Mass collaboration between employers and universities is the future of higher education | Part 1 — why are we investing in this space?

The widening gap between higher education and industry cannot be solved unless we rapidly scale the breadth and depth of employer-university collaboration. We believe that startups are the key to making this happen, and estimate that the market size for startups enabling employer-university collaboration will grow by a CAGR of 13.0% from £18.2bn in 2020 to £61.6bn in 2030.

As we’ve outlined in our manifesto, the global labour deficit is projected to reach $8.5 trillion by 2030. We believe that at least one of the root causes behind this is the widening gap between higher education (HE) and industry. On one hand, the world of work is changing at an unprecedented rate and 1.2 billion employees worldwide will be affected by automation technologies over the coming decade. On the other hand, universities are often moving slowly and many are struggling to adapt, making limited changes to the courses they offer. For example, it often takes more than 18 months to develop a new undergraduate course, and the typical refresh cycle for courses is close to 5 years.

There are pockets of excellence of universities leading the way in working closely with employers to adapt their offerings in line with the rapidly changing employability needs of students and talent needs of industry: for example, Coventry University’s partnership with Unipart led to the creation of the UK’s first ‘Faculty on the Factory Floor’ that brings together the best in academia, industry and R&D in a ‘live’ manufacturing environment. However, while these models can be highly impactful, unfortunately, these examples are rare and often difficult to scale across large numbers of universities and employers.

We believe that a key solution to the widening skills gap is mass employer-university collaboration (EUC).

There is increasing recognition that collaboration between universities and employers can play a key role in tackling the skills gap. By combining the unique strengths of each, there is significant potential for delivering up-to-date and industry-relevant education for learners across all demographics. As outlined in the graphic above, both universities and employers have unique strengths across each of the four steps in the education value chain. For example, universities have extensive pedagogical expertise and robust quality assurance processes, while employers offer the opportunity for learners to access first-hand insights into the workplace. These strengths can be combined to create a powerful education experience that directly meets the evolving needs of both individuals and employers.

It has become increasingly clear in recent years that the economy will benefit most when education providers and industry work together to develop the workforce. — Nick Petford, Vice-Chancellor at the University of Northampton

What might higher education look like with mass EUC?

• Courses designed and delivered in partnership by universities and leading companies in every growth industry: this would increase learner choice and offer pathways to acquiring in-demand skills and industry certificates, all while allowing students to earn credit toward a degree
• Employers and universities working together to provide universal access to experiential learning for students through projects and internships that are clearly linked to course work and, in many cases, credit-bearing
• Clear and accessible information for learners on employers’ demand for skills and the growth of jobs, as well as on which university programmes offer viable pathways into these jobs
• Employers taking a much more active role in providing financing for, and helping workers to choose, university programmes that could improve their career prospects: this would decrease the barrier for workers to go (back) to university to up-skill and re-skill

To date, it has been difficult to implement effective EUC at scale.

Traditional models of EUC have failed to scale as a result of the following four barriers.

1. Lack of incentives: University faculties have traditionally focused on academic theory and have limited incentive to support students with skill development or engage with employers to improve student employability outcomes. When it comes to industry, many employers will focus their efforts on building partnerships with a small group of target universities, showing little interest in collaborating with larger numbers of institutions.
2. Operational complexity: Many existing EUC models are operationally complex to implement. For example, the management and delivery of micro-internships for 100+ students at a time is extremely difficult in the current paradigm where there is a lack of clear guidelines and streamlined processes. At the same time, current models of EUC are rooted in building deep partnerships with one institution at a time. As these models can be very time-intensive, the number of partnerships each university or employer can build is limited.
3. Inconsistent and incomplete data: The lack of a shared language and common taxonomy for skills between universities and employers can lead to disagreement and miscommunication — for example, on how university courses translate to employability outcomes for learners. A recent survey of 531 senior HR managers by Pearson Business School found that only 13% felt graduates were ‘ready to hit the ground running’ on arrival in the workplace.
4. Cultural differences between employers and universities: Finally, cultural differences create a further barrier for collaboration, particularly given the vastly different pace at which HE and industry often operate.

We have identified four emerging models of EUC, each powered by technology, that are set to overcome the existing barriers.

Unlike traditional models of EUC, the emerging models below utilise technology to directly address the four key barriers by seamlessly connecting large numbers of organisations, streamlining processes, aggregating large datasets and standardising ways of working between universities and employers:

1. Dynamic course co-creation and co-delivery: companies such as Fourthrev build courses with industry, then partner with universities to validate and deliver these courses. Marketplaces such as FutureLearn are increasingly helping universities to market such courses. As mentioned before, these courses often carry both an industry and a university credential and are thus doubly attractive to students.
2. Experiential learning: companies such as Riipen aggregate micro-internships at scale and enable university instructors to integrate these into existing courses as credit-bearing activities.
3. Career navigation and application support: companies such as Handshake allow individual universities to connect simultaneously with thousands of employers and vice versa. This enables university students and recent graduates to benefit from personalised job recommendations and clear signposting to relevant career opportunities.
4. Education as a work benefit: companies such as Guild Education enable employers to offer scalable education as a benefit programme. They do this by aggregating university courses, coaching workers through course selection and completion, and providing analytics to the employer. This model enables universities to reach larger numbers of learners and, in the case of Guild, employers generate cost savings of $2.44 for every dollar spent on education.

This is a nascent market with vast potential for growth. Here are the key emerging and leading players in this space.

The market for technology providers enabling EUC is already massive today, at an estimated size of £18.2bn for the US, UK and the rest of Europe.

For technology providers enabling EUC, the market size is a function of the proportion of learners (full-time and part-time) that are taking part in EUC-driven offerings, the price of those offerings and the share of that price that goes to the technology providers rather than universities. Based on publicly available data and our conversations with founders and investors in the space, we estimate that, even today, this market represents around £18bn. This is an attractive market by any standard but pales in comparison with the £150bn online education market. However, we believe this market is poised for growth.

We expect this market to grow rapidly over the coming decade for three main reasons.

Driver 1: Learner population growth

While we expect the total number of university students to almost double over the coming decade, and a much larger proportion of these students to take up EUC-enabled courses, we anticipate the number of adult learners who take up these courses to grow even more quickly in response to the widening skills gap. For example, more than 50% of the one billion global knowledge workers are projected to need upskilling or retraining to avoid being pushed into under- or unemployment. In the current climate, due to disruption from COVID-19 and its impact on the global economy, we also expect enrolment in vocationally oriented university courses to accelerate further given increased demand for viable routes into employment.

Driver 2: Growth in proportion of university offerings enabled by EUC

We believe that the adoption of EUC will grow rapidly as universities continue to increase their focus on employability outcomes and technology enables EUC to be implemented at scale. This can be seen in the case of the Institute of Coding (IoC) in the UK, a consortium of 35 universities and 100+ employers working together to tackle the digital skills gap. By using online platforms such as FutureLearn, the consortium increased its portfolio of co-created courses from 35 to 100+ over the course of 2019. We see the greatest growth potential here for models 1 and 2 (course creation and co-delivery, and experiential learning), which currently exist on a very small scale across a few institutions. New technology providers, such as FourthRev and Riipen mentioned above, are well-positioned to support universities in realising this potential and embedding EUC within their current offerings at scale over the coming years.

Driver 3: Increased revenue share for startups

The role of startups in this space will continue to grow as they develop networks and marketplaces with thousands of universities and employers. The resulting network effects and the growing volumes of data gathered by the future large players will enable them to command a higher share of revenue from universities. For example, these leading players will be in a unique position to define the future taxonomy for skills and also implement personalisation to optimise outcomes for learners.

As a result of these drivers, we estimate that the market size will grow by a CAGR of 13.0% to £61.6bn in 2030.

At Emerge, we are on the look-out for the companies (existing and new) that will shape EUC over the coming decade.

In Part II of this series, we will present a guide to the EUC market for startups, based on insights gleaned from conversations with leading experts, universities and employers. The purpose of this guide will be to provide detailed insights into the four models of EUC highlighted above and outline practical advice that can be used by founders to build a successful business in this space.

For the purpose of driving long term change, we are convening an action group of innovative HE and industry leaders, along with select startup founders, to collectively produce a far-reaching green paper on ‘the future of employer-university collaboration — a vision for 2030’. This group will focus on laying out and working towards a future vision for employer-university collaboration at scale. The group will be supported by Riipen and chaired by Nick Petford, Vice-Chancellor at the University of Northampton, and will kick off with the first meeting in May 2020.

If you are a founder building a business in this space, send us your deck here.

About Emerge

Emerge Education is a European seed fund investing in exceptional founders who are solving the $8.5tn skills gap. Emerge is backed by strategics such as Cambridge University Press, Cambridge Assessment and Jisc, as well as founders/investors of Trilogy and 2u.

The team has a solid track record with 50+ investments, with those companies raising £100m+ from investors such as Local Globe, Stride, Project A, Rethink Education, Learn Capital and Reach Capital.

Portfolio: www.emerge.education/portfolio

Acknowledgements

• Nick Petford, Vice-Chancellor at the University of Northampton
• Bennett Dwosh, Director of Strategy & Venture Acceleration at ASU Enterprise Partners
• Paul Fairburn, Director of Enterprise & Innovation at Coventry University
• Deepak Farmah, Digital Transformation Consultant at the Institute of Coding
• Obum Ekeke, Global Lead of Educational Partnerships at DeepMind
• Ed Broadhead, Head of Adecco Analytics at the Adecco Group
• Hannah Rolph, Head of Graduate Recruitment at Allen & Overy
• Andy Durman, Managing Director at Emsi UK
• Josh Nester, Education Director at SEEK
• Jack Hylands, Co-founder at FourthRev
• Omar de Silva, Co-founder at FourthRev
• Elizabeth Garlow, Investment Officer at Lumina Impact Ventures
• Shauntel Garvey, General Partner at Reach Capital
• James Kim, Senior Associate at Reach Capital
• David Shull, Head of UK and Europe at Handshake
• Christine Cruzvergara, VP of Higher Education at Handshake
• Sara Leoni, CEO at GreenFig
• Glenn Campbell, Executive Director & CEO at DeakinCo
• Duncan Dunlop, Business Development Director at FutureLearn
• Scott Lomas, VP of University Partnerships at Pathstream
• Chris Edwards, SVP of University Partnerships at MindEdge
• Shawn Lestage, Director of Operations at Riipen
• Karen Bakker, Director of Strategy at Riipen
• Emma Talbot, Strategic Policy Analyst at Riipen
• Chris Freire, CEO at the Student Opportunity Center