By David Wright, HECG Managing Director
The year dawned with a shadow looming over the sector from continued pressure on funding and concerns when the potential saviour fee deregulation was road-blocked in the Senate. However, 2015 closes with a wave of positivity – more funding, increased Government investment in innovation and a focus on the primary reason we are all here – the creation and enhancement of human capital. Many of our clients, while pragmatic about challenges ahead, have an optimism that is infectious.
So how will we remember 2015: “Private Providers Cash in?”, “Innovation” or “Are the top ranked unis the best for me?” We discuss these below and then make some predictions for 2016. Lastly, we give a brief update on HECG’s journey this year.
Private providers cash in
VET Fee Help provisions were exploited by private providers to the tune of billions of taxpayers’ dollars. The growth has been the largest and fastest seen in Australian education history.
Some private providers have and continue to offer quality programs ethically; however, many took advantage of the incredible loopholes in the funding models which saw fees for weak quality offerings climb to similar levels of leading university programs.
But the real rub is when all of those fees were enabled to be collected up front irrespective of the service being delivered or student completing. And guess what happens when there is no incentive for students to complete – retention and completion levels commonly under 10% and often close to zero.
Governments are now scrambling to both clean up the mess (though a number of these initial changes are easily circumvented) and at the same time trying to ensure the mistakes aren’t blamed on them. The effects are not just budgetary:
- Good providers are being tarred with the same brush as charlatans simply because they are privately owned. We act for a number of private providers with ethical practices and controls in excess of many universities. Competitors have enjoyed the collateral damage done to these quality providers.
- The VET system, already under extreme distress, has been further damaged as student revenue is taken by new providers. The cost of an ethical offering is commonly much higher than a minimum sellable product. While the providers have exposed known weaknesses in the Technical and Further Education system (such as out-dated offerings, high costs and poor marketing) many TAFE institutions require considerable changes quickly in order to survive.
Innovation is all the buzz
The end of the year saw vested interest everywhere leaping on the innovation bandwagon. The Federal Government has done a great job of encouraging a mission and being direct and honest about how poorly Australia performs in one area of innovation – transforming research outcomes into social and economic benefit, with translation at the bottom of the OECD, 72nd in terms of innovation efficiency, and no Australian university ranked in the top 100 innovative universities worldwide. The call for a “high performing innovation economy” is echoed by CSIRO chief executive Larry Marshall, who says that in an interconnected world of accelerating, technology-driven change, our future prosperity, health and sustainability is closely bound to our capacity for innovation.
A great part of this new Government strategy is that it has identified a position that is paradoxically both incongruous and uniting. Incongruous because how can we have such great research institutions and yet such poor translation of the product of that work into industry. Uniting, because improving the innovation system benefits all and many.
The number of entities claiming a place at the table is incredible and the Government has created a “user generated content” wave with a huge number of voices speaking out in favour of the mission – thus amplifying the message and driving change.
HECG is a passionate supporter of the recent initiatives but perhaps the weakest part of the innovation discussion to date is that it mostly focuses on a small part of what the sector (other than institutions such as our clients CSIRO and a few others) – actually does: translating research into industry. This type of innovation is not central to the business of universities, and so the significant changes desperately needed in core areas – teaching and academic research – are not addressed. But it is in precisely these areas that innovation can have the most material impact, and in the shortest time.
The good news is that 2015 saw some fantastic early forays in this area:
- Charles Sturt University launched a truly work integrated engineering offering that we believe should be an outstanding success.
- International business schools – particularly with their Executive MBA programs – have taken partnering to a new level with almost all the Top 20 Programs being joint offerings, often between intensively competitive rivals.
- We have seen effective research (and ranking) strategies lift universities such as Charles Darwin, UTS, JCU and Flinders.
- Our client UTAS has employed sophisticated marketing and student recruitment techniques to drive incredible success. Its campaign involving Google virtual reality glasses is a stand-out for all industries.
But surely the ‘Innovation in Australian Higher Education Award for 2015’ would have to go to Deakin University. Deakin released a set of strategies aimed at increasing connection and flexibility for students including its new web site this. | Powered by Deakin, a new accreditation model, lifetime of learning offerings, and the use of business intelligence platform – IBM Watson – to understand and connect with student needs. It is a rhetorical to ask whether these actions or the innovation in translating research will have a greater impact on Deakin, but they do show that innovation in multiple areas can boost a university’s profile while at the same time contributing to the cause of education.
Are the top ranked the best for me? Student Focussed Marketing
The year saw an interesting parry from some universities to challenge the perception that the top-ranked universities in Australia provide the best student outcomes.
It is well understood in the sector that the most prominent rankings systems have little real relevance in determining the best program for an individual student. However, many advocates for the “top” universities suggest the rankings show they are indeed the best when it comes to graduate success. But if one examines the weighting given to student outcomes it can be seen how little these rankings consider graduate success in the job market. What they do well is to increase the barriers for new entrants and limit change in the status quo. The concerted effort by some institutions to lobby for the end of the MyUniversity website is a stark example of the strategy.
So in 2015 we saw a number of universities launch marketing campaigns that highlighted their performance in achieving student outcomes. This drew the obvious defensive response – challenge the data. The challenge worked – some data were incorrect and so damaged the campaigns. The correct data were then not trusted, which also served to limit the success of the marketing strategies.
It is very clear from our experience that there are many programs in every university with great student outcomes, but as a result of poor marketing and development many of these struggle for survival.
In our view it is inevitable that programs with great graduate outcomes will succeed. The market will eventually have its way, mostly, but with two caveats – marketing must move even further to a student centric methodology and … check your data!
Looking ahead – what’s in store for 2016?
- UK coming back
The UK has kicked one of the worst own goals in international recruiting history, effectively damaging its institutions’ ability to recruit international students by limiting their work rights as a knee-jerk reaction to the perceived risk of immigration.
A huge part of the international student market is high quality academically, but many students need to work to live in another country – to damage this segment is to damage institutions’ ability to recruit in the regions in which the majority of students originate.
The UK – which has excellent institutions with great programs and experience, especially in India, the Middle East and growth markets in Africa – has now realised this error and is moving to compensate in the market.
The US will continue to grow but still operates comparatively weakly in international markets – making many of the same mistakes as Australian and UK institutions made over a decade ago. If a few US institutions and the US Government start to effectively apply Australian or UK practices, they have the offerings and demand to rapidly double their student numbers.
The UK doesn’t have to acquire this capability, it already has it. It will start its comeback strongly in late 2016 – and this is not the year to provide it with any advantages.
- Market Grab of Category Leadership – the “Year of the Faculty”
Institutions will move much more aggressively to take the lead in particular segments. Every university has made some kind of comment that it must focus on its strengths. If you don’t get serious about this in 2016 then someone else will take a leadership position you should have.
We have already seen the early signs of this in refocusing at least some marketing from the generic rankings-based position to “best in” category. This has been Marketing 101 in industry for many years but is very new in any successful way for higher education. In 2016 this will change.
Marketing professionals know that the technically superior offering is no guarantee of leadership – especially in the minds of consumers. To own a segment a more sophisticated plan of attack is required including: consumer focus, followers, partnering (especially with industry), pricing, awareness, positioning, naming (see Sydney Business School) ease of acquisition, emotion, design, post-study features (especially utilising the incredibly underused post study work rights) and, dare I say it, student satisfaction.
To succeed in this the engagement with Faculty must be revitalised. After years of centralisation of recruiting and marketing the universities that succeed in claiming leadership in student segments will be the ones that work best with faculties. Faculties that are able to innovate and better meet students needs and desires will best contribute to the overall success of their institutions.
Faculties have a significant role in marketing and branding though it is patently different in strategy, action and skills than an effective central capability. By developing some simple processes and readily available capability, faculties can create sustainable pipelines of students and industry engagement that will underpin their the future success – creating rather than waiting for reward.
Done well this Faculty activity complements central activity and provides the foundation of the long-term brand of the university – not a logo, or an age, or a sandstone building, but a place where great things happen.
In 2016, faculties’ role in the development of their university will increase. University management will grapple with the increased risk involved in this autonomy and innovation, while at the same time understanding that achievement in this endeavour will be essential to institutional success.
Investment processes and risk mitigation strategies are available to give greater comfort, but not complete comfort – or no success. Perhaps the most effective of these strategies we expect to see in 2016 (note with somewhat less confidence than our other predications) is the investment in people – most importantly, to train and develop current and future university leaders to be innovators.
The smartest universities will realize that the comments about the primacy of human capital apply to them. Universities are full of brilliant people who can acquire these skills and we expect leading institutions of the future will put much of their focus on this in 2016 – and in the process find that concerns about time availability and cost can be overcome.
- The next international student market shakeup
Two big changes will come next year: First, current SVP universities will be classified according to risk under the new SSVF regime. A significant number of Universities are likely to have their risk status materially reduced, causing significant damage to their international operations. Second, private providers will be given much stronger status in international markets – equivalent to many universities.
This process has been poorly conceived. It is not designed to promote the best risk result. Rather, it will create a situation in which universities with success in international markets following strong government support, but very low risk levels, will be damaged. Australian private providers – some without any genuine track record of risk and with known retention issues (exacerbated with international students) – may well recruit these students.
To be clear HECG does not believe that private providers – many offering high quality programs and services and with the customer focus and marketing skills to succeed internationally – should be disadvantaged by regulatory limitations. We should not forget that companies such as Navitas and Studygroup have been operating very successfully in international markets under the same risk practice as universities for more than 10 years. But we do believe that high quality universities should not be damaged by lack of an effective strategy to achieve a risk-balanced outcome.
Rather than working flexibly with the industry to achieve a balance between growth and risk, the regulators have assessed and created a circumstance for many of inevitable penalty (without even probationary type status for those falling just outside the Assessment level) while those universities not prepared to promote into new markets are advantaged. While other economies look to support high growth quality operations (otherwise known as “ScaleUps”), our government will do the opposite.
For example, India is one of the best markets for international students but addressing this market effectively brings with it risks that need to be professionally managed. Only taking the wealthy elite or dealing with extreme low risk countries will ensure limited to negative growth. Other countries – most notably Singapore, Canada, New Zealand and soon the UK – will exploit this weakness, as they did several years ago.
- Patience is futile
Most universities have realized that fee deregulation is not coming soon enough (or at all) to prevent hard decisions on cost or efficiency levels. The financial leadership within most universities will have run out of patience and in 2016 will have no choice but to act.
UWA was one of the first to move on announcing its fees in a new deregulated environment and were also one of the first to announce significant cuts in recognition that these hard decisions have to be made.
However, we do not support the strategy of announcing job cuts in this way. This works for public companies that need to show action to appease shareholders but not for institutions with tremendous opportunities to grow efficiently. Further, it creates a difficult industrial relations position and increasing resistance and mistrust.
We were able to improve the bottom line of a client university by over 10% and, while there were significant staffing reductions, industrial relations issues were practically non-existent. We focussed on first creating the best and most efficient institution and trusting and working with our workforce to do this. Where this meant employing more staff this was fine if the plan still delivered a better bottom line result.
Of course, universities have inefficiencies and duplications but paying major consulting firms large amounts of money to identify these is rarely, if ever, a sustainable improvement to the bottom line. We hope that institutions will look more at jointly developing and owning sustainable growth
At HECG we have had a great year
Our clients have each grown really well and we are happy to be part of that. With new clients – we now have more than 20 – we look forward to growing with them too. To all our clients – we thank you for your trust and support.
Our team now numbers 15 and is doing some fantastic work. I am so proud of them and what they have created – something different, credible and valuable to our clients and us.
2016 will not be about more of the same for us. Our development strategy practice has been overwhelmed with interest and continues to build great relationships. Some very exciting international projects are underway, the demand for our specialist digital marketing skills has grown, our analytics practice has great plans – including disseminating more industry business intelligence – while our social venture Global Access Project is on track to achieve our mission of enabling the full potential of students with disabilities.
Happy and safe holidays – it’s been a big year for HECG and I am looking forward to more great things in 2016.
You can contact HECG here.