Your SlideShare is downloading. ×
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
University of The Future 2012
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

University of The Future 2012

284

Published on

Published in: Education
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
284
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
5
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Universityof the future A thousand year old industry on the cusp of profound change
  • 2. Over the next 10-15 years, the current public university model in Australia will prove unviable in all but a few cases2 University of the future
  • 3. ContentsIntroduction and executive summary 4Drivers of change 6Evolution of the university model Current state 14 Case for change 15 Streamlined Status Quo 16 Niche Dominators 18 Transformers 20 Conclusions 22Implications for universities 24Implications for policy makers 26Implications for the private sector 27Ernst & Young’s framework for assessing and designing a model for the future 28Ernst & Young Higher Education contacts 29Methodology 30Ernst & Young research team 31University of the future 3
  • 4. Introduction and executive summaryThe current Australian university model — a broad-basedteaching and research institution, with a large base of assetsand back office — will prove unviable in all but a few cases.Ernst & Young’s view is that the higher education sector is 3. Digital technologies — Digital technologies have transformedundergoing a fundamental transformation in terms of its role media, retail, entertainment and many other industries —in society, mode of operation, and economic structure and higher education is next. Campuses will remain, but digitalvalue. To explore these themes and future directions, we have technologies will transform the way education is deliveredconducted an industry-wide study of the main forces impacting and accessed, and the way ‘value’ is created by higherthe higher education industry globally and locally, and the education providers, public and private alike.opportunities, challenges and implications for Australian 4. Global mobility — Global mobility will grow for students,universities. We conducted a mix of primary and secondary academics, and university brands. This will not only intensifyresearch, including interviews with more than 40 leaders from competition, but also create opportunities for much deeperpublic universities, private universities, policy makers and global partnerships and broader access to student andsector representative groups. Our interviewees included academic talent.representatives from more than 20 universities, including15 Vice-Chancellors. The topic attracted immense interest 5. Integration with industry — Universities will need to buildaround Australia. significantly deeper relationships with industry in the decade ahead — to differentiate teaching and learning programs,Our primary hypothesis is that the dominant university model support the funding and application of research, andin Australia — a broad-based teaching and research institution, reinforce the role of universities as drivers of innovationsupported by a large asset base and a large, predominantly and growth.in-house back office — will prove unviable in all but a few cases The university sector is critical to Australia’s future. Universitiesover the next 10-15 years. At a minimum, incumbent educate our leaders and entrepreneurs of the future, createuniversities will need to significantly streamline their operations new ideas and knowledge, and earn much needed exportand asset base, at the same time as incorporating new teaching income. Universities provide opportunities for students of alland learning delivery mechanisms, a diffusion of channels to backgrounds to increase standards of living for themselves andmarket, and stakeholder expectations for increased impact. future generations. But, to succeed, universities will need toAt its extreme, private universities and possibly some forge new business models that are dynamic, modern and fit forincumbent public universities will create new products and the decades ahead.markets that merge parts of the education sector with other We see university business models becoming more diverse, andsectors, such as media, technology, innovation, and venture anticipate three broad lines of evolution.capital. Exciting times are ahead — and challenges too. 1. ‘Streamlined Status Quo’ — Some established universities willWe have summarised the drivers of change of this brave new continue to operate as broad-based teaching and researchworld into five key trends: institutions, but will progressively transform the way they1. Democratisation of knowledge and access — The massive deliver their services and administer their organisations — increase in the availability of ‘knowledge’ online and the mass with major implications for the way they engage with expansion of access to university education in developed and students, government, industry stakeholders, TAFEs, developing markets means a fundamental change in the role secondary schools, and the community. of universities as originators and keepers of knowledge. 2. ‘Niche Dominators’ — Some established universities and new2. Contestability of markets and funding — Competition for entrants will fundamentally reshape and refine the range of students, in Australia and abroad, is reaching new levels of services and markets they operate in, targeting particular intensity, at the same time as governments globally face tight ‘customer’ segments with tailored education, research and budgetary environments. Universities will need to compete related services — with a concurrent shift in the business for students and government funds as never before. model, organisation and operations.4 University of the future
  • 5. 3. ‘Transformers’ — Private providers and new entrants will carve out new positions in the ‘traditional’ sector and also create new market spaces that merge parts of the higher education sector with other sectors, such as media, technology, innovation, venture capital and the like. This will create new markets, new segments and new sources of economic value. Incumbent universities that partner with the right new entrants will create new lines of business that deliver much needed incremental revenue to invest in the core business — internationally competitive teaching and research.Faced with this dynamic industry landscape, Australianuniversities should critically assess the viability of theirinstitution’s current business model, develop a vision ofwhat a future model might look like, and develop a broadtransition plan. Deliberations on future models need toinclude which customer segments to focus on, what‘products’ or services they need, optimal channels tomarket, and the ideal role of the university within theeducation and research value chains. Support functions willneed to be streamlined and in some cases fundamentallyreconfigured. Regardless of the path chosen, universitieswill need to align new directions to their institution’s corepurpose and values.This document describes our study, key findings andrecommended responses. It covers:• Drivers of change• Evolution of the university model• Implications for public universities, policy makers and the private sector• How to play in the future — Ernst & Young’s framework for assessing and designing a model for the future• Ernst & Young team and methodologyWe hope the paper provides food for thought as universitieschart their journey towards a new future.Justin BokorErnst & Young University of the future 5
  • 6. Drivers of changeFive mega-trends will transformthe higher education sector.Our research and industry discussionshighlighted a number of major forcesimpacting the higher education sector inAustralia and internationally. Theseforces coalesced around five key driversof change. The first section of this paperexplores each of the five drivers and theirlikely impact in the decade ahead.Figure 1. Drivers of change • Ubiquitous content Democratisation of • Broadening of access to knowledge and access higher education • Increased participation in emerging markets Contestability of Digital technologies markets and funding • Bringing the university to the Drivers of change device — MOOCs and the rise of • Fiercely competitive online learning domestic and international student markets • Bringing the device to the university — the use of digital • Challenges to technologies in campus-based government funding learning • Competing for new • Blended learning sources of funds Global mobility Integration with industry • Emerging markets becoming • Scale and depth of industry-based learning global-scale competitors in the international student market • Research partnerships and commercialisation • Academic talent increasingly sourced from emerging markets • Industry as competitors in the certification and delivery of content • Emergence of elite, truly global university brands6 University of the future
  • 7. Democratisation of knowledge and access will drive a global‘education revolution’ of a scale never before seen, creatingboth new opportunities and new sources of competition.“Teaching methods have 1. Democratisation of knowledge education participation rate more than and access trebled from 8.0% to 25.9% in the first to change. We can’t rely decade of this century, and is likely to Traditionally, universities held the key to on delivering content knowledge, in both a physical and double again in the next 10-15 years1. anymore — it’s all about philosophical sense. University libraries, Participation rates are growing rapidly in faculty domains and research institutes a host of other economies and regions: contextualisation, ways were where knowledge was created, Latin America, ASEAN, the Middle East of thinking, and the stored and shared. The staff working in and North Africa. Participation rates are student experience.” those domains typically held a privileged also now growing steadily in sub- status as originators and keepers of Saharan Africa, after decades ofUniversity Provost knowledge. Now knowledge is open to negligible growth. anyone globally with a device and This expansion of access will drive a connectivity — not just facts and figures, global ‘education revolution’ of an but also analysis, interpretation, and unprecedented scale, transforming curation of knowledge. societies by creating opportunities for Access to universities has traditionally millions of people and their families to been dominated by a modest proportion increase their standards of living. For of society in developed markets — 20-30% universities, this will drive new of post-secondary students — and a very approaches to teaching and learning, narrow proportion of society in emerging create opportunities for entry to new markets, typically the elite. markets and new global partnerships, stimulate new distribution approaches Today, access is expanding both in — such as low-cost distribution in rural developed markets, such as Australia, areas — and also create new sources and even more fundamentally in of competition. emerging markets. China’s tertiaryFigure 2: Tertiary education participation rates (Proportion of 18-22 years olds in post secondary education) 80.0% Note that the OECD figure represents an 75.0% approximate average across developed 2000 countries within the OECD and excludes OECD developing countries such as Mexico. 2010 40.5% 29.0% 30.0% 25.9% 22.6% 21.0% 17.9% 15.8% 8.0% 9.4% 6.8% 4.3% OECD East Asia & Pacific China India Latin America MENA Sub-Saharan AfricaSource: World Bank, Ernst & Young analysis. MENA — Middle East & North Africa; OECD — Organisation for Economic Co-operation & Development1 See, for example, Outline of China’s National Plan for Medium and Long-term Education Reform and Development (2010 — 2020), China Ministry of Education (www.moe.gov.cn). University of the future 7
  • 8. Drivers of changeContestability of markets and funding will deepen both inAustralia and internationally, with any growth in fundingcoming from highly competitive, non-government sources.“We will come under 2. Contestability of markets Contestability of funding for teaching and and funding research will likewise deepen, both in increased pressure on The introduction of a demand-driven Australia and internationally. Mining Government funding, funding model in Australia in 2012 has boom Mark I drove the 2006-07 and whichever way you driven whole new levels of competition. 2007-08 Australian budget surpluses A number of universities that had that filled the coffers of EIF2. However, look at it.” previously felt secure in their market the fiscal boost of mining boom Mark II appears over before it even began. TheHead of university shares found themselves confronted by losses in share of 5-10% or more as government faces a mighty task to returnrepresentative group the budget to surplus, and both sides of 2011 first preferences and 2012 enrolment data started to come politics have spending commitments that through. In Victoria, for example, four will take every spare dollar and more well universities lost 3.5% market share or into the next political cycle. more — see Figure 4 below. Universities in Australia will need to While future Australian governments prepare for an environment where every may seek to limit the fiscal implications dollar of government funding is of growth in enrolments, the deepening contestable and any growth in funding of market contestability is unlikely to be comes from non-government sources reversed, either in Australia or — students, industry, philanthropists, and internationally. The genie is well and global collaborations — that are all truly out of the bottle. fiercely competitive.Figure 3: Australian government fiscal surplus/deficit, Figure 4: Market competitionFinancial Year (FY) 2005 to 2013 Percentage change in market share of first preferences(A$ billion ) 2011 vs 2010 — Victorian market (universities de-identified) 21 21.4% 17 15 11 13.8% 3 FY09 FY10 FY11 FY12* FY05 FY06 FY07 FY08 FY13* 6.2% 4.6% 1.6% 0.1% G H I J A B C D E F -30 -3.8% -4.2% University -42 -7.7% -53 -52 -11.5%Source: Based on Treasury data — Commonwealth of Australia Budget Source: Ernst & Young analysis of market data.Papers 2006-07 to 2012-13.* Figures are estimates from the May 2012 paper2 EIF — Education Investment Fund. For more information see deewr.gov.au/HigherEducation/Programs/EIF8 University of the future
  • 9. Digital technologies will transform the way education isdelivered, supported and accessed, and the way value iscreated in higher education and related industries.“Our major competitor in ten 3. Digital technologies Digital technologies will also fundamentally transform the way value years time will be Google… Digital technologies and innovation have is created within higher education and disrupted all manner of established if we’re still alive!” industries — media, retail, entertainment related industries. For example, new technologies will enable public andUniversity Vice-Chancellor and many others. While online education private providers to specialise in parts has been around since the 1990s, it has of the value chain — content been in the last 2-3 years where the generation, content aggregation, mass pace and disruptiveness of change has distribution, certification, really accelerated. commercialisation and so on. Digital technologies will not cause the New technologies will enable media disappearance of the campus-based companies to enter the university university. Campuses will still exist as sector, either in partnership with places of teaching and learning, incumbents, or potentially in their own research, community engagement, and right. The so-called Massive Open varied forms of student experience — Online Courses (MOOCs) are an early assuming universities can deliver a rich, stage example of the search for new on-campus experience. But digital models. Some of these models will technologies will transform the way decline and fail, others will create very education is delivered and supported, for substantial economic value. Winners example through applications that are likely to be a mix of new, pure play enable real-time student feedback, and online businesses and traditional the way education is accessed in remote businesses with powerful online models and regional areas — both in the and capability. developed and developing world. University of the future 9
  • 10. Drivers of changeGlobal mobility will continue to grow for students, academictalent and university brands, with the likely emergence of asmall number of elite, truly global university brands.“There will be 15-20 4. Global mobility Global mobility of academic brands is a newer phenomenon, but is also growing independent, global Global mobility will continue to grow in importance. ‘MOOC-based’ for students, academic talent, and brands … the rest will be increasingly for university brands. distribution of content by the likes of Harvard, MIT and others is creating a playing for the silver medal.” International students have been the global brand impact, if not revenue at lifeblood of the Australian higher University Vice-President education industry over the last 10-15 this stage. International branch campuses (IBCs) are also growing: there years. The international student market are 200 globally now, with 38 more is growing rapidly (global growth of 6.6% planned in the next two years. per annum over the last decade), but will fundamentally change in structure in the The likely outcome over the next 10-15 coming decade and beyond, as years is the emergence of a small traditional source markets — China, number of elite, truly global university Malaysia, South Korea and others — ‘brands’. These global brands of the increasingly become global-scale future will include some of the ‘usual destinations for international students. suspects’ — a subset of Ivy League and Oxbridge institutions — as well as a Likewise, the sources of academic talent number of elite institutions from China. will become more diffuse as academics China’s ‘C9’ institutions have the from emerging markets become resources, government support and increasingly mobile and in demand, intent to achieve global elite status. This providing a growing source of talent for will drive new partnership opportunities universities in both developed and and new sources of competition for developing economies alike. Australian universities.Figure 5: Top 10 source and destination countries for Figure 6: Top 10 source countries for tertiary education studentsinternational branch campuses in 2011 (2009 figures and comparison to 2005)(total established IBCs = 200; total planned IBCs = 38)Source country Destination country Malaysia Australia’s share of students 35% 58 from the country (2009) USA 78 13 UAE 37 UK 25 8 China 17 7 25% France 27 2 Singapore 18 3 Turkey India 15% China USA 211 India 17 2 Malaysia 7 7 568 Russia South Korea Australia 12 Qatar 10 5% Morocco 127 55 Germany France 68 105 3 54 72 62 Iran 6 India 5 4 0% 2% 4% 6% 8% 10% 12% 14% 1 Netherlands 6 UK 6 1 Annual growth in students from source country (%) 3 Malaysia 6 South Korea 2 Note: Size of bubble denotes number of students studying abroad in 2009 (‘000) 1 Canada 4 Mauritius 5 Source: Education at a Glance 2011, OECD Indicators 3 China 1 Canada 4 1 Planned IBCs Current IBCsSource: International branch campuses — data and developments,The Observatory on Borderless Higher Education, January 201210 University of the future
  • 11. The relationship between the higher education sectorand industry will deepen — industry will be a key partner,and also a competitor in specialist professional programs.“The big game will be 5. Integration with industry established by the University of Queensland4 and the University of co-investment with the The relationship between industry and Western Australia5. the higher education sector is changing private sector.” and deepening. Industry plays multiple Research commercialisation will goHead of university roles: as customer and partner of higher from being a fringe activity to being a education institutions and, increasingly, core source of funding for manyrepresentative group as a competitor. For universities to universities’ research programs. survive and thrive, they will need to build Already, venture capitalists, industry, significantly deeper relationships with and entrepreneurs are increasingly industry in the coming decade. Scale and being brought together to depth of industry based learning and commercialise university research; for internships, for example, will become example, the Knowledge and Innovation increasingly critical as a source of Communities being established by the competitive advantage for those European Union6. universities who have the industry Finally, industry will increasingly partnerships and pedagogy to do it well. compete with universities in a number Research higher degree programs and of specialist professional programs. applied research will increasingly be run Accounting industry bodies already in partnership with industry — like for provide a range of specialised post- example the Australian Technology graduate programs (CPA, CA, CFA etc). Network of Universities’ new industry- Other industry groups, for example based PhD program3, and the mining engineering associations and pharmacy industry research partnerships guilds, may play an increased role as certifiers and deliverers of content. InnoEnergy — Creating the world’s largest innovation factory Launched in May 2010, the massive European initiative InnoEnergy brings • 5-year plan... together industry, research centres, universities and business schools — a total of 29 partners — to: • €700 million budget a) Deliver post graduate education in the area of sustainable energy, with each • 60 new companies program including training in innovation and entrepreneurship • 100 new products b) Develop and launch innovative sustainable energy technologies c) Spin off new enterprises to commercialise InnoEnergy’s new technologies • 80 patents The intent is to spur innovation and commercial activity in Europe, while at the • 3300 graduates same time helping to solve global energy problems. InnoEnergy is one of three large-scale, cross-border Knowledge and Innovation Communities established by the EU’s European Institute of Innovation and Technology7.3 ATN Industry Doctoral Training Centre (atn.edu.au/IDTC)4 Sustainable Minerals Institute (smi.uq.edu.au)5 Energy and Minerals Institute (emi.uwa.edu.au)6 See eit.europa.eu/kics7 KIC InnoEnergy (kic-innoenergy.com) University of the future 11
  • 12. Drivers of changeThese drivers of change will transform the highereducation industry landscape, forcing universitiesto adapt their business models.“The traditional university Conclusions These changes will force universities to adapt in a number of ways: model is the analogue of The sum total of these drivers of change will be a significantly different • Breadth of programs — Universities the print newspaper… higher education industry landscape will need to consider whether they 15 years max, you’ve got 15 years from now. We see the sector can continue to maintain a developing as follows: competitive position — domestically the transformation.” and internationally — across a broad • Universities will be compelled to University Vice-Chancellor create new, leaner business models range of programs, or whether to concentrate resources on a smaller as competition increases for staff, range of programs. students, funding and partners. • Target customers — Universities • Public institutions will increasingly will need to have a clear strategy be run like corporations, while and execution around target seeking to maintain the freedom student segments and their of inquiry and academic rigour specific needs and preferences. that their long-term reputation Today, most universities’ depends on. segmentation is broad at best • Private institutions will exploit (for example — school leavers, profitable market niches, while mature age, and international). others will create new markets and Universities that do not become sources of value; for example, by more focused on segments will be specialising in select parts of the exposed to competitors with education value chain. targeted student propositions. • Policy makers will seek to maintain • Channels to market — Universities steady growth in access to will need to rethink the role of university education. They will digital channels and third party search for policy levers and partnerships in recruiting students programs that put the higher and delivering teaching and education sector at the centre of a research programs. genuine knowledge economy • Back office — The asset base and integrated into the Asian region, university administration will need while inevitably tightening the to be significantly leaner than it is public purse strings for higher today. Most universities at present education providers. have significantly more support staff than academic staff — this ratio will have to change.12 University of the future
  • 13. University of the future 13
  • 14. Evolution of the university model —current state…The dominant university model in Australia is a broad-basedteaching and research institution, supported by a large assetbase and a large, predominantly in-house back office.Figure 7: Current model — established universitiesCustomers Domestic students International students IndustryProduct offerings Vocational and further Higher education Research education and training Arts Engineering Science Business Medicine/health LawEducation disciplines IT Design Other Other Other OtherSales Schools Open days Agents Road-shows Digital Other OtherDelivery On campus Digital PartnershipsStudent services Student administration Career centre Other Other OtherBack office HR IT Finance Legal Other Other Other Source: Ernst & YoungLegend Current area of focus In the current model most Australian universities: • Serve a broad mix of student segments • Deliver and manage the vast bulk of — school leavers, mature age students, student services and back-office and international students. functions (HR, IT, payroll, finance, • Offer a broad range of disciplines — procurement and so on) in-house. health sciences, arts, science, There are, of course, exceptions to this technology, business, economics, broadly defined current model. For education, law and more. example, some of the technology • Deliver teaching and learning programs universities have progressively oriented primarily on campus in Australia, their institutions around a focused set of supplemented by various online disciplines or industry domains. But, at offerings, franchise arrangements, the moment, these institutions are the twinning partnerships and international exception, rather than the rule. branch campuses.14 University of the future
  • 15. …and case for changeWe expect a significant transformation of universitybusiness models in the coming decade and beyond,despite the historically slow pace of change in the sector.“Universities face their Given the forces of change impacting the We side with the latter. We cite the higher education sector, we expect a Darwinian force of the market and biggest challenge in significant transformation of university innovation. The printing industry 800 years.” business models in the coming decade prospered for the better part of six and beyond. However, the industry centuries after the invention of the University Vice-Chancellor leaders we spoke to were divided in their printing press — but there is not a single views on the extent of change that part of that industry that has not been Australian universities will undergo. disrupted in the last decade. Longevity is no guarantee of permanence. A number of industry leaders felt that Australian universities, especially public At a minimum, incumbent higher universities, will continue with broadly education institutions will need to similar models to those of today. They significantly streamline their operations cited the slow pace of change: and asset base, at the same time as “universities haven’t changed much in a incorporating new teaching and learning thousand years” was a common refrain. delivery mechanisms and a diffusion of They also believe that policy and funding channels to market, and adapting to uncertainties make it difficult for stakeholder expectations of increased universities to adapt their business impact and 24/7 engagement. models with confidence about the likely The following section explores how the outcomes. Several university executives current model might evolve in the also highlighted the new regulatory following decade and beyond. regime being implemented by TEQSA as a potential brake on the speed of change. Others saw change as inevitable, citing drivers of change similar to those described in this paper, as well as the economically fragile state of many incumbent institutions in the sector. Where does your institution sit in the debate on the extent of change… will ‘steady as she goes’ work for your institution? University of the future 15
  • 16. Evolution of the university model —‘Streamlined Status Quo’Some universities will continue to operate as broad-basedteaching and research institutions, but will transform the waythey deliver their services and administer their organisations.Figure 8: Potential future model — ‘Streamlined Status Quo’Customers Domestic students International students IndustryProduct offerings Vocational and further Higher education Research education and training Arts Engineering Science Business Medicine/health LawEducation disciplines IT Design Other Other Other Other Road-Sales Schools Open days Agents Digital Partnerships Other showsDelivery On campus Digital PartnershipsStudent services Student administration Career centre Other Other OtherBack office In-house Outsource Source: Ernst & YoungLegend Current area of focus In this model, the university: • Continues to serve a broad mix of • Forms a range of sales and delivery Area de-scoped or reduced in focus in future models student segments. partnerships with public and private • Continues to offer a broad range of higher education providers, TAFEs, Increased area of focus in future models disciplines, but discontinues a small secondary schools, industry partners number of sub-scale/unprofitable and other institutions that can open up disciplines (or merges those disciplines new markets — or more efficiently with a ‘competitor institution’ to access and serve existing markets. achieve scale) — providing the • Outsources some back-office functions resources required to maintain to realise lower operating costs, and/or international competitiveness in drives efficiencies through shared other disciplines. services arrangements with like- • Invests heavily in digital sales and minded institutions. delivery channels, both ‘pure play’ digital channels and blended models.16 University of the future
  • 17. Universities have ample scope to increase the efficiency oftheir organisations, including reducing the ratio of supportstaff to academic staff and using assets more efficiently.“We’re not businesses… Most universities have ample scope to Organisations in other knowledge-based streamline their business and operations. industries, such as professional services but we need to be run Figure 9 charts the ratio of support staff firms, typically operate with ratios of in a business-like way.” to academic staff across a sample of 15 support staff to front-line staff of 0.3 to Australian universities — three from each 0.5. That is, 2-3 times as many University Vice-President of the four representative groups, and front-line staff as support staff. three non-aligned universities. Universities may not reach these ratios in 10-15 years, but given the ‘hot Only one of the universities — a Group of breath’ of market forces and declining Eight university — has a ratio less than government funding, education one. All the rest have more support staff institutions are unlikely to survive with than academic staff. Four of the ratios of 1.3, 1.4, 1.5 and beyond. universities have 50% or more supportWhere does your staff than academic staff, and more than Use of assets is also an area with scope half (8 of the sample of 15) have at least for much greater efficiency. Mostinstitution fit in this chart? 20% more support staff. universities own and maintain a sizeableIs your institution’s ratio of asset base, much of which is used only for four days per week over twosupport staff to academic 13-week semesters — not much morestaff sustainable? than 100 days per year.Figure 9: Ratio of support staff to academic staff, sample of 15 Australian universitiesAll ratios based on Full Time Equivalent (FTE) staff data, reported as of September 2012 University A Universities Innovative Research University B University C University D Group of Eight University E University F University G Technology Australian Network University H University I University J Universities Regional Network University K University L University M Non-aligned University N University O 0.0 0.5 1.0 1.5 2.0Sources: University statistical reports; Ernst & Young analysis University of the future 17
  • 18. Evolution of the university model —‘Niche Dominators’Some universities will fundamentally reshape and refine theservices and ‘markets’ they operate in, with a concurrentshift in their business model, organisation and operations.Figure 10: Potential future model — ‘Niche Dominators’ Domestic students International students Industry professionals Other educationCustomers providers Executive School leavers Mature age High-end Mass market B2B education Illustrative segmentsProduct offerings Vocational and further Higher education Research education and training Arts Engineering Science Business Medicine/health LawEducation disciplines Illustrative focus IT Design Other Other Other Other Road-Sales Schools Open days Agents Digital Partnerships Other showsDelivery On campus Digital PartnershipsStudent services Student administration Career centre Other Other OtherBack office In-house Outsource Source: Ernst & Young In this model, the university:Legend Current area of focus • Chooses particular customer • Builds deep alliances with industry Area de-scoped or reduced segments to focus on — for example, in its chosen fields, including in focus in future models mature age distance learning partnerships to support R&D, Increased area of focus in students, international mass market commercialisation of research future models or industry professionals — enabling and innovation, professional skill the targeted development of course development, and lifelong learning. offerings, sales channels, delivery, • Like Streamlined Status Quo, and related services, such as industry streamlines its back office, including based learning, career placement using outsourcing and/or shared and outreach, and embedded services models to drive efficiency and research programs. economies of scale. • Significantly reduces its range of education disciplines, creating a focused set of areas of genuine domestic and global strength and credibility.18 University of the future
  • 19. The drive towards this model will come from the challengeof staying competitive — in domestic and internationalmarkets — across a broad range of disciplines and segments.“The big change will be The drive towards this model will come However, this constraint assumes the from the challenge of maintaining a current asset base and operating model partnerships with industry competitive position — in domestic and of the typical Australian university. around niches…” international markets — across a broad Universities that move to a significantly range of disciplines and segments. Jack streamlined asset base and operatingUniversity Vice-Chancellor Welch’s ‘rule of two’ will increasingly model — for example, utilising physical come to bear: you’re either number one assets across the year rather than two or number two in your chosen field, or 13-week semesters — will make the Niche you exit — either by choice or driven by Dominator model increasingly feasible. market forces8. Private providers and new entrants will Some leaders we spoke to raised the also carve out market positions using need for scale as an inhibitor of the Niche Dominator models, building fit for growth of the Niche Dominator model, purpose, segment-focused businesses citing 20-25,000 students as a base without the constraints of legacy assets number to maintain an economically and workforce structures; for example, viable Australian university. BPP University College in the UK. Aalto and BPP University College — a focused set of disciplinesCan your institutionmaintain a strong Officially launched in September 2010, Aalto University was formed by merging three Helsinki-based universities in technology, art and design, and economics9.competitive position Aalto’s mission is to contribute to solving global issues through a multi-disciplinaryacross a broad range approach to research and teaching and to support the internationalisation and competitiveness of the Finnish economy.of disciplines? Even after merging three separate institutions, Aalto has a focused range of programs. Aalto seeks to strengthen and differentiate these programs through its multi-disciplinary approach, partnerships with industry, design hubs and programs that promote innovation and entrepreneurship. Aalto aims to use strengths in its chosen fields to achieve a place among the world’s top universities by 2020 and seed a new generation of innovators. In the UK, BPP University College10, a for-profit provider of higher education degrees owned by Apollo Global, focuses on providing profession-focused higher education programs in accounting, banking and finance, law, marketing, and human resources. BPP focuses on students seeking professional qualifications and therefore builds teaching programs and industry partnerships linked to the professions.8 See “The Competitor: Jack Welch’s Burning Platform” by Amir Hartman, ftpress.com, 20039 Aalto University (aalto.fi/en)10 BPP University College (bpp.com) University of the future 19
  • 20. Evolution of the universitymodel — ‘Transformers’Private providers and new entrants will carve out newpositions in the traditional sector, creating new markets thatmerge parts of the higher education sector with other sectors.Figure 11: Potential future model — ‘Transformers’ Domestic students International students Industry professionals Other educationCustomers providers Executive School leavers Mature age High-end Mass market B2B education Parents Content wholesalers Content consumers Service providersProduct offerings Vocational and further Higher education Research Mass distribution education and training Content aggregation Entertainment Financial services OtherSales Other Digital Other OtherDelivery Digital Partnerships Other Other Student administration, career services, other (outsourced)Student services Customer relationship management (cloud)Back office Outsourced Source: Ernst & Young Potential areas of focus for The model in Figure 11 represents a range of possible market positions to be pursuedLegend new models by innovators, rather than representing a ‘model’ of a single institution. In this world, the innovators: • Extend the definition of a higher • Build a sales model that is education ‘customer’ to include predominantly digital and build delivery content wholesalers, content models that combine digital services consumers, financiers, employers and specialist ‘face to face’ services and parents. sourced from partners. • Disaggregate the value chain to create • Outsource student services, while new areas of specialisation, such as retaining ownership of their customer content aggregation, mass distribution, relationships, using cloud-based assessment and certification. customer relationship management • Combine traditional education services tools and techniques. with services in related industries, such • Outsource their full suite of back- as media and entertainment, financial office functions. services and venture capital.20 University of the future
  • 21. The key for public universities in this world is to cutthe right deal — a deal that builds in brand protectionand a reasonable share of the value created.“We’re all looking In our view, the evolution of the The challenge for public universities in Transformer model will be led by private this world is to cut the right deal — a for additional sources providers and new entrants, not deal that builds in brand protection and of income.” incumbent public universities. This level a reasonable share of the value created. of ‘disruption’ is hard to lead from the The answer might lie in a consortium University Vice-Chancellor inside. However, savvy public approach, especially if the prospective universities will seek opportunities to partner has the market weight of a create value in this space in partnership global technology or media company. with private providers and new entrants. For public universities that get this Incumbent public universities bring two right, the rewards will be high: critical assets to this model: credibility increased global reach of the core and academic capability. In an age of mission and brand, not to mention ubiquitous content, ‘content is king’ no much needed incremental revenue to longer applies. Credibility is king — and support internationally competitive increasingly ‘curation is king’. education and research programs. Universities are uniquely positioned to bring credibility and to act as curators of content. Venture GarageWhat impact willinnovation and new models In 2009, a group of students convinced Aalto University in Finland to grant €500,000 to establish Venture Garage, a hub for entrepreneurs and start-upsin higher education have based on one of Aalto’s main university campuses11.on your institution? What Venture Garage combines physical space and virtual communities to promoteopportunities will they entrepreneurship in Aalto University and to promote venture capital and innovation in Finland. Venture Garage provides links to venture capitalists in Europe and theopen up? US, links to academics and research within the university, and a space for young entrepreneurs to develop and launch companies. Venture Garage runs entrepreneurship programs and competitions to encourage and find the most-promising start-ups, rewarding them with access to facilities, investors, and coaching from experienced entrepreneurs. Coursera Coursera is an online university enterprise created by two computer science academics from Stanford University12. In April 2012, Coursera secured $16 million in venture capital funding, seeking to make “the best education in the world freely available to any person who seeks it”13. More than 30 international universities offer online courses on the Coursera platform, with the University of Melbourne the first Australian university to sign up. As of September 2012, Coursera claimed to have 1.4 million students and is growing rapidly. The long-term outcome of ventures like Coursera, edX and Udacity remains unclear, but the impact on the sector will be profound. 11 aaltovg.com 12 coursera.org 13 coursera.org/about University of the future 21
  • 22. Evolution of the universitymodel — conclusionsHybrid models and other models are also possible;regardless of the model and direction they choose,universities face the most interesting of times.“It’s going to be a Conclusions Smaller universities will become increasingly focused on a narrow range tough decade.” The models described above present of research programs. To make this three lines of evolution of university work, they will need to explicitly tie University Vice-Chancellor business models. There are, of course, education programs and industry other potential models, including: partnerships to these focused programs life-long learning models, global — as per the ‘Niche Dominator’ model alliance models, multi-disciplinary — or invest in a distinct student models and hybrid models. A number experience for teaching and learning of the leaders we interviewed spoke of programs not tied to research. a ‘model 1-model 3’ hybrid. That is, continue with a leaner version of their It may be that in 10-15 years time a current model, while looking with small number of Australian universities interest at the possibilities presented have evolved to become specialised by selectively playing in a tertiary education teaching institutions, ‘Transformer’ world. with no research programs at all. However, at this stage, we see it more Many of the leaders we spoke to saw likely that even the smaller universities teaching-only institutions as will find ways to maintain at least 2-3 inevitable. Interestingly, not one of targeted research programs, potentially them — and we spoke to leaders of in partnership with other institutions. more than 20 universities in Australia — saw their own university becoming a Regardless of the model and direction teaching-only institution. The policy chosen, universities in Australia face the makers we spoke to were also most interesting of times. The following sceptical of this model. section explores the above implications further, covering the challenges that We share this scepticism. It would be universities will need to overcome to brave step for a university in Australia enable them to implement new models, to completely relinquish research as a key considerations for policy makers, stated aim or part of its business. and opportunities for the private sector. Nevertheless, research will become increasingly concentrated in universities that can demonstrate excellence and impact.22 University of the future
  • 23. University of the future 23
  • 24. Implications for universitiesTo build a successful model into the future, publicuniversities will need to address a number ofchallenges, regardless of their chosen model.Future challenges a) Quality and academic excellence c) Commercial skills Regardless of the target segment — As higher education markets become • Quality and academic metropolitan students, regional increasingly competitive and consumer- excellence students or international students — driven, public universities will need to and the pressure on institutional deepen their commercial skills and • Academic talent and finances, universities will need to find capability — both in the administrative ways to maintain academic excellence and academic workforce. This will be workforce structure and deliver quality teaching and needed, not just to secure market share • Commercial skills research. Some in Australia worry that in undergraduate and postgraduate quality will suffer in a competitive student markets, but also to enable • Change management market. This may happen at the universities to cut the right deals with and speed to market margins, but over time those that private providers and new entrants. cannot maintain quality will lose • Relationship with market share and relevance. d) Change management and speed government to market b) Academic talent and The new models that universities workforce structure develop and implement over the The academic workforce in Australia is coming decade and beyond will aging, significantly more so than the require significant change. Universities rest of the workforce. A quarter of have traditionally been resistant to Australia’s academic workforce is aged change, typically citing the need for 55 and over, compared to 15% for the academic independence and the purity rest of the workforce in Australia14. For of the mission. University leaders will the 45 and over age group, the need to find ways to stay true to the percentage is 54% for the academic mission, maintain academic integrity workforce compared to 38% for the and independence, and at the same rest of population. Significant time change their business and proportions of this workforce will operating models. retire in the coming decade. A critical component of this change will Universities will need to attract new be the need for speed to market. As the talent to replace this workforce, and at market becomes increasingly the same time build a new workforce competitive domestically and structure that can support new internationally, universities will need to business models, deliver increased be first to market with new teaching and productivity, and accommodate research programs and innovative non-traditional operating models — for student experiences. example, tri-semesters and northern hemisphere timetabling. 14 Hugo, G., “The demographic outlook for Australian universities’ academic staff, CHASS Occasional Papers, 2008.24 University of the future
  • 25. Challenges include the relationship with government,which will need to evolve from ‘fight for funds’ topartner for the nation’s future.“Universities should be e) Relationship with government Universities will also need to find ways to become increasingly influential embedded in Australia’s Australian governments, regardless of from an electoral point of view. “There political persuasion, will be increasingly economic growth… but fiscally constrained, at least in the next are no votes in higher education,” was a common lament in our discussions we’re not!” 3-5 years, and probably beyond. with university leaders. A number ofHead of university Government funding as a share of leaders in the sector are endeavouring university revenue will likely decline. to shift community and governmentrepresentative group Universities will need to search for ways mindsets on this point; this needs to to move beyond the ‘fight for funds’ continue apace. relationship with government. Ideally universities will be seen as key partners for government in stimulating innovation and economic growth. For example, universities might participate in joint initiatives with industry and government that promote the development and commercialisation of new technologies, and create opportunities and skills for a new generation of entrepreneurs. University of the future 25
  • 26. Implications for policy makersPolicy makers have limited influence over the decisions ofindividual institutions, but must find ways to set a frameworkthat maximises the sector’s contribution to Australia’s future.Key policy issues Policy makers find themselves in a b) Scenario modelling difficult situation. Universities infor consideration Australia are increasingly operating in Policy makers should model different scenarios for the sector over the next contestable markets and relying on • Role of higher non-government funding sources; yet 10-15 years; for example, to consider how the models described in this education they deliver many services that are, at paper might evolve, what it might least in part, a public good. • Scenario modelling mean for the ‘public good’ role of The sector is also one of the main universities, and what role policy • Regulation drivers of Australia’s economic future as might have to optimise the outcome a key source of the talent, insight, new for the public good and the nation. • Role of the private ideas and intellectual property required sector and new to build a high-performing knowledge c) Regulation entrants economy. The sector also provides TEQSA is still new and evolving the life-shaping opportunities for thousands way it implements its oversight of the • Price flexibility of students from economically sector. In the longer-term, disadvantaged communities. Thus, the governments and regulators need to shape and performance of the sector consider how new university models matters critically to the future of the might fit into their regulatory nation, yet policy makers are frameworks, and what forms of increasingly limited in their ability to regulation might be appropriate to influence the decisions of individual maintain standards of quality, at the institutions that will drive their future same time as enabling innovation and shape and performance. new models to develop. It is beyond the scope of this paper to cover the full range of issues that policy d) Role of the private sector and makers must grapple with. Rather, we new entrants have highlighted a subset of key issues Policy makers will need to have a view that need to be addressed to prepare for on the desirability or otherwise of the a changed higher education landscape: private sector and new entrants — domestic or international — creating a) Role of higher education in the new models or carving out market nation’s future share using existing models. Politicians and policy makers should present a clear policy and public case for e) Price flexibility the critical role of higher education in Price flexibility is no panacea, but the nation’s future, to build public under the right conditions might support for the university sector and set enable universities to secure much the foundations for higher education needed funds for the future. Those public policy. conditions must balance price flexibility with equity and the economically and socially critical participation agenda.26 University of the future
  • 27. Implications for the private sectorWe foresee very large opportunities for the private sector —ambitious players will need to move fast to establish newmodels and secure partnerships with leading incumbents.“We bring university The implications for the private sector Higher education markets have superb should at face value be more fundamentals for long-term growth education to those who straightforward: find opportunities to — for example, annual spend on higher haven’t had it before and create value and craft the business education in Asia will grow by a trillion models required to bring them to life. dollars or more over the next fifteen help them to get a great job.” We contend that opportunities exist for years15 — and provide links to Managing Director, more than just traditional private burgeoning middle classes in emerging providers of higher education. markets. Given the scale of this Private-sector growth, we encourage potential private university operator We see a role for media companies, sector players to put serious resources technology providers, financiers, and a into establishing new models and to range of industry groups to create value start securing partnerships with providing services within the higher leading incumbents. education value chain, such as content distribution, commercialisation, industry placements and certification. Some of these services might be provided on a stand-alone basis. More likely, however, are joint-ventures or partnerships with incumbent institutions that bring market credibility and academic capability. 15 Based on Ernst & Young analysis of participation growth rates, populations and annual spend per student, we are forecasting annual spend on higher education in the Asian region to increase by more than a trillion USD by the year 2030. University of the future 27
  • 28. Ernst & Young’s framework for assessingand designing a model for the futureUniversities should critically examine their currentmodel, develop a vision of what a future model mightlook like, and develop a broad transition plan.Universities should assess if We believe the drivers of change Deliberations on future models need to described above will fundamentally include which customer segments totheir current model is future transform the higher education sector. focus on and what services they need,proof, and, if not, determine Our hypothesis is that these drivers, over and the universities’ channels to market the next 10-15 years, will render the and role within the value chain. Supportwhere and how to play in the dominant Australian university model of functions will also need to befuture. Ernst & Young is today unviable in all but a few cases. streamlined. Regardless of the pathuniquely placed to assist in chosen, reform will need to align to the To address the implications specific to institution’s purpose and values.these deliberations. their institution, public universities need to consider a series of strategic questions related to the viability of their institution’s current model, and where and how to play in future.Is your institution’s business model ready for the future?Figure 12: Ernst & Young’s framework for assessing and designing a university model for the future Future model dimensions Customers Students, professionals, Strategic questions industry, etc… Transition considerations Is our current model Managing the transition future proof? Products/services What does the transition Can our organisation survive and Vocational education and training | Higher education look like as a high-level, thrive in its current business Research | Employment services | Other multi-year plan? model and mode of operation? What capabilities do we need to Where to play? manage the transition? Channels What student, industry or other Managing the brand and On campus | Digital | Partnerships | Other customer segments should we market position focus on? How do we protect our brand What will be our point of Role within the value chain and market position during difference and how do we Education… the transition? sustain this? Develop Attract and How do we manage changes Graduate/ How to play? teaching recruit Enrol Teach Assess to our brand as our products, transfer programs students services, channels and Who should we partner with? partners evolve? Research… What workforce capabilities and Operating the new model structures do we need? Develop Secure Conduct research Publish Commercialise How would we govern How do we optimise our assets? funding research projects and administer a model with new partners? Support functions How do we know we will Finance | HR | IT | Facilities management | Other secure the desired benefits from the new model? And how Institutional purpose and values will we sustain these? Source: Ernst & Young28 University of the future
  • 29. Ernst & Young Higher Education contactsOur higher education team — with deep strategic and operationalexperience in the sector — is ideally placed to advise universityleaders on the transition to new models for the future. Justin Bokor Peter Rohan Report author — Executive Director, Advisory Partner, Advisory Tel: +61 3 9655 2755 Tel: +61 3 9655 2668 Mobile: +61 401 288 114 Mobile: +61 433 983 969 justin.bokor@au.ey.com peter.rohan@au.ey.comJustin has 15 years’ experience as an advisor on strategy to Peter is Ernst & Young’s national Head of Education, and haspublic and private sector organisations. Justin has extensive more than 25 years experience as an advisor to Governmentexperience in the education sector and is a regular presenter and industry. Peter’s university work has included operatingon higher education reform and the impact on higher education model transformation, financial modelling and cost reduction,institutions. He has consulted extensively to education sector shared services, and advice on strategic direction. Peter’sclients across Australia, including universities, sector clients have included universities across Australia.representative groups, TAFE providers, high schoolsand state and federal departments of education. Meredith Scott Gerald Marion Partner, Assurance Director, Advisory Tel: +61 2 9248 4533 Tel: +61 7 3011 3136 Mobile: +61 413 750 497 Mobile: +61 410 652 551 meredith.scott@au.ey.com gerald.marion@au.ey.comMeredith is a Partner in Ernst & Young’s Sydney office and Gerald is an experienced Director in the Brisbane officeworks across the technology, entertainment and education of Ernst and Young’s Advisory Practice. Gerald has a wealthsectors. She has 25 years’ experience in professional services, of experience in the education sector, and has worked withfocused on compliance and governance. Meredith serves as a a number of universities on a variety of strategic andmember of the Finance and Audit Committee of University of operational challenges. In particular, Gerald has beenthe Sydney and as a Council member of one of Australia’s working on whole-of-student lifecycle diagnostics, businesslargest schools, Pymble Ladies College. model redesign, strategy execution at a granular level, and operating model transformation. Heidi Riddell Mark Stewart Partner, Advisory Partner, Advisory Tel: +61 8 9429 2136 Tel: +61 8 8417 1658 Mobile: +61 404 236 668 Mobile: +61 421 610 597 heidi.riddell@au.ey.com mark.stewart@au.ey.comHeidi is a Partner in Ernst & Young’s Perth office. She has Mark is a Partner in Ernst & Young’s Adelaide office. He has14 years experience providing professional services across 18 years experience as an advisor to Government and industry,the government, utilities and resources sectors. Her client focused on productivity improvement, operating modelportfolio includes universities, departments of education, transformation, and cost reduction. Mark’s clients have includedutilities and health providers. universities, education departments, other government departments and scientific organisations. University of the future 29
  • 30. MethodologyErnst & Young undertook an Primary Research — Senior Secondary research of Executive Interviews overseas marketsindustry wide study of the We interviewed more than 40 senior We conducted secondary research intoforces impacting the higher executives from public universities, international developments in highereducation industry globally private universities, policy makers and education, including reviewing higher sector representative groups across education markets and developments in:and locally, and the Australia, to understand their views on: North America, Asia, Latin America,opportunities, challenges Europe, the Middle East, Africa and • Drivers of change in the higherand implications for education sector Oceania. The research identified changes impacting the higher education industryAustralian universities. • The long-term future of universities and new and emerging models in higher • Potential evolutions of the education in these markets. university model Leveraging our network of • Implications for their institution industry leaders Our interviewees included leaders of Ernst & Young insights from more than 20 universities, including international locations were used to 15 Vice-Chancellors. complement the views of the Australian Ernst & Young would like to thank each of higher education team, as well as insights the interviewees for their time and from our team’s extensive work in other thoughtful contributions to the research industries undergoing major and points of view discussed in this paper. transformations; for example, media, The views expressed in this paper, though retail, utilities, telecommunications, informed by this research, are those of banking and insurance. Ernst & Young alone. Market Analysis Market analysis included assessment of the: • Drivers of growth in higher education internationally • Levels of competition pre and post the introduction of a demand-driven funding model in Australia • Drivers of student choice • Current university operating models30 University of the future
  • 31. Ernst & Young research team Rachit Srivastava Mary Gendy Manager, Advisory Senior Consultant, Advisory Tel: +61 3 9288 8579 Tel: +61 3 9655 2651 Mobile: +61 413 293 590 Mobile: +61 421 883 828 rachit.srivastava@au.ey.com mary.gendy@au.ey.com Maya Narayanan Yoganya Arun Manager, Advisory Senior Consultant, Advisory Tel +61 3 9655 2677 Tel: +61 3 9288 8151 Mobile: +61 424 200 907 Mobile: +61 411 211 550 maya.narayanan@au.ey.com yoganya.arun@au.ey.com Justin Singh Senior Consultant, Advisory Tel: +61 3 8650 7660 Mobile: +61 404 154 604 justin.singh@au.ey.com University of the future 31
  • 32. Ernst & YoungAssurance | Tax | Transactions | AdvisoryAbout Ernst & YoungErnst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide,our 167,000 people are united by our shared values and an unwavering commitment to quality.We make a difference by helping our people, our clients and our wider communities achievetheir potential.Ernst & Young refers to the global organisation of member firms of Ernst & Young Global Limited,each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited byguarantee, does not provide services to clients. For more information about our organisation,please visit www.ey.com.© 2012 Ernst & Young, Australia.All Rights Reserved.SCORE No. AU00001492This communication provides general information which is current as at the time of production. Theinformation contained in this communication does not constitute advice and should not be relied onas such. Professional advice should be sought prior to any action being taken in reliance on any of theinformation. Ernst & Young disclaims all responsibility and liability (including, without limitation, for anydirect or indirect or consequential costs, loss or damage or loss of profits) arising from anything doneor omitted to be done by any party in reliance, whether wholly or partially, on any of the information.Any party that relies on the information does so at its own risk.Liability limited by a scheme approved under Professional Standards Legislation.ED 0313 S1224764

×