Higher Education - Looking ForwardAn Educator’s Perspective:A thousand year old industryon the cusp of profound change
21st Century Universities:Performance and Sustainability
IUA Symposium, Dublin
29th September 2014
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Contents
The University of the Future
Drivers for Change
• Democratisation of Knowledge & Access
•Contestability of Market & Funding
•Digital Technologies
•Global Mobility
•Integration with Industry
Evolving University Models
The EY Education team
Our capabilities and service offerings
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The EY Education Team
Professor Stephanie Fahey
Oceania, Education Lead Partner
Formerly DVC Global Engagement MonashUniversity, Melbourne
Local EY partners, Dublin
John Higgins
Colm Devine
More than 300 staff globally with educationexpertise
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The University of the Future
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The University of the Future
►The higher education sector is undergoing a fundamental transformation in terms of its role in society,mode of operation, and economic structure and value.
►To explore these themes and future directions, EY worked closely with the University sector to identifyand categorise the main forces impacting the higher education industry globally and locally, and theopportunities, challenges and implications, primarily for the University sector in Oceania.
►The output from this process was a publication - ‘The University of the Future’ (2012) - which bothidentifies the drivers of change in this brave new world and anticipates three broad lines of evolutionfor institutions responding to these challenges.
►Our primary hypothesis is that the dominant university model: a broad-based teaching andresearch institution, supported by a large asset-base and in-house back-office, will proveunviable, in all but a few cases over the next 3 to 5 years (we underestimated the pace ofchange in our 2012 report).
►At a minimum, universities will need to streamline their operations and asset base, and at the same time add newteaching/learning delivery mechanisms. Explicit stakeholder expectations for increased impact will increase
►At its extreme, private providers (and possibly some public universities) will create new products and marketswhich effectively blur the line between education, media, technology, innovation and venture capital
►What is worrying is that institutions appear to be in denial about the magnitude and the inevitability of the changesahead
►What I would like to do today is review some of these challenges with a particular focus on theimplications for universities and policy makers in Ireland. My aim is to be provocative.
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The Drivers of Change
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Drivers for Change
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1: Democratisation of Knowledge andAccess
►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 andshared and universities held a privileged status as originators and keepers of knowledge.
►50 years ago access to universities in developed countries was restricted to modest levels of about 5% of schoolleavers but with the ‘massification’ of HE, it has grown to comprise 40-50%. In emerging economies, access is stillrestricted to a very narrow proportion of society, typically the elite.
►Today, access is expanding both in developed markets but even more fundamentally in emergingmarkets
►In China participation trebled from 8.0% to 25.9% in the first decade of this century, and is likely to double again inthe next 10-15 years. Five years ago there were no Chinese universities in the top 200; now there are six. With$250b a year being invested in Chinese universities, it is only a matter of time before these universities enter thetop 100.
►The ‘massification’ of higher education is driving a global ‘education revolution’ within societies by creatingopportunities for millions of people and their families to increase their standards of living.
►Increasingly knowledge is open to anyone globally with a device and connectivity — not just facts and figures, butalso analysis, interpretation, and curation of knowledge although credentials are still controlled mainly by theinstitutions.
►For universities, this is driving new approaches to teaching and learning, creating opportunities forentry to new markets and new global partnerships, stimulating new distribution approaches — andalso creating new sources of competition and sustainability challenges.
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1: Democratisation of Knowledge andAccess
Implications for the University Sector in Ireland
►The importance of equity of access, both as a foundation stone of social mobility and a means forrealising Ireland’s higher education skills targets is recognised both by the Hunt Report (2011) and inthe recent Higher Education System Performance Report (2014)
►The challenge for the University Sector in Ireland, as elsewhere, will be to maintain and grow student numbers inthis environment (as required by their performance compacts) but at the same time maintain quality
►Democratisation of knowledge and access, especially as it ripples through the developing world willcreate significant opportunities for those Universities who are globally competitive
►The compelling challenge for the Irish University Sector will be to address the opportunity that this creates in anenvironment which is currently heavily fiscally constrained
►While the Higher Education System Performance Report explicitly recognises the need for IrishUniversities to be globally competitive, less clear to an outsider is how this will be funded and howthis can be delivered in an environment where student numbers and staff:student ratios are both onthe rise.
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2: Contestability of Market and Funding
►Since the global financial crisis, most developed economies have experienced a decline in Statefunding per student, some more rapidly and deeper than others
►The UK experienced one the most dramatic increases in the proportion of private expenditure on tertiary education from2000-2011 (30-70%). The US and Australia showed marginal increases but were already about 65%.
►In 2011, Australia ranked 24th out of 30 OECD countries for public investment in tertiary education (OECD 2014) but is stillabove the UK and the US. The proportion dropped between 1995-2000 with the introduction of student funded HEC.
►In Australia Government introduced a demand-driven funding model in 2012 in order to increaseaccess, drive competition and differentiation - numbers increased and distribution shifted.
►A number of mainly lower ranked universities that had previously felt secure in their market shares found themselvesconfronted by losses of 5-10% as some of the more highly ranked universities and those in niche areas increased theirintakes to take advantage of marginal gains. Competition is set to intensify if/when proposed deregulation of fees fordomestic undergraduate students is introduced by the current Coalition Government.
►While efforts may be made to limit the fiscal implications of growth in enrolments, the deepening ofmarket contestability is unlikely to be reversed, either in Australia or internationally. The market willdrive much of the pace of change - not just government policy – unfortunately this is not wellunderstood across the sector.
►While the University environment is markedly different in Australia to that of Ireland (where I understand core expenditureper student has declined by as much as 15% in recent years and not replaced by other revenue sources), the broader trendwhereby every dollar of government funding is contestable and securing funds from non-government sources — students,industry, philanthropists, and global collaborations — is fiercely competitive
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2: Contestability of Market and Funding
Implications for the University Sector in Ireland
►As yet, there does not appear to be quite the same level of competition for domestic students inIreland as seen in other markets due to demographics – but as the Australian example has shown,domestic demand is not static. Demand is also impacted by affordability/access.
►Nor would it appear that there is the same aggressive pursuit of international students with the use ofagents as is the norm in Australia although the expectation is that Ireland should double the currentnumber.
►New funding models, as the Australian example has shown, are incredibly efficient tools for drivingbehaviour and the challenge for Irish Universities will be to ensure that a workable and sustainablefunding model is arrived at by the recently established Working Group on Future Funding.
►The level, nature and basis for any performance funding element of overall university fundingwhich is advocated should be considered carefully with reference to the internationalexperience in this area.
►Finally, on the broader subject of funding, there is a quantum of system learning now within Australiaon the relative merits of alternative models of student-based charging (including the Australiandeferred loan model which I understand has been considered in the Irish context) and on theopportunities and risks that growth in international students numbers present to a national educationsystem (ie non-educational considerations can crash demand in a short-period).
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3: Digital Technologies
►Digital technologies will transform the way education is delivered and supported - education must beavailable anywhere, anytime – and deliver real-time student feedback, learning analytics, seamlessstudent support systems, transparency of ROI and employability - both in the developed anddeveloping world.
►Digital innovation has disrupted many established industry sectors (newspapers, music, retail, airlines etc) . While ‘onlineeducation’ has been here since the 1990s, in the last 2-3 years the pace of change has accelerated and has impacted the roleof the academic – the role will become increasingly disaggregated as curriculum development, presentation, online design andanalysis of learning analytics become specialisations.
►Efficiency gains delivered through the digitisation of the support functions of Finance, HR, IT, central procurement, studentservices and research support are yet to be realised in many institutions.
Digital technologies will not cause the disappearance of the campus-based university of the future.Campuses will still exist as places of teaching and learning, research, community engagement, and ofvaried student experience — assuming universities can deliver a rich, on-campus experience.
Digital technologies will transform the way value is created within HE - new technologies will enablepublic and private providers to specialise in parts of the ‘value chain’ content generation/aggregationand new models of collaboration with media companies will evolve. This is where private or non-university providers will compete.
►Some of these models will decline and fail, others will create very substantial economic value. Winnersare likely to be a mix of new, pure play online businesses and traditional businesses with powerfulonline models and capability.
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3: Digital Technologies
Implications for the University Sector in Ireland
►As digital technologies and innovative approaches to teaching, learning, collaboration in researchand student services extend their reach into Irish Universities I would expect a near-transformation ofboth the on-campus and off-campus student experience.
►In this context it is heartening to see that a Teaching and Learning Enhancement Fund has beenestablished in Ireland which is focussed on digital capacity for the education sector …with Phase 1reviews of proposals due tomorrow, I’m sure some of you will be getting good news but one shouldnot underestimate the long-term investment required in technology and skilled staff in order to deliverquality outcomes.
►While improving local teaching and learning delivery to on-campus students is a worthwhile andnecessary goal, the real challenge for Irish universities will be to:
►leverage new technologies to satisfy student demand for flexibility of delivery and to grow their remote andinternational student base (aligning with multiple goals under the performance compact)
►to position themselves as an attractive partner with industry and to develop sustainable (read profitable) models ofcollaboration with industry
►Digital technologies, the growth of the importance of rankings and increasing participation rates indeveloping countries will intensify the competition for and expectations of internationally mobilestudents – the Irish university of the future will need to ensure that it is well positioned in terms ofteaching and research quality, student services and profile (rankings and marketing).
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4: Global Mobility
►Global mobility will continue to grow for students, academic talent, and increasingly for universitybrands. In the face of government cut-backs, international students have been the lifeblood of theAustralian higher education industry especially over the last 15 years.
►Of the 1m plus HE students in Australia, 22.3% (240,000) are full fee paying international students studyingonshore. Several universities have more than 30-40% of the study body who are international students.
►In addition, tens of thousands of international students are studying at Australian off-shore campuses in Malaysia,Vietnam, Singapore, South Africa, India, China and the UAE; in twinning arrangements with off-shore partners;and as external students on-line.
►While the international student market is growing rapidly, it will fundamentally change in structure inthe coming decade as traditional source markets – China, Malaysia, Singapore, South Korea andothers – increasingly become global-scale destinations for international students.
►Global mobility of academic ‘brands’ is increasing and ‘MOOC-based’ distribution of content by thelikes of Harvard/MIT, Stanford, Open University and others is creating a global brand impact (if notrevenue at this stage).
►Global mobility of students, professionals and university brands is also creating pressure for globalrecognition of accreditation. Who will determine global credential standards will be a contested area.
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4: Global Mobility
Implications for the University Sector in Ireland
►The Irish National Strategy for Higher Education already recognises the existing and potential valuefrom increasing the internationalisation of both students and staff within Irish Universities.
►More recently the 1st Higher Education System Performance report emphasised these benefits andcharted significant progress towards the achievement of the 15% target for full-time internationalstudents by 2020
►There are a number of challenges however for Irish institutions in maintaining and growing this sector
►As noted on the previous slide, many of Ireland’s tier one targets for student recruitment (China, India, MiddleEast) will themselves transition from source to destination markets in the next 15 years
►Recruiting international students requires a reputation for both academic quality and the quality of the studentexperience – fiscal constraints have the potential to very quickly impact on standard rankings in both these areas
►Global mobility may favour recruitment for those elite universities and those with the capability to grow and extendthe reach of their the brands.
►Increasingly universities will have to compete aggressively for their talent as academic mobility becomes the norm.This requires flexibility in the conditions of appointment, salary packages and access to research facilities, fundsand high calibre students.
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5: Integration with Industry
►The relationship between the higher education sector and industry will deepen – industry will be a keypartner, and also a competitor in specialist professional programs. This change is already in train withindustry now playing multiple roles: as customer and partner of higher education institutions and,increasingly, as a competitor.
►EY is a perfect example – we recruit 1000s of new graduates each year, we sponsor university activities > $20mpa, we deliver 9.5m hours pa training to our staff and deliver millions of hours training to our clients.
►For universities to survive and thrive, they will need to build significantly deeper relationships withindustry in terms of curriculum design, employment outcomes and research collaboration.
►Scale and depth of industry-based learning and internships will become increasingly critical as a source ofcompetitive advantage for those universities who have the industry partnerships and pedagogy to do it well.
►Where industry is small, or comprised of branches of MNC, research will struggle to flourish unless globalresearch collaboration models are facilitated and incentivised.
►Research degree programs /applied research will increasingly be run in partnership with industry
►In Australia we have seen the Australian Technology Network of Universities’ deliver a new industry-based PhDprogram, and the mining industry establish tight research partnerships with the University of Queensland and theUniversity of Western Australia.
►In Australia, research funding has been slashed by the current government with priority given to areas whereAustralia is a global leader ie clinical medicine and in areas where industry leads.
►Research commercialisation will go from being a fringe activity to being a core requirement to secure funding formany universities’ research programs.
►Increasingly industry will compete with universities in a number of specialist professional programs.Professional organisations (engineering, pharmacy etc) may follow the lead of the accounting bodiesand provide a range of specialised post-graduate programs with a particular emphasis on their role ascertifiers and deliverers of content.
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5: Integration with Industry
Implications for the University Sector in Ireland
►The clear intent of both the Irish National Strategy for Higher Education and the performancecompacts for Higher Education Institutions is to make HE much more market facing, both in terms oftheir explicit focus on meeting Ireland’s human capital requirements and also in terms of enhancingcooperation with industry and commercialisation activity
►Increasing PhD activity in Science, Technology, Engineering and Mathematics and projected increase in Mastersby research align closely with national objectives and industry requirements.
►More broadly we believe that the implications for the Irish University Sector of changes in this areaare
►The nature of the engagement between universities and industry will deepen, broaden and become more strategicto both parties – though this will not apply equally across all institutions
►The emphasis and focus on the value of commercialisation activity will grow significantly and with it the role for theCentral Technology Transfer Office (CTTO)
►Closer involvement of industry in the ‘business of education’ will see industry participants emerge as both joint-venture partners and competitors to universities in multiple domains
►The challenge will be who will be responsible for funding blueskies research and that required to support tuition.
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Broad Implications
Together, these drivers of change will mean asignificantly different education landscape 5 yearsfrom now. If universities do not choose their niches– the market will effectively “impose” niches uponthem - so the message is: choose now.
►Universities will be compelled to create new, leanercentred business models as competition increases forstaff, students, funding and partners.
►Increasingly, public institutions will be run likecorporations, while maintaining the necessary freedomof inquiry and academic rigour.
►Private institutions will exploit profitable market niches,while others will create new markets and sources ofvalue; for example, by specialising in select parts of theeducation value chain.
►Policy makers will seek to maintain steady growth inaccess to university education. They will search forpolicy levers and programs that put the highereducation sector at the centre of a genuine knowledgeeconomy while inevitably tightening the public pursestrings.
►These changes will force universities to adaptin a number of ways:
►Breadth of programs — Universities will need toconsider whether they can maintain a competitiveposition across a broad range of programs, or whetherto concentrate resources on a smaller range ofprograms.
►Target customers — Universities will need to have aclear strategy around target student segments andtheir specific needs and preferences. Universities thatdo not become more focused on segments will beexposed to competitors with targeted studentpropositions.
►Channels to market — Universities will need torethink the role of digital channels and third partypartnerships in recruiting students and deliveringteaching and research programs.
►Back office — The asset base and universityadministration will need to be significantly leaner than itis today.
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Evolving University Models
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EY Framework for Assessing and Designing aModel for the Future
Universities should criticallyexamine their current model,develop a vision of what a futuremodel might look like, and developa broad transition plan
Public universities need to consider aseries of strategic questions
related to the viability of theirinstitution’s current model,
Deliberations on future models needto include customer segments tofocus on, services they need, and theuniversities’ channels to market androle within the value chain.
Support functions will also need to be
streamlined. Regardless of the path
chosen, reform will need to align tothe institution’s purpose and values.
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Evolving University Models
The dominant university model in Australiaand elsewhere, is a broad-based teachingand research institution, supported by alarge asset base
►Serve a broad mix of student segments
►Offer a broad range of disciplines
►Deliver teaching and learning programsprimarily - supplemented by various onlineofferings, franchise arrangements, internationalbranch campuses.
►Deliver and manage the vast bulk of studentservices and back-office functions in-house.
We now expect a significant transformationof university business models in the comingdecade and beyond, despite the historicallyslow pace of change in the sector.
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Evolving Models - Streamlined Status Quo
Some universities will continue to operate asbroad-based teaching and research institutions,but will transform the way they deliver theirservices and administer their organisations
In this model, the university:
•Continues to serve a broad mix of student segmentsand continues to offer a broad range of disciplines
•Discontinues a small number of sub-scale/unprofitabledisciplines (or merges those disciplines with a‘competitor institution’ to achieve scale) - providing theresources required to maintain internationalcompetitiveness in other disciplines.
•Invests heavily in digital sales and delivery channels,both ‘pure play’ digital channels and blended models.
•Forms a range of sales and delivery that open up newmarkets — or more efficiently serve existing markets.
•Outsources some back-office functions to realise loweroperating costs, and/or drives efficiencies throughshared services arrangements with like-mindedinstitutions.
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Evolving Models - Niche Dominators
Some universities will fundamentally reshapeand refine the services and ‘markets’ theyoperate in, with a concurrent shift in theirbusiness model, organisation and operations.
The drive towards this model will come from thechallenge of staying competitive — in domesticand international markets — across a broadrange of disciplines and segments.
In this model, the university:
•Chooses particular customer segments to focus on -enabling the targeted development of course offerings,sales channels, delivery and related
•Significantly reduces its range of education disciplines,- focus on areas of genuine global strength/credibility.
•Builds deep alliances with industry in its chosen fields,including partnerships to support R&D,commercialisation of research and innovation etc.
•Like Streamlined Status Quo, streamlines its backoffice, including using outsourcing and/or sharedservices models to drive efficiency & scale economies
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Evolving Models - Transformers
Private providers and new entrants will carve outnew positions in the traditional sector, creatingnew markets that merge parts of the highereducation sector with other sectors.
The model opposite represents a range of possiblemarket positions to be pursued by innovators, rather thana ‘model’ of a single institution.
The evolution of the Transformer model will be led byprivate providers rather than public universities (this levelof ‘disruption’ is hard to lead from the inside) but savvypublic universities will create value in this space byleveraging two of their critical assets: credibility andacademic capability.
With democratisation of knowledge, credibility andincreasingly curation is king and universities are uniquelypositioned to bring credibility and to act as curators ofcontent.
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Evolving Models – The Implications forIreland
The inevitable evolution of University Models has pushed educators, policy makers and private sectorentities to begin to question some of the scared cows of the University system in Australia. Theseinclude:
►The number of ‘world-class’ universities that a country the size of Australia can realistically continue to support
►The breath of disciplines that a University should focus on and the place for specialisation in education provision
►The role of the academic and the continuing involvement of all academics in teaching/research/content development
►The responsibility of HE sector not only to educate students but also prepare them for the workforce (technical vsuniversity training)
►The traditional ethos surrounding decision making and governance in universities which are not suited to rapidlychanging circumstances
Universities in Ireland will not escape these competitive pressures and we would expect
►An informed decision to be made as to whether to support any one Irish University to the degree required to be a trulyworld-class university (as opposed to individual departments) – Australia, with 39 universities, faces this samedecision
►More generally we would expect, and already see evidence of a move to a streamlined status – evidenced by theongoing rationalisation of the Institutes of Technology and Initial Teacher Education, the regional clustering of highereducation institutes and initiatives in ‘Back Office’ reform such as the Procurement Reform Programme and the pushto shares back-office services Shared Services Plan for Education and Training Sector
►The bigger, more difficult questions relate to the degree to which Irish universities will be allowed and will be supportedto further specialize and become ‘Niche Dominators’ – with the acceptance that such aspirations would need to beclearly and appropriately recognized in institutional performance compacts and any new performance fundingmechanism
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