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From Transformation to Disruption in the Higher Education Industry

4 April 2024

The Australian Universities Accord is a welcome contribution to the development of policy in higher education teaching and research. It sets some targets for education delivery for 2050 and advocates for changes in student assistance and support.

However, it largely assumes the continuation of an institutional status quo and does not address the transformational and disruptive forces working through the higher education industry.

The higher education industry

Few people like to think of the higher education sector as an industry.

Higher education has long been recognised as a vital societal institution focused on knowledge creation, human capital development, and intellectual inquiry. However, the lens of industry has increasingly been applied to understand its economic dimensions, market dynamics, and competitive forces.

The recognition of higher education as an industry gained prominence in the latter half of the 20th century, coinciding with the expansion of post-secondary education, globalisation, and the rise of market-oriented policies. This period has seen the corporatisation of higher education, with institutions facing pressures to operate more like businesses, compete for students and research funding, and demonstrate value for money.

The 21st century has further reinforced the industry perspective, driven by factors such as rising tuition costs, increased competition, the emergence of online education and Edtech startups, and the growing importance of market-oriented metrics such as rankings, student outcomes, and return on investment.

The industry lens does not diminish the sector's broader societal mission or its role in advancing knowledge, critical thinking, and social progress. Rather, it provides a framework for understanding the complex interplay between economic forces, educational outcomes, and public policy considerations within the higher education landscape.

The transformation process

Our perception of higher education institutions has already transformed from what we knew as communities of scholars embedded in the concept of “public bodies” or, in some cases, NGOs or “charities” into public corporations and now into what are effectively state-owned business enterprises.

The business perception derives from the application of financial reporting and accounting standards determined by Accounting Standards Boards, which reflect principles that apply across the public enterprise and corporate sector.

Increased government funding, revenue from students and university trading enterprises, growth in net assets, and expansion into new activity areas have been critical transformative drivers. The size of funding became noticeable in the government Budget and the broader community. They also became more visible (buildings, structures, facilities, and equipment) and increasingly important in terms of their economic impact in regions and cities. 

Initially government funding came in the form of “financial assistance” to independently managed and operating organisations. Institutions were largely left alone to get on with the job set out in their enabling legislation.

As funding grew, so did demands for accountability, first in the use of funds (efficiency) and then in how funds are used (effectiveness and appropriateness). Financial assistance transformed into an ever-expanding maze of programs with strings attached, to the extent that it is now effectively payments for services regulated by Governments—through Ministers and/or regulatory bodies.  

As institutions became larger and spent more money, so did the requirements for professional management in governance, strategy, finance, people, and property. These requirements also include a wide range of legislative instruments, accountability for how funds are applied, and compliance with a wide range of statutory instruments covering employment, urban and regional planning, and international relations.

The “head office” role has expanded accordingly.  

The corporatisation of higher education institutions is virtually complete, and the clock cannot be wound back. Older scholars are unhappy with this, but it is the new reality.

But there is more

Industries constantly face disruptive pressures—significant changes or upheavals that challenge existing norms, structures, and practices. In higher education, new technologies, business models, educational methods and approaches, and players (providers, consumers, and other stakeholders) are redefining the industry's dynamics and beginning to alter how higher education is delivered, accessed, and perceived.

For example, disruption threatens incumbent institutions and stakeholders who may be resistant to change or invested in maintaining the status quo. It forces them to reconsider their strategies, adapt to new realities, and innovate to remain competitive.

But disruption also creates opportunities for innovation, enabling new entrants, startups, and non-traditional providers to introduce new services that address unmet needs or capitalise on emerging trends. It challenges stakeholders to navigate uncertainty, complexity, and ambiguity.

We are already seeing the impact of disruptive forces in the rise of online learning platforms, the proliferation of alternative credentialing mechanisms, the globalisation of educational offerings, and the growing emphasis on lifelong learning and skill development.

Online learning platforms and MOOCs offer convenient, flexible, and often more affordable alternatives to traditional classroom-based learning. The MIT/Harvard founded edX reportedly hosts about 3,000 courses and caters to about 25 million learners from every country in the world.

The growing number of Edtech startups offer an increasingly diverse and specialised range of courses, resources, and services. EdTech has not had difficulty in raising funds from venture capital investors.

Already, we are seeing how research universities are building their research capability and cutting costs in their teaching roles. This has often involved outsourcing delivery to secondary providers.

These disruptions are already starting to reshape traditional notions of teaching, learning, and accreditation, necessitating a re-evaluation of how higher education is conceived, delivered, and valued.

Where is it all going?

Overall, disruption in the higher education industry represents a profound and ongoing process of change that demands agility, innovation, and strategic foresight from all stakeholders involved.

Embracing disruption as an opportunity for renewal and growth can enable institutions to thrive in an increasingly dynamic and competitive environment.

The only uncertainty in this scenario is the pace of disruptive change. However, the higher education industry is unlikely to be the same in 2050 as it is in 2024.

We must examine how we might navigate the future—to understand the flow rather than try to stem the tide. In doing this we may be able to draw on the experiences of disruption that have occurred in other industries, such as Transport, Retail, Hospitality, Finance, and Healthcare.

Higher Education will not be immune from disruption.

 

John Howard is the Executive Director of the Acton Institute for Policy Research and Innovation and a Visiting Professor at the University of Technology Sydney

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