Beyond Good and Evil: Understanding the Role of For-Profits in Education through the Theories of Disruptive Innovation

The
debate surrounding for-profit corporations in education is often highly
polarized (especially in Ohio):
For-profits are cast as either heroes or villains, but seldom anywhere in
between. In the American Enterprise Institute’s (AEI) latest report, Michael B.
Horn articulates a more nuanced
role for for-profits in education.

Horn analyzes at an abstract level the
differences between non-profits and for-profits in the areas of scale, focus,
and “what opportunities appear attractive.” He posits that for-profits are able
to scale their operations quickly and effectively because of a clear focus
(turning a profit by providing a high-quality good or service to the
corporation’s best customers), and that they are inherently driven to pursue
opportunities that maximize profit. Although they are often slower to adapt to
market conditions and have more difficulty maintaining a clear organizational
focus than their for-profit cousins, non-profits are able to remain in markets
where profit opportunities are smaller and fewer.

Horn claims that the for-profit model
makes it suited for specific, but not all, ends in education. He focuses on
online education and asserts that if proper regulations are put in place,
for-profit corporations can be the most efficient vehicles for obtaining
high-quality outcomes for students in certain situations. (Unfortunately, Horn
does not discuss for-profit charter school operators, a hot issue in Ohio of late.) For-profits tend to
innovate and expand in the direction that will appeal most to the consumer.
This can work to the advantage of students if the government (the “consumer”
for public education) implements regulations and incentives that encourage
for-profits to pursue educational goals established in legislation. In the end,
Horn recommends an expanded role for for-profit corporations in US education,
but he cautions that for-profits should not be viewed as a “final solution.”

Provisions recently inserted into HB
153, Ohio’s budget bill, greatly expand opportunities for for-profit charter
operators in Ohio. As written, the bill would allow a for-profit corporation to start a
charter school with state funding, then operate with minimal regulation, much
as a private school does. Fordham has raised sharp objections to this provision, and our own Terry
Ryan recently testified before the Senate Finance Committee
to advocate removing it. For-profit corporations can be useful tools in public
education, but they must be held accountable for whether or not they achieve established
educational goals.

 

Beyond Good and Evil: Understanding the Role of For-Profits
in Education through the Theories of Disruptive Innovation

Michael
B. Horn
American
Enterprise Institute
April
2011

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