E.F. Shumacher wrote Small is Beautiful in 1973. Shumacher learned a lot about disruptive innovation from his professor Joseph Schumpeter. A lot of us that found advantages in smaller organizations have been quoting him for decades. Recent interest in promoting small business growth has spurred renewed interest in Shumacher’s work.

The Economist reviewed a Progressive Policy Institute report on scale and innovation where Michael Mandel drew a different conclusion, “today’s economy favours big companies over small ones.” Mandel points to three reasons:

  1. The economy is driven by big ecosystems and they need to be managed by companies with scale and skill.
  2. Globalization puts a premium on size and it often pays to be big enough to stand up to the nation state.
  3. The most important challenges involve complex systems and serious change requires serious scale.

All three of these arguments are relevant to education and make the case for big innovation-focused learning companies like Pearson.  Education is moving toward platform ecosystems that will orbit big partnerships. The ecosystems will include these ten elements:

  1. Standards-aligned libraries of open and proprietary content
  2. Social, collaborative, and productivity tools
  3. Assessment tools and achievement analytics
  4. Learner profiles and portfolios
  5. Smart recommendation engines
  6. Assignment and matriculation management tools
  7. Aligned student services: tutoring, guidance, health, youth & family services
  8. Aligned teacher services: professional development, lesson & tool sharing
  9. Aligned school services: implementation support, new school development, and school improvement
  10. Aligned systems: enrollment, finance, personnel, and facilities

While a couple big companies may provide the gravity for these ecosystems, the innovation around the edges will primarily come from small nimble organizations.  Education will benefit from innovation from scaled capabilities like Pearson, McGraw, K12, Inc. and New York City as well as from start ups like Formative Learning, Straighter Line, Mangahigh, Desmos, Class Dojo, and Junyo.

It’s also worth noting that in education, foundations (and to some extent RttT funded states) are also attempting to play the role of big and clever.  The Gates Shared Learning Infrastructure will be one of the ecosystems with the feature set above.

The Economist points to two objections to Mandel’s argument. First, big companies are “less comfortable with disruptive innovation.”  It’s likely to be the case that the big players will focus on incremental innovations and that the really disruptive stuff will come from the edges.

And, second, the Economist suggests that progress tends to come from growth companies regardless of whether they are big or start small.  No question that we’ll see more innovation from Edmodo than HMH.

Big companies and small companies each have some unique advantages.  Big and clever organizations can address opportunities at scale and have the gravity to attract partners and shape markets.  Small organizations can pinpoint innovations and shift nimbly from one opportunity to something better.

There is a big gap between the education opportunities we have and those our kids need.  We’d do well to encourage investment and contribution from big and small organizations to fill the gap and support the schools we need.

Disclosures: Edmodo, Formative Learning, Desmos, Mangahigh and Class Dojo are portfolio companies of Learn Capital where Tom is a partner and Pearson is an investor. 

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