Crisis in UK Universities – The Need for Differentiation

In 2017, I published a Linkedin article entitled ‘The Perfect Storm Facing UK Universities’. Increasingly, it looks like that storm has now made landfall!!

The earlier article made the case for differentiation in strategy if future success is to be ensured. This was set against a background where low interest debt was financing campus expansions, but where many of the ‘competing’ university entities seemed to be doing little to differentiate themselves and were essentially offering ‘me too’ offerings to potential students. Success in such an environment can only be achieved for as long as demand exceeds supply, and where costs can be contained within planned budget levels. Both these criteria for success are now threatened.

So, what is happening now? Firstly, on the cost side, interest rates are trending upwards from historically low levels. The cost of debt fuelled expansion therefore starts to challenge the logic of the overall financial model that was created. Secondly, the UK cost of living crisis has drastically increased operating costs, with utilities and wage inflation becoming hugely concerning. Additionally, the revenue side is under threat. Demand from overseas students is dropping as government policies, aimed at reducing net migration, force restrictions on accompanying dependants of the highly lucrative overseas student market. Universities have also seen fees on UK students capped, and more and more UK students are questioning the value of starting their working life with huge student debt that is not justified by any ‘salary premium’ derived from obtaining a university degree. ?

University management has been forced to respond to these challenges but is not necessarily addressing the fundamental root cause.

With immediate financial shortfalls, there are certain actions which have to be taken. Hence, we see programmes of voluntary and forced redundancies as universities seek to streamline their manpower costs, and further cost cutting also being expedited. ?This is absolutely necessary given the reality of the financial situation which many are facing.

However, some other actions aimed at managing through this situation are more concerning. Universities are lobbying for increases in fees for domestic students, and in some cases seem to be content to reduce entrance qualifications for the overseas student cohort. Both of these actions are ultimately likely to result in declining academic standards which will further suppress an already worrying decline in the demand side of the equation. Instead of pursuing these options, universities would be better advised to look at the root cause analysis and address the issue of the ‘product offering’ itself.

This brings us back to the rationale of my earlier article where I made the case for differentiation. As strategy guru Professor Michael Porter of Harvard Business School so eloquently states, strategy is about having (and delivering) a unique offering that meets a clear market need. This means having clear differentiation from other ‘competing entities’ in your chosen industry. Some universities have achieved this. Take for example, the University of the Arts London (‘UAL’). Its very name makes a clear statement of differentiation. Although some of its various courses may exist as offerings in other universities, the designation of ‘Arts’ in the institution’s name clearly defines it in the minds of prospective students, as well as positioning it with industry players. It already sounds like this institution is a centre of excellence in its field and hence it can attract investment and high-quality talent to its various colleges and faculties. As a consequence, it has been able to be ranked second in the world for Art and Design in the 2024 QS World University Rankings.

It is the university of ‘something’ not just the university of ‘somewhere.’

Other examples can be seen in the case of Imperial College (formerly Imperial College of Science and Technology). Although a very broad base of subject coverage, it has been able to successfully position itself as another example of a centre of excellence which has allowed it to grow its faculties into management science and then medicine and become the world leading institution that it is today.

So, is it possible for other existing universities to make this differentiation? Its not easy, but I would argue that it is essential. It requires the following key steps:

1)????? A commitment by senior leadership. It will take some years to effect the transformation, and so will require steadfast leadership who are prepared to make some tough decisions during the journey.

2)????? Clarity of the differentiation. This requires careful thought. It may be based around certain faculties of the existing university where there is already a perceived or real excellence. It could also be developed based on the specific geographic location of the current university. For example, a university currently based in a tourist centre could choose to develop its differentiation around becoming the University of Tourism and Leisure. It could also be based around alignment with societal priorities e.g. why not a University of Social and Aged Care? All the prior examples would create this concept of a differentiated centre of excellence in tertiary education.

3)????? A clear transformation plan. This is perhaps the biggest challenge. One option for any current university with multiple campuses would be to designate one of these campuses as the area for the chosen differentiation. Current faculties that are not aligned long term with the differentiated area could then be progressively relocated to the other campuses and progressively contracted in parallel with the growth of the sphere of differentiation. As time progresses, it might be possible to merge the non-differentiated faculty areas with others who are undertaking a similar transformation journey to create a new generalist university (for which there may always be a demand). The transformation plan might also include a new definition of a ‘campus’ for the differentiated area. Here a multi-purpose environment could be created where education blends with commercial or social enterprises all located on the same campus to facilitate research and pathways to employment. This again is another way to transform the strategic offering of the university.

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The challenge is clear, but there can no solution to existing problems without addressing the fundamental root cause and establishing a pathway to more levant tertiary education for the future.

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As always, comments are welcome. If you would like to discuss these ideas, or their implementation, further then please do contact me on +44 7460 563036 or via my email at [email protected]

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Author’s Bio

Nigel Penny is a leading global expert on strategy, performance and leadership techniques. His focus is to ensure the sustainable future success of clients through effective strategic management processes.

Nigel has over thirty years international experience implementing consulting and training solutions encompassing all aspects of business and people management. Between 1996 and 2002, he worked closely with Dr. David Norton and Professor Bob Kaplan, the co-founders of the Balanced Scorecard approach, and was Vice President of the Asia practice of Balanced Scorecard Collaborative. Nigel was also partner in charge of KPMG’s performance management practice in Australia, and a member of their team developing global methodologies for Balanced Scorecard development and implementation techniques.

Nigel has facilitated strategy and business performance improvement programs in food, manufacturing, financial services, retail and utility industries, as well as working extensively with governments, educational establishments and not-for-profit agencies.

He has lived in UK, USA, Singapore, Malaysia, UAE and Australia.

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