Five Trends to Watch in Higher Education, published this month by the Boston Consulting Group (BCG), a management consulting group, has some dramatic and valuable things to say. You may recall that last week, we presented our thoughts on another BCG report in our Intead Insight: Can Millennials Change Marketing Forever? Uh, yes (eyeroll). We certainly consider both of these BCG reports worthy your attention.
In this latest BCG report, the authors talk about influential forces rather than trends, saying that "five forces are reshaping Higher Education." Today, we'll review these forces and offer up a few of the report's charts that we find the most informative and intriguing.
Revenue from key sources is continuing to fall, putting many institutions at severe financial risk. No real news there. But the reports shows the variability of state funding among states and institutions, ranging from 36% of total revenue at SUNY to only 5% at the University of Michigan. Oh, and a whopping 1% (not a typo) at the University of Colorado, Boulder. The declining state support and greater reliance on tuition revenue will shift the priorities of university administrators and even academic staff.
Demands are rising for a greater return on investment in higher education. The authors state that a myriad of facts support this demand. Pressure increases despite the fact that college graduates have much higher earnings and lower unemployment rates, on average, than people with a lower-level degree. The fast rise in costs for education, stagnant median family incomes, rising student loan defaults and a very soft market for recent college graduates have led to this latest outcry demanding more outcome assessment on education investments. Who can blame them (or us) for thinking along these lines.
Greater transparency about student outcomes is becoming the norm. Performance-based funding which assesses student outcomes such as completion rates are part of the appropriations process. The question is how can parents and prospective students assess and evaluate the outcomes of their education? Sometimes it goes back to the "good fit" for a student in respect to institution and subject of study as well as the availability/effectiveness of appropriate support and career services. And, yes, we have been teaching at universities as well, so we understand the issue of motivation and preparedness of students very well. Many factors influence student success.
New business and delivery models are gaining traction This headline covers a whole range of changes including accelerated three-year degrees (Wesleyan), industry accreditations, online and hybrid programs and providers such as Western Governors University andStraighterline. For our benefit, the U.S. university system has been traditionally more diverse than most other academic systems in the world. We agree with theBCG consultants that the world of education providers is going to become even more fragmented and diverse in the future. Colleges and education providers will have to find their competitive niche, deliver superior services, more continuously innovate and prove their "market value" to their consumers. This is sounding so very commercial industry business planning and marketing, isn't it? LIkely to throw many academic administrators for a loop.
The globalization of education is accelerating. Top universities that once vied locally and nationally for students now face global competition from other top-tier universities. Exhibit 5 from the report shows that international enrollment reached 820,000 students in the U.S., or nearly 4% of total U.S. enrollment. China, India, and South Korea remain the top countries of origin. Yet, BCG sampled 18 top public universities and found that international enrollment stood at 15% of total enrollment in 2012, up from 9% in 2002. These public universities have replaced lost state aid with revenue from international students. Exhibit 5 below shows the sample of six top private universities, which comprise on average 24% of total enrollment in 2012, up from 18% in 2002. Columbia leads the cohort with 31% of international students according to BCG.
What strikes us with all these trends (or forces) is that the nature of these changes is more gradual than an immediate sharp crises. We understand that the financial crises leading to enrollment declines and state funding reductions caused pain in the last years, but with few exceptions they have largely not led to dramatic restructuring or bankruptcies of institutions.
The world of education feels like the famous, but untrue experiment: a frog will jump immediately, when you put it into boiling water, but it will die slowly if you put it into just warm water and heat it to boiling over time. That's what higher education feels today -- the slow, rising temperature that will bring everyone to a boil sometime in the future.
We believe that a great number of institutions will rally to the challenge these forces present. They will continue to thrive by reviewing what they have to offer and making an investment in refining their set of services. With these investments they will more than endure, they will lead.
With the rising rates of international student mobility, we are looking for these committed institutions as partners and clients. And we have put together a powerful global marketing workshop that we are offering to a small set of universities in June in NYC at the SUNY Global Center. Here we will be diving into the commercial business planning concepts and marketing innovations that leading universities are employing to overcome the challenges these forces present. Join us in NYC for this focused opportunity to learn from industry peers.
Let us know if you want to talk about how to grow your international footprint. We're here to help.