Stimulating Excellence
Unleashing the Power of Innovation in Education

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Executive Summary

The United States is facing one of the worst financial crises of recent history. But we are experiencing a quiet crisis, as well--one that has been building in our nation's classrooms and schools for decades. We are failing to prepare the next generation of Americans as citizens, thinkers, and graduates prepared for success in a global society.

Yet, even amid this crisis, there are reasons for optimism. Recently, a new generation of social entrepreneurs has begun to transform public education with innovative solutions that have extraordinary potential to serve American students more effectively and efficiently. Programs like Teach For America, College Summit, New Leaders for New Schools, the Knowledge is Power Program, among others, are part of a growing movement to use new methods to deliver a higher-quality education to every student--particularly those from disadvantaged backgrounds. These innovators have challenged our understanding of "business as usual" in American public education by introducing new philosophies, methods, and expectations for the education of our nation's students.

The 2009 American Recovery and Reinvestment Act accords increasing importance to entrepreneurship in education, primarily through a $650 million "innovation fund" designed to allow non-profits with a record of increasing student achievement to scale-up their initiatives. Nonetheless, entrepreneurs in education continue to face significant barriers to success and expansion: rigid bureaucracies, lack of access to capital, limited supply of human talent and other barriers inhibit entrepreneurs' entry and growth, and together combine to discourage new innovations.

To foster and support innovative solutions to our nation's education crisis, we urge policymakers to pursue numerous reforms that change the demands and incentives in K-12 systems to better serve students. In this report, we gather creative solutions and ideas from a collection of leading education entrepreneurs about federal and state policy changes that can support the emergence, success, and growth of entrepreneurial problem-solvers while encouraging a determined focus on quality and results. We primarily address the specific local, state and federal policy barriers that have thus far precluded thriving entrepreneurial activity in public education. We then outline several policy approaches for district and
state superintendents, governors, and the new federal administration.

Fifty systems of standards and assessments make it difficult to compare and aggregate performance across states, and the information generated by these systems typically does not make it possible to tie internal systems to results.

The recommendations included in this report are not a wish list of items to support entrepreneurs; rather, they represent a nonpartisan agenda for federal, state and local leaders to address the rules, procedures and practices that hinder innovation in education. We concentrate on those policy changes that enable high-quality entrepreneurs to better succeed at scale because it will allow them to better serve students, teachers and schools. We recommend initiatives that prompt local action, rather than issuing broad mandates; focus on state and local changes that require limited federal involvement to have an immediate impact; and, particularly mindful of our current economic climate, offer reforms that remove anachronistic barriers and problematic practices, rather than those that require additional resources.


Use Dramatically Better Information to Create a Performance Culture. The interviewed entrepreneurs identified the lack of a performance culture in K-12 public education as the greatest constraint on their ability to scale and succeed. A critical ingredient of this performance culture--clear metrics that indicate how good a product is or how well a service is working--is largely missing in public education. Insufficient data means that teachers rarely have the capacity or tools to adjust their instruction based on results. Fifty systems of standards and assessments make it difficult to compare and aggregate performance across states, and the information generated by these systems typically does not make it possible to tie internal systems to results. Proposed federal and state approaches to address these challenges include updating student achievement data systems to maximize their utility for educators; encouraging the formation of consortia of states that adopt common standards; supporting collection and reporting of management data; and a commitment to track a set of high-priority "power metrics" that can be used to assess the quality of entrepreneurial providers as well as the status quo systems with which they aim to compete.

Open the Public K-12 System to a Diverse Set of Providers. In American schools today, local, county, and intermediate school districts largely hold exclusive rights over the provision of education, and a small number of large providers monopolize the marketplace for services and tools. Practical constraints such as budgetary rules and processes and collective bargaining agreements combine with a widespread bias against outsourcing to prohibit or discourage districts and schools from opting for entrepreneurial provision of key services, even when they are superior to current providers. Policy reforms--such as eliminating unnecessary statutory and regulatory constraints upon the location or delivery of schooling, opening the market for licensed providers of principal and teacher training, and devolving purchasing power for some services to school leaders--would help open the supply markets to more new, high-quality providers.

Make Districts and Other Buyers into Real "Customers." A public education sector open to entrepreneurship also requires true demand--a set of real "customers" among districts and other potential buyers of education services. Even when an exclusive franchise does not fully block entrepreneurs' access to markets, spending restrictions, rigid procurement regulations, slow buying cycles, a fragmented set of buyers, and a dearth of investment vehicles make it very difficult for entrepreneurs to have an impact. Granting existing resources in more flexible ways, facilitating investments to free up future savings, and allowing greater collaboration between buyers and sellers would empower districts and schools with real buying power and enable entrepreneurs to better articulate their value.

Use Public Policy to Encourage Financing for Entrepreneurial Ventures. Finally, entrepreneurship can thrive only when there are various types of financing available for new ventures. Few dollars are currently available in the education sector for startups, new tools, or delivery systems, and the capital market lacks many of the elements that make these markets work for entrepreneurs in other industries. Policymakers can use existing public funding streams in ways that better foster innovation by reallocating current funds to encourage recipients to tap entrepreneurial providers, leveraging more private investment, and developing models of performance-based funding to reward and sustain those entrepreneurs that are most successful.

A public education sector open to entrepreneurship also requires true demand--a set of real "customers" among districts and other potential buyers of education services.

In addition to the recommendations outlined above, several overarching themes also arose from our conversations with leading education entrepreneurs:

  • Using the "bully pulpit." Federal and state leaders have a critical opportunity to communicate a commitment to supporting promising innovations, educate philanthropists and private investors about the success and potential of educational entrepreneurs, and provide a forum for addressing the barriers that hinder even effective ventures.
  • Inventorying national and state agencies. This process can be used to assess agencies' openness to entrepreneurship, evaluate their performance metrics, and eliminate outdated rules and practices that today impose a burden relative to the benefits they convey.
  • Engaging foundations and private investors. In this report, we focus primarily on the role of state and federal policymakers, but private funders can help jumpstart many of our proposals by providing seed funding for new initiatives and co-funding alongside publicly financed ventures.
  • Re-examining the traditional structures of public schooling. Many of our recommendations are designed to make the traditional structures in public education.

We should be encouraged and inspired by the current generation of educational entrepreneurs who have challenged our assumptions about what is possible in public K-12 education and provided a higher-quality education to thousands of students. But the current and potential new entrepreneurs are stifled by several unnecessary and outdated state and district policies, and an education system that remains as a whole insensitive to performance and quality. The recommendations here suggest several steps that state superintendents, governors, and the new federal administration can take to make public K-12 education a more enticing and hospitable sector for social entrepreneurship. By removing barriers to innovation and reform and providing greater support for entrepreneurship, we can spur the critical and necessary new solutions to many of public education's greatest challenges.

Click here to view the full text of this report as an Adobe Acrobat PDF.

Frederick M. Hess is a resident scholar and director of education policy studies at AEI.

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