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Australian universities will not make it to 2025 unless they significantly improve their digital platforms and current business models, according to a new report. 

Ernst & Young’s ‘University of the Future’ report was released earlier this week and it declared that the current public university model in Australia will prove unviable in the next decade, in all but a few cases. It seems that if universities don’t better utilise digital opportunities, they won’t survive. 

Technology has already caused significant structural changes to industries like retail and media - and executive director of Ernst & Young’s education division Justin Bokor suggests that higher education will be affected next: 

There’s not a single university that can survive to 2025 with its current business model.

Universities will need to rethink the role of digital channels and third party partnerships in recruiting students and delivering teaching and research programs. 

How digital will continue to impact higher education

Online (and often free) courses have already challenged the traditional business model of higher education and it seems the popularity of this learning style is on the rise. Online classes have created an environment where those who are time-poor or residing in remote areas can access education in their own time. While this is great in terms of reaching a wider segment of the general public, it does pose a threat to student recruitment and course enrollments for bricks and mortar institutions. 

But Bokor is quick to point out that digital technology will not cause the disappearance of campus-based universities because they offer community engagement and student experience, something online courses cannot do. However, for the university leaders who think their industry is mostly resistant to the changes that have hit other sectors, he says they will be in for a shock.

We expect a significant transformation of university business models in the coming decade and beyond, despite the historically slow pace of change in this sector.

The printing industry prospered for the better part of six centuries after the invention of the printing press but there is not a single part of that industry that has not been disrupted in the last decade. Longevity is no guarantee of permanence. 

What changes do universities need to make? 

The report suggests that universities need to streamline existing versions of teaching through digital technologies, better target certain student groups, as well as use their assets more efficiently. 

Three different models for how universities might evolve in the decade ahead are offered, and all of them focus on the area of digital delivery and sales, emphasising the need to heavily invest in these channels. The models include:

  1. ‘Streamlined Status Quo’ - Model one suggests that universities continue to offer a broad range of disciplines, but discontinue a small number of unprofitable ones, create a range of sales and delivery partnerships with other industry partners to open up new markets, while outsourcing some of the back office functions to lower operating costs
  2. ‘Niche Dominators’ - Model two suggests universities choose particular customer segments to focus on, such as mature age distance students or international ones, and then develop course offerings and delivery specifically for this target group. Universities should also significantly reduce the range of disciplines, creating a more focused set of areas. And, like model one, the back office should be streamlined to drive efficiency
  3. ‘Transformers’ - The final model involves using cloud-based customer relationship management tools and techniques, outsourcing the entire back of office function, building a sales model that is predominantly digital, and disaggregating the value chain to create new areas of specialisation. 

What next?

Bokor emphasises that the dominant Australian university model of today will undoubtedly be unviable in the next ten years. To deal with this change he suggests that universities assess their current business models and figure out how to make themselves future proof because if they do nothing, they will fail. 

Winners are likely to be a mix of new, pure-play online businesses and traditional business with powerful online models and capability. 

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

[Image credit: Tolomea]

Claire Brinkley

Published 25 October, 2012 by Claire Brinkley

Claire Brinkley is Econsultancy Australia's news and insight reporter. Follow her on Twitter, Google+ or connect with her on LinkedIn

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