The search continues for effective ways to educate disadvantaged children in big cities. Different cities have tried varied approaches--intensive work on the professional skills of teachers and administrators in Boston, standardized approaches to instruction in San Diego, and extensive use of vouchers and chartering in Washington, D.C., and Milwaukee. Though some school districts have shown flexibility, government and education sector leaders in some cities have become convinced that they must look outside the traditional boundaries of the district for new ideas, talent, and learning opportunities. While also trying to strengthen existing public schools, leaders in several cities, including New York, Chicago, New Orleans, and the District of Columbia, have adopted a "portfolio strategy". The essence of a portfolio strategy is the provision of public education by multiple means. Districts pursuing a portfolio strategy (portfolio districts) sponsor some schools operated by district employees in the traditional way, and others operated by independent organizations and run under new rules. District and community leaders in cities adopting a portfolio strategy (presently including New York, Chicago, New Orleans, Denver, Philadelphia, Hartford, and the District of Columbia, among others) must search for answers to questions that have seldom been asked in American public education: (1) How do they know whether a given school or initiative is likely to succeed or fail?; (2) When do they shore up a struggling school or abandon it?; (3) How do they avoid being stuck with no option other than to continue supporting a school in which children are not learning?; and (4) How do they make sure students are not hurt by closing a school or replacing one school provider with another? This paper is the first to offer answers to these questions. The authors hoped to mine the experiences of other organizations that have developed the capacity to oversee diverse portfolios of service providers, and to apply lessons learned to the challenges districts face as they adopt portfolio-based strategies. While acknowledging that public education is unique in many ways, the project tried to use the practices evident in other organizations as sources of ideas, and it applies them to education cautiously. Subsequent papers, based on a recently funded national study of districts pursuing portfolio strategies, will provide detailed examples of data systems, analytical methods, and decisionmaking processes. These papers will be available in late 2010. "Managing School Performance" Working Paper Series are appended. (Contains 4 tables and 24 footnotes.)