Steering Capital: Optimizing Financial Support for Innovation in Public Education

Kim Smith and Julie Petersen:

Public education has reached a moment of rare consensus: something must be done about the sorry state of our public schools, particularly in urban and low-income areas, and that the solution must deliver better results at scale – and without significant additional resources. Other fields like medicine and communications have embraced innovation – a new approach that achieves a better result – as the best means to this end. But education innovation has not yet lived up to its promise. In this paper, education entrepreneur Kim Smith and innovation writer Julie Petersen chart a path forward for how the public, private and nonprofit sectors can work together to advance education innovation by steering capital toward products, services and approaches that improve educators’ productivity and students’ learning outcomes.
Today, the educational ecosystem is not set up to support meaningful and widespread innovation. The policy and investment context that defines the flow of capital in education can either encourage or inhibit this innovation, and today it does much more of the latter than the former. Public policies and regulations favor compliance over excellence, rarely allow state or district buyers to choose flexibly between a range of high-quality product or service options, inhibit the flow of information that would allow buyers to anticipate or measure performance improvements, and offering few meaningful incentives for these buyers to adopt better products and services. The philanthropic capital market similarly provides few mechanisms for rewarding dramatically improved outcomes (including little funding for the scale-up of successful organizations), instead favoring small doses of funding across many organizations. Private investors shy away from fueling education innovation, intimidated by policies that restrict the work of for-profit providers in education, frequent policy volatility at the local level, market domination by a few large publishers that feel little pressure from competition or from their customers to really innovate, and a slow, relationship-based sales cycle that rarely measures or rewards quality.