Designing a Business Model to Transform the Indian Education System

P1300644

July, 2014. Rural Education Center (REC) Rishi Valley School, Madanapalle, India.

This article is an effort to describe a profitable business model for a private schooling firm in India that looks to maximize the quality and accessibility of its educational services.

The intention is to design a business model for a firm that will initiate a systemic push towards an education system designed with the veil of ignorance that was described by John Rawls (ie ensuring equality of opportunity for children of all social and economic backgrounds).

I will first discuss a series of ideas that form the foundation of this model and then finally weave those ideas together in order to describe it.

The Need for a Cultural Change in the Nation’s Economic Elite:

03092009cartoon6

When we discuss ideas to address various negative trends in social, political and economic systems, there is a tendency to largely focus on the design of the system in question.

A good example would be the constant debate between the conservatives and the liberals regarding, Big Government vs Big Corporations. Other variations include: Trickle down economics vs Trickle up economics. Liberalization vs Protectionism. Amartya Sen vs Jagdish Bhagwati.

In India we have implemented variants of both the competing models. The “Big Government” sectors of our economy continue to facilitate extensive corruption and excessive economic inefficiency. At the same time, the rise of the the “Big Corporations” can be said to have had no effect at best, and egregious effects at worst, to numerous negative social, political and economic trends (undemocratic political influence, crony capitalism, media corruption, rent seeking, rising inequality, persisting poverty, environmental destruction and so on).

clutter

So what is the real problem?

I would argue that there is a more fundamental underlying problem in the culture of the economic elite that serves as the root cause for these exacerbating and persistent negative trends.  The dominant culture of the economic elite celebrates pursuing short term self interest typically at the expense of the collective interests. For example, in India, the dominant culture of the economic elite dictates that an individual’s supreme priorities are to build the biggest houses, purchase the fanciest cars, and arrange the grandest weddings. These are such powerful cultural priorities that people are willing to contribute to negative social trends either actively through their actions, or passively through their inaction, if they can take another step towards achieving such glorified material goals.

This problem will transcend all the variations of the social, economic and political systems that we focus on designing. I am convinced that we will just keep oscillating between various systems through destructive change as this underlying cultural problem of the economic elite will undermine any system that we adopt.

So how do you address this cultural problem of the economic elite? By changing their educational experiences to ensure that they fully appreciate the concept of the enlightened self interest.

Note: The reason I focus on the economic elite is that they will always exist in any social system and will always heavily influence all social, economic and political policy and by definition have access to every rung of the ladder of opportunity.

114281-112170What is the enlightened self interest? If some course of action contributes to a negative trend that hurts the collective interests of society, then by definition it hurts your self-interest because the self is always a component of the collective. It is simply a deep appreciation of the idea that we are all connected to each other through social, economic and political frameworks and that a negative trend in any of these frameworks will eventually hurt everybody. So the challenge is in making it a cultural priority to (1) recognize that collective interests and self interest aren’t disconnected and (2) that seemingly beneficial short term self interests that hurt the collective interests are really self destructive in the long run. It is deeply in the interest of the economic elite to address the impending dangers of exacerbating negative trends in various frameworks as the destructive change that these trends inevitably result in, typically hurt the economic elite the most.

Increasing the Quality of the Educational Experience in High Schools for Students from Upper Income Bracket Families through Service Learning:

Service Learning.  Hannah Community Center, Lafayette, Indiana.

Service Learning. Hannah Community Center, Lafayette, Indiana.

The schooling system in India tends to segregate students based on their economic background. The children of the economic elite who have the resources and opportunities  to become the nation’s next business leaders, innovators, bureaucrats, politicians and influential citizens are completely disconnected from the realities and challenges facing the rest of their countrymen. This is a major reason why the dominant culture of the economic elite characterized by passivity and a lack of appreciation of the enlightened self interest gets propagated.

The need of the hour is to integrate service learning to the educational experience of these students to make understanding enlightened self interest a cultural priority. Roman Krznaric would call this the Power of Outrospection.

Apart from helping students develop an appreciation of the enlightened self interest, what are the other possible benefits of service learning for such students?

  • Help them develop an appreciation of the opportunities that they have been blessed  with and increase the likelihood of them making the most out of them. Help them discover purpose, inspiration and drive.
  • Significantly improve the learning experience of students because, “teaching is actually one of the most valuable ways to learn.” So help improve student’s own understanding of the subject material, the world and themselves.
  • Help them develop communication skills, leadership skills, respect and responsibility.

Identifying the Most Strategic Way to Provide Children from the Lower Rungs of the Economic Ladder Access to the Ladder of Opportunity:

Hannah Community Center

Service Learning. Hannah Community Center, Lafayette, Indiana.

There are two primary parameters one needs to consider whilst establishing this strategy, (1) identifying the resources and basic skills a child needs in order to have a shot at achieving any academic or professional goal, and (2) minimize the resources required for (1).

The technological revolution is the disruptive development that has made leveling the playing field through online education a reality. (Khan Academy, MIT Open Courseware, Coursera, edX, Code.org etc).

A cover story in The Economist rightly noted that, “The staid higher education model is about to experience an earthquake” (“The Future of Universities: The Digital Degree”, The Economist, June 28th 2014. Print. )

In the Indian context this means that the question we should be answering is, how do we design a system that will allow the poorest children to access the infinite opportunities provided by the internet?

The answer to this question has two simple steps,

  1. Help children develop a working proficiency in the English language.
  2. Provide children access to computers with an internet connection.

From a practical perspective the real challenge with trying to implement these two steps as a component of a business model is the lack of teachers in India who can help students develop a proficiency in the English language.

studnt_techerratio_pkg1

(“Shortage of 600,000 teachers in the country: Pallam Raju” – NDTV“Many Private School Teachers Lack Proper Qualifications” – Times of India, “Shortage of 70,000 teachers in Government Schools” – Times of India, India faces shortage of nearly 1.4 million trained teachers – Deccan Chronicle).

The Business Model with the Objective of Killing Two Giant Birds with One Stone

What if we can design a business model for a private schooling firm that works towards changing the culture of the economic elite AND helps poor students access the ladder of opportunity?

The key idea is that the firm will offer two educational services. One service will be targeted exclusively at the children of the economic elite and the other at the children who are in the lower rungs of the economic ladder of Indian society.

I have established that the children of the economic elite desperately need an additional element in their learning experience:  community involvement to help develop an understanding of the enlightened self interest. Lets make that community involvement strategic. These children tend to be extremely proficient in the English language because of their social capital and upbringing. Lets make them help children from the lower economic strata learn the English language whilst gaining tremendously from the experience themselves.

The firm will thereby add immense value to the educational experience it provides to the upper income bracket students even as those very students serve as crucial inputs to another component of the firm’s business model.

How do we make this work?

The Hub and Spoke Configuration of Assets:

images

Vijay Govindarajan and Ravi Ramamurti wrote an article in the Harvard Business Review titled, “Delivering World Class Health Care, Affordably” that analyzes how certain Indian medical firms were able to maximize the quality and accessibility of their health care services by designing extremely efficient and profitable business models. One particular mechanism through which these medical firms achieved efficiency was through a hub and spoke configuration of assets. This mechanism is ideal for our purposes.

The Hubs:  The “hubs” are schools for students who are from the upper income bracket families so this is where the firm will make its primary investments in human and physical capital (such that the investments add significant value to the educational services the firm provides thereby putting an upward pressure on the tuition fees the hubs can charge their students). This includes investment in school infrastructure and faculty. The spokes can be viewed as value adding assets to the hubs that will also put an upward pressure on the tuition fees (because they add real value!).

The Spokes: The “spokes” are learning centers for children who are from the lower rungs of the economic ladder. The firm has to thereby look to minimize its investments in human and physical capital in order to ensure a downward pressure on the fees the firm will charge these children. Therefore the spokes are designed to provide just two crucial services: English training and access to the internet. The most important idea is that all the “consumers/students” in the hubs serve as inputs to the spokes. This key idea tackles the staggering teacher deficit and empathy deficit problems by converting all the high school children of the educated elite into productive resources. Note that it is also an imperative to closely follow the works of people like Sugata Mitra in order to evaluate the optimal approach for teaching in the “spokes/learning centers”.

The inherent complexity of the Indian markets should really be seen as an indication of the immense opportunity and flexibility that they offer. This article can only describe the broader framework of this idea because ground level details like the optimal operating strategy and pricing models depend heavily on the local conditions where the firm will operate. The key idea here is that the firm is looking to maximize its profit margins AND generate real societal value. The profits are extremely important because they will allow the firm to scale up their business and start capturing a larger percentage of the market share. This in turn will have a positive inductive effect on the entire education sector. The problem seems to be that people largely tend to look to exclusively maximize profit margins or exclusively maximize societal value when the winning requirement is an equal emphasis on both these end goals. So the question business leaders should be asking themselves is, how do you make generating real value the most powerful driver of profit maximization and positive change?

Here are the facts, In India we currently have,  an energy crisisa water crisisan agrarian crisis, an education crisis, a healthcare crisis, an infrastructure crisis and wow… the list can really go on and on. So the public education system in India isn’t going to magically get better anytime soon. The Government will not magically become efficient and effective. We aren’t going to have a sudden influx of proficient teachers available at low wages. Not for Profit organizations do brilliant and inspiring work but by definition they are limited in scale and typically never induce the relatively rapid systemic, sector wide changes in the manner that effective business models do.

There is an urgent need for business leaders to work on developing profitable business models that will rely on innovation, ingenuity and vision to disrupt the education sector in India to radically transform the lives of more than 300 million children for the better.

Through the Social Entrepreneurship Committee of the Student Think Tank for India, we are going to try and take this idea to school administrations and hopefully even help design ground level operating strategies for them. Best case scenario: we contribute to disruptive positive change. Worst case scenario: we take part in an extremely productive theoretical exercise.

Note for individuals who think that making English learning an imperative is some sort of threat to our national identity: Let me state unequivocally that not making implementing the two steps mentioned in the article an absolute imperative is equivalent to condoning the heartless enslavement of a majority of our population. This sentiment isn’t rooted in a latent post colonial deference for the Western world. The world has evolved and reached a point where the English language and the internet are the mediums through which one can have access to the best resources, ideas and information. These mediums are synonymous to opportunity. We can embrace our culture and heritage without condemning a majority of our population to an extreme form of opportunity deprivation.

Leave a Reply

Your email address will not be published. Required fields are marked *