Changing the university business model

Joseph Hedley of Northumbria University and James Middleton of Durhamlane discuss why the best universities are embracing commercialisation

There is little disagreement that government policy has led to a continuous reduction of public sector funding over the last 15 years. At the same time, universities are experiencing an increasing level of scrutiny over the value they provide, and an increasing requirement to generate income beyond student fees.

In large part, government policy seeks to encourage universities to work more closely with business so that university outputs in turn drive the UK economy. While this means universities have the opportunity to both drive the economy and create huge impact through their outputs of research, education and corporate and social impact, this change within the sector brings about new challenges for academics and professional services alike. This policy, combined with a number of external factors, is changing the university business model.

Challenges of the changing education environment

The ‘corporatisation of academia’ is somewhat of a juxtaposition, angering the traditionalist and endangering the very purpose of academic rigour. However, a number of universities struggle to make money from their core offerings with the higher education sector making a combined loss of £3.5 billion in the academic year 2018/19 and only two universities generating enough income from tuition to cover expenditure.

Income from non-regulated income has long been seen as a way of balancing the books and supporting new initiatives while tuition fees are rightly used to support the student experience. For universities to survive and be competitive in the increasingly changing environment in which the operate they must:

  • Introduce and embrace commercialisation
  • Understand how to generate revenue from different sources

To be successful commercially, universities must not step away from what makes them special – the innovation and creativity of academia. Academia and commercialisation must be run in parallel complementing each other. Commercialisation is only possible when perspective, processes and culture are all in place.

Universities are set up to deliver the best in education, student experience and research – this is how they are ranked (X), receive funding and is what traditional university calibre is judged upon. Generating revenue (Y) largely comes from additional activities, which are underpinned by commercial principles and processes.

For universities to survive, X and Y must become compatible.

Commercial success comes from meeting a need of the customer; in part, the role of employer engagement is to understand what that need is, work with academia to create solutions and ensure a return for the university. This can often be in the form of impact, income and/or reputational benefit.

In today’s research and education arenas, links with industry and academic rigour are not mutually exclusive. In fact, they are complementary and key building blocks of government policy in education and research.

For example, working collaboratively with industry is a central component of the degree apprenticeships provision and the Industrial Strategy Challenge Fund.

The Knowledge Exchange Framework will encourage universities to align X and Y, providing a measure of how effective they are at engaging with business. To rank highly, universities will need to combine best in class academia and research with a robust employer engagement strategy.

Further, KEF is a statement of how important the effectiveness of a universities output is – is the university generating something of actual tangible value not only for themselves but external organisations and communities?

Not only are universities seeing a reduction in funding from the UK government, but Brexit also poses the risk of further funding reduction. The uncertainty of Brexit on freedom of movement and the right to work will affect student intake and create challenges in attracting the best staff.

Increasing academic and living costs for students is causing many to think twice about if and when they go to university. Expectations from students are also changing, particularly with the rise of alternative education, some of which provides access to on-demand, 24-hour education at a relatively low cost. Simply put, students are expecting far more from universities than many are currently offering.

A look at leading universities

We examined the top 30 universities based on income to see their performance in student league tables and how they work with businesses.

  • 73% of universities with the highest income appeared in the top 30 of the University League Table
  • 79% of institutions had a partially or fully implemented business engagement strategy.
  • 90% appear in the top 30 for total income generated through research grants and contracts.

This tells us the best-performing universities have the highest incomes and work best with business.

Academic rigour/quality is what makes universities valuable and unique, this translates into income and vice-versa.

Equally:

  • Research quality is strongly positively associated with commercialisation.
  • Academics involved in commercialisation publish more and better articles than their peers.
  • Collaborative projects often yield new, academically valuable insights and ideas.
  • Academics with industry exposure support more students.
  • Academics believe commercialisation can increase their prestige and reputation.

Making commercialisation work in an academic environment

To work successfully with business, universities must be successful at employer engagement. The average academic runs a mile when they hear the word “sales”. But to be candid, the key skills of employer engagement are sales skills, ie engaging with key decision makers in business, taking a consultative approach to understand the challenges they face and proposing an appropriate solution.

The infrastructure needs to be in place to support this practice. Employer engagement needs to be consolidated in a single organisation that is the conduit between business and university faculties. This organisation should look to actively engage businesses to understand what their challenges are and how the university can bring value.

University professionals must bring structure to something that is currently intangible for them, define a process and create a framework for employer engagement so that it can be articulated to senior leadership for their buy in. Buy is based on gain and risk; gain in the context of universities is more reputational than financial. The realisation recently is that you need commercial processes to really make the most gain regardless of how you measure it.

A robust employer engagement strategy will not only provide universities with a positive revenue stream, but also raise their reputation, thus opening the door for more research opportunities.

Content + Commerciality = Revenue + Reputation

Once a strategy has been defined, universities need to be able to take a consultative engagement approach – which is a sales-centric skill – to understand the challenges businesses are facing and identify how they can best help them.

Additionally, universities can look to provide solutions to businesses that simplify the often-complicated university offering so that it is easier for businesses to primarily engage the university.

Universities must empower their academics and business engagement teams with the skills and support that enable them to have productive conversations with the right people.

Success stories

Durhamlane are experts in employer engagement and have supported numerous universities with their business development strategies. Take a look at their case study to learn how they helped Northumbria University engage employers by embracing commercialisation.

Leave a Reply

Send an Invite...

Would you like to share this event with your friends and colleagues?