Global Trends, Challenges and Drivers of
Success for Universities
“The University is no longer a quiet place to teach and do
scholarly work at a measured pace and contemplate the universe
as in centuries past. It is a big, complex, demanding, competitive
business requiring large-scale ongoing investment”
Malcolm Skilbeck, The University Challenged1
1. Quotation sourced from “On the Edge: Securing a Sustainable
Future for Higher Education”, OECD, 2004
Universities face a complex set of challenges
Digital
Technologies
Integration with
Industry
Reporting
requirements
Market pressure
to differentiate
Pressure to Adopt
Management
Practices
Fluctuating
application levels
Competition
for Faculty,
Students,
Funding and
Partners
Global
Mobility
Model Innovation
e.g. MOOCs
Accountability to
multiple stakeholders
Pressure on
public funding
Broader and more
diverse student body
Universities are exposed to competition and market forces on a
number of fronts
Competitive Arena
Example Segments
Research
Funding
• Commonwealth
• Industry
• Other
Donations
• Alumni
• Foundations/HNW individuals
• Companies
• Other
Faculty
Students
• Leading researchers
• Effective teachers
• Effective leaders
• Undergraduates
• Research postgraduates
• Professional postgraduates
• International students
• Distance students
For each segment it competes in,
a university needs to understand:
• Intensity of competition
• Nature and identity of:
- Competitors
- Substitutes
- Potential entrants
• Basis for competition
• Relative power of
suppliers/buyers
North American universities occupy half of the top 30 places on the QS
World University Rankings
2012 QS World University Rankings: Top 30
North America
Europe
Asia
Australia
US universities are winning an increasing share of Nobel prizes
Percentage of Laureates by Institution Nationality
75% of
Laureates since
1990 have been
affiliated with US
institutions
Total prizes
33
24
32
38
30
55
59
77
75
75
52
Notes: Excludes Literature and Peace Laureates (only one peace Laureate and no Literature laureates were affiliated with an institution when their prize was awarded
Source: Sutton Trust, “Nobel prizes, the Changing Pattern of Awards”, 2003; http://nobelprize.org;
Success in competition for talent and for money determine a
university’s relative status over time
Competition for Talent
“A university’s quality comes from the quality of its faculty and its students. Buildings and
other tangible assets, as well as the professional and other staff, also constitute essential
elements for quality, but all of these elements serve the academic needs of the faculty and
students. Quality faculty at the level required to compete among the top American
universities exists in limited supply. As a result, the national and international marketplace
for research faculty is highly competitive. The university establishes its quality by
recruiting, retaining, promoting and rewarding the best research faculty.”
Competition for Money
“The acquisition of revenue is another highly competitive markeplace for American
universities. Money purchases the physical plant, facilities, quality staff, and competitive
salaries that support and attract first-rate faculty. Money purchases the scholarships,
fellowships, libraries and student facilities that attract the best students.
Every dollar not required to support continuing operations is a dollar that the university
can invest in improving research or student quality. The effectiveness of the university in
acquiring these funds and investing them in research or student quality determines the
relative success of the university within its competitive marketplaces.”
John V. Lombardi, “Quality Engines: The Strategic Principles for Competitive Universities in the Twenty-First Century”, The Centre Reports, March 2001
There is a clear cycle of success in the world’s top universities
Competitive salaries
Research funding
and facilities
Research grants
Contract research
IP-related revenue
Strong
Research
Performance
HR
Policy
Strong
Faculty
Strong
Reputation
Financial
Strength
Donations,
Commercial
ventures, fees
Donations
Successful
Alumni
High Quality
Students
Strong
Teaching
Performance
Scholarships
Facilities and support
(Endowment +
Annual Giving +
Operational
Surplus)
Less than 5% of US higher educational institutions conduct over 90%
of the research
US Higher Educational Institutions 2002-03
Highest
Degree
Offered
4168
% Private
Doctorate
261
36%
Masters
646
56%
Baccalaureate
658
85%
Other 4 Year
Qualification
759
92%
2 Year Qualification
1844
40%
• Exceptional diversity in terms of
size (~500 to ~50,000 students),
breadth of focus, private vs public
ownership, research vs teaching
focus, sectarian vs secular
orientation
• Highly concentrated research
resources, with over 90% of the
total federal scientific research
funding controlled by just 150
universities
Source: NCES Digest of Education Statistics, 2003; Lombardi, John V., Quality Engines: The Strategic Principles for Competitive Universities in the Twenty First Century; The
Centre Reports, March 2001
Endowment funds at top US universities are much larger than at UK
universities
Endowment per
Student
Total Endowment 20031
(£ Billion)
(£’000s)
Top 5 UK
Universities
King's
0.1
6.7
Glasgow
0.1
6.5
Edinburgh
0.2
9.0
Oxford
2.0
119.0
Cambridge
2.0
120.0
Stanford
Top 5 US
Universities
Princeton
Texas
Yale
Harvard
4.8
358.0
5.2
813.0
5.4
109.0
6.6
593.0
10.7
550.0
Note: (1) Cambridge and Oxford include university and college endowment. University endowment alone for Cambridge was £660m and £470m for Oxford in 2002.
Source: The Sutton Trust, ‘University Endowments – A UK / US Comparison’, May 2003
Higher ranking universities tend to have larger endowments
Shanghai Score vs Endowment per Student
Endowment / Student
(US$ million)
3.5
R2 = 0.462
3.0
2.5
Annual giving
also needs to be
factored in – it is
very significant
for leading US
public universities
2.0
1.5
1.0
0.5
0.0
0
Note:
20
40
60
80
Shanghai Rankings - Points Scored
100
(1) Shanghai Ranking data is 2004; Endowment data is 2003
Source: The Times Higher Education Supplement, Nov 2004; ‘Voluntary Support of Education’, Council for Aid to Education, New York 2003; Shanghai Ranking
http://ed.sjtu.edu.cn; The Sutton Trust ‘University Endowments a UK/US comparison’ May 2003.
Various factors contribute to US universities’ strong fundraising
performance
Factor
Observations
Cultural attitudes
•
Culture of ‘mass giving’ in the USA, with charitable donations amounting to 2% of
GDP (0.6% in the UK)
Income levels and
wealth differentials
•
Wealthy individuals are a key source of donated funds: over half the total value of
alumni donations comes from 1% of alumni
The USA has by far the largest number of wealthy individuals, with over 2.3
million high net worth and 32,000 ultra-high net worth individuals in 2003
– By comparison, there were 0.1m high net worth and around 700 ultra high
net worth individuals in Australia in 2003
•
University
environment
•
Intense student experience in leading US universities (living on campus,
interacting outside faculty, etc.) fosters strong emotional connection to university
University
fundraising
practices
•
Top US universities have very active alumni and fundraising programs,
generating extremely high participation rates (e.g. 64% for Princeton)
Areas of focus include active alumni programs to generate sense of community,
high profile general appeals, and targeted programs to attract major donors
Taxation of
donations
•
•
•
USA: donors can claim back all charitable donations directly from income tax
UK: complex tax treatment; donor and the beneficiary share the tax rebate
Note: (1) High net worth individuals are those with more than US$1m in net financial assets; ultra high net worth are those with over US$30m in net assets
Source: World Wealth Report 2004, Cap Gemini and Merrill Lynch; Source: The Sutton Trust, ‘University Endowments – A UK / US Comparison’, May 2003
Alumni, other individuals and foundations provided 75% of
donations to US universities in 2002-03
Sources of Voluntary Support for US Higher Education 2002-03
(US$ billion)
Total = US$23.9 billion
Percent of total
Growth over
5 years
28%
+20%
19%
+1%
6.6
28%
+74%
Corporations
4.3
18%
+31%
Other Organisations
1.9
8%
-1%
Alumni
6.6
Other Individuals
4.6
Foundations
Source: The Chronicle of Higher Education, 2004
Universities have multiple stakeholders, making it harder
to define a single objective function
Stakeholder
Relationship
Key Needs
Students
• Customers
• Improve future income
• Build social / career network
• Gain status
Alumni
• Donors
• Ambassadors
• Association with successful
institution
• Ongoing access to social
network and new knowledge
Staff
• Producers of research
and teaching outputs
• Manage university
• Competitive research
infrastructure
• Competitive remuneration
Businesses and
public sector
organisations
• Employers of graduates
• Research / commercial
partners
• High quality graduates with
relevant skills
• Commercially valuable R&D
Federal
Government
• Funds research and
teaching
• Sets educational policy
• Contain costs
• Contribute to social and
economic goals
Other stakeholders: state government, parents, professional associations, community
Every university
needs to decide:
• In addressing
stakeholders’ needs,
what should we try to
maximise, and where
can we satisfice?
• Can we assemble the
resources to pursue
all of these objectives,
or do we need to
narrow our focus?
• Where should we
focus? Which
stakeholders /
segments are key to
our success?
An organisation’s competitive position in its industry
is defined by the type of advantage it pursues and the
breadth of its market focus
Type of Advantage
Broad
Low-Cost
Differentiation
Cost
Leadership
Differentiation
Mass Market
Segment cost
leadership
Segment
differentiation
Over-served or
under-served
segments
Market Focus
Narrow
A superior competitive position requires superior capabilities; this
position is only sustainable if they are based on hard-to-replicate
resources
Resources
Hard-to-replicate
assets and activity
system
Assets and activities
that are difficult for
other firms to acquire or
imitate are the most
secure basis for
sustainable advantage
Capabilities
Leadership in one or
more market-relevant
capabilities
Explicit trade-offs
usually necessary to
create industry
leading capabilities
Competitive
Position
Unique, sustainable
cost or differentiation
advantage in chosen
markets
Offerings
Products and
services with a
unique price/value
proposition attractive
to target customers
A cost or differentiation advantage allows
a company to generate superior returns
Example of Trade-Offs: Revenue diversification may improve financial
performance and strengthen institutional autonomy, but it may also
require trade-offs with other objectives
Revenue Source
Perceived trade-offs
International students
Diversion of resources from domestic students
Full fee paying domestic students
Potential lowering of standards
Continuing education fees
Distraction from core teaching activities
Bequests and donations
Withdrawal of other funding sources
Industry funded research
Reduced independence and knowledge sharing
Research commercialisation
Reduced knowledge sharing
Consultancy fees
Distraction from core teaching and research activities
The strategy needs to be translated into a prioritised set of organisational
requirements
Key organisational capabilities required to
support business strategy
How important is this
characteristic in key markets?
Market A
Minimise administration costs
Maintain world-class expertise in key areas
Coordinate development and delivery of outputs
across divisions
Support customised outputs for specific
customers and customer segments
Maintain flexibility to adapt to rapidly changing
competitive environment
Facilitate development of new businesses
Enable external strategic and commercial links
Market B
Market C
Priority
An effective organisational strategy should align decision rights, structure
and performance management with the business strategy
Allocation of
Decision
Rights
Systems
Business
Strategy
Required
Organisational
Capabilities
Organisational
Structure
Performance
Management
Policies
Processes
People
“How, then, are American universities so successful? Primarily, I would say, by
maintaining this ferment, this clash of perspective, and this reliance on the authority
of ideas.
And we compete vigorously: for the best students, the best young faculty, and the
allegiance of donors. Without this competitive environment, the tendency towards
self-replication, towards inbred comfort, could become dominant.
Finally, governing a university is a subtle thing. As we’ve seen too often abroad, and
increasingly in public higher education here, efforts by larger government bodies to
manage aspects of public life are doomed to fail. Creativity is repelled rather than
attracted, inspiration is dulled – and disappointment is the result.
At the same time, we have seen that the team cannot be managed by its players. Too
often, universities have been managed as kibbutzim, with academic leaders elected
by faculty, students and staff, thus undercutting mandates to impose high standards
and the creation of leadership horizons sufficient for true long-term innovation
Success depends on the middle ground. Leadership that is strong, not bureaucratic;
leadership that recognizes the best ideas come from creative scholars, not
managers; and leadership that knows if everything is a priority, nothing is a priority.
For priorities, like energy, like capital, must be conserved.”
Lawrence H. Summers, President, Harvard University1
1. Quotation sourced from Harvard Magazine, November – December 2004
BCG / WFPMA - Global Survey 2012
13/04/2015
21
BCG Report – Importance of HR Capabilities
22
13/04/2015
Economic Impact of HR Capabilities
13/04/2015
23
BCG Conclusions
13/04/2015
24
Strategic Workforce Planning
13/04/2015
25
Recruitment Media
13/04/2015
26
Talent and Leadership Management
13/04/2015
27
Appendix
13/04/2015
28
US universities spent US$36 billion on research in 2003, 60% of which was
funded by the Federal Government
Sources of Funding for Research and
Development by US Universities in 2003
Other
7.4%
Total Expenditure:
US$36.3 billion
Institution
19.6%
Industry
6.0%
6.9%
State and Local
Government
Note:
60.1%
Federal
Government
Total expenditure on
research & development
by Australian institutions
in 2002 was A$3.4 billion
(approx. US$2.4 billion)
US Federal Government departmental breakdown: Health & Human Services = $13.4bn;National Science Foundation = $2.8bn; Defense = $2.1bn; NASA = $1.1bn;
Agriculture = $0.6bn; Energy = $0.7bn
Source: The Chronicle of Higher Education, 2004
Unique resources and capabilities are protected by barriers to
imitation
•
A competitive advantage
is sustainable when it
persists, despite efforts by
competitors or potential
entrants to imitate it
–
–
•
The organisation must
possess unique resources
and capabilities
It must be difficult for other
firms to acquire or develop
these resources and
capabilities
This requires resources
and capabilities that are
protected by barriers to
imitation
Potential
Entrants
Barriers to
Entry
Competitors
Barriers to
Imitation
Organisation
Industry
A unique value proposition can be visualised as a distinctive value
curve
Eating facilities
Average
One Star
Hotel
Architectural aesthetic
Lounges
Average
Two Star
Hotel
Room size
Reception hours
Room amenities
Bed quality
Hygiene
Formule 1
Room quietness
Price
High
Low
Relative Level
Source: “Value Innovation: The Strategic Logic of High Growth”, W. Chan Kim and Renee Mauborgne, Harvard Business Review, Jul-Aug 2004
Barriers to imitation include early-mover advantages, trade-offs and
other factors
Early-Mover Advantages
Trade-Offs
Other Factors
 Learning curve
 Network externalities
e.g. strong alumni
network
 Firm or brand
reputation e.g.
customer uncertainty
when buying experience
products
 Buyer switching costs
e.g. customer
investment in learning
to use software
 Incompatible product
attributes or design
features e.g. research
vs teaching only focus
 Inconsistencies in
brand image or
reputation e.g.
traditional vs innovative
image
 Limits on internal
coordination,
measurement and
motivation e.g. “culture
clash”
 Economies of scale
 Legal restrictions e.g.
patents, trademarks,
copyrights, licenses
 Superior access to
inputs e.g. ownership or
long-term contracts
 Superior access to
customers e.g. location,
exclusive distribution
channels
 Intangible barriers e.g.
causal ambiguity
An effective strategy requires a unique value
proposition based on distinctive, inimitable capabilities
– most “strategies” fail this test
What Is a Strategy?
The right goal
and
A unique value proposition
and
Clear trade-offs
and
Tailored activities
fitting together in
an integrated system
and
Consistent improvement, but with
continuity of the strategic position
Source: Michael Porter, Competitive Strategy 2002
What Is Not a Strategy?
Best practice
or
A vision
or
Learning / flexibility / agility
or
Innovation
or
Restructuring
or
Mergers/alliances
or
CRM
or
The Internet
US universities occupy 17 of the top 20 places in the Shanghai Jiao
Tong University Rankings
2006 World University Rankings, Shanghai Jiao Tong University: Top 20
1 Harvard Univ
2 Univ Cambridge
3 Stanford Univ
4 Univ California - Berkeley
5 Massachusetts Inst Tech (MIT)
6 California Inst Tech
7 Columbia Univ
8 Princeton Univ
9 Univ Chicago
10 Univ Oxford
11 Yale Univ
12 Cornell Univ
13 Univ California - San Diego
14 Univ California - Los Angeles
15 Univ Pennsylvania
16 Univ Wisconsin - Madison
17 Univ Washington - Seattle
18 Univ California - San Francisco
19 Tokyo Univ
20 Johns Hopkins Univ
100.0
72.6
72.5
72.1
69.7
US
66.0
61.8
Europe
58.6
Asia
58.6
57.6
55.9
54.1
50.5
50.4
50.1
48.8
Australian Universities in Top 100
48.5
Rank University
Score
47.7
54
Australian National University
30.8
46.7
78
University of Melbourne
26.4
46.6
Source: Academic Ranking of World Universities 2006, Institute of Higher Education Shanghai Jiao Tong University
US universities are slightly less dominant on the more broadly-based
Times Higher Rankings
2005 World University Rankings, The Times Higher: Top 20
North America
Europe
Asia
Australia
Other Australian Universities in Top 50
Source: The Times Higher Education Supplemen, October 28 2005
Rank
University
23
33
38=
47
Australian National University
Monash University
Sydney University
Queensland University
Score
52.9
46.5
42.6
38.5