"Our primary hypothesis is that the dominant university model in Australia — a broad-based teaching and research institution, supported by a large asset base and a large, predominantly in-house back office — will prove unviable in all but a few cases over the next 10-15 years. At a minimum, incumbent universities will need to significantly streamline their operations and asset base, at the same time as incorporating new teaching and learning delivery mechanisms, a diffusion of channels to market, and stakeholder expectations for increased impact. At its extreme, private universities and possibly some incumbent public universities will create new products and markets that merge parts of the education sector with other sectors, such as media, technology, innovation, and venture capital."
Tertiary education is on the rise all around the world. This figure shows participation rates for 18-22 year-olds in tertiary education around the world. Just from 2000 to 2010, the percentage has tripled in China, and more-or-less doubled in India, East Asia and the Pacific, and Latin America. (Side note: "MENA" in the table refers to the "Middle East and North Africa region.)
Finishing a four-year college degree is historically something that happens for well under half of students in high-income countries, and for only a tiny slice of students in low-income countries. With the dramatic expansion of attendance, the traditional model won't work well--it's just too costly on a per-student basis. How this industry will shake out in world of digital technology and global mobility, along with research programs that are increasingly intertwined with industry, is not at all clear. But the E&Y report offers a glimpse of some of the possibilities. Here are a few thoughts, scattered through the report, that jumped out at me.
"The likely outcome over the next 10-15 years is the emergence of a small number of elite, truly global university ‘brands’. These global brands of the future will include some of the ‘usual suspects’ — a subset of Ivy League and Oxbridge institutions — as well as a number of elite institutions from China."
"The relationship between industry and the higher education sector is changing and deepening. Industry plays multiple roles: as customer and partner of higher education institutions and, increasingly, as a competitor. ... Research commercialisation will go from being a fringe activity to being a core source of funding for many universities’ research programs. ... Finally, industry will increasingly compete with universities in a number of specialist professional programs. Accounting industry bodies already provide a range of specialised postgraduate programs (CPA, CA, CFA etc). Other industry groups, for example engineering associations and pharmacy guilds, may play an increased role as certifiers and deliverers of content."
"Organisations in other knowledge-based industries, such as professional services firms, typically operate with ratios of support staff to front-line staff of 0.3 to 0.5. That is, 2-3 times as many front-line staff as support staff. Universities may not reach these ratios in 10-15 years, but given the ‘hot breath’ of market forces and declining government funding, education institutions are unlikely to survive with ratios of 1.3, 1.4, 1.5 and beyond."
"Use of assets is also an area with scope for much greater efficiency. Most universities own and maintain a sizeable asset base, much of which is used only for four days per week over two 13-week semesters — not much more than 100 days per year."
"Incumbent public universities bring two critical assets to this model: credibility and academic capability. In an age of ubiquitous content, ‘content is king’ no longer applies. Credibility is king — and increasingly ‘curation is king’. Universities are uniquely positioned to bring credibility and to act as curators of content. The challenge for public universities in this world is to cut the right deal — a deal that builds in brand protection and a reasonable share of the value created."
One university vice-chancellor is quoted as saying: "Our major competitor in ten years time will be Google ... if we're still alive!" Another is quoted as saying: "The traditional university model is the analogue of the print newspaper ... 15 years max, you've got the transformation." And yet another is quoted as: "Universities face their biggest challenge in 800 years."
I would only add that universities and colleges typically don't like to think of themselves as "businesses," but even nonprofit institutions have a "business model" in which revenue needs to match up to expenditures. The higher education business model is going to be dramatically disrupted, and so far, we've only seen the front edge of those changes.