Trouble With the Curve: Estimating the Size and Growth Rates of K-12 Markets


Estimating the size of different markets, and the speed with which they develop, is critical for a host of business decisions. Is a product category big enough to be financially viable? Which customer segments should you target first? When can your investors expect to see a return on their investment? Without solid estimates, entrepreneurs are left to make big decisions based on weak analytical foundations.

But accurately forecasting product adoption “curves” (so called for their visual form when plotted on a graph) is particularly challenging in K-12 markets. Like a curveball in baseball (pun intended), it’s one pitch that many of us struggle to see coming—and, consequently, one we fail to reliably hit.

Two key factors drive this complexity. First, many educational markets are shaped by public policy. For example, specific policies regarding academic standards, testing requirements, and charter school authorization caps can give rise to specific types of products. Second, K-12 education in the United States is primarily a local affair—with states and districts shouldering most of the costs and driving many key policy decisions.

The net result: Entrepreneurs first have to understand the relationship between education policy and their particular education products. Then they have to understand how those policies are likely to be adopted across the many jurisdictions that comprise the U.S. K-12 landscape.

To illustrate this dynamic, consider the market for teacher evaluation tools. The teacher evaluation market has grown dramatically over the last few years, driven by the 2009 implementation of Race To The Top (RTTT) and the subsequent introduction of NCLB waivers in 2012. RTTT offered states grant money to implement education reforms, including the introduction of teacher evaluation systems, and NCLB waivers nudged states further in this direction. These incentives drove a dramatic increase in teacher evaluation requirements at the state level. By 2013, 28 states required teachers to be formally evaluated every single year, and 41 states required teacher evaluation models to include student achievement data.

The surge of teacher evaluation policies across the country has spurred a flurry of activity in the private sector, as schools increasingly needed tools that facilitate evaluation such as rubrics, video observation platforms, student perception surveys, and professional development products linked to teacher observations.

The good news is that estimating product adoption doesn’t have to be complicated. The following four-step process can help entrepreneurs simplify this process and make more reliable estimates.

1: Understand the Relationship Between your Product Category and the Policy Environment

First, develop a clear point-of-view about what types of policies will boost, constrain, or otherwise shape the market for your particular product. The growing market for teacher evaluation tools, mentioned above, offers a good illustration of the interrelationship between education policy and education products. Other examples include:

  • The market for personalized learning is influenced by competency-based education policies;
  • The market for charter schools is influenced by state-by-state limits on authorizations;
  • The market for student assessments is influenced by state adoptions of college and career ready academic standards (e.g., Common Core, Next Generation Science Standards, etc.).

With this understanding in place, you’ll have a better sense of what to look for on the policy horizon.

2: Create Your Heat Map

Second, create a ranking system to evaluate the relative attractiveness of various jurisdictions (i.e., regions where a relevant policy would apply). This evaluation should be based on factors such as the following:

  • The size of the region based, primarily, on the numbers of students (or other target customers)
  • The likelihood the region will adopt the policies that drive your product category.
  • The fit of your company and product for the particular region. How well do you understand the needs of the families, teachers, and students? How strong are your relationships with state and district administrators? How well positioned are you to operate in this region (e.g., delivery, service, etc.)?

The diagram below uses a hypothetical example to illustrate how such a heat map might look.

Step 3: Track Policy Adoption and Diffusion

Third, track the adoption of relevant policies, by region, on an ongoing basis. In other words, as policies are adopted, note the changes in your heat map. Additionally, as part of this exercise, watch for the leading indicators of adoption. Standard policy adoption and diffusion frameworks can help make this process simple and repeatable. I like to use John Kingdon’s Multiple Streams framework and Charles Shipan and Craig Volden’s framework on policy diffusion, which provide an organized way to think about and anticipate policy adoption.

Step 4: Build and Revise Adoption Scenarios

Finally, using each of the steps above as building blocks, you can craft a set of “adoption scenarios” that should should yield a set of market size, growth, and timing estimates. Just as political pundits look for viable electoral paths to the White House, entrepreneurs can use these scenarios to craft paths for market expansion. The diagram below illustrates how such a “policy-driven” product adoption curve might look.

Education product adoption curves are complex, and many great tools and services are often left on the shelf—instead of in the hands of teachers and kids who need them. But just as batters can master the curve, so too can education entrepreneurs.

Jay Bakhru is an education policy consultant and Chair of the Wharton Education Network. He writes about the intersection of education policy, entrepreneurship, and innovation.

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