Middle-tier universities in Australia aren’t doomed to wither and die

It has been predicted middle-tier universities will “wither on the vine” in the wake of fee deregulation, but they have a unique opportunity to bloom and thrive if they go about it the right way. Flickr/Austin DeArmond, CC BY-SA

The “future of universities” has been the subject of much speculation in recent years. Online learning, declining government support, global competition between universities and the rise of universities in Asia are maligned as threats to universities in Australia.

The recent budget announcing further significant cuts to Commonwealth support for higher education and further deregulation of the Australian system raised the question: “who will survive?”

What do funding cuts and deregulation hold in store?

These debates have generated enough flawed arguments and assertions to provide material for a decade of rational thinking courses. One theme that does have substance is that the competitive environment Australian universities operate in will continue to strengthen. As a consequence, two things will happen.

First, there will be a more pronounced “layering” of universities in terms of brand position, as has been the case in the US for decades. Second, we will start to see universities and other providers focusing more on strategy and competitive positioning. A good illustration of this is the vast array of specialised rankings of universities in the UK.

Most assume the market will favour premium brands, so further deregulation in Australia should be good for the prestigious Group of Eight. There is also a strong competitive place here for the “low-cost provider”. That may be an option some private providers or universities will follow.

What, then, happens to the competitors “stuck in the middle”; neither having a premium brand position nor able to match the low-cost provider? Wouldn’t this be the position of the majority of Australian universities? Isn’t “withering on the vine” the inevitable outcome?

Such analyses significantly oversimplify the strategic options and outcomes available to what might be called “middle-tier” Australian universities.

A useful analogy is the motor vehicle market. The premium brands have little incentive (or real ability) to totally dominate market share and buyers have a wide range of product needs and preferences, and aren’t only interested in low-cost vehicles. The result is a range of market niches, each offering value to a different package of buyer preferences and prices, driven by different competitive strategies. A wide variety of brand loyalties makes the mix of outcomes even more complex.

This analogy suggests a much richer set of strategic and competitive possibilities for middle-tier universities. Such a competitive environment offers many opportunities to bloom and thrive; if you are able to effectively identify and execute an appropriate strategy.

What middle-tier universities must do to survive

Four key messages for middle-tier universities in such market conditions are reasonably clear.

First, if all you are doing is being a poorer clone of the premium brand, then you are unlikely to thrive. If you are unable to match the premium brand, you will wither away as other effective niche providers offer a better “product” to students, research partners and other key stakeholders.

Second, it follows that you need to understand the variety of higher education offerings that students, research partners and other key stakeholders might value. Only then can you identify and deliver a high-value “product” to a sustainable market segment.

Increasingly, this offering will need to be globally relevant and benchmarked. There are clearly strategic differences across Australian universities; it is less clear, however, whether these are informed by and aligned with what students, research partners and other key stakeholders desire and consider valuable.

Third, you will need to develop organisational capabilities and management systems that support what is offered as your new, differentiated strategy. You will have to be able to recruit staff that either already have the skills and commitment to support this, or have staff development that does so. Generic recruitment will not cut it. Also, you need to understand the key strategic threats to your model, how to monitor them and how to react when they emerge.

Fourth, and seemingly in contradiction to the above, you may need to be careful not to be over-specialised. That creates a risk of being in a market niche that is too easily undermined by changes in the domestic and global higher education market. Being a university has certain valuable generic characteristics and these still need to be protected.

Personally, I am confident about the opportunities for middle-tier Australian universities to thrive in a more deregulated market. Full deregulation does significantly increase the risks, but it also significantly increases the opportunities, allows them to be linked to appropriate rewards and, most importantly, puts the fate of the university in its own hands.