by NIGEL PENNY
As universities make the hard choices on short term survival tactics, it is easy to assume that this is a transitory, albeit indeterminate, period until we emerge and resume ‘normal service.’ However, simply applying cost reduction and revenue protection techniques to ‘ride out the storm’ is a dangerous strategy. Instead universities need to engage in a long overdue debate about different models of doing business, and consequently need to consider the ‘re-design’ their business model. This is about a new operating business model that leverages different techniques for delivering value. It needs to address a complex set of issues such as the role of the physical vs virtual university; how to reach global audiences against a backdrop of changing political and economic dynamics; leveraging the opportunity of digitisation (not just putting courses online), and planning for enhanced resilience and business continuity.
In 2017, I published an article on key challenges facing universities. The article specifically addressed UK university challenges of over-investment in physical assets; lack of strategic differentiation between institutions, and the poor leverage of digitisation to uncover new delivery models. These messages resonated globally with established universities, but little changed.
Inevitably, it can take a seismic shock to stimulate radical change to what appears to be an established and working business model. We are experiencing just such a shock at the moment!
Clearly the first, and necessary, reaction is to ensure survival. This is what we are now seeing in universities. Courses rapidly put on-line to protect revenue wherever possible, and dramatic attempts to cut costs, typically through headcount reduction.
The bigger question that we must address – now rather than later – is whether this recalibration of an existing business model is all that is necessary, or whether a fundamental rethink of the entire university business model is required.
Consider some of the challenges.
Universities are still primarily invested in ‘bricks and mortar’ operations usually centred in a single geography. Attempts to globalise our bricks and mortar delivery have generally been unsuccessful with abortive forays into new counties, or partnerships sometimes with academically questionable local partners overseas. Fundamentally we still operate with local rather than global mindsets – happy to take the overseas fee income, but largely expecting our overseas students to come to us. Covid-19 has cruelly exposed our lack of business continuity planning around this existing business model, and it won’t necessarily be rectified when the immediate pandemic subsides. Geopolitical tensions in relations with some of our major student bases may ultimately prove a more potent disruptor and, again, one over which the universities have no control.
Universities have also largely failed to leverage the massive advances in technology over the last few decades. Whilst applauding the remarkable efforts to put teaching on-line during the Covid-19 crisis, we must realise that digitisation is not about applying technology to an existing business model. Digitisation require us to rethink the possibilities that technology offers to create new business models.
And finally, none of the above address the core challenge of my earlier article – namely how universities can move away from generic ‘me-too’ strategies to deliver truly differentiated value to their clients – whoever those may be in the future.
So, the challenge for university executives and planners is clear.
Recognise that there are two phases to your current work which should be undertaken in parallel. Firstly, as has already been happening, plan your survival strategies – making whatever assumptions about the likely required longevity of those strategies. Secondly, start now to envisage a new business model for the university and work out a phased migration strategy over several years to take you there. Ensure that the decisions taken for survival planning are aligned to the directions of the new business model to eliminate as much unnecessary and discardable components as possible in the survival plan. Above all, envisage the university of the future as a potentially different entity from our historic university blueprint.
Thoughts and opinions are welcome. Please contact me at firstname.lastname@example.org
Nigel Penny is a strategy, performance and leadership consultant with over 35 years international experience. Over the years he has worked with several leading Australian universities as well as universities in New Zealand, Singapore, Malaysia and the UK.