Category Archives: Business

What social entrepreneurs can learn from Medium’s business model shift

Medium is trying to change its business model.

I. For-Profit Business Models 

In the for-profit market, you can only sustainably solve problems when the solutions generate profits.

Overarching visions (bringing the world’s information to everyone) are brought a little bit closer through sound business models (ad driven internet searches).

The profit requirement is useful in that it ensures entrepreneurs add value to other people in their quests for solving great problems.

But the profit requirement is also limiting: an entrepreneur might complain that the quickest path to solving the far problem is not solving one close problem after another.

II. Non-Profit Business Models 

In the non-profit market, philanthropy often determines what problem an entrepreneur can try to solve.

This is useful in that philanthropy is not bound by solving profit generating problems.

But the philanthropic model is also limiting: when there is no need to add value to other people, bad endeavors can go on for far too long, thereby reducing the amount of funds available to good endeavors.

 

III. The Risk of Each Model 

In the for-profit market, entrepreneurs need to guard against the fact that solving close problem after close problem may get them off the path from solving their far problem.

This is what Medium is struggling with.

In the non-profit market, entrepreneurs need to guard against the fact that trying to solve the far problem will lead them down a path where lack of accountability prevents them from adding any value to others (despite expending large amounts of resources).

A lot of social entrepreneurs and philanthropists struggle with this. They set out to solve far problems without understanding the near problems.

Most often, solving near problems better trains you to solve the far problem.

Social entrepreneurs should keep their eyes on the far problem, but they ignore near problems at their own peril.

Medium had the discipline to recognize that they were solving close problems that were not leading them to solve their far problem.

Social entrepreneurs need to have the same discipline in the opposite direction: they need to recognize when an elaborate plan to solve a far problem is a wasteful quest that ignores real people’s acute needs.

This is the Business Community’s Greatest Educational Mistake

Crain’s Chicago Business just put out a list of 5 Big Ideas for Chicago’s Troubled Schools.

While surely well intentioned, I thought the ideas were terrible.

Here are the five ideas they proposed in their five day series:

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To sum up: Crain’s thinks that Chicago Public School can be fixed through better management.

Their strategies focus on reorganizing the bureaucracy, developing leaders, and using data in more sophisticated ways.

I do not think that better management will lead to sustainable gains in student learning.

At best, better management will lead to modest improvements that are constantly at risk of being undermined via political instability.

I believe that structural change is a much better strategy for reform.

By structural change, I mean letting educators operate schools via non-profits, allowing families to choose amongst these schools, and ensuring that government regulates for equity and performance.

Evidence from New Orleans and urban charter schools across the country provide some evidence that this strategy can work. Though, admittedly, it’s not a slam dunk case by any stretch of the imagination.

Much remains to be proven.

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I do find it odd that the business community thinks that government monopolies will run better if these bureaucracies simply adopt business best practices.

Given that these practices are not a secret, the business community needs to ask the question: why isn’t the government already implementing these practices?

The most likely answer is: structure.

The source of the business community’s error, I think, is that at heart they are organizational leaders and not policy makers. Their instincts are operational and not structural.

For the same reason corporate CEOs probably wouldn’t make good Fed Chairs, the business community seems to have a lot of weak ideas about educational policy.

All this being said, business communities are vitally important stakeholders for education reform, and the goal should be outreach, not rejection.

Perhaps, over time, business leaders will further realize that the success of business is not solely due to their own management genius; rather, it is the structure in which businesses operate that explains some of their impact.

Education policy leaders can surely learn much from the business community, but these lessons are probably best captured by sound analysis of industries and regulation and, on average, not by listening to business leaders themselves.