Embracing change: navigating transformation in higher education

29 May 2024

The winds of change are sweeping through higher education, compelling institutions to reimagine their business models and embrace innovation. From top to bottom, the sector is experiencing a shift, with some changes being forced upon them while others are long overdue. The necessity for business transformation and financial sustainability has never been clearer. Attracting and retaining students in a competitive market while promoting access, equity, and inclusion is also becoming increasingly challenging. What is evident is that higher education institutions must adapt, or risk being left behind.

Clarity of purpose and strategy

Among the multifaceted challenges higher education institutions currently face, at the core lies the need for clarity of purpose and strategy. Like any business transformation, it’s essential that these institutions begin by defining their key differentiators and unique selling propositions. They need to understand what their market looks like not only today but also in the coming decades as we embark further into a digital and knowledge age. Identifying critical cost and revenue levers for higher education establishments is equally essential, as is understanding the guiding principles that will dictate the extent to which each lever is utilised. 

Operating model challenges must be acknowledged and addressed head-on, with close coordination of effective change management approaches to deliver successful outcomes. Traditional bureaucratic hierarchies, despite being deeply engrained, need to give way to more agile and responsive governance structures and commercial thinking. Decision making empowered by data-driven insights and stakeholder collaboration will enable higher education institutions to respond quickly to changing market dynamics. 

Rethinking financial models and financial sustainability

Higher education institutions must adopt a new commercial mindset to transform in ways that not only resonate with their target market but ensure financial sustainability. Achieving financial stability is crucial, necessitating the diversification of revenue streams and the optimisation of operational efficiency. This could involve implementing stricter spending controls while simultaneously enhancing services and standards. Exploring additional revenue sources is also vital, but only while safeguarding academic reputations and the student experience. 

Having robust financial insight is essential given the trend of universities offering tailored courses with varying pricing and student demographics (UK domestic students and international students). Without it, institutions risk financial mismanagement and compromise their ability to maintain academic standards amidst the pressures of international student recruitment. Many institutions currently lack sophisticated financial analysis capabilities due to outdated finance systems. This results in misbilling and manual billing processes, which are not only costly but also time-consuming. Prioritising enhancements of current finance systems is imperative for institutions, both for analysing course profitability and student billing, thereby minimising errors and manual processes, but also for preventing institutions from running courses at a financial loss.

For instance, international students (whose fees are uncapped) represent a key additional revenue source that can generate positive margins for higher education institutions. However, this financial benefit must be carefully assessed against several factors. Firstly, there is unease regarding the impact on the availability of spaces for domestic students, especially since press reports suggest that domestic students often achieve significantly higher grades than some of their overseas counterparts. Additionally, there has been unfavourable press regarding the methods higher education establishments use to attract international students. Institutions face a pressing need to uphold academic standards while accommodating the influx of international students. Balancing these factors is essential for higher education institutions as they navigate the complexities of international student recruitment, all while maintaining their integrity and quality of education.

Digital transformation

Embracing digital transformation is a cornerstone in the landscape of higher education. From a cost and efficiency perspective, long-term commercial benefits must be sought, but this will require significant initial investments and grants. By integrating innovative technologies and establishing robust IT infrastructure, institutions can seamlessly transition between physical and virtual environments, enriching the learning experience for students and optimising operational efficiency.

Many higher education institutions are currently using outdated student management systems which are not capable of providing the Higher Education Statistics Agency (HESA) data required for statutory reporting. This is leading to a large amount of manual work and spreadsheet manipulation to meet submission deadlines. It is imperative for institutions to update these systems, allowing them to streamline their administrative processes, provide essential data for reporting, and reduce manual work, thereby enhancing overall efficiency and effectiveness.

Enhancing digital interaction represents another pivotal aspect of modernising higher education. The current generation of students are much more sophisticated and can find their digital interaction with their individual institutions to be outdated and frustrating. By reimagining the student journey and experience, and revamping student information systems accordingly, institutions can improve digital interaction, empower students with self-service capabilities, and equip staff with enhanced tools. This will ultimately elevate both the student experience and operational efficiency.

During the pandemic, lots of higher education universities quickly introduced Virtual Learning Environments (VLEs), many of which are now proving to be limited in functionality and costly to maintain. The adoption of flexible learning models and the optimisation of these VLEs is paramount to accommodate diverse student needs, foster access, equity, and inclusion, and enable seamless transitions between different modes of learning. However, it's crucial to enhance existing VLEs to meet functionality needs and reduce maintenance costs, ensuring their effectiveness in facilitating flexible learning models.

While implementing the above initiatives will be crucial for higher education institutions to transform their offerings and remain competitive, ensuring ongoing software support is also vital. Institutions must prioritise maintaining relationships with financially stable software suppliers to uphold critical systems and investments, safeguarding the continuity of operations and the integrity of academic endeavours.

Lastly, prioritising cybersecurity is non-negotiable. Given the increasing threats of cyber-attacks and intellectual property theft, robust cybersecurity measures are essential to protect institutions and their valuable assets from potential harm.

Ensuring future success

The path to transformation in higher education demands more of a business and commercial mindset. This starts with a clear vision, strategic planning, and proactive adaptation to meet the evolving needs of students and stakeholders. By embracing innovation, fostering inclusivity and emphasising financial sustainability and digital advancements, institutions can effectively navigate future challenges and work toward a prosperous, sustainable future.

If you would like to discuss anything mentioned above, please contact Joel Segal, Ashley Barlow or your usual RSM contact.