Australian universities on the cusp of profound change: EY report
Wednesday 24 October 2012 — Time is running out for traditional university business models. New technologies, increased competition and flat-lining government funding will force universities to fundamentally reinvent themselves in the decade ahead, according to an EY report – University of the Future - released today.
The report is the culmination of a six month study by EY on the changes occurring in Australian and international universities. The study included interviews with more than 40 leaders from universities, the private providers and policy makers – including extended interviews with 15 Vice-Chancellors around Australia.
“We’ve seen fundamental structural changes to industries including media, retail and entertainment in recent years – higher education is next. There’s not a single Australian university than can survive to 2025 with its current business model,” says report author Justin Bokor, Executive Director in EY’s Education practice.
“At a minimum, universities will need to get much leaner, both in terms of the way they run the back-office, and in use of assets.” As part of the study, EY compared ratios of support staff to academic staff across a selection of 15 Australian universities, covering all the main groups of universities – Group of Eight (Go8), Australian Technology Network of Universities (ATN), the Innovative Research Universities (IRU), regional universities and non-aligned universities.
Only one of the universities in the EY sample – a Go8 university – has a ratio less than one. All the rest have more support staff than academic staff. Four of the 15 universities have 50% or more support staff than academic staff, and more than half (8 of the sample of 15) have at least 20% more support staff. “Given increased market forces including the switch to a demand-driven model in the domestic market and increased global competition in the international student market together with tight government funding, universities with these types of support structures will struggle to see out the next ten years.” Justin said.
The study highlighted five key drivers that are changing the world of universities – the democratisation of knowledge and access, contestability, new technologies, global mobility, and integration with industry. The sum total of these drivers of change will mean universities will be very different in 15 years from now and will need to:
- Increasingly orient their strategies and organisations around particular student and industry segments;
- Create new, leaner business models as competition increases for staff, students, funding and partners;
- Innovate the higher education value chain, for example forming partnerships and areas of specialisation in particular areas of the value chain - content aggregation, mass distribution and certification;
- Increasingly fund, conduct and commercialise research in partnership with industry;
- Face new competitors in Australia and internationally – both online and campus-based competitors, especially as emerging market universities move up the rankings and private providers develop successful segment-focused models
EY’s report sets out three models for how universities might evolve in the decade ahead. Model one, which EY has labelled “streamlined status quo” runs similar teaching and research programs to today, but uses digital technologies in teaching and learning, is much leaner and has deeper partnerships with industry and international collaborators.
Model two – “niche dominators” – focuses on a small range of teaching and research programs, but is truly world class in those programs and integrates work experience, career opportunities, life-long learning and research commercialisation into the programs.
Model three – “transformers” – sees universities form partnerships with media companies and global technology providers to change the way education and knowledge is accessed and delivered – in Australia and in a range of cities and rural areas in Asia, Latin America and Africa. This model will transform the world, creating new opportunities for millions of young people, their families and the societies they live in.
Policy makers also face a unique set of challenges, the study reports. “The university sector is critical to Australia’s future,” Justin says. “Universities educate our leaders and entrepreneurs of the future, create new ideas and knowledge, and earn much needed export income. Universities provide opportunities for students of all backgrounds to increase standards of living for themselves and future generations. However, policy makers’ influence could decline in the decade ahead as the sector becomes increasingly global, competitive, and reliant on non-government sources of funding.”
The report argues that politicians and policy makers should present a clear case for the critical role of higher education in the nation’s future – to build public support for the university sector and set the foundations for higher education public policy. Policy makers should develop scenarios for how university business models might evolve and what this might mean for the ‘public good’ role of universities. For its part, the Tertiary Education Quality and Standards Agency (TEQSA) will need to consider how new university models might fit into their regulatory frameworks, and what forms of regulation might be needed to enable innovation and new models to develop whilst maintaining overall standards of quality.
“This is a sector that, more than any other, will shape Australia’s future as a high-performing knowledge economy,” Justin says, “But, to succeed, Australian universities will need to forge new business models that are dynamic, modern and are fit for the decades ahead.”
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