By Ian Koxvold, Head of Education Strategy, PwC
I was delighted to be invited to join a panel at the 2019 HEPI annual conference to speak on Future-Proofing the Higher Education landscape – and intimidated to follow excellent talks from Professor Julia Buckingham and the Rt Hon Dame Margaret Hodge MP.
Our universities, as both illustrated clearly, are both individually and in aggregate precious national assets that allow the UK to punch well above its usual international weight. None of us wish to see this imperilled by poor policy, excessive short-term commercial pressures, or penny-wise funding reductions. However when we look at the sector we see a lot of change and complexity – in respect of international competition, in respect of approaches to student decision-making, in respect of changes to supply and demand for UK HE, and from the risk of funding reductions.
Of these challenges, I think one is especially worth noting – specifically that in the short to medium term institutions are growing the number of ‘spaces’ for students as the number of students wanting to study HE falls. Even when the demographic bulge begins to arrive, ongoing growth in capacity will slow down the impact.
The demand side of this imbalance is led by short-term demographics and Brexit-driven reductions in students from mainland Europe (once they lose access to the Student Loans Company). The supply side of the imbalance is led by the construction of more purpose-built student accommodation and other facilities, which is largely a debt-fuelled construction boom.
If the numbers below land as we expect (and each can be debated) then over a three year timeframe a 10-15 per cent gap opens up.
This gap won’t be distributed evenly – some universities will be full (and many will grow as they fill up their new construction). Some may see surprisingly large declines.
If there is a 10 per cent gap between supply and demand that implies that about 30% of universities could be about 30% empty. If the gap is 15 per cent then the impact could be 40% of institutions being 40% empty. I believe that this will present an existential challenge to some.
We can look at the retail sector for a comparison – which has seen 15 years of turbulence. That sector has seen a shift of spend from ‘stuff’ to ‘experiences’, the rise of online buying and consequent reduction in footfall in both the high street and shopping centres, and the unwinding of excess space built up in the early 2000s. The impact has been profound in terms of prompting development – successful retailers are now truly ‘omnichannel’, we see new models (‘pop-ups’), and a greater degree of focus (covering the right segments with 70 stores rather than looking for national coverage with 150-200). This development – all good – has come through pain, as the number of retail sites in the UK has fallen from c.410,000 in 2008 to what will probably be c.290,000 in 2022. Twenty-one national chains went bust or closed significant parts of their portfolio in 2018.
So – in this challenging landscape, how should a university’s management team develop their strategy?
The competitive perimeter
There is a lot to be said for understanding an institution’s true current position in terms of student recruitment – not just in terms of which students end up enrolled, but why. In normal times there may not be a huge difference between a student who comes because you are her first choice, and one who ‘settles’, perhaps after looking at three or four alternatives. Either may thrive with your academic care and attention. If – however – your competitors start growing their capacity then it may well be that the river runs dry before it gets to you, as more can go to their aspirational choice.
We look at a ‘competitive perimeter’ – understanding for each subject / segment combination what the addressable opportunity is, what the level of interest within this is, what these prospective students most value, which alternatives they consider and how they decide where to enrol. This does not have to be very complicated, but it does represent quite a lot of detailed research and analysis in order to re-aggregate a view of an institution’s situation. Most institutions contain areas where they are exposed as well as other areas where they could grow.
Success vs. winning
It is equally important to lay out priorities. When I read university strategy plans I am often struck by the long list of objectives – generally with limited articulation of how these are to be achieved beyond ‘hard work’.
Universities can define success in many ways – for example in terms of student success and outcomes (arguably the highest priority), or provision of key support to the local community, or supporting social mobility, or in protecting staff (perhaps, at least, avoiding involuntary redundancies). Many of these can be achieved independently of scale; some are mutually supporting – although there is also danger in laying out too many targets in case the effort focused on each is spread thin. These objectives can also be achieved independently of what a peer institution is doing; in these domains we can all succeed together.
There are other objectives that are qualitatively different: to grow student numbers (or, indeed, to hold numbers steady as competitors are trying to grow theirs), or to win key research contracts, or to climb the ranking tables. These sort of objectives are competitive – for one institution to gain a student, another must lose out. If one institution climbs from #89 to #88 in the Complete University Guide, another must fall.
In the environment that we have described, where there may be a number of empty seats (or beds), we have found that many institutions are focusing on these competitive objectives – i.e. on winning. This requires a different mindset, a different model of leadership, planning and strategy. In this sort of domain, we cannot all win together.
Ian Koxvold will be speaking at a special HEPI half-day conference on ‘Valuing higher education – how best to safeguard investment in the sector’ hosted by PwC in London on the morning of 18thOctober. For further details please contact Sarah Isles on [email protected].