they are like newspaper reporters in the 1990s.
Credentialing and accreditation in the traditional sense (diplomas) will become less important as the student’s work product becomes more available to be sampled and measured online.

9) Testing and assessment will play more of a role in adapting the teaching process. A good example of this is how video games constantly adapt to the skill level of the player to create the perfect amount of creative tenstion. Adaptive learning systems will soon be able to do the same for students.

10) Spaces for learning (schools and libraries) will be re-evaluated. It was suggested that Starbucks is the new library. I don’t think that will be the case but the value of dedicated physical spaces for learning will decline. It has already happened in the world of professional education.

11) Learning is bottom up and education is top down. We’ll have more learning and less education in the future.”

Association of Educational Publishers

Lots of folks in the educational publishing business are trying to figure out what is coming and how they position for that future. The Association of Educational Publishers has a well balanced set of members across 4 main categories (specific to K-12, not higher ed):

1. Corporate. These are the Publishers. They have 49 member organizations. These include big names such as McGraw Hill, Pearson and Scholastic. But there are also a host of smaller, specialist publishers. This does NOT look like the legal publishing market, it has not consolidated down to an oligopoly.

2. Non-Profit/School Members. There 42 in this category. One example, a much loved institution: American Montessori Society.

3. Affiliates. There are 46 in this category, everything from technology vendors to investment bankers.

4. Freelance/Independent. There are 45 in this category.

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