Ernst & Young – University Report Highlights Opportunities For Private Sector: Innovation

Universities’ business models need radical overhaul: Report

By Michelle Hammond
Wednesday, 24 October 2012

Traditional business models within universities will be obsolete by 2025, according to a new Ernst & Young report, which highlights opportunities for the private sector as changes occur.


The report, titled University of the Future, is the culmination of a six-month study on the changes occurring in universities both here and overseas.


The study included interviews with more than 40 leaders from universities, private providers and policymakers, including extended interviews with 15 vice-chancellors around the country.


According to report author Justin Bokor, major structural changes have already occurred in industries including media, retail and entertainment, and higher education is next on the list.


“There’s not a single Australian university than can survive to 2025 with its current business model,” Bokor said in a statement.


“To succeed, Australian universities will need to forge new business models that are dynamic, modern and are fit for the decades ahead.”


“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.”


In order to survive, universities will need to build “significantly deeper relationships” with industry in the coming decade, according to the report.


“Scale and depth of industry-based learning and internships, for example, will become increasingly critical as a source of competitive advantage,” it said.


“Research higher degree programs and applied research will increasingly be run in partnership with industry.”


In addition, the report said research commercialisation will “go from being a fringe activity to being a core source of funding for many universities’ research programs”.


“Already, venture capitalists, industry and entrepreneurs are increasingly being brought together to commercialise university research,” it said.


With regard to opportunities for the private sector, Ernst & Young said it sees a role for media companies, technology providers, financiers and other industry groups to provide services within the “higher education value chain”.


These services could include content distribution, commercialisation, industry placements and certification, it said.


“Some of these services might be provided on a stand-alone basis. More likely, however, are joint ventures or partnerships with incumbent institutions that bring market credibility and academic capability,” it said.


According to the report, higher education markets have “superb fundamentals” for long-term growth.


“For example, annual spend on higher education in Asia will grow by a trillion dollars or more over the next 15 years – and provide links to burgeoning middle classes in emerging markets,” it said.


“Given the scale of this growth, we encourage potential private sector players to put serious resources into establishing new models and to start securing partnerships.”


The findings come on the back of the latest AMP.NATSEM report, which shows Australians with postgraduate degrees will, over their working lives, earn almost double that of people with a Year 11 or lower qualification.

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I read this with mixed reactions. On the one hand, what's the surprise? What industry can rely completely on their current business models in 2025? And isn't it a complete no-brainer in the new technological (and globalization) landscape that things will happen? On the other hand, and much more interestingly, I think we can marvel at how SLOWLY things happen, relative to what technology etc seems to allow. It is now about a decade ago that we started to be excited and nervousl about actors like Universitas21 and the like taking over in no time. And how much has happened to universities business models compared to what we then thought? And this is not restricted to universities. I remember as a doctoral student in the mid 1980s activitely de-selecting the topic of the effects of CAD/CAM and the "customized mass production" it allows for my dissertation for fear that practice would outrun my research before I was done. Twenty years later, there was a dissertation presented on that very topic -- and we still haven't seen shoe stores become showrooms where you point at a model, put your feet in a device for multidimensional measurement to be taken and sent real time to production, and then get your custom-made, factory-produced shoes sent to you a couple of days later. Similarly, many of the big failures weren't that stupid, they were just acting on the presumption that the market was ready to embrace them much earlier than it actually was. IKEA had enjoyed highly visible success in Sweden and Europe before trying it in the US, and not a single copy cat appeared over there until IKEA actually entered that particular market. At that point it was too late; IKEA had perfected their core skills to a level copy cats could not achieve. I also recall my first visit to the US and the lousy coffee and beer that dominated that market at the time (early 80s). Many thousands -- millions -- of visitors made the same observation, and laughed at it. As Americans are hardly genetically predisposed not to appreciate good coffee or good beer -- as later history has shown -- we all missed huge entrepreneurial opportunities while standing there laughing. The moral? There are HUGE and suprisingly easy opportunities out there for alert entrepreneurs, and often they don't even have to rush it. The world is more inert than we think, and the risk of being too early may be greater than the risk of missing out on "first mover advantages".
Per Davidsson , November 01, 2012
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