A Fundamental Rethink of the Higher Education Business Model
In the rapidly evolving landscape of higher education, institutions must embrace educational innovation and strategic adaptation to change. This involves recognizing new realities in the academic world to stay relevant and effective.
The landscape of higher education is being reshaped by several formidable challenges that necessitate a fundamental rethink of the higher education business model. To understand why change is not just necessary but imperative, it is essential to dissect the issues that are causing institutions to falter and compelling them to seek new paths to sustainability.
With evolving financial models, colleges and universities–beyond the Ivy League–need to explore sustainable solutions that balance educational quality with fiscal responsibility.
Shrinking Tuition Income from Declining Enrollments and Shifting Demographics
One of the most pressing problems is enrollment challenges, namely the steady decline in enrollment. Universities are witnessing a worrying trend of shrinking class sizes, with current figures at 70%-80% of what they were just half a decade ago. This decline is not merely a temporary fluctuation; it’s a symptom of larger demographic shifts, including reduced high school graduation rates in some regions and changes in the perceived value of traditional degree programs.
For example, according to the College Board, in 2016, 70% of all high school seniors (traditional-age students) went to college. Fast forward to 2022, only 62% of graduating seniors attended college. This is a drop of 8%, which, unto itself, doesn’t seem like a whole lot. But when you look at the numbers of students, from 18 million down to 16.5 million, that is a huge drop in attendance that is not being made up by graduate students.
Escalating Costs in Higher Education: Addressing Financial Unsustainability
Adding to the challenges that colleges and universities face, the cost structure of higher education has become increasingly untenable. With the rise in operational expenses significantly outpacing revenue growth, universities are grappling with financial models that are no longer viable. Traditional cost-cutting measures, such as hiring freezes and budget cuts, offer only temporary relief – they fail to address the systemic issues that are eroding the financial foundations of these institutions.
For example, West Virginia University is making drastic cuts to stabilize finances as they are facing a $75 million deficit over the next five years. These cuts include cutting 28 majors and 143 faculty.
Underutilization of University Assets
Many universities possess a wealth of underutilized assets. These range from physical resources, like real estate and facilities, to intellectual property and research capabilities. The failure to leverage these assets effectively has resulted in missed opportunities for revenue diversification and has weakened the institutions’ ability to invest in their core mission of education and research.
Some institutions, such as Unity Environmental College of Maine, are renting out facilities during the summer months that would normally be left vacant and bringing in conferences and other revenue-generating activities to help offset their costs.
The Need for a New Higher Ed Value Proposition
As the availability of world-class educational content has expanded, with terabytes of information now accessible free online, universities must redefine their value proposition. The traditional model of education, characterized by lecture-based teaching and standardized curricula, is no longer sufficient to attract and retain students. Universities must demonstrate what unique benefits they offer that cannot be obtained through alternative educational pathways.
Aligning Education Investment with Employment Outcomes
There is a growing expectation among students that their educational investment will lead to better employment outcomes. The disconnect between academic programs and the needs of the labor market has been a source of frustration for graduates and employers alike. Universities must bridge this gap by aligning their curricula with real-world skills and by forging stronger connections with industry to ensure that their graduates are job-ready.
One University that is a leader in this respect is Franklin University in Columbus, Ohio. Franklin University does not start up a new program without first having done its market research – is the program going to be viable and have significant enrollment – but also works with industry leaders to ensure the program teaches students the skills that business leaders want and need in its graduates. Thus, Franklin graduates are ready to join the workforce and have the skills necessary to be successful.
The employment numbers do not lie. Over 90% of all Franklin graduates are gainfully employed within six months of graduation.
Resistance to Change in Academic Culture
One of the most intractable problems is the inherent resistance to change within the academic culture. Universities are bastions of tradition and academic freedom, often characterized by decentralized governance structures that can impede swift decision-making. Convincing faculty and other stakeholders to embrace new business models, pedagogies, and technologies requires a delicate balance of respect for academic values and the persuasive articulation of a new vision for the future.
Nowhere more evident was this in the growth of online education.
How the Pandemic Escalated Evolution in Higher Education
The pandemic’s impact on higher education was both immediate and profound, as institutions worldwide were propelled into the digital realm, turning to online learning as the primary medium of instruction. Prior to the pandemic, faculty strongly resisted online education as “lacking rigor” But when they were forced to transition, many found that they actually liked teaching in the medium. This shift dismantled long-standing reservations about remote education, revealing its potential to offer flexibility and accessibility. Students who might have once balked at the idea of virtual classrooms found value in the ability to access education from anywhere, balancing academics with other life responsibilities.
Faculty members, too, experienced a shift in perspective. The necessity to adapt to online teaching methods brought to light the efficiency and reach of digital platforms. With reduced overhead for physical resources, universities glimpsed the financial flexibility to enhance digital infrastructure, develop innovative programs, and extend their support services to encompass a broader and more diverse student body.
As the world gradually transitions into a post-pandemic phase, it’s becoming evident that online education will remain a significant component of university offerings. The collective experience has underscored the efficacy of digital learning and its role in fostering a more inclusive educational environment. This acceptance and advocacy for continued and expanded remote learning opportunities signal a transformative period in higher education, one that embraces innovation for a more adaptable and resilient future.
Innovative Solutions for a Sustainable Future in Higher Education
In response to the complex challenges outlined previously, universities must embrace innovative solutions that are key to sustainable development in higher education. These solutions should focus on the evolving needs of students and the broader societal context.
This section explores a holistic strategy for the strategic reinvention of higher education, highlighting how forward-thinking institutions can adapt and thrive in a rapidly changing educational environment.
Reimagine the Student Experience
Central to the transformation is a deep understanding of the new generation of learners — what they seek from their education and how they envision their university experience. This requires institutions to engage directly with prospective students, employing methodologies akin to consumer research to capture the voice of their primary clientele.
By tapping into the aspirations and preferences of students, universities can design educational experiences that are not only relevant and responsive but also differentiated and personalized.
Embrace Digital Transformation
The incorporation of digital technologies in higher education goes beyond the mere digitization of existing content. It involves a radical rethinking of teaching, learning, and credentialing processes.
Universities are leveraging Artificial Intelligence (AI) to provide personalized learning experiences and to support faculty with AI assistants. They are utilizing data analytics to enhance operational efficiency and to automate repetitive tasks, freeing up human resources for higher-value activities.
Furthermore, digital tools are expanding access to education, enabling real-time translation and support for students with disabilities, and facilitating the integration of Augmented Reality (AR), Virtual Reality (VR), and gaming into the curriculum.
In the realm of credentialing, higher education institutions are increasingly adopting blockchain technology for credential verification, ensuring secure and verifiable academic qualifications. This strategic move not only enhances the authenticity of credentials, it allows students to own their credentials in NFT format, aligning seamlessly with the evolving digital landscape of the global job market, reinforcing the adoption of innovative educational practices
Cultivate Digital Proficiency Among Faculty
Investing in faculty development is critical, as the shift to digital requires educators to acquire new skills and pedagogical approaches. Training programs focused on digital literacy and innovative teaching methods are essential. These programs should empower faculty to create engaging, interactive, and personalized learning experiences that meet the expectations of modern students.
Align Education with Employment
Universities must forge stronger connections with employers and integrate practical, career-oriented skills into their programs. By demonstrating a clear pathway from education to employment, institutions can articulate a compelling value proposition that resonates with students and parents alike.
Utilize Assets Strategically
To address financial sustainability, universities should evaluate their underutilized assets with a commercial lens. This includes exploring new revenue streams, such as partnerships with industry, licensing intellectual property, and developing educational products and services that extend beyond traditional degree programs.
Foster a Culture of Innovation
Cultural change is pivotal. Universities must cultivate an environment that encourages experimentation, tolerates risk, and rewards innovative ideas. This involves redefining leadership roles, engaging all stakeholders in the change process, and aligning incentives with strategic objectives.
Strategic Collaboration and Peer Review
In navigating change, institutions should not operate in isolation. Seeking external validation through peer review and consulting with industry experts can provide critical insights and reinforce the credibility of new initiatives.
Leverage the Pandemic’s Momentum
The disruptions caused by the pandemic have demonstrated the potential for rapid change. Universities should capitalize on this momentum to accelerate their transformation efforts, retaining the beneficial changes and learning from the experience to build more resilient and adaptable models.
In essence, the solution for universities lies in a concerted effort to reinvent their educational models, embrace technology, and respond proactively to the changing dynamics of the global education market. By doing so, they can ensure their relevance and sustainability for years to come.
The Practical Steps: Implementing Change in Higher Education
Transforming higher education to meet the demands of the future is not just about ideation but also about execution. Here are practical implementation steps and change management tips that leaders in higher education can take to translate vision into reality.
Develop a Comprehensive Change Management Plan
Creating a detailed change management plan is essential. This plan should define clear goals, establish milestones, and outline the roles and responsibilities of all stakeholders involved. Transparency in communication and a shared understanding of the vision are crucial to fostering buy-in from faculty, staff, and students.
Invest in Professional Development for Faculty
A significant investment in the professional development of faculty can ensure they are equipped to deliver high-quality, digitally enhanced education. Workshops, seminars, and ongoing training programs should focus on modern pedagogical techniques, the use of educational technology, and methods to foster student engagement and success.
Upgrade Technological Infrastructure
Universities must prioritize the upgrade of their technological infrastructure to support digital learning. This includes robust learning management systems, AI tools for personalized learning, and platforms that facilitate collaboration and interaction among students and faculty.
Engage Students in the Design Process
Involving students in the design and implementation of educational programs ensures that their needs and preferences are adequately addressed. Establishing student advisory panels and conducting regular surveys can provide valuable insights into the student experience.
Strengthen Partnerships with Industry
Forging strong partnerships with industry can help universities stay aligned with the skills required in the workforce. Collaborative programs, internships, and mentorships provide students with practical experience and networking opportunities that enhance their employability.
Diversify Revenue Streams
To achieve financial stability, universities should look beyond tuition and government funding. This could involve creating continuing education programs for professionals, offering online courses to a global audience, and commercializing research and development initiatives.
Implement Data-Driven Decision-Making
Data analytics should be at the heart of strategic decisions. By analyzing trends in enrollment, student performance, and market demands, universities can make informed decisions that align with their strategic goals and the changing landscape of higher education.
Foster a Culture of Continuous Improvement
Building a culture of continuous improvement requires regular assessment of programs and initiatives. Feedback mechanisms should be in place to gather insights from all university constituents, leading to iterative enhancements in educational offerings and student services.
Ensure Alignment with Regulatory and Accreditation Standards
As universities innovate, they must remain compliant with regulatory requirements and accreditation standards. Ongoing dialogue with accrediting bodies and government agencies will ensure that innovations are recognized and valued within the higher education ecosystem.
Monitor and Adjust Strategies Based on Outcomes
Finally, it is vital to monitor the outcomes of change initiatives and be willing to adjust strategies based on what is working and what is not. This agile approach allows universities to pivot in response to new challenges and opportunities.
By taking these practical steps, universities can embark on a journey of transformation that is both strategic and sustainable, ultimately leading to a brighter future for students, faculty, and the broader society.
Three Key Takeaways for Higher Education Presidents and Boards
As higher education navigates a rapidly evolving landscape, leadership and boards must remain vigilant and adaptive. Here are three key takeaways from the insights shared, complemented by final thoughts to guide institutions toward a successful future.
1. Center Change Around People
Universities are, at their core, about people — the students, faculty, and staff. Any change initiative must prioritize the human element. Leaders must foster a community where every individual feels valued, supported, and involved in the institution’s evolution. Change should be co-created, not imposed, and the development of people within the organization must be a central goal.
2. Leverage Digital Transformation Strategically
Digital tools and educational technologies offer unprecedented opportunities to enhance learning experiences and operational efficiency. However, they should be deployed strategically, always with the aim of enriching human connections and educational outcomes, rather than simply digitizing existing analog processes.
3. Embrace Discomfort as a Catalyst for Growth
The path to transformation is seldom comfortable. Universities should be prepared to venture into uncharted territories, making bold decisions that may initially feel unsettling. The discomfort associated with change often signifies a departure from the status quo towards innovation and improvement.
In an era where higher education must redefine its value proposition, the willingness to embrace change, understand the needs of the modern learner and anticipate future trends is more critical than ever. This requires a clear vision, steadfast leadership, and a community united in pursuit of a common goal.
Leaders must be the champions of this change, facilitating a culture that is open to new ideas and ways of operating. They should encourage experimentation and be willing to learn from both successes and failures.
It’s also important to recognize the global context in which higher education operates. Collaboration, both within the academic community and with external partners, can amplify the impact of change efforts.
As institutions look to the future, they will find that their resilience and relevance depend on their ability to adapt, innovate, and remain steadfast in their commitment to education as a public good. The institutions that will thrive are those that view the challenges ahead not as obstacles but as opportunities to reimagine their role in a changing world.
Universities have always been crucibles of innovation and progress. By embracing this legacy with a forward-looking approach, they can ensure that they continue to serve as pillars of learning, discovery, and social advancement for generations to come.