Obi Okwara's Profile

Wow, this is an excellent point. KIPP has created a highly structured environment for the students, but in some ways, the environment may be too structured. It is important for students to learn how to manage themselves. KIPP has recognized this, and they are working to instill character traits in their students that are positively correlated with good life outcomes. In 2011, The New York Times published an excellent article titled, “What if the Secret to Success Is Failure?” The article discusses how KIPP kids were achieving good grades in high school, but this was not translating to high performance in college.

Here is a quote from the article: “As Levin watched the progress of those KIPP alumni, he noticed something curious: the students who persisted in college were not necessarily the ones who had excelled academically at KIPP; they were the ones with exceptional character strengths, like optimism and persistence and social intelligence. They were the ones who were able to recover from a bad grade and resolve to do better next time; to bounce back from a fight with their parents; to resist the urge to go out to the movies and stay home and study instead; to persuade professors to give them extra help after class. Those skills weren’t enough on their own to earn students a B.A., Levin knew. But for young people without the benefit of a lot of family resources, without the kind of safety net that their wealthier peers enjoyed, they seemed an indispensable part of making it to graduation day.”

In addition to teaching cognitive skills like math and reading, KIPP schools are now also working to develop noncognitive skills like optimism and self-control.

Link to New York Times article: http://www.nytimes.com/2011/09/18/magazine/what-if-the-secret-to-success-is-failure.html?_r=0

This is a great point. Charter school networks like KIPP have achieved tremendous results, but now it is time to determine what parts of the KIPP operating model can be replicated in traditional public schools. Roland Fryer, a Harvard economics professor, is currently conducting research to understand this question. In Houston, Texas, he conducted a randomized, controlled experiment where charter school best practices were implemented in low-performing schools in Houston, Texas. Fryer implemented five charter school practices into the traditional public schools: increased instructional time, more-effective teachers and administrators, high-dosage tutoring, data-driven instruction, and a culture of high expectations.

This economics paper provides the results of the research: http://scholar.harvard.edu/files/fryer/files/2014_injecting_charter_school_best_practices_into_traditional_public_schools.pdf

Here is another piece touching on the research: http://www.newsweek.com/what-makes-school-successful-327339

With regard to funding, KIPP constantly thinks about whether they are building a sustainable financial model. KIPP talks about their approach to funding here: http://www.kipp.org/question6

KIPP receives funding from local, state, and federal government. In addition, they receive private donations. The mix of revenue streams varies by city.

For Sprig, I want to know how they think about profitability. On the income statement, Sprig can see the overall profitability of the firm, but it is also important to know the profitability of each meal. Does Sprig have an understanding of the full cost of the meal which includes the cost of ingredients, preparation, and delivery? To create a sustainable business model, it will be important for Sprig to determine the cost per meal of delivery and preparation, and then they will need to determine how to reduce the costs. For example, it seems like promising a 15-minute delivery time would be expensive. In my mind, short delivery time would require a lot of cars and/or a lot of trips to deliver the food. It may be more effective to batch together large volumes of meals, but this batching would increase delivery times for food.

As you pointed out, Buc-ee’s success is directly related to its ability to empathize with the consumer. The best evidence of consumer empathy is the focus on ensuring clean bathrooms in all of their locations. Prior to reading about Buc-ee’s, I would never thought of clean bathrooms as a means to create value for consumers. With that said, clean bathrooms are not a defensible position. The barriers to competition are low since any gas station can provide clean bathrooms. For Buc-ee’s success to be sustained, the firm needs to deliver more value than clean bathrooms. You also pointed out that Buc-ee’s differs from other gas stations since 2/3 of their revenue comes from “inside” sales where as other gas stations only earn 1/3 of revenue from “inside” sales. This gives me confidence in their business model since selecting merchandise that resonates with customers is more defensible than clean bathrooms. One concern of mine is Buc-ee’s decision to solely fund growth through cash on the balance sheet. The decision to only self-fund growth means the speed with which Buc-ee’s can grow is limited. By using only cash, Buc-ee’s provides an opportunity to another firm to grow faster than Buc-ee’s by raising external capital in the form of equity or debt. If Buc-ee’s only uses cash, they need to be sure that other competitors will not beat them to the markets where they hope to expand.

It is great to hear that a firm like Revolution Foods is attempting to create value by providing healthy meals to young people. You pointed out that “the company has not yet turned a profit”, so I am concerned if this business will be sustained in the future. Will it be possible for Revolution Foods to capture enough value to make the business sustainable? In my understanding of the food industry, healthier foods tend to cost more than unhealthy foods (e.g., fruits and vegetables are more expensive than a burger from McDonald’s). As a result, Revolution Foods will face significant pressure on profit margins due to the price ceiling on food. Since they cannot increase prices, Revolution Foods will be forced to reduce costs. It appears that increasing the scale of the business provides an opportunity to reduce costs. Currently Revolution Foods is focused on delivering meals to low income kids in America. Are they looking at opportunities to reach kids at all income levels? By serving a larger customer base, Revolution Foods should be able to secure low prices as they purchase larger volumes of food. The larger volumes of food will lead to lower food costs, and as a result, it should increase profit margins.