Earlier this week my team launched the $6m Literacy Solutions Challenge, open to for-profit and nonprofit providers of online content and tools that support Common Core literacy standards, particularly in writing. You can read more about the specifics of the challenge here.

Why in the world are we doing this? I coauthored a blog at Impatient Optimists with Emily Dalton Smith and Robert Torres that talks about the critical need for students to increase their literacy skills and some of nuts and bolts of the The Lit Challenge. The launch of the Challenge generated some great questions about why we settled on literacy and why we chose the challenge structure. So, I thought I would address those here.

The Lit Challenge is designed to fill an important gap in the digital courseware market. We’ve seen a lot of activity in digital math products in the last few years, but the level of activity for literacy solutions doesn’t come close.

In 2010, the entire K-12 supplemental materials market grew more than 10% to nearly $3 billion in sales, including 20% growth in courseware (instructional software) for all subjects. The supplemental English Language Arts (ELA) materials market for grades 4 through 8 is approximately $800 million, 40% of which is digital in some way.

While at first glance this is a healthy, growing market, the detailed sales figures for digital solutions are a little sobering. Nearly half of spending on digital 4th-8th-grade supplemental resources in 2010 was on interactive whiteboards. Courseware (instructional software) for all subjects accounted for only 7% of the market, and digital content (digitized materials) for less than 5%.

Math courseware is a bright spot in the segment. Products such as Reasoning Mind, Dreambox, and ST Math are producing demonstrable learning gains for students. Mathalicious is also a great resource.  Khan Academy, a free resource originally built for self-directed learning, burst into the public consciousness and into classrooms. Dan Meyer, a great math teacher, also has a library of free lessons which include instructional videos for math topics like Algebra and Geometry.

New entrants and new products from existing players in the literacy space have been pale by comparison. And few literacy products can provide even moderate evidence that they positively impact student learning. Scholastic’s terrific Read180 is a notable exception. Based on our analysis of the market, which was corroborated in conversations with educators and investors, this gap presents a major challenge to implementing the Common Core and advancing personalized learning.

But still, why a challenge? Why not set some product criteria and just pay a developer or two to build  solutions that meet the market need we think we identified in conversations with users and buyers? Actually, there are lots of reasons not to take the needle in the haystack approach, but I’ll cover the two main ones in this post.

First, my team and I aren’t interested in (and don’t believe in) the one best product. We are more interested in seeing an increasingly competitive, performance-driven market for literacy courseware, with many innovators tackling tough instructional challenges, and with mechanisms for generating and distributing abundant, transparent information about the attributes and effectiveness of products. This goal is different from looking for THE needle in the haystack or silver-bullet product that will meet most everyone’s needs.

Second, the structure of the challenge focuses simultaneously on strengthening the capacity of buyers and users to identify and articulate their needs more clearly and use them to make solid purchasing decisions. The most innovative teachers and school leaders tell us they are overwhelmingly dissatisfied with their existing options for literacy courseware. They also are able to clearly articulate what they would buy if it were available. We and many analysts we talk with believe this is a leading indicator of where the overall demand-side will move over the next few years. By shining a spotlight on these product attributes now, we aim to catalyze innovators to create solutions for a segment that is poised to take off and will eventually begin to eat into the massive basal textbook segment.

So, by mobilizing customers and the product developers in an organized way, we’re trying to foster healthier market dynamics for the long term.  This is different from Gates or any other donor deciding what everyone needs, funding the creation of it and subsidizing districts & schools to use it.

Around 30 schools will participate as test beds during the challenge, and they’ll select which products they want to try from among the entries. Schools will have free licenses for the products, and teachers will incorporate the solutions into their literacy instruction. An outside evaluation team will be tracking implementation issues and product efficacy. At the end a few winners will be named, and all of the product information generated through usage and evaluation will be made public.

This post is longer than my rule of thumb, but if you made it this far I’d love to hear your reaction to the thinking behind the challenge.