Professional Documents
Culture Documents
University
University
of the future
A thousand year old
industry on the cusp of
profound change
Contents
Drivers of change
Current state
14
15
16
Niche Dominators
18
Transformers
20
Conclusions
22
24
26
27
Ernst & Youngs framework for assessing and designing a model for the future
28
29
Methodology 30
Ernst & Young research team
31
private sector
How to play in the future Ernst & Youngs framework for
Justin Bokor
Ernst & Young
Drivers of change
Five mega-trends will transform
the higher education sector.
Democratisation of
knowledge and access
Ubiquitous content
Broadening of access to
higher education
Increased participation in
emerging markets
Contestability of
markets and funding
Fiercely competitive
Digital technologies
Drivers of change
Challenges to
government funding
Competing for new
Blended learning
sources of funds
Global mobility
Emerging markets becoming
university brands
Integration
with industry
Scale and depth of industry-based learning
Research partnerships
and commercialisation
Industry as competitors in the certification and
delivery of content
1. Democratisation of knowledge
and access
Traditionally, universities held the key to
knowledge, in both a physical and
philosophical sense. University libraries,
faculty domains and research institutes
were where knowledge was created,
stored and shared. The staff working in
those domains typically held a privileged
status as originators and keepers of
knowledge. Now knowledge is open to
anyone globally with a device and
connectivity not just facts and figures,
but also analysis, interpretation, and
curation of knowledge.
Access to universities has traditionally
been dominated by a modest proportion
of society in developed markets 20-30%
of post-secondary students and a very
narrow proportion of society in emerging
markets, typically the elite.
Today, access is expanding both in
developed markets, such as Australia,
and even more fundamentally in
emerging markets. Chinas tertiary
Figure 2: Tertiary education participation rates (Proportion of 18-22 years olds in post secondary education)
80.0%
75.0%
2000
2010
40.5%
29.0%
30.0%
25.9%
17.9%
15.8%
8.0%
OECD
China
22.6%
21.0%
9.4%
India
4.3%
Latin America
MENA
6.8%
Sub-Saharan Africa
Source: World Bank, Ernst & Young analysis. MENA Middle East & North Africa; OECD Organisation for Economic Co-operation & Development
1 See, for example, Outline of Chinas National Plan for Medium and Long-term Education Reform and Development (2010 2020), China Ministry of Education (www.moe.gov.cn).
Drivers of change
Contestability of markets and funding will deepen both in
Australia and internationally, with any growth in funding
coming from highly competitive, non-government sources.
2. Contestability of markets
and funding
The introduction of a demand-driven
funding model in Australia in 2012 has
driven whole new levels of competition.
A number of universities that had
previously felt secure in their market
shares found themselves confronted by
losses in share of 5-10% or more as
2011 first preferences and 2012
enrolment data started to come
through. In Victoria, for example, four
universities lost 3.5% market share or
more see Figure 4 below.
Head of university
representative group
11
15
17
FY06
FY07
21
FY09
FY05
FY10
FY11 FY12*
FY08
13.8%
3
FY13*
6.2%
4.6%
1.6%
-30
0.1%
University
-42
-53
-3.8% -4.2%
-11.5%
Source: Ernst & Young analysis of market data.
-7.7%
-52
3. Digital technologies
Digital technologies and innovation have
disrupted all manner of established
industries media, retail, entertainment
and many others. While online education
has been around since the 1990s, it has
been in the last 2-3 years where the
pace and disruptiveness of change has
really accelerated.
Digital technologies will not cause the
disappearance of the campus-based
university. Campuses will still exist as
places of teaching and learning,
research, community engagement, and
varied forms of student experience
assuming universities can deliver a rich,
on-campus experience. But digital
technologies will transform the way
education is delivered and supported, for
example through applications that
enable real-time student feedback, and
the way education is accessed in remote
and regional areas both in the
developed and developing world.
Drivers of change
Global mobility will continue to grow for students, academic
talent and university brands, with the likely emergence of a
small number of elite, truly global university brands.
4. Global mobility
Global mobility will continue to grow
for students, academic talent, and
increasingly for university brands.
International students have been the
lifeblood of the Australian higher
education industry over the last 10-15
years. The international student market
is growing rapidly (global growth of 6.6%
per annum over the last decade), but will
fundamentally change in structure in the
coming decade and beyond, as
traditional source markets China,
Malaysia, South Korea and others
increasingly become global-scale
destinations for international students.
Likewise, the sources of academic talent
will become more diffuse as academics
from emerging markets become
increasingly mobile and in demand,
providing a growing source of talent for
universities in both developed and
developing economies alike.
78
25
13 UAE
China
27 2
Singapore
India 17 2
Malaysia
12
3
6
1
6
Qatar
Australia
Iran
Netherlands
Malaysia
Canada
China
1
3
Planned IBCs
France
37
17 7
18
7 7
10
India 5
UK 6
South Korea
Malaysia
35%
58
25%
Turkey
India
15%
China
Morocco
54
2%
France
4%
127
Russia
55
68
6%
USA
211
568
South Korea
5%
0%
72
8%
62
10%
105
Germany
12%
14%
1
3
Note: Size of bubble denotes number of students studying abroad in 2009 (000)
Mauritius 5
Canada 4 1
Current IBCs
Destination country
USA
UK
5-year plan...
60 new companies
80 patents
3300 graduates
The intent is to spur innovation and commercial activity in Europe, while at the
same time helping to solve global energy problems. InnoEnergy is one of three
large-scale, cross-border Knowledge and Innovation Communities established by
the EUs European Institute of Innovation and Technology7.
a) Deliver post graduate education in the area of sustainable energy, with each
11
Drivers of change
These drivers of change will transform the higher
education industry landscape, forcing universities
to adapt their business models.
Conclusions
The sum total of these drivers of
change will be a significantly different
higher education industry landscape
15 years from now. We see the sector
developing as follows:
Universities will be compelled to
12
13
Domestic students
Product offerings
International students
Industry
Higher education
Research
Engineering
Science
Business
Medicine/health
Law
IT
Design
Other
Other
Other
Other
Schools
Open days
Agents
Road-shows
Education disciplines
Sales
Delivery
Digital
On campus
Student services
Back office
Student administration
HR
IT
Other
Digital
Career centre
Finance
Other
Legal
Other
Other
Other
Other
Partnerships
Other
Other
Legend
14
15
Domestic students
Product offerings
International students
Industry
Higher education
Research
Arts
Engineering
Science
Business
Medicine/health
Law
IT
Design
Other
Other
Other
Other
Education disciplines
Sales
Schools
Delivery
Open days
Agents
Roadshows
On campus
Student services
Digital
Digital
Student administration
Career centre
In-house
Back office
Partnerships
Other
Partnerships
Other
Other
Other
Outsource
Source: Ernst & Young
Legend
student segments.
Continues to offer a broad range of
16
Non-aligned
Regional
Universities
Network
Australian
Technology
Network
Group of Eight
Innovative
Research
Universities
University A
University B
University C
University D
University E
University F
University G
University H
University I
University J
University K
University L
University M
University N
University O
0.0
0.5
1.0
1.5
2.0
17
International students
Industry professionals
Customers
School leavers
Mature age
High-end
Mass market
Other education
providers
Executive
education
B2B
Illustrative segments
Product offerings
Higher education
Engineering
Education disciplines
Business
Medicine/health
Law
Other
Other
Other
Illustrative focus
IT
Sales
Science
Research
Schools
Delivery
Design
Open days
Agents
Other
Roadshows
On campus
Student services
Digital
Digital
Student administration
Career centre
In-house
Back office
Partnerships
Other
Partnerships
Other
Other
Other
Outsource
Source: Ernst & Young
Legend
18
The drive towards this model will come from the challenge
of staying competitive in domestic and international
markets across a broad range of disciplines and segments.
8 See The Competitor: Jack Welchs Burning Platform by Amir Hartman, ftpress.com, 2003
9 Aalto University (aalto.fi/en)
10 BPP University College (bpp.com)
19
International students
Industry professionals
Customers
School leavers
Product offerings
Sales
Mature age
High-end
Mass market
Other education
providers
Executive
education
B2B
Parents
Content wholesalers
Content consumers
Service providers
Higher education
Research
Mass distribution
Content aggregation
Entertainment
Financial services
Other
Other
Delivery
Digital
Digital
Student services
Partnerships
Other
Other
Other
Other
Back office
Outsourced
Source: Ernst & Young
Legend
20
office functions.
Venture Garage
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-ups
based on one of Aaltos main university campuses11.
Venture Garage combines physical space and virtual communities to promote
entrepreneurship in Aalto University and to promote venture capital and innovation
in Finland. Venture Garage provides links to venture capitalists in Europe and the
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 it13. 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
21
Its going to be a
tough decade.
University Vice-Chancellor
Conclusions
The models described above present
three lines of evolution of university
business models. There are, of course,
other potential models, including:
life-long learning models, global
alliance models, multi-disciplinary
models and hybrid models. A number
of the leaders we interviewed spoke of
a model 1-model 3 hybrid. That is,
continue with a leaner version of their
current model, while looking with
interest at the possibilities presented
by selectively playing in a
Transformer world.
Many of the leaders we spoke to saw
teaching-only institutions as
inevitable. Interestingly, not one of
them and we spoke to leaders of
more than 20 universities in Australia
saw their own university becoming a
teaching-only institution. The policy
makers we spoke to were also
sceptical of this model.
We share this scepticism. It would be
brave step for a university in Australia
to completely relinquish research as a
stated aim or part of its business.
Nevertheless, research will become
increasingly concentrated in
universities that can demonstrate
excellence and impact.
22
23
Future challenges
c) Commercial skills
14 Hugo, G., The demographic outlook for Australian universities academic staff, CHASS Occasional Papers, 2008.
24
Universities should be
embedded in Australias
economic growth but
were not!
Head of university
representative group
25
Role of higher
education
Scenario modelling
Regulation
26
b) Scenario modelling
Policy makers should model different
scenarios for the sector over the next
10-15 years; for example, to consider
how the models described in this
paper might evolve, what it might
mean for the public good role of
universities, and what role policy
might have to optimise the outcome
for the public good and the nation.
c) Regulation
TEQSA is still new and evolving the
way it implements its oversight of the
sector. In the longer-term,
governments and regulators need to
consider how new university models
might fit into their regulatory
frameworks, and what forms of
regulation might be appropriate to
maintain standards of quality, at the
same time as enabling innovation and
new models to develop.
d) Role of the private sector and
new entrants
Policy makers will need to have a view
on the desirability or otherwise of the
private sector and new entrants
domestic or international creating
new models or carving out market
share using existing models.
e) Price flexibility
Price flexibility is no panacea, but
under the right conditions might
enable universities to secure much
needed funds for the future. Those
conditions must balance price
flexibility with equity and the
economically and socially critical
participation agenda.
We bring university
education to those who
havent had it before and
help them to get a great job.
Managing Director,
Private-sector
university operator
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.
27
Future model
dimensions
Customers
Students, professionals,
industry, etc
Strategic questions
Is our current model
future proof?
Can our organisation survive and
thrive in its current business
model and mode of operation?
Transition considerations
Managing the transition
Products/services
Vocational education and training | Higher education
Research | Employment services | Other
Where to play?
Channels
On campus | Digital | Partnerships | Other
Enrol
Teach
Assess
Graduate/
transfer
Research
Develop
research
projects
Secure
funding
Conduct
research
Publish
Commercialise
Support functions
Finance | HR | IT | Facilities management | Other
Institutional purpose and values
28
Justin Bokor
Report author Executive Director, Advisory
Peter Rohan
Partner, Advisory
Meredith Scott
Partner, Assurance
Gerald Marion
Director, Advisory
Heidi Riddell
Partner, Advisory
Mark Stewart
Partner, Advisory
29
Methodology
Secondary research of
overseas markets
education sector
The long-term future of universities
Potential evolutions of the
university model
Implications for their institution
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 models
30
Rachit Srivastava
Manager, Advisory
Mary Gendy
Senior Consultant, Advisory
Maya Narayanan
Manager, Advisory
Yoganya Arun
Senior Consultant, Advisory
Justin Singh
Senior Consultant, Advisory
Tel: +61 3 8650 7660
Mobile: +61 404 154 604
justin.singh@au.ey.com
31
S1224764
ED 0313