Challenger Universities pt. 2a: The rise and resilience of the university establishment
This Emerge article series, researched in collaboration with our extensive network of education leaders, offers insights and practical advice for founders and university leaders bold enough to create new universities.
In the first, introductory part in this series (here) we highlighted the huge $2tn university industry, the opportunities and challenges of accommodating an additional 200m new active students by 2030, and our questions and hypotheses around the potential for new radically different and innovative challenger universities to play important roles in the future of higher education.
In this second part of the series, we focus on the existing university landscape, first explaining the rise and resilience of the university establishment, and then further laying out the case and space for innovation in the sector in the upcoming weeks.
In this piece, we explain how universities have evolved to be so successful and why we believe many will still be around for a long time.
The rise of higher education has been a global growth success over the last 50+ years
“Universities are the longest surviving institutions we have as a society besides the Catholic church. The first modern university started in 1088 in Bologna, and since then universities have survived everything from the black death to the printing press and they will be around for a long time to come.”
Daniel Pianko, managing director of University Ventures
From the first university in Bologna in 1088, to around 150 niche elite institutions in the 18th century and the increasing rise in HE enrolment since the second world war, today there are 20,000 HE institutions worldwide. While HE was still not mainstream before the second world war, with most countries at less than 10% of eligible population enrolments, today the numbers are significantly higher with most parts of the world seeing 20, 30 and 40%+ enrolment rates and growing (source). In the US, the percentage of high school students that enrol in college immediately after graduation has climbed up to 70% (source) with a total of 20m students today including adults (source). In the UK almost 50% of young people today will have entered HE by the age of 30 (source). In Latin America and East Asia, where universities were virtually non-existent at the start of the 1970s, enrolment has catapulted to more than a third of the eligible population (source).
The university as we know it is here to stay, for a while at least
“If I said a third of schools will close, I would be the 800th person to say this over the last decade. I don’t see a meteor coming down and all the dinosaurs dying. This will not happen, even at community college levels — when you are killing that regional college or state school, you are having an impact far larger than just cost savings and people loathe doing this.”
John Katzman, CEO of Noodle Partners and former CEO of the Princeton Review and CEO of 2U
In some markets universities have reached maturity when it comes to domestic enrolments. Year after year people have been talking about the disruption of this industry, aided by technology, and year after year are surprised that nothing has happened. Pandemics like Covid-19 will definitely have short term impacts on the industry and lead to some medium-term changes and hopefully improvements. Universities as we know them are, however, likely to be here for the foreseeable future. They have financial and political support from government (particularly in the West), alumni, degree-awarding power and long-reaching histories and track records of overcoming some of the greatest challenges.
In both the US and UK, the rise of bootcamps, massive open online courses (MOOCs) and private for-profit universities have not dented existing university enrolments. They have addressed different use cases (primarily access to quality content in the case of MOOCs and, with bootcamps, a specific type of vocational training) and markets. They have also not focused on and/or been able to recreate the social experiences, brands and perceptions of exclusivity that many universities have. While quality content and getting a job is increasingly important for students, there are many other reasons to go to university that these alternatives do not offer.
In the US and UK, many new for-profit HE players have also failed to impact non-profit and public incumbents, often giving poor quality, undifferentiated offerings and weak graduation and employment outcomes
While there are some limited successes in the US and UK, many private players have failed to outplay incumbents in their own game. In the US alone 270 out of 769 four-year for-profit schools closed from 2014–2018, largely driven by a few poorly regulated chains, representing 95% of all closures (source). The UK has had its own experience of fraudulent private universities over the last decade (eg GSM), which have contributed to a very cautious approval climate and only a handful of new approved players today. Many online-only universities charged the same prices but provided worse student experiences and outcomes. Recessions and global crises like Covid-19, for for-profit players that are taking the incumbents head-on, but with limited government support, are particularly challenging.
Elsewhere in the west, it has been difficult to grow successful for-profit establishments given the low, government-subsidised costs of higher education, lack of access to loans and understandable lack of student appetite to pay huge sums for education.
Interestingly, however, in developing markets where governments have offered very limited subsidies to develop public HE, the majority of rapid growth (eg Latin American and SE Asia) has come from private for-profit establishments. As relatively new organisations, it will be interesting to see how they will navigate the pandemic in the short term. Once things settle down, given the rising demand for education in these markets, however, it is certain that prospect for many players will continue to be bright given the educational gaps they are filling.
This piece has provided a high-level overview of the rise and resilience of HE which has overcome many challenges over the last thousand years to become a mega-industry. It will very likely weather the Covid-19 storm, with a few bruises and new accessories gained, but largely untouched.
Stay tuned for a new article in the series every week. Next week in piece 2b. we share an overview of the challenges we see in the HE space that create opportunities for innovation.
While starting a new university is probably one of the most difficult and likely to fail ideas that you can have, it is such crazy ideas that excite us at Emerge. If you are a daring founder in this space or a university leader on the path to improving or reinventing the core student experience, we would love to talk and see how we can help: email@example.com