Competition can generate innovation and change

Innovation in higher education promises to be a prominent theme again in 2015 as a range of market forces continues to impact on universities. While various Silicon Valley entrepreneurs view universities as an endangered species at risk of being “disrupted”, the global market for higher education remains generally robust.

Still, various dynamics that have for decades posed challenges to the traditional university business model are today exerting an even greater influence. These include the disappearance of traditional geographic barriers to competition, via transnational and online education; the marketisation of higher education due to a focus on value and transparency; and the opportunities of outsourcing and partnerships, among others.

The emergence of greater levels of competition and complexity demands a response driven by business management principles and thoughtful strategy. This market-oriented approach need not conflict with classic academic values.

Complexities of internationalisation

In recent years, many universities in the English-speaking world have come to rely on globalisation for growth. Demand from Asia remains very strong while Latin America and even Africa are emerging as important markets.

However, many nations are progressing in building their own local capacity – and countless universities from all corners of the world continue to flood into the international arena. In a more competitive environment, university business plans cannot be overly reliant on student imports or the assumption of winning global market share.

Competing on the international stage requires a nuanced understanding of the university’s unique value and brand relative to students’ other options. Both of these are business concepts that are fundamentally predicated on academic quality.

In addition, as transnational education grows, more can be done to study and understand the impact of international perspectives and student diversity in the classroom – as well as on teaching and learning, particularly by meshing assessment with business planning.

Data's increasingly central role

As higher education increasingly becomes viewed as a private good in addition to a public one, pressure is increasing to report outcomes and demonstrate return-on-investment as both consumers and governments appropriately focus on the interplay of higher tuition and fees, debt levels and job market outcomes.

Perhaps the best example is the development of the US government’s 'College Scorecard' transparency framework, as well as the mounting pressures on accrediting agencies.

Additionally, offerings ranging from LinkedIn’s new university pages to rankings that leverage PayScale.com’s salary data represent a class of technologies that are “consumerising” higher education through real-time data, in a way that classic, more static rankings did not.

Data – especially on student outcomes – is therefore becoming more central and strategic to the management of higher education institutions. Like businesses, more universities are employing management dashboards and analytics tools, although this requires new administrative infrastructure and a team approach bridging administrative and academic silos.

Academics are certainly appreciative of data and evidence, and in the years ahead, analytics and big data will be key to both improving learning and operating more efficiently – well beyond simple reporting and compliance.

Online education: the next frontier

Like transnational education, online education is another major area of historical growth but also a rising challenge for universities because here, too, the traditional competitive barrier of geography is levelled.

The online degree market is maturing rapidly and growth today is not as simple as launching the world’s 500th online MBA programme. In fact, the online education realm is a great example of a true market – with substantial consumer choice, competitive pricing, branding and heavy investments in marketing and student recruiting.

For these reasons it is critical that institutions understand their competitive position through the lens of market analysis and invest only in programmes with proven market success. And, even as the market for online degrees expands, the future of online learning’s impact lies also in learning science and integration with the on-campus student experience.

This moves the aspects of online education that have historically been experimental and on the fringe to a more central role, complete with the ensuing attention to quality, intellectual property and other issues.

Partnerships and joint ventures with enabling firms

'Turn-key' partnership, joint venture and outsourcing arrangements represent another mode of operating that is increasingly common, especially in the critical areas of international student recruitment and online education I referred to above.

The online education service provider market alone – which includes Pearson, 2U, and countless others – is a sector now generating US$500 million in revenue. In international education, veterans such as Kaplan and Study Group compete alongside upstarts such as Shorelight Education to help universities tap into global growth opportunities.

Operating in these joint venture models places new demands on the academic enterprise and entails complexities such as integrating business and academic functions, determining the up-front funding of investments and quality assurance.

The most significant and, in some ways, existential question is in what areas universities should partner or outsource versus building internal capacity: a question that can only be answered through sound business analysis and planning.

The 'market-smart' university

Higher education scholars in different eras, ranging from George Keller in 1983’s Academic Strategy to Robert Zemsky’s 2005 articulation of a “market-smart, mission-centred” Remaking the American University, have highlighted the growing role of market forces and strategic, business-oriented planning in higher education.

Given the current areas of growth and development in the global higher education landscape, the last half of this decade will surely present many opportunities for the application of strategic management to the operation of universities.

Sean R Gallagher is chief strategy officer at the US Northeastern University Global Network.