05/08/2009 05:12 am ET Updated May 25, 2011

Innovation Fund Will Not Promote Innovation

The $650 million portion of the US Education Department's (USED) stimulus bill supposedly devoted to innovation was written with three fatal flaws:

• Most of it will go to school districts which, by design, are among the least innovative institutions in society.

• It must be for 'what works,' a narrow rear view mirror view of success. There's benefit to scaling what works, but it's not innovation

• The USED has no authority to engage the venture community.

The education sector is in desperate need of innovation. The gap between the entertainment and communication products that young people use outside of school stands in stark contrast to the boring, print-centric, age-cohort batch processing that characterizes most of our public delivery system. Every day, 10 million people enter an engaging world customized based on skill and interest--World of Warcraft is the world's largest learning system but has few educational benefits. While we've personalized entertainment and health, we've made little progress in personalizing learning. It's largely a function of the lack of public and private investment in R&D which, in turn, is largely a function of a highly decentralized ineffective market trapped in layers of bureaucratic input-based public policy.

Investing in innovation is risky--most of it doesn't work. There are three types of investors that can accept the risk to invest in R&D--government, foundations, and private capital. Where there's potential to improve public systems (i.e., health, education, defense, transportation), governments can and should invest in R&D. Foundations are uniquely positioned to focus on innovation given their ability to accept risk and seek impact over long periods of time. Where there is market potential, private investors sponsor R&D and service innovations. When it comes to education, none of these groups have spent much on innovation.

If we were serious about equitable educational outcomes--a fair starting point for young people in a market economy--we'd invest several orders of magnitude more on R&D and we'd create incentives and spaces for innovation. We'd focus on student groups that have historically been underserved. We'd create a new generation of schools that blended online learning with powerful face-to-face experiences. We'd focus on literacy and numeracy, adaptive assessment, engaging learning experiences, and new ways to make real world connections. We'd build learning games as engaging as World of Warcraft, networks as powerful as Facebook, and personal learning devices as ubiquitous as iPods.

So it should be good news that USED is going to spend $650 million on 'innovation.' But given the limitations of the bill, it will be used to scale practices that work less bad than the system we have.

USED doesn't have the same authority as Treasury or SBA to invest in/with private investors. If USED has to live with the language and shovel money in the next 90 days, the only variable that can impact the success of this program is foundation involvement (which the bill encourages). Foundations can set their own requirements for matching or parallel grant programs. Foundations should focus their innovation investments on:

• Grants to universities for tech transfer programs bridging compute science and education

• Program Related Investments (PRI) structured as venture debt targeting both non-profit and for-profit enterprises with plans for a scalable innovation

• Grants to supporting organizations which invest in education venture funds

• Advocacy efforts to improve public policy around online learning

• Partnerships with venture funds to create a robust service economy around engaging open content (i.e., Redhat/Linux business model, iTunes U content, MMO learning games, and effective student, teacher, and school support services) so that there was lots of cool free material and smart people that could help you use it.

About two thirds of American young people leave high school unprepared for college, careers and citizenship. There are more than a half a billion young people in the world that don't have access to quality secondary education. These are not just scaling problems; they are innovation problems. To derive benefit from the USED innovation grants, we need foundation leaders to play a leadership role--to be smart and aggressive, to take the long view, to take some risk, to innovate.