As we head into the tail end of 2013, a variety of claims and predictions are being tossed about regarding the future of higher education – and the university business model – that would have been considered preposterous a few years ago, such as:
- “University experiences are increasingly being characterised by: impractical learning, out-of-touch faculty, exorbitant tuitions, time-wasting requirements and diminishing probabilities of employment.” – Forbes
- “In fifty years, if not much sooner, half of the roughly 4,500 colleges and universities now operating in the US will have ceased to exist. The technology driving this change is already at work, and nothing can stop it. The future looks like this: Access to college-level education will be free for everyone; the residential college campus will become largely obsolete; tens of thousands of professors will lose their jobs; the bachelor’s degree will become increasingly irrelevant; and ten years from now Harvard will enrol ten million students.”
– The American Interest, a magazine on foreign policy, international affairs, global economics, and military matters
- “It’s going to reinvent education. It’s going to transform universities. It’s going to democratise education on a global scale. It’s the biggest innovation to happen in education for 200 years.” – Anant Argarwal, founder of edX, a major virtual consortium of open online learning schools governed by MIT and Harvard
There are still some who dispute the extent of the “disruption” underway in the university model. For example, here is Eric Beerkens’ conclusion in an article he wrote for University World News this month:
“I can safely say that the DNA of the traditional university has not changed in the past 25 years and I can safely predict that it will not change in the coming 25 years. And essentially, that is a good thing.”
Beerkens considers “apocalyptic” warnings about the end of the traditional university model to be ahistorical and ill-founded, arguing instead that the model has been evolving for years – gradually – to the point where there are nuances and adjustments, but no radical transformations.
What’s likely is that the answer about the future of higher education lies somewhere in the middle of the two viewpoints (revolution or evolution); and no one knows exactly how things will shake out. While we wait, some actual, present-day developments do suggest that fundamental aspects of higher education – its business model and the way in which people want to receive it – are changing fairly rapidly:
- US college enrolments are declining – This September, the US Census reported that US college enrolment declined for the first time in six years in the fall of 2012. Moody’s Investors Service says that already, “precipitous enrolment declines for fall 2013” have damaged the credit quality of two private colleges – Loyola University in Louisiana and Central College in Iowa – and a public one, St. Mary’s College in Maryland. Both undergraduate and graduate enrolments fell, and Moody’s said “graduate programmes typically generate more revenue per student than undergraduate ones” and that “the lower demand for graduate education will likely continue for some time, given that applications for law, education and business schools have all declined dramatically.”
- US institutions have financial challenges – The financial consulting firm Bain & Company has just released a report finding that fully one-third of universities and colleges in the US are in “real financial trouble” because “institutions’ operating costs are rising faster than revenues and investment returns can cover them.” The main culprit, according to Bain, is a vicious cycle of rising tuitions, students’ and parents’ price sensitivity, and corresponding tuition discounting that universities cannot afford.
- Delineation between “source” and “destination” countries is blurring – Large source countries are becoming unstable in terms of how much they can be counted on as an origin of highly valued international student tuition. In some cases, they are contributing less than in the past – e.g., Indian students in the UK – or bulking up their own domestic capacity and quality of higher education – e.g., China and Hong Kong, among other educational hubs.
- MOOCs and other digital-based delivery models are evolving and gaining ground – Just this week we reported on the first UK-based MOOC, as well as the increasing sophistication and credibility of MOOCs. Along with being more affordable and able to reach students around the world, MOOCs are now seen to be “unbundling” the concept of higher education, providing it in bite-sized chunks and allowing it to be mixed and matched. MOOCs are also seen by some to be maturing to the point they will offer standardised credentials – a weakness in the model at its inception. Finally, there are anecdotal reports that the learning interface provided by MOOCs is in some cases very exciting; this Guardian piece does an excellent job of profiling the actual experience of studying MOOCs.
What possible shapes could the revolution – or evolution – take?
Last year, we published an article that examined the findings of Ernst & Young’s report on the Australian university sector. The report considered that the traditional university model in Australia would disappear over the next 10–15 years due to factors including the ones mentioned above (e.g., online delivery models, competition for students, greater access to education) and foresaw three potential models for the universities of Australia’s future:
- “Streamlined Status Quo” – Established universities that “continue to operate as broad-based teaching and research institutions, but that will progressively transform the way they deliver their services and administer their organisations – with major implications for the way they engage with students, government, industry stakeholders, TAFEs, secondary schools, and the community.”
- “Niche Dominators” – Established universities and new entrants that “fundamentally reshape and refine the range of services and markets they operate in, targeting particular ‘customer’ segments with tailored education, research and related services – with a concurrent shift in the business model, organisation and operations.”
- “Transformers” – Private providers and new entrants that “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.
The Forbes article mentioned earlier adds to the list of potential outcomes of universities’ evolution, including:
- New players emerging to deliver education – For example: “The American Museum of Natural History can emerge as a player not only in the esoteric research realms of PhD education, but also in the more mass markets of masters degree programmes.”
- Branding as key – “Fast-mover advantage, and existing brand recognition, will be enormous assets in the recasting of our higher-educational future.”
- Less prestigious institutions struggling more – “The new virtual offerings of big-branded global players will diminish the allure of less prestigious local alternatives.”
- The ascendance of “certificates” – Where “evaluation” loses importance and preference is given to “a variety of certificates which attest to exposure rather than mastery.”
- Changing definition of a “campus” – Where the campus becomes more of a lab or a social centre than a place for faculty to deliver course content.
- “Rockstar” lecturers – As MOOCs and other global courses gain ground and campuses change in nature, the local constraints on hiring professors and lecturers will fall away, and “great delivery” of content will be more and more expected. (Note: we see this trend already in South Korea and Hong Kong, where some tutors are akin to celebrities.)
Brandwork now is essential
Smart executives at every higher institution, everywhere, are now aware of the reality that disruption to their business sector is seriously underway.
The challenge will be to thoughtfully assess the competitive landscape and how best to move forward within it. As we wrote earlier this year:
“Strategy involves the hard but rewarding work of looking at the strengths, challenges, and opportunities of the institution to develop a clear and compelling competitive advantage for target markets (which must be very well defined and understood).”
Our article offers some excellent case studies of institutions reevaluating their brands and how to appeal to their natural markets.
Disruption will not have one face
One thing (and perhaps only one thing) is clear about the changes underway in the global higher education landscape: there is both increasing fragmentation and increasing consolidation.
On the consolidation side, there are the prestigious universities banding together to offer jointly branded courses (e.g., edX) in one place: online. On the fragmentation side, there are more countries vying for a share of the global student market and more students gaining access to education. There are more types of jobs out there for which one can study, and there is – as always – an enormous variety regarding what students want to study, and where, and how.
Institutions that can leverage either the consolidation theme or the fragmentation theme (e.g., by knowing their audience deeply, differentiating their offerings, branding and marketing well, and establishing a reputation as quality providers of a specified, relevant education) will stand a better chance of thriving in the new, disrupted environment. So, too, will institutions that take on the reality of the profound changes taking place: in the Bain report on US colleges and universities’ financial strain (cited earlier in this article), the authors conclude:
“Change is needed, and it’s needed now. Still, at the majority of institutions, the pace of change is slower than it needs to be. Plenty of hurdles exist, including the belief that things will return to the way they were. Note: They won’t.”