Should large companies co-provide university courses?
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Should large companies co-provide university courses?

Picture this: a top law firm and a university law school form a commercial joint venture to provide undergraduate and postgraduate law degrees. Each has equity in the new company.

A mix of university lecturers and law firm staff teach the course, providing theory and practice. The course has a higher component of online learning compared to traditional degrees. There is more industry-based learning as students spend time at the law firm.

Different models are needed to drive collaboration.

Different models are needed to drive collaboration.

Photo: Louise Kennerley

Students win by getting a better mix of academic and industry skills, industry experience and exposure to potential employers. Having spent several semesters working on real law projects, students emerge as more rounded graduates compared to those who study only at university.

The law firm wins by having equity in a successful new venture that can export Australian law education to booming Asian markets. Also, the firm assesses students in action and can recruit the cream, and it has a large supply of free interns for lower-level work.

The university wins if the joint venture teaches more students at lower cost and provides better learning outcomes through industry-based experience. The university has a smaller slice of a larger pie and can receive income from the joint venture to fund research, or later sell down its equity to fund other initiatives.

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Yes, this type of business-model innovation looks like a pipedream in higher education. Why would universities have industry equity partners in cash-cow courses, such as law? Surely the culture clash between unis and industry would kill the venture.

I considered business-model innovation – and the role of creative destruction – after reading Ernst & Young’s recent report on the University of the Future.

E&Y outlined four future scenarios: a champion university that has more government support; a commercial university that draws closer to industry on teaching collaboration; a disrupter university that aggressively enters new markets with new products; and a virtual university where universities restructure into networks that share digital platforms.

Universities will need aspects of all four scenarios to compete in the future. I favour the second model, the commercial university.

Sadly, government is more likely to provide less, rather than more, support for higher education, killing hopes of the champion university model. And the sector is not ready for radical disruption or virtual networks.

Critics will argue the term commercial university is a misnomer. Universities are mostly not-for-profit organisations that provide a public good. Excessive commercialisation of universities – turning some into degree factories – has harmed the sector.

These are valid criticisms. But business-model innovation around university/industry teaching collaboration need not take the sector further from its social mission. Rather, it should be about creating wealth to deliver better student outcomes and more research.

Universities know the benefits of industry-based learning. Some have made terrific progress in integrating industry-based subjects into courses, through internships or industry projects. They are boosting teaching collaboration with industry partners.

My concern is finding the right incentives for industry to collaborate with universities on teaching. As it stands, taxpayers and students fund university learning; industry gets the benefits from all that training and uses university courses as a “signalling exercise” to identify top graduates. There are not enough incentives for industry to get involved.

University/industry collaboration on teaching is piecemeal. For example, a university uses industry-based sessional lecturers for some courses, which in truth is as much about cutting costs through workforce casualisation as it is about providing industry insight.

Or the university encourages companies to provide industry-based learning projects, internships or occasional lectures. It’s good stuff, but not enough to reinvent collaboration on teaching and disrupt traditional teaching business models.

It’s naive to think industry will work closer with universities on teaching because it’s the right thing to do, creates better-skilled graduates or a different perspective on business challenges and innovation.

Although I used law as the earlier example, the concept of universities and industry forming commercial teaching joint ventures could apply to other courses. A top media company could form an equity joint venture with a top university to teach journalism, for example.

The students get a full university degree in journalism and vital work experience with the media company. They learn from working practitioners and journalism academics. Their classroom is the university campus and media-company newsroom (for a small part of the degree). They finish university with a portfolio of published stories, months of experience in a newsroom and a foothold in the industry.

In accounting, a big-four firm works with a top university to provide an accounting degree. The new venture aggressively expands into Asia and can teach many more students at lower cost because a higher proportion of the course is delivered online.

The new business is better placed to raise equity or debt capital and expand. Free from university bureaucracy, the venture is agile and can drive rapid product development. The business can push towards the disrupter and virtual university models that Ernst & Young suggests – something that seems impossible in higher education now.

"Radical business-model innovation is never easy. It takes foresight, guts and a willingness for creative destruction."

This approach is well suited to the digital economy, where more companies are focusing on radical adjacencies and moving into unrelated industries. For example, law firms leveraging their intellectual property into higher education. Or media companies leveraging their news platform into education and commercialising industry-based learning opportunities.

Granted, this form of equity-based collaboration around teaching is fraught with complication and risk. Look at what happened in the vocational education sector when greedy private operators became more involved and listed on ASX. Good governance is paramount.

Also, radical business-model innovation is never easy. It takes foresight, guts and a willingness for creative destruction. Driving innovation in change-resistant organisations and sacrificing a business division to do something different and better, takes real leadership.

Sometimes it requires an admission that innovation in current businesses, especially those built on decades of history and layers of bureaucracy, is too slow. The best approach is starting with a blank sheet of paper.

Universities have shown they can create wealth with industry by commercialising research and, to a lesser extent, on teaching. Swinburne University’s online joint venture with Seek is a case in point: Swinburne made millions from selling down its stake in Online Education Services.

There’s potential for more universities to spin off aspects of their teaching into commercial joint ventures, share in any upside and funnel that money back into research and other programs that have a social impact. This model could even give academics long-term equity incentives in new teaching ventures, so they share in the wealth (that is radical thinking!).

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Stronger separation of teaching and research in some university courses is another benefit. Academic research is still needed to inform the teaching, but we would not have the crazy situation of academics who are great teachers being penalised for a lack of research.

Academic purists will no doubt detest this idea. But surely there’s merit in debating the right incentives to encourage industry collaboration on teaching and better student outcomes.

And finding the best teaching model in the digital economy that balances the needs of all higher-education stakeholders: students, universities, community, industry and government.

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Tony Featherstone writes on Personal Finance specialising in Superannuation & SMSFs, Specialist Investments.