The 21st Century
UniversityThe 21st Century
UniversityPaper presented to the 5th Round Table of the National Scholarly Communications Forum - Canberra - 22nd October 1996
Here is an interesting quote;
The diminishing economic returns for academic credentials will lead to the devaluation of higher education (and a return to academia's 19th-century role as a primarily social institution for the children of the wealthy). (Paul Krugman, "White Collars Turn Blue," New York Times Magazine 29 Sep 96 p106)
Krugman is an MIT economist.
The background to this meeting is fertile ground for pessimists.
Without repeating the detail of the local gloom - such as the reported 40% drop in applications to Macquarie university reported last weekend - we have statistics indicating, for example, a 400m pounds deficit at UK universities to maintain research equipment at current standards. Some 1200 jobs, it is said, must go by the end of the decade.
This gloom is a much broader issue than what I want to talk about to-day. Much of what I have to say does not address the big question: what SHOULD a university be in the 21st century ? Rather, it answers more the question: what WILL a university be in the 21st century ?
This is a tactical response - a response which addresses questions of survival, of revenue, of technology, and a response to inevitabilities.
The philosophical, political, and social issues raised by the introductory quote are for better minds than mind to grapple with
I want to give you a simple example of why I think it is. It comes from an attempt by the University of Tasmania to publish the following ad with Rupert Murdoch's Australian last month.
The ad had already been run in Campus Review.
The university was told that it could not run the ad in this form, because it gave too much prominence to the Web, and News Limited considered the Web competitive with its publishing interests.
Shortly after this incident, the Australian published an ad for its Newsclassifieds Web site using a prominent banner with the Web site address.
This talk is about globalisation in education - about how students need no longer confine their study choices to locally convenient institutions, and the consequences of this change for university strategy in the next 5 years.
The number of degree courses being offered on the Internet is exploding - from a handful a year ago, to thousands to-day. Although the picture is chaotic and embryonic, a few trends seem clear:
There are other possibilities in the longer term, some of them dramatic in their implications
Of course, a more comprehensive view of the future of higher education is needed if we are to make sensible responses to the impact of globalisation. In the face of cost, brand, quality, technology and demand pressures, universities must develop responses just as businesses always have when threats emerge.
For many, the threats have always been there. The differences now are in the way fundamental truths of a geographical or cultural franchise are being overturned through low cost, interactive communication.
The competitor is no longer just the established but arrogant campus across town, or the upstart but student-oriented campus 100 km west: it is the 2000 or more aggressive, lean institutions with a presence on the Web - some of them with brands we can never develop in a lifetime, and perhaps with a greater commitment to customer service than we have had in the past.
These changes are no longer startling news. They are now regularly debated at conferences, in newspapers, and amongst working academics. The understanding of their impact is, however, still limited.
We are talking here about nothing less than a re-engineering of a teaching process largely untouched over several centuries; about dramatic changes to the economics of education; about shifts in the power of accreditation; and about private involvement in an industry which hitherto has resisted such intrusions except at the edges.
There are other forces driving some of these changes. Here is another interesting quote:
"Nurtured by an amusement culture from their first days of watching "Sesame Street," students now are children of postmodernity, who "seem implicitly to distrust anything that purports to be a source of knowledge and objectivity."
(John Leo, "No Books, Please; We're Students," US News & World Report 16 Sep 96 p24)
The student will demand, even is demanding more colourful lectures, more interactive tutorials, and a generally more entertaining learning experience than his predecessor. The student also demands justification for an education - usually in terms of economic returns.
This is no longer so novel, so we only need a brief description of the possibilities and reality.
Internet education and training is, at the least, about replacing traditional print-based distance learning with an electronic model: students may still buy a textbook, but other materials are delivered via the Web. Even better, students can now communicate with their tutors, other students, and experts elsewhere. They can find comprehensive Web-based information, chaotic as it is, more current than in any traditional library. They can share voice, images, software, and video screens with other students
The quality of learning can be enhanced through simulation of engineering, scientific, business, social, or medical scenarios.
{examples}
Self-assessment tools can be used to tailor learning paths to individual student needs, rather than offering students a single thread when we know that learning needs vary enormously across a class.
Systems for the management of learning online are now becoming available. Other systems, for tutor management, student administration, information searching, and automated assessment are being developed or are available in-house.
Online providers are developing Web-based reading lists and forums by discipline.
The business of learning, which is so information intensive, is succumbing to information systems.
Most of this technology is available now, but the curriculum hasn't caught up - and converting existing courses requires a massive effort beyond most institution's budgets.
Already at the pilot stage, we have broadband services which support quality voice and video conferencing, and the cost issue is being address through mass services such as cable TV. Commerce is exploding as businesses discover the virtue of contestability of supply and reduced transactions costs.
In the years from 1981 to 1993, government grants for higher education in Australia have fallen from about 90% to 60% of the total funding; the trend is worldwide and seems certain to continue. Governments are tiring of their obligation to fund higher education. What was once an unquestioned commitment has been bundled together with unemployment benefits, pensions, and health as a commitment to special groups only, to be minimised to reduce government involvement in all but the most essential of services.
Some economies have been made in the system, notably by reducing tutorial activity. However, cost reduction in a service business such as education is difficult, and institutions have generally targeted revenue by pursuing high growth/high fee courses in business, law, and information technology.
Export has also been used to derive additional, full-fee income, although often at a high marginal cost.
In 1994, roughly $14,250 per EFTSU was spent by universities. The recent Budget changes to HECS have therefore lifted cost recovery from students from about 17% to 23-39% of average total costs. We have yet to see the impact of the increases in fees on enrolments, but even a small drop in enrolments will be critical for some institutions and disciplines, because it significantly erodes margin in what is essentially a fixed cost business. Many institutions will be unable to afford the redundancy payouts necessary to adjust to the lower demand, even without considering the need to lift salaries to retain skilled staff. Subjects such as law would be expected to be most heavily affected, and this is a high margin subject.
At the same time as this is happening, the requirement to offer expensive multimedia courses is increasing. Such materials can be justified only in large markets.
The consequence of these changes is that universities must seek to lift revenue, because operating costs scale fairly accurately with enrolments, and therefore with grant revenue. Further, the method used to lift revenue must use leverage: it must present opportunities which do not require a proportionate increase in investment. They must also seeks partners with financial resources equal to the new tasks.
Accreditation has always been the jewel in the university crown. It is the brand strength, the marketing power, and the status symbol. It endows graduates with an employment prospect beyond other awards. Or at least, it did. Increasingly, the power of employment rests with the markets, and only the elite university brands. The generic brand strength of degrees has been eroded by overuse, by a loss of exclusivity. As in other social measures, a stratification into the lowly and the elite is taking place.
Degrees without exclusivity are declining to the point where they are increasingly discounted in the eyes of would-be employers, and job performance is replacing them as a qualification. The information technology industry has long been a precursor of other industries in this respect.
Even the once priceless MBA has been scarred and sullied, with the effect of raising the status of the few and debasing the rest.
Higher education has long been a spoilt marketplace. That is, it is not attractive to investors because government subsidies reduce prices and margins. As in any market, when government steps back, private investors come forward. The publishers, for example, sense that books will not be as profitable in an online world, so they are forming alliances with universities to protect and enhance their opportunities. So are broadcasters.
Murdoch, Viacom, IBM, and Pearson are just four of the names which have already announced new initiatives in education.
The polite world of non-competition in university education is changing to one of fierce, global wars for the student dollar.
There will also be much more emphasis on the job-finding services of universities, since that is the currency by which students increasingly measure their merit.
The business basis of education in the online world can scale quite differently from traditional educational services. Let us take a hypothetical example of the gross margin possible in this new model:
Item year 0 year 1 year 2 year 3 year 10
Revenue
Enrolments 40 150 220 2000
Fees@$150 $ $ $ $
6,000 22,500 33,000 300,000
Expense
Conversion $
-
Amortised $ $ $ $
conversion - - - -
Maintenance $ $ $ $
- - - -
Tutoring $ $ $ $
926 3,472 5,093 46,296
Lecturing $ $ $ $
200 750 1,100 10,000
Property $ $ $ $
312 1,170 1,716 15,600
Web server $ $ $ $
- - - -
Total $ $ $ $
1,438 5,392 7,909 71,896
Expense/enrolment $ $ $ $
36 36 36 36
Gross margin$ $ $ $ $
4,562 17,108 25,091 228,104
GM$/enrolment $ $ $ $
114 114 114 114
Tutor & o/heads
$50,000
Lecturer &
o/heads $70,000
Item year 0 year 1 year 2 year 3 year 10
Revenue
Enrolments 40 150 220 2000
Fees@$150 $ $ $ $
6,000 22,500 33,000 300,000
Expense
Conversion $
5,000
Amortised $ $ $ $
conversion 1,000 1,000 1,000 1,000
Maintenance $ $ $ $
1,667 1,667 1,667 1,667
Tutoring $ $ $ $
185 694 1,019 9,259
Lecturing $ $ $ $
- - - -
Property $ $ $ $
- - - -
Web server $ $ $ $
500 500 500 500
Total $ $ $ $
3,352 3,861 4,185 12,426
Expense/enrolment $ $ $ $
84 26 19 6
Gross margin$ $ $ $ $
2,648 18,639 28,815 287,574
GM$/enrolment $ $ $ $
66 124 131 144
This is a very simple model: it assumes that :
In his recent book "The Death of Competition", James Moore describes the successful corporation of the 1990s and beyond as one in which the lines between partners and competitors are blurred. Instead of vertically integrated organisations (of which universities are good examples), corporations now execute their functions through a mass of outsourced relationships. The glue which enables them to present a single face to the market is information, and so information systems become truly crucial to the success of the corporation.
To illustrate how this relationship model may work in a university, here are some slides showing how, even to-day, it is possible to relinquish control on many elements of the traditional institution yet maintain, or even improve quality and reduce costs;
The 21st century university will exploit its assets more effectively than the 20th century model. A university's assets are threefold: its staff, its curriculum, and its brand (or accreditation).
The most obvious way to make better use of these assets is to license courses to other providers. This can be done both with and without accreditation. Obviously, agreements which licence the accreditation require more care than those which do not, since the brand is at risk if the licensee does not maintain the quality standards of the licensor.
For example, a university owner of a course which cannot afford to offer it in, say, Eastern Europe may licence a provider (not necessarily a university) to offer the online course there in return for a royalty. Final assessment may still rest with the course owner, in order to maintain some control over quality and branding.
Of course, all of this has focused on mainstream teaching. There will obviously be niches in research, residential and corporate education and training, and subjects not easily taught online where institutions can make their futures. It is inevitable, I think, that we will see both stratification and specialisation, and even the creation of research and teaching universities. The legacy of the unified system mergers will guarantee it.
How can we draw together these disparate changes and options and formulate a sensible response ?
Open Net's experience as would-be course licensee has taught us a few lessons:
In conclusion, the concept that the only service provided by a university is a complete course will go. Universities may become loose conglomerates of centres of discipline expertise, with horizontal groups performing management and marketing of commercial services. In the process, the identity of an educational culture is at risk, as the drive towards a corporate university model gains strength. The Internet is merely a catalyst for these changes, and economic forces are the drivers.
I do not think institutions can afford to ignore Internet delivery, for both competitive and revenue reasons. Australian university brands are under much threat from globalisation, and must respond with high service levels, creative learning tools, and an outward looking view of their markets and partners.
The university of the 21st century is a very different beast from the one we have known, and it is here now.
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Updated 2 November, 1996