What models can universities use to prosper in difficult

times?

Paul WoodgatesHead of Consulting Services,

PA Consulting Group

Appendix A(iii)

All change in higher education…

Reducedpublic funding

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All change in higher education…

Opening up to private providers

Reducedpublic funding

Contestability and competition

Technology-enabled alternatives

Customer-led delivery

Demand for useful learning

“Something for something” policies

Rising student demand

Pressure on pay and pensions

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Perfect storm, or permanent climate change?

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What might this mean for Universities?

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Headline predictions and concerns from survey of VCs (June 2010):• Significant number of mergers and acquisitions, and some institutional

failures• New entrants and private providers becoming significant competitors• Sector organised and operated much more efficiently• Major focus on international campuses and partnerships• Growth in external (academic) partnerships and collaborations• Growth in partnerships and collaborations with private sector service

providers• Need for better resource management, information systems and business

processes• Concerns over lack of business skills, institutional agility and will to

change

Past conditions for success will not be sufficient in the future

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“FUNDED WORLD” “MARKET WORLD”

Institutional Goals Maximising institutional reputation Self-sustaining business portfolio

Business Imperatives ~3% net surpluses for resilience 5 -10% surpluses for self-sufficiency

Critical Capabilities Peer-rated teaching and research Competitive service propositions

Organisation Discipline- and function- based Open and flexible resourcing structures

Resource Management Revenues allocated ‘as earned’ Devolved minimum operating surpluses

Cost Drivers Staff and other fixed operating costs Optimal inputs for competitive pricing

Performance Measures Activity and output level KPIs Differentiation, value, cost-effectiveness

“FUNDED WORLD” “MARKET WORLD”

Institutional Goals Maximising institutional reputation Self-sustaining business portfolio

Business Imperatives ~3% net surpluses for resilience 5 -10% surpluses for self-sufficiency

Critical Capabilities Peer-rated teaching and research Competitive service propositions

Organisation Discipline- and function- based Open and flexible resourcing structures

Resource Management Revenues allocated ‘as earned’ Devolved minimum operating surpluses

Cost Drivers Staff and other fixed operating costs Optimal inputs for competitive pricing

Performance Measures Activity and output level KPIs Differentiation, value, cost-effectiveness

Universities need new capability-based business models

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EXPECTEDFUNDING

“THIRD STREAM”REVENUES

CORE OPERATIONS

BUDGETALLOCATIONS

ContractedActivities

Inherited Cost

Structures

IncrementalResources

EXPECTEDFUNDING

“THIRD STREAM”REVENUES

CORE OPERATIONS

BUDGETALLOCATIONS

ContractedActivities

Inherited Cost

Structures

IncrementalResources

DISTINCTIVEASSETS

INCOME &MARGINS

OPERATINGSTRUCTURES

COMPETITIVEPROPOSITIONS

MarketInsights

SharedPurpose

IntegratedDelivery

Investment& Renewal

DISTINCTIVEASSETS

INCOME &MARGINS

OPERATINGSTRUCTURES

COMPETITIVEPROPOSITIONS

MarketInsights

SharedPurpose

IntegratedDelivery

Investment& Renewal

The current funding-led business model isgeared to sustaining a fixed cost base, and depends on continually rising revenues

A capability-based business model would be self-sustaining and inherently adaptive to changing market opportunities

Critical capabilities derive from strategic priorities

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STRATEGIC OBJECTIVES SUCCESS FACTORS CRITICAL CAPABILITIES

Protect Home/EU student income · external quality rankings· student satisfaction· retention rates· employability

· learning/study experiences· support and services/IAG· work-based course design· environment and facilities

Extend Home T earnings · part-time and work-based· CPD and short courses· e-learning offers/options

· employer and prof. body links· targeted programme design · marketing and channel mgt.

Grow international T earnings (a) in UK · attractive location(s) and courses· recruitment channels· fee levels and other costs· satisfaction and WOM feedback

· overseas marketing presence· effective agency networks· links with o’seas HEIs· on-site support and services

Grow international T earnings (b) offshore · in-country partnerships· local operations and quality mgt· local programme delivery

· o’seas Govt. relationships· o’seas partners and investors· local management and delivery

Develop new services and business opportunities

· franchised courses and content· employer partnerships· accreditation and consultancy

· business account management · external relationships· enterprise mgt. systems/skills

Improve efficiency and margins on operations

· staffing and resource controls· ‘sweating the assets’· fees and pricing strategies

· flexible and productive staffing· innovative delivery models· year-round operations

STRATEGIC OBJECTIVES SUCCESS FACTORS CRITICAL CAPABILITIES

Protect Home/EU student income · external quality rankings· student satisfaction· retention rates· employability

· learning/study experiences· support and services/IAG· work-based course design· environment and facilities

Extend Home T earnings · part-time and work-based· CPD and short courses· e-learning offers/options

· employer and prof. body links· targeted programme design · marketing and channel mgt.

Grow international T earnings (a) in UK · attractive location(s) and courses· recruitment channels· fee levels and other costs· satisfaction and WOM feedback

· overseas marketing presence· effective agency networks· links with o’seas HEIs· on-site support and services

Grow international T earnings (b) offshore · in-country partnerships· local operations and quality mgt· local programme delivery

· o’seas Govt. relationships· o’seas partners and investors· local management and delivery

Develop new services and business opportunities

· franchised courses and content· employer partnerships· accreditation and consultancy

· business account management · external relationships· enterprise mgt. systems/skills

Improve efficiency and margins on operations

· staffing and resource controls· ‘sweating the assets’· fees and pricing strategies

· flexible and productive staffing· innovative delivery models· year-round operations

Extending university capabilities through partnerships

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Discussion• How distinctive are the capabilities of your university?

• How can those capabilities be deployed to deliver the strategic mission?

• What new markets could those capabilities open up?

• What does that mean for the way the institution is managed and led?

• How will the university develop its capabilities – in-house or through partnerships?

• What needs to happen next?

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