Educational Educational Entrepreneurship: Entrepreneurship:

What, Why, and How?What, Why, and How?

Frederick M. HessFrederick M. Hess

American Enterprise InstituteAmerican Enterprise Institute

A New Educational A New Educational HorizonHorizon

Our education system was never Our education system was never designed to educate all children designed to educate all children

Globalization and new advances Globalization and new advances pose unprecedented challengespose unprecedented challenges

Change always entails risk–but, Change always entails risk–but, today, today, failurefailure to change holds to change holds significant risks as wellsignificant risks as well

Failure Is Not an Option…Failure Is Not an Option… … It’s a Necessity … It’s a Necessity

Innovation and entrepreneurship entail Innovation and entrepreneurship entail failure failure

But so do existing arrangements–and risk- But so do existing arrangements–and risk- aversion has repelled talent and brought aversion has repelled talent and brought stagnation stagnation

Entrepreneurial presumption: Entrepreneurial presumption: Risks of status quo outweigh those of Risks of status quo outweigh those of

reinventionreinvention Might occur inside or outside traditional systemMight occur inside or outside traditional system Might be driven by for-profits or non-profitsMight be driven by for-profits or non-profits

The Search for SecurityThe Search for Security

The “Familiarity” Trap The “Familiarity” Trap

The “Certainty” Trap The “Certainty” Trap

The “Jetsons” TrapThe “Jetsons” Trap

Reinvention Is MessyReinvention Is Messy

New challenges demand dynamic New challenges demand dynamic responses:responses: Solutions will change over timeSolutions will change over time Solutions are always untested, many Solutions are always untested, many

never “proven”never “proven” Solutions emerge from trial and error, Solutions emerge from trial and error,

not heroic prognosticationnot heroic prognostication

It’s an Uncertain World–It’s an Uncertain World–Success Isn’t PredictableSuccess Isn’t Predictable

1/3 of new firms fail in first 2 years, and 1/3 of new firms fail in first 2 years, and more than 1/2 fail within first 4 years.more than 1/2 fail within first 4 years.

In 1861, Philip Reis invented but In 1861, Philip Reis invented but abandoned telephone—finding no abandoned telephone—finding no public demand.public demand.

In 1950, Univac predicted that 1,000 In 1950, Univac predicted that 1,000 computers would be sold by 2000.computers would be sold by 2000.

Knowledge-Based Knowledge-Based Innovation Is Especially Innovation Is Especially

TrickyTricky ““Even when it is based on Even when it is based on

meticulous analysis, endowed with meticulous analysis, endowed with clear focus, and conscientiously clear focus, and conscientiously managed, knowledge-based managed, knowledge-based innovation still suffers from unique innovation still suffers from unique risks and, worse, an innate risks and, worse, an innate unpredictability.”unpredictability.” Peter Drucker, Peter Drucker, Innovation and Innovation and

Entrepreneurship Entrepreneurship (1985: 120).(1985: 120).

Uncertainty in the World Uncertainty in the World of Ideasof Ideas

8,000+ new publishers enter market 8,000+ new publishers enter market every yearevery year

120,000 to 150,000 new books published 120,000 to 150,000 new books published a yeara year

5 publishers control 80% of book sales, 5 publishers control 80% of book sales, but 78% of but 78% of titlestitles are published by smaller are published by smaller competitorscompetitors

Books passed up by major publishers Books passed up by major publishers include include Harry Potter and the Sorcerer’s Harry Potter and the Sorcerer’s StoneStone and and The Hunt for Red OctoberThe Hunt for Red October

Entrepreneurship Involves Entrepreneurship Involves Throwing a Lot of DartsThrowing a Lot of Darts

Many creative problem-solvers working Many creative problem-solvers working under intense pressure create multiple under intense pressure create multiple solutionssolutions

TFA, KIPP, SEED, New Leaders for New TFA, KIPP, SEED, New Leaders for New Schools, The New Teacher Project, Schools, The New Teacher Project, Edison, National Heritage Academies, Edison, National Heritage Academies, Big Picture Co., Green Dot, High Tech Big Picture Co., Green Dot, High Tech High, etc. are important not as “right” High, etc. are important not as “right” answers, but as models of this processanswers, but as models of this process

Number of Venture Capital Number of Venture Capital RecipientsRecipients

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

2000 2002

TotalEarly-Stage

Source: Money Tree SurveySource: Money Tree Survey

Entrepreneurial Activity Entrepreneurial Activity in 2004in 2004

0%2%4%6%8%

10%12%14%16%18%20%

U.S. France Slovenia Educ,Health, &Soc ServSector

% of workersstarting ormanaging newbusinesses

Source: Journal of Developmental Entrepreneurship, August 2004Source: Journal of Developmental Entrepreneurship, August 2004

Federal R&D Commitment Federal R&D Commitment in 2004in 2004

0

5

10

15

20

25

30

Nat'l Instof Health

Inst ofEduc

Sciences

in billions of dollars

Entrepreneurship Isn’t Entrepreneurship Isn’t About “School Choice”...About “School Choice”...

Markets aren’t just about making Markets aren’t just about making choiceschoices

Markets are fueled by “creative Markets are fueled by “creative destruction” – new approaches emerge, destruction” – new approaches emerge, dated ones disappeardated ones disappear

Markets can be dynamic– or notMarkets can be dynamic– or not Of 25 biggest French firms, 0% founded Of 25 biggest French firms, 0% founded

since 1965 since 1965 Of 25 biggest U.S. firms, 76% founded since Of 25 biggest U.S. firms, 76% founded since

19651965

……It’s About Creating New It’s About Creating New SolutionsSolutions

Much creative energy is focused on Much creative energy is focused on EMOsEMOs But this is just one of an array of optionsBut this is just one of an array of options

Money can be packed in more nimble Money can be packed in more nimble streamsstreams

Services can be configured differentlyServices can be configured differently

Key Barriers to Key Barriers to Entrepreneurial ActivityEntrepreneurial Activity

Lack of capitalLack of capital Barriers to entryBarriers to entry Talent pipelineTalent pipeline InfrastructureInfrastructure

Key Research Questions Key Research Questions

What does world of educational entrepreneurship What does world of educational entrepreneurship look like?look like? How does it vary inside-outside district, with for-profit How does it vary inside-outside district, with for-profit

status?status? What motivates entrepreneurs?What motivates entrepreneurs? What tools do entrepreneurs need?What tools do entrepreneurs need?

What policies or practices impede entrepreneurship?What policies or practices impede entrepreneurship? What are their costs?What are their costs? What are the virtues of current arrangements?What are the virtues of current arrangements? How might barriers be lowered - and what are perils of How might barriers be lowered - and what are perils of

doing so?doing so?

Entrepreneurship as a Lens Entrepreneurship as a Lens for Viewing Reformfor Viewing Reform

What do various voucher or charter What do various voucher or charter proposals look like if we focus on proposals look like if we focus on entrepreneurship?entrepreneurship?

What do regulations of principal or What do regulations of principal or teacher licensure and compensation teacher licensure and compensation look like?look like?

What do NCLB provisions look like?What do NCLB provisions look like?

Educational Educational Entrepreneurship: Entrepreneurship:

What, Why, and How?What, Why, and How?

Frederick M. HessFrederick M. Hess

American Enterprise InstituteAmerican Enterprise Institute