‘Diversify or die’: UniMelb VC on the Australian university

The reminder of the need to diversity and focus on one’s competitive advantage is surely a good one, but if the little anecdote about Rutgers and the University of Phoenix, even if it were not highly misleading, hardly illustrates the point. Perhaps it is the result of attempting to summarize a point from the book (which I have not read) to a few paragraphs in this short article, but the little anecdote, by claiming that Rutgers “thought it was safe” and then discussing the supposed rise of the University of Phoenix — especially paired with the threat to “diversify or die” — falsely implies that Rutgers has since shut down or at least has fallen on hard times as a result of the rise of the University of Phoenix. As someone who happens to know a little bit about Rutgers (most of my family lives in New Jersey and both of my brothers graduated from Rutgers, as did a sister-in-law), I find the anecdote, at least as reported here, to be both bizarre and highly misleading. Rutgers is the state university for the State of New Jersey and currently has approximately 69,000 students, according to its website, including around 50,000 students at its New Brunswick campus alone. One of the oldest schools in the United States (it was founded in 1766), Rutgers was already a well respected university, but it has become even more selective in recent years, accepting fewer applicants and enjoying a higher yield on its offers. It is hard to imagine that Rutgers wants any more students than it already has, considering how many it turns away, whereas the little anecdote seems designed to make one think that Rutgers has suffered a loss of students thanks to the entry of the University of Phoenix to the New Jersey market.

Furthermore, just because certain people in New Jersey have decided to enroll at the University of Phoenix does not mean that there is any causal connection between that development and the fate of Rutgers, much less the direct cause-and-effect link that this article implies exists. The US has over 3000 institutions of higher education, and I am quite certain that most of the people who are considering attending Rutgers would never in a million years consider attending Phoenix instead because Rutgers and Phoenix provide very different offerings, for target markets that I would suspect do not overlap all that much. (And isn’t this the point of Davis’s warning that universities need to diversity???) It is more likely that developments at neighboring schools such as Princeton (such as improvements in financial aid) or state school competitors such as the University of Maryland or Penn State have more to do with the relative fate of Rutgers than anything that Phoenix is doing. And who is to say that the students being siphoned off by Phoenix in New Jersey are students that Rutgers is hoping to entice? I suspect that many Phoenix students in New Jersey would otherwise be attending community colleges in the evening if they could not study online, not enrolling at Rutgers. The University of Phoenix may offer a popular product, if the enrollment numbers stated in this article are to be believed, but it is nevertheless a niche product that does not suit the needs of the many American students who want to take advantage of the rich campus life on offer at American universities. There is nothing wrong with that, but it calls into doubt the comparison that Davis supposedly made. The argument that what Phoenix is doing has much if anything to do with how Rutgers is faring is dubious, to put it charitably. I suspect that the only people who would even consider both Rutgers and Phoenix concurrently would be people who are only interested in an online-only or primarily online degree, such as perhaps mature-aged students who want to squeeze in a degree while working. Further, considering the extent to which “brand names” matter in the US, I suspect that even people who were only considering online-only degrees would much rather have a Rutgers degree (or some other brand-name school) than a Phoenix degree as long as Rutgers offered the online program they were looking for. Rutgers is quite selective whereas Phoenix accepts anyone with a pulse and a wallet. Selective schools are a lot more prestigious in the US than schools with open enrollment, and that prestige helps get you jobs. I spend a lot of time in the US each year and my impression is that most people still think of a Phoenix degree as something foreign and perhaps semi-illegitimate compared to degrees from universities that have a physical campus and storied history. Indeed, Phoenix has a poor reputation in the US due to its very low graduation rate and very high student loan default rate. The notion of scam programs run by for-profit universities has received a lot of critical press in the US in recent years. Witness the Trump University scandal. A quick Google search in fact shows that Phoenix’s enrollment numbers are WAY down in recent years due to bad press following a series of problems including the aforementioned low graduation rates. So, while the University of Phoenix may have found a profitable niche for themselves (and good for them for serving a target market that obviously was previously underserved to the extent that they are actually doing so; that is to be applauded), I have to laugh at the suggestion that well known brand name schools are in serious jeopardy due to competition from the University of Phoenix. Anybody who thinks that Americans are going to ditch brand name schools for no-name offerings (especially when the brand name school offers a hefty in-state discount to students resident in that state) obviously does not know the US market all that well. Even if Phoenix has made inroads into New Jersey to the extent that it is picking up online students who were never in a position to enroll in an in-person degree, I suspect that will change as Rutgers and similar schools expand their online offerings. (And according to a quick Google search, Rutgers now offers several online-only offerings.) So Davis is certainly right about the need to keep up with the times, and to find and exploit one’s competitive advantage, but his choice of anecdote to illustrate his story, or at least what appears to be his spin on that anecdote, leaves me scratching my head. If anything, Phoenix has expanded the pie through its decision to serve a market that traditional universities were leaving unsatisfied — which is great, to the extent that it is not scamming students out of tuition dollars which are financed through student loans not dischargeable in bankruptcy that the students are unable to pay back when they fail to graduate. But according to Rutgers’ enrolment statistics, the implication that Phoenix has cannibalized Rutgers’ market share is clearly false. The inclusion of this anecdote in this article seems to imply that everybody needs to chase the latest trend, but it seems to me that what diversification really means is that different universities focus on their different strengths and competitive advantage, whether newfangled or old school.