Anna Gu, formerly a research assistant at the Clayton Christensen Institute, and I coauthored this piece.
The prospect of disruption looms on the horizon for many of America’s independent schools. They face difficulties not unlike those of the country’s higher education system, where the increasingly burdensome cost of the postsecondary experience is causing the traditional college business model to break at its seams at the same time that disruptive entrants are gaining traction.
As many students and their families in the independent school world struggle with ever-rising tuition prices, institutions must figure out ways to rein in their expenditures and remain attractive while confronting the disruptive threats that are just beginning to appear so that they can stay successful—and, in some cases, simply survive.
According to data from the National Association of Independent Schools, the cost of independent schools has risen rapidly over the past decade. Because boasting a wide array of academic and non-academic programs and state-of-the-art facilities are markers of quality, schools engage in an arms race of sorts against one another as they seek to bolster their reputations and be the best. Because this competition is predicated on adding costly items, it in turn drives up the tuition price. And having a high tuition often becomes a proxy for quality in the eyes of the schools and families.
The challenge is that these rising costs and tuition prices have outpaced wage growth—over the past decade, incomes for most Americans have been stagnant—which means that fewer people are able to afford an independent school experience. In addition, charter school and homeschooling options have increased, which have provided parents who are dissatisfied with their public school options more choices. Indeed, NCES data shows that the country’s total private school enrollment has been decreasing since 2005.
Against this backdrop, a relatively new type of private school has emerged in the form of micro-schools, which have the potential to transform the independent schooling landscape—and threaten existing independent schools in the process. Micro-schools are gaining traction among families who are dissatisfied with the quality of public schooling options and yet cannot afford or do not want to pay the ever-rising cost of traditional private schools.
This relatively new competitor is the first real disruptive threat to independent schools. With the enabling technology of online learning in a blended-learning setting, micro-schools are able to offer similar or even higher levels of personalization than traditional independent schools with a lower-cost business model. These schools lack the wide expanse of programs, reputations, and deep histories that traditional independent schools on the high end have. Instead, they offer greater affordability and accessibility.
For example, AltSchool is a micro-school network in San Francisco with tuition that is 10 to 15 percent cheaper than the average for other private schools in the city–-and it hopes to scale its model such that the price falls over time to the point that it is only marginally more than the cost of educating a public school student. Using proprietary technology developed in-house, the schools are working to be able to track the progress of each student and provide individual attention while, once at maturity, keeping their student-to-teacher ratio at 12:1. Although the campuses do not have full gymnasiums, auditoriums, or other facilities frequently seen at independent schools, they focus on providing a customized student learning experience.
Another set of micro-schools, the Acton Academies, has tuition prices ranging from $4,000 per year to $9,900. Acton compresses students’ core learning into a two-and-a-half-hour personalized-learning period each day during which students learn mostly online. This affords time for three two-hour project-based learning blocks each week, a Socratic seminar each day, game play on Fridays, ample art and physical education offerings, and many social experiences.
One lesson from the theory of disruptive innovation is that a service that looks like a primitive and incomplete offering in the early years will improve over time, so incumbent organizations shouldn’t discount it.
In the face of oncoming disruption, what can independent schools do?
We see three primary options for an independent school: adopting online learning as a sustaining innovation; launching its own disruptive innovation by creating an autonomous schooling model powered by online learning; and focusing so clearly on nailing a particular “Job” that the school is able to survive and thrive amidst disruption. We discuss the first two options today and will discuss the third option next week.
Independent schools can and should adopt online learning as a sustaining innovation to slow their cost increases. By leveraging online learning—such as that offered by the Global Online Academy or the Online School for Girls—they can boost their offerings and focus on what they do best. They can also deploy new blended-learning models that allow them to create new staffing models that stem cost increases.
For schools that have the leadership, vision, and resources—meaning their financial situation is not declining such that they are hemorrhaging resources—they can also set up an autonomous unit to manage a disruptive outshoot to compete directly with the disruptors and serve students they would not be able to reach with their core model. This new unit should focus on providing a student experience that excels on measures different from the traditional measures of quality—such as top-notch extracurricular offerings and state-of-the-art facilities—that private schools have historically used.
There is precedent for institutions doing this in the world of higher education. Southern New Hampshire University established College for America as a completely autonomous model separate from the rest of the university. With a goal of preparing students with specific industry-needed skills rather than the myriad of missions of a traditional university, the program is able to take advantage of online learning to offer a degree that is both less expensive and more flexible than degrees from more traditional institutions.
Although national trends in costs and wages paint a potentially bleak picture for independent schools, an understanding of disruptive innovation trends can help private schools update their business models and maintain their survival through stagnating wages.
