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Reinventing the university business model: opinion

COVID-19 has caused a brutal reappraisal of the value of higher education and the university business model.

Universities Australia estimates a revenue shortfall of up to $4.5 billion in 2020 with international student demand dropping by up to 50 per cent. This puts the sector in danger of entering the death spiral of shrinking demand and oversupply.

Universities urgently need to evolve. But while they pride themselves on progressive thinking, they simply aren’t as agile as other enterprises. With unique constraints including government funding structures and internal fragmentation, many struggle to innovate at all, let alone at pace.

So how might they build world-class services and brands that students and stakeholders’ value when, for the foreseeable future, knowledge needs to be delivered digitally?

Across the world, the top 20 global university brands are only getting stronger. This is because strong brands are a refuge in times of crisis and have ‘stretch’ – the ability to move into arenas, customer segments or partnerships outside their traditional remit.

It’s a valuable asset when leveraged strategically. When MIT or Stanford look to leverage their tech-savvy brands to scale, they could welcome not one thousand, but tens of thousands of students a year. The days of celebrating the rate of exclusion as a driver to engineer prestige and exclusivity may well be over. That effort can instead be directed at innovating and forming partnerships with industry, research and design firms.

For guidance on how to scale, universities need look no further than big technology brands. Tech brands actively look for markets to expand into. They have the ‘stretch’, the funds, the credibility and the open-mindedness to reinvent themselves.

Better yet, instead of borrowing from the strategy of tech brands, why not partner with them? What student wouldn’t pay a premium to study at Tesla or Amazon? By aligning with these organisations, universities can leverage their brand power with the lasting benefit to both being the ability to charge the brightest students as they train for a job.

Industry has long sought job-ready applicants and a degree in ‘AI-driven health-tech from Apple and (insert your university here)’ or a degree in ‘Machine Learning for Agriculture in partnership with CSIRO’ would combine the brand halo, perceived rigour in selection and academic performance with hands-on, job-of-the-future-ready style learning, even if done at a distance. It will answer the need for prestige, credentials and contacts.

If these business model innovations seem distant, consider Google’s recent announcement that it is working to create a rival to MIT and Stanford, the US Digital Services Academy, which will train new classes of coders and funnel them directly into government roles.

Another example of this approach is the recent University of Queensland Business School initiative with the Australian Defence Force to address the growing challenges created by artificial intelligence and machine learning, which gives students a chance to become entrepreneurial while solving real-world problems.

For universities unable to partner with tech firms, the focus should be on experience. From this point of view, a new golden ratio needs to be created. This can be done by shaping hybrid courses that are mainly digital but have in-person components over blocks of weeks or months. Smaller, focused groups, rock star tutors, tech partners and course-specific locations could be combined to create a unique experience. As the pandemic continues, small groups could cycle through purpose-built student accommodation, with constant health checks. This would allow the creation of personal bonds and enhance the university experience.

We’re already seeing hints of this locally with RMIT, for example, reimagining its campus as a connected network of ‘theatrical stage sets’, or adaptive spaces designed for connection and collaboration. Spread across the city of Melbourne, RMIT blends diverse environments into a purposeful whole positioning the university well for the future.

As universities look to embrace the change at hand, the approach needs to be tailored to reflect the brand values of the specific university. A shortcut to assisting with this is the development of brand experience principles. Brand experience principles offer a valuable framework when creating digital and in-person interactions as they describe how a brand’s strategy is brought to life through meaningful and differentiated customer experiences.

This will go some way to offsetting the reduction in humanity that results when designing tech-based experiences at scale. The global experiment that is social media has shown us the ways tech can make people feel less connected and more lonely. Universities would do well to avoid that.

Finally, the greatest opportunity for universities lies in rethinking the role of university education in our lives and our society. With people living to 100 and having multiple careers, should university be a three-year investment in our twenties, or could it instead be the host for a connected community of continuous learners?

By moving beyond the current discrete learning transaction to become a lifetime knowledge partner, universities can open up a much wider audience, reducing the reliance on international students physically relocating to our shores. The cultural characteristics of Australia can still be leveraged to increase desirability, even when experienced in a less physical way.

Regardless of the approach, ensuring the brand DNA shows up in the experience is vital. Without this, a brand lacks the shared decision-making tools to agree which signature moments are best to invest in.

While COVID-19 has caused significant pain for Australia’s higher education system, it also presents an undeniable opportunity to innovate and prototype new services that reimagine universities for a new and more fluid era.

Dan Bradley is director of AlphaLab at Principals, building brands through service and experience design.

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One comment

  1. Dan makes some good points. However, in my personal opinion he completely misses the point when he tries to reduce the role of Universities to ‘being businesses’ that should focus on ‘creating job-ready graduates’. The whole point of Universities has always been to create and expand knowledge. Knowledge that is not always linked to what industry wants, but that is linked to our progression as a species. Knowledge that does not automatically fit into a job-ready program, but which expands our understanding of our species and our planet.
    If we need to make use of some business principles in order to keep our institutions going, then so be it. We may even see some Universities fail due to economic contractions. However, Universities are only susceptible to those contractions because they have been made to operate like businesses by Governments. Do not make the mistake of treating Universities as corporate businesses. Knowledge is not a resource that should be held hostage by corporate interests.

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