The Cat. 2-4 research battleground

I recently wrote an article revealing the challenges faced by many in the Group of Eight (Go8) universities when it comes to growing research income.

Over the period 2014 to 2017 only half of the Go8 universities (Melbourne, UNSW, Sydney and ANU) grew their (HERDC) total research income.

Perhaps even more alarming is the fact that only Melbourne and ANU managed to grow their respective market shares over this period.

So what's the story? Although the total HERDC research income pie grew by $200M to $3.9B over this period, why did these universities lose market share and where did it go? The following chart reveals part of the answer!

Beyond the Go8, there are a further 18 universities that earned greater than $30M in total HERDC research income in 2017.

Four of these institutions are now within striking distance of at least two of the Go8 - The University of Western Australia (UWA) and Adelaide University. Although the distance is still some $60-$70M, it is a gap that has been closing rapidly. In 2014, the distance between UWA and this emerging group was more than $100M.

The following provides a good sense of scale associasted with the growth achieved by this group between 2014 and 2017!

Two-thirds of these universities, let's call them the Group of Eighteen (Go18), grew their respective market shares over the same period, some spectacularly! This growth is all the more remarkable when you consider the relative Category 1 (Australian Competitive Grants) performance of my Go18 over the 2014 to 2017 period.

More than half the Go18 experienced a decline in Category 1 income over the 2014 to 2017 period. With La Trobe University, The University of Technology Sydney, Charles Darwin University, and The University of New England among the notable and impressive exceptions.

Some of the Category 1 income declines are significant and would have had Research Block Grant ramifications - perhaps a topic for another day? Nevertheless, with big Category 1 research funding hits to so many of the Go18, how did so many in this group manage to expand their total HERDC research income market share?

The Category 2 to 4 Research Battleground

Unlike Category 1 research income (which largely comprises NHMRC, ARC, Rural R&D (and from 2018 MRFF) competitive grant funding), Category 2 to 4 (Cat. 2-4) 'engagement' income is effectively uncapped.

• Category 2 encompasses public sector research income, not specified as income from those research schemes and programs registered on the Australian Competitive Grants Register, and spans Commonwealth, State and Local Government sectors.
• Category 3 comprises industry and other research income, including Australian companies, international businesses and governments, and local and international research-directed philanthropy.
• Category 4 covers Co-operative Research Centre (CRC) research income - at the heart of industry and university engagement.

Most universities in the Go18 know the Cat. 2-4 battleground well, and the performance of the vast majority in the 2014 to 2017 period speaks volumes!

Thirteen of the Go18 grew Cat. 2-4 income by at least 18%, with Deakin University leading the way with 99% growth, closely followed by Western Sydney University (90%), Swinburne University of Technology (88%), and Macquarie University (61%).

Just by way of example, let's put Deakin's phenomenal Cat 2-4 growth into perspective. From 2014 to 2017:

• Cat. 1 income declined from $26.0M to $23.9M, down $2.1M or 8%
• Cat. 2 income grew from $9.4M to $17.4M, up $8.0M or 86%
• Cat. 3 income grew from $10.1M to $23.3M, up $13.2M or 130%
• Cat. 4 income grew from just $2.3M to $2.6M, up $0.3M or 13%
• Accordingly, Cat. 2-4 growth was $21.5M, taking it from $21.8M to $43.3M

Across the Go18, these Cat. 2-4 research income growth rates have translated into many impressive improvements in market share over the 2014 to 2017 period!

And where's the Go8 when it comes to Cat. 2-4 research income? They have a way to go! They may have tremendous scale advantage, but they are mostly very big and complex ships to turn, with longstanding and deeply ingrained cultures needing to be gently bent and flexed toward a more outward looking and industry-engaged way of thinking. Simply put, it's hard work!

The University of Melbourne leads the way within the Go8 with respect to their focus on the uncapped Cat. 2-4 market. It's relatively early days, but momentum is clearly building, and persistence would appear to be paying off. The Cat. 2-4 battleground presents a huge opportunity, and one worth fighting for.

Although the 2018 data won't be published until much later this year, each university should already have a reasonable handle on where they landed.

A future article will take a look at the movers and shakers in my Group of Eighteen!

Key Questions

Is your ship turning toward the Cat. 2-4 research battleground (and opportunity)? Can you hold your share of Category 1, and make the most of the Medical Research Future Fund, AND exploit the 'uncapped' Cat. 2-4 segments? Do you have a plan, and is it working? Will your 2018 data show improvements or even more of a challenge? What must change in 2019? Are the smaller and younger universities more nimble and culturally attuned to the Cat. 2-4 markets? How will you crack the culture change code?

?Mike Pepperell is Managing Consultant at CIS and has advised Melbourne, UQ, ANU, Macquarie, UTAS, and WSU in recent years.

The broader CIS team has advised around 30 universities and a number of major Research Institutes over the past 20 years, helping to raise more than $500M in research and infrastructure funding in the course of their strategy and implementation consulting engagements. Industry engagement is a particular sweet spot with over a decade of CRC-related consulting activity.

Data for this article was sourced from the HERDC Research Income Data (2004 - 2017) time-series.