“Trends in Universities – possible implications for RM and IA”

1. “Trends in Universities – possible implications forRM and IA” Ernst & Young Presentation AURIMS / ANZUIAG Conference 15 May 2013

2. Introduction • Context – short term issues versus long term trends • “University of the Future” – Ernst & Young study • Overview of study • Key findings • Trends across the Australian HE sector • Potential implications • for the University (and TAFE) Sector • For RM and IA • For Policy Makers EY Higher Education Study, 2012

3. Context – the (then) short term issues • Impact of the Bradley Review Implementation • Significant increase in competition for domestic students • Significant increase in marketing - “brands on trams” • Fees - “Caps on” versus “Caps off” debate • Drop in international students- $A too high?? • EBA negotiations – extracting marginal changes • Cost reduction programs in many universities • Dealing with the new TEQSA

4. Universities of the FutureThe Ernst & Young Whitepaper • Ernst & Young issued its Whitepaper on the long-term future of universities and the evolution of university business models – November 2012 • Interviews attracted much interest – a topic clearly exercising the mind of university leaders – 15 VCs contributed plus other sector leaders • A common refrain: traditional university business models must change. • Driving the Changes - new technologies (MOOCS), global competition, changed student learning styles and expectations, etc • EY developed three potential ‘future models’ as a basis of discussion: • Streamlined Status quo • Niche Dominators • Transformers • They are NOT mutually exclusive or exhaustive – but useful to explore potential responses by universities to the fast-changing environment

5. Drivers of Change • Five mega-trends will transform the Higher Education sector

6. Potential Implications for traditional University and TAFE Operating Models…

7. Current Model for Higher Education Current model – Established Universities/TAFEs Domestic students International students Industry Customers Vocational & further education and training Higher education Research Product offerings Arts Eng. Science Bus. Medical / health Law Education disciplines IT Design … … … … Digital … … … Agents Open days Road-shows Sales On campus Digital Partner-ships Delivery Student administration Career centre … … … Student services HR IT Finance Legal … … Back office Increased area of focus in future models Current area of focus Areas de-scoped or reduced in focus in future models Legend:

8. Future Models for Higher Education “Streamlined Status quo” Education disciplines Domestic students International students Industry Customers Vocational & further education and training Higher education Research Product offerings Arts Eng. Science Bus. Medical / health Law IT Design … … … … Agents Open days Road-shows Digital Partnerships … … Sales On campus Digital Partnerships Delivery Student administration Career centre … … … Student services In-house out-source Back office Current area of focus Increased area of focus in future models Areas de-scoped or reduced in focus in future models Legend:

9. Future Models for Higher Education “Niche dominators” Education disciplines Domesticstudents International students Industry professionals Other education providers School leavers Mature age High-end Low-end B2B Exec. Educ. Customers Vocational & further education and training Higher education Research Product offerings Arts Eng. Science Bus. Medical / health Law (illustrative focus) IT Design … … … … Sales Delivery Same as in ‘streamlined status quo’ model Student services Back office Current area of focus Increased area of focus in future models Areas de-scoped or reduced in focus in future models Legend:

10. Future Models for Higher Education “Transformers” Domesticstudents International students Other education providers School leavers Mature age High-end Low-end Parents Content wholesalers Content consumers Service providers Customers Product offerings Industry professionals B2B Exec. Educ. … Digital … … Sales Vocational & further education and training Content aggregation Entertainment Higher education Research Financial services Mass distribution … Digital Partnerships … … Delivery Student administration, career services, other - outsourced Student services Customer relationship management (cloud) Outsourced Back office Current area of focus Increased area of focus in future models Areas de-scoped or reduced in focus in future models Legend:

11. Trends across the Australian university sector…

12. Some observations of what the market is doing now • Brand investment – heavy investments in branding and profile raising, incl. “international index management” • Market competition - pressure downwards on ATARs, partly in pursuit of market share/student numbers, partly in pursuit of social objectives • Going more regional/national – more campuses outside original “ regional focus” – CQU, ACU, CSU, etc • MOOCS and on-line learning – watching, monitoring, “foot in the water” initiatives e.g. Uni of Melbourne/UWA and Coursea • Seekingmore flexibility on resourcing – teacher-only positions, trimesters, etc • Alumni- as a source of revenue and “recommendation” • Administration areas – focus of productivity improvements, outsourcing, etc – professionalising” • Research/Teaching – reviews to get tighter focus and accountabilities

13. Potential Implications for the University Sector…

14. Some implications for Universities (and TAFEs) • Greater domestic and international competition will place significant pressure on operating margins of universities • There will be winners and losers… a number of universities trail significantly on the drivers of student choice… • Universities at risk will need a clearly differentiated market position and a strong alignment of the student experience and brand promise • Need for a genuine focus on improving the “students’ experience” – using market segmentation and differentiated service models e.g. school leaver vs. mature age student vs. international student, etc • Getting the right balance between incorporating new technologies into the pedagogical experience – yet retaining/building student learning intimacy – as perceived by the student

15. Some Implications for Universities (cont.) • On-line channels bring additional, NOT reduced, costs in the immediate term • More pressure on IT capabilities and costs • Need to being sharing course development costs across preferred partners • Bringing employers along the journey – will they accept students taught through the new learning paradigms? • Observe and learn from other sectors impacted by like technology – media, music, banking, retail, etc Overall Implication Current operating models MUST change – more segmented student experience, sharing/outsourcing, more partnerships, more flexibility, more technology

16. Potential Implications for RM and IA…

17. Changes in the market, changes in operating models • Market risks – more important than ever – reliance on overseas students, competitor risks • RM/IA Impact: Operating margins more vulnerable/less predictable than ever • Partnering/Third party risks – across the whole value chain – research, teaching, special product offerings, product development, delivery, sales, student support, admin support • RM/IA Impact: quality controls in partner organisations, their financial viability, etc • Technology risks – “external third party platforms, including “Cloud” solutions, security • RM/IA Impact: quality controls in partner organisations, their financial viability, etc • Offshore risks – for delivery of university courses, accessing offshore courses for Australian-based students • RM/IA Impact: quality and risk control over offshore third parties, possibly operating under different regulatory models • Foreign Exchange risk – costs to overseas students, foreign debt

18. Ernst & Young Global Risk & Opportunities Report

19. Potential Implications for Policy Makers

20. Implications for Policy Makers • Recognition of the role of Higher Education in the nation’s future • Not just about export revenue • Not just about “efficiency/value-for-money” • BUT Higher Education is a key input to a nation’s long term productivity and competitiveness • Flexibility in Regulation • Fee-capping?, Allowing new entrants? • Links/overlaps with TAFE/Vocational Education Reform? • Clarity on all Government roles - regulator, price setter, buyer/funder (of research activities), owner (state governments), etc • Clarity may assist reduce regulatory burden • Funding of Research • Squeeze on teaching margins reduces scope to cross-subsidise research

21. Comments & Questions?

22. About the presenter… Peter RohanPartner, Advisory Tel: +61 3 9655 2668Mobile: +61 433 983 969peter.rohan@au.ey.com Peter Rohan is a Partner in Ernst & Young’s Advisory team and has more than 25 years experience as an advisor to Government and industry. Peter's university work has included re-alignment of marketing strategies, student driver market research, operating model transformations, financial modelling and cost reduction, shared services, and advice on strategic direction.