Facing up to market forces

November 13, 1998

Universities are waking up to the fact that their position as primary providers of post-secondary knowledge is under attack. Alison Goddard reports on challenges that lie ahead

Seven years ago Sir Douglas Hague, associate fellow of Templeton College, Oxford, highlighted the threat to universities from so-called knowledge businesses. "The current stage of economic development is strongly based on the acquisition, analysis and transmission of information and on its application," he wrote. "Universities will be forced to share, or even give up part of, their role as repositories of information and power-houses for ideas."

In his pamphlet, Beyond Universities: A New Republic of the Intellect, he concluded: "Knowledge is permeable; technology is universal; universities are impermeable; the universities' regulator is set in concrete. Something has got to give."

Since then, companies have further developed in-house training and become more international. And the internet has helped to expand the number of universities and educators in the commercial sector, often operating virtually and globally. At the same time, the introduction of tuition fees in the United Kingdom has turned students into paying customers.

These knowledge businesses are poised to pull students away from traditional universities. "If English universities do not get their act together, they will be taken over because these institutes are moving into Europe big time, and they can spend money like water," said Marcel van Miert, director of the private European Business School in London and chairman of the Council of Independent Colleges and Research Institutions.

The Committee of Vice-Chancellors and Principals recently organised a workshop to discuss such challenges and how universities might meet them. A CVCP briefing said: "Lessons from the United States's experience show us that once for-profit providers gain a foothold in the education market, the risk to non-enterprise-like, more traditionally organised providers rapidly escalates."

The CVCP has agreed to work with Australia's government and its universities to further illuminate the threat. "Because the challenge is global, we have a lot of information to share," a CVCP spokeswoman said.

Next month, the Society for Research into Higher Education's annual conference will consider "the globalisation of higher education". Heather Eggins, the society's director, said: "Higher education in the United Kingdom is already feeling the wind of globalisation. Pessimists argue that in a few years' time, there will remain only a few international "mega" institutions, if not entirely in private hands then certainly as far beyond the reach of single governments and states as any multinational corporation."

In a paper presented last year to Sweden's National Agency for Higher Education, Sir Douglas said it was four years before his pamphlet was taken seriously. He identified four trends that will "transform universities in the 21st century, not least by reducing the monopoly they have held over a reservoir of talent, especially talent devoted to research and to training the next generation".

Two trends were economic. The first was the shift of manufacturing and service industries to a knowledge base. "They will use high-technology processes to produce high-technology products and services, and so will need more well-educated and technically competent people."

The second was the growth of "pure knowledge businesses" within service industries. "Unlike knowledge-based businesses, they trade in knowledge itself and work in fields such as R&D, design, software, consultancy, economic research, training and education," Sir Douglas said.

The third trend was the development of information and communications technology, and the fourth was the demand for university places from the growing numbers of knowledge workers. This last trend, Sir Douglas said, would cause funding problems for the state.

He pointed out that the growth in the number of graduates means that "substantial numbers of people outside universities would be capable of setting up private universities to engage in teaching and research in competition with them".

He also argued that if universities do not provide the teaching and research training business needs, business will establish corporate universities. In the UK, six firms have formed or are forming corporate universities.

"A rich mixture of change is in prospect," Sir Douglas concluded. "It offers both opportunities and threats to universities. Unless they grasp the opportunities, the threats will be more substantial."

The CVCP has begun to research the threat with the Australians. It is yet to work out a strategy for dealing with it.

Higher demands

The appetite for learning is rising throughout the world. According to the World Bank, as many as 150 million people will be seeking higher education by 2025.

Today, in the western world, between 30 per cent and 50 per cent of the population receive tertiary-level education.

In East Asia, this figure is less than 15 per cent. In South Asia it is about 5 per cent, and in sub-Saharan Africa it is lower still. The countries of these regions have young populations, and the figures are expected to rocket.

How big a threat is the knowledge business?

"Universities have always had rivals, but the provision of learning is increasingly shared between academic and work/community environments. There has recently been a growth in corporate and virtual providers in the UK and abroad, which will pose challenges and opportunities for universities in the future. It is clear that competition and potential collaboration in knowledge provision is becoming increasingly global."

CVCP briefing note, September 1998

"I find it hard to believe that bright 18-year-olds would want to stay at home and watch university on screen instead of coming here and having the time of their lives."

Michael Shattock, registrar at the University of Warwick

"Many of our universities see themselves as global institutions. And the demand to learn is expanding exponentially throughout the world."

Heather Eggins, director of the Society for Research into Higher Education "We need not be over-pessimistic. In the US, employees are increasingly seeking qualifications from 'accredited academic institutions'. They are therefore pressing 'corporate universities' to form partnerships with academic institutions."

Sir Douglas Hague, September 1997

"You have a whole new band of students looking for distance learning via email. But if you want the best degrees, you will find yourself in class."

Marcel van Miert, director of the European Business School and director of the Council of Independent Colleges and Research Institutions "It is the big dilemma in higher education: whether internet courses will sweep all before them or not. If they take off, they will present a formidable challenge to universities. But there are formidable quality assurance problems with online courses."

Roger Brown of the Southampton Institute, former chief executive of the Higher Education Quality Council



There are several types of knowledge businesses that may rival universities, among them are corporate universities and privately funded higher education institutions. They can range in size from small centres to large, networked institutes enrolling more than 100,000 students each year. Some have many campuses at which students attend classes; others are virtual universities, providing distance-learning courses.


Corporate universities are poised to attract graduates who might otherwise enrol on a postgraduate course at a public-sector university. Six businesses in the United Kingdom - Body Shop, British Aerospace, Ford, Motorola, Price Waterhouse Coopers and Unipart -have established universities or are in the process of doing so. BAe offers customised advanced degrees. Its masters degree in aircraft engineering comprises nine one-week modules taken over three years. The firm has PhD students and research fellows working in areas such as materials science and optics and laser technology at its Sowerby Research Centre in Bristol.

In April, BAe founded its virtual university, which combines its advanced degree programme with an international business school and a faculty of learning. The business school is developing a certificate in management, and the faculty of learning aims to facilitate lifelong learning from national vocational qualifications to PhDs. The degrees are awarded in partnership with existing universities. "The virtual university is a business strategy, twinning academic and business excellence," said its vice-chancellor, Geraldine Kenney-Wallace.


Virtual universities can overcome international boundaries and reach students around the world. They are fast developing into a new breed of "mega" universities, defined as having more than 100,000 students. Some are private, others have developed from state universities.

Virtual universities running distance-learning courses could offer overseas degree courses to students based in the UK. The Western Governors University in the United States offers diplomas and degrees by distance learning. For a fee, it provides students with access to courses offered by universities and colleges in the western states of the US in various formats ranging from online access to printed pages delivered by post. The university also offers a competency-based degree programme that counts "skills and knowledge gained at other universities, on the job, or just through life" towards a degree.

The University of Phoenix is one of the world's largest private, for-profit higher education institutions. It has 65 campuses in the United States and Puerto Rico and also offers a degree programme entirely online. More than 48,000 students are enrolled on its certificate and degree programmes in business and management. Its courses allow people in full-time work to gain further qualifications.

In the UK, The Open University's distance-learning courses have more than 150,000 fee-paying students, about 80 per cent of whom are in full-time work. It offers a range of diplomas and degrees, along with courses suitable for professional development. Similar institutions exist in Spain, France and India.

The Open University also validates degree courses offered by traditional private higher education institutes, such as the London-based European Business School, and diplomas and degrees awarded by overseas higher education institutions in France, Denmark, Hungary and the Netherlands.

Private institutions Private business schools attached to universities offer advanced degrees to students who have usually spent a few years working after graduation. And private institutions such as the European Business School offer diplomas and degrees to full-time students.

Private overseas universities are also making the most of the demand for higher education in other countries, where the UK state sector could be expected to do well.

Henley Management College is part of an international network running disance-learning MBAs in 30 countries through local partners. Ashridge Management College also has international links.

Kellogg and Wharton business school at the University of Pennsylvania are collaborating on a new business school in India, and there are at least four private universities in Bangladesh.


The threat presented by overseas institutions offering courses via the internet is the subject of an international study that was commissioned this week by the Committee of Vice-Chancellors and Principals.

"The purpose is to look at how the global market for virtual learning is likely to develop," said Tony Bruce, director of policy development for the CVCP. "We hope to provide advice on strategy to CVCP members."

The study will be conducted with the Queensland University of Technology in Australia. The Australian government will fund its half of the project. "We are potentially facing a common competitive threat, primarily from North America," Mr Bruce said.

The study's first stage aims to quantify the size of the global market for internet courses. "As far as I am aware, there are no hard market-based data or projections," Mr Bruce said.

The next stages will assess Australian and British universities' responses, challenges to individual institutions and changes in structure and regulation faced by the sector as a whole.

The study is due to be completed by the end of 1999.

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