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© 2018 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. and its affiliates. This publication may not be reproduced or distributed in any form without Gartner's prior written permission. It consists of the opinions of Gartner's research organization, which should not be construed as statements of fact. While the information contained in this publication has been obtained from sources believed to be reliable, Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner research may address legal and financial issues, Gartner does not provide legal or investment advice and its research should not be construed or used as such. Your access and use of this publication are governed by Gartner’s Usage Policy. Gartner prides itself on its reputation for independence and objectivity. Its research is produced independently by its research organization without input or influence from any third party. For further information, see "Guiding Principles on Independence and Objectivity."

Terri-Lynn ThayerVice President, AnalystFebruary 2019

The Road to the Future of Higher Education

https://www.gartner.com/technology/about/policies/usage_policy.jsp#_blankhttps://www.gartner.com/technology/about/ombudsman/omb_guide2.jsp

M&A Activity Is a Sign of Business Model Pressure


Not Just a U.S. Trend

EUA University Merger Tool

Source: European University Association, September 2017


http://www.university-mergers.eu/

Some of the Root Causes4 © 2018 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. and its affiliates.

Student Population Shifts

Workforce Demands

Cost-Benefit Imbalance

Globalization

Reasons and Benefits

Synergy

Diversification/Focus GrowthIncrease Pricing Power

Eliminate Competition

The Irony Is …

Most higher educationinstitutions think theyare unique

The reality is very limited diversity in business models


At Least Five Major Value Propositions


Pursuit of Knowledge

Focus on Research

Education in Practical

Fields

Vocational Training

Workforce Development

University of California, President Clark Kerr (1963)


The “American Model” of the post-war university is a “multiversity” — an institution serving varied, even conflicting, interests and oriented to a range of purposes.

https://www.chronicle.com/article/Why-the-University-s/244010

The University is Run Amok!

https://www.chronicle.com/article/Why-the-University-s/244010

Value Proposition

Customer

Capabilities

Financial Model

A Business Model Describes How a Business Is Configured to Create ValueValue Proposition: Quality Service Cost Assets

Capabilities: Information Technology People and Culture Assets Capital Structure Ecosystem Stakeholders

(e.g., Partners, Suppliers)

Customer: Customers Ecosystem Stakeholders

(e.g., Partners, Suppliers) Channels Relationships Industry Segment

Financial Model: Pricing Revenue Model Key Performance

Indicators Financial Statements Cash Conversion Model


We Supersized the Business Model!

• People, technology and physical assets leveraged across multiple BMs in nonstrategic and often unknown ways.

• Omniversity leads to brand dilution.

• Lack of clear anddistinct value props.

• Many customers across many channels but not well-understood

• Untapped customers

• Revenue, cost andpricing out of balance

• KPIs not tracked or aligned

Value Proposition

Capabilities

Funding Model

StudentEmployerSociety


Let’s Look at Some Trends


The model in mostcountries today

Shadow Education Sector Is Growing

Low High

Public Good

Private Good

Competition

Know

ledg

e

Traditional Tertiary

Education

The direction we are heading

Shadow Education

Sector


Numbers will shrink

Growth in Nonaccredited Space

Inclusive Exclusive

Transformation here

Accredited

Nonaccredited

Growth likely hereShadow

Education Sector

Employer-Based Education

Steady state in mature marketsGrowth in emerging markets

Elite

Small Privates

Publics

Some consolidation here

MOOCs Coding Boot

Camps



Growth in Microcredentials and Work-Focused Education

General Specialized and Niche

Transformation here

Degrees

Certificate and Microcredentials

Significant growth here

Shadow Education

Sector

Employer-Based

Education

Professional Schools

Small Privates

Publics

Consolidation and shrinkage

A mixture of moderate growth andsome shrinkage

MOOCsCoding

Bootcamps

Elite Privates

Vocational/Tech

Growth in shadow education sector and employer-provided education

Marked increase in institutions and programs conferring smaller stackable credentials to an older population of serial learners

Long and Short of It … There Are Three Clear Trends

Shrinking number of institutions leading to a strengthening of those that remain


How Do You Traverse This Road to the Future?


Three Key Strategies for Competitive Advantage

Where is your institution today?

Can you clearly defineyour benefits, target market and competition?

Industrywide

FocusUnderstand and serve your target market better than anyone else

Usually achieved through a combination of cost leadership and differentiation that leads to superior customer service and a more personal experience

DifferentiationDeliver better benefits than your competition

Achieved by innovation, quality, or improved customer service

Cost LeadershipProvide reasonable value at a lower price.

Achieved by improving operational efficiency


The Road to the Future of Higher Education Is Paved With Technology


Use Technology to Change Your Capabilities

2018 Education Hype CycleDigital University Ambition

Improved Institutional Productivity and Products

BetterStudent Experience

Optimize

From “Hype Cycle for Education, 2018,” 17 July 2018 (G00340209)

New Productsand Services

TransformNew BusinessModels


https://www.gartner.com/document/3882872?qid=c1d08ade1a2925f6f8eb6a3fb&ref=TypeAheadSearch&toggle=1

Institutions Optimizing and Transforming With Technology


Using AI to Optimize the Student Experience

Amazon Echo devices in dormitories

Optimize Better Student ExperienceFrom “Hype Cycle for Education, 2018,” 17 July 2018 (G00340209)



Using Education Analytics to Improve Student Success

Predictive analytics + new homegrown advising system

Created a “network of care” Improved first-year retention rate Improved six-year graduation rate Unlocked $15M in

performance-based funding

OptimizeImproved Institutional

Productivity & Products

Better Student Experience




Using Exostructure Strategy to Transform Business Model

Targeting “new” market First Ivy League degree on platform M.S. Computer Science $26,300 — 1/3 the cost of on campus

TransformNew Products and Services



New Business Models


Using Blockchain to Disrupt the Business Model

Digital Education Platforms

Transform New Business Models

Academic Publishing




Recommendations


Use scenarios to advance planning and idea generation Identify and explore new value proposition opportunities:

– Unserved or underserved customers in existing markets– New customers in adjacent or related markets

Urge, implore and lead your institution to define a digital ambition:– Use Gartner Hype Cycle to identify technologies that can optimize

and transform


“If you don't know where you aregoing, any road will get youthere.”

— Lewis Carroll

© 2018 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. and its affiliates. This publication may not be reproduced or distributed in any form without Gartner’s prior written permission. It consists of the opinions of Gartner’s research organization, which should not be construed as statements of fact. While the information contained in this publication has been obtained from sources believed to be reliable, Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner research may address legal and financial issues, Gartner does not provide legal or investment advice and its research should not be construed or used as such. Your access and use of this publication are governed by Gartner’s Usage Policy. Gartner prides itself on its reputation for independence and objectivity. Its research is produced independently by its research organization without input or influence from any third party. For further information, see “Guiding Principles on Independence and Objectivity.”

Terri-Lynn ThayerFebruary 2019

The Workplace and Education Being on a Collision Course Is a Really Good Thing

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Worlds about to collide

Both Internal and External Forces of Change

Increased Focus on Career

Rising Costs

STEM Focus

Changing Nature of Work

The Skills Gap

Changing Demographics


FinancialWell-Being

Philosophyof Life

1976 50% 65%

2014 82% 45%

Increased Career Focus of Students

Adapted from https://repository.upenn.edu/dissertations/AAI10158551/

Changing importance of career for students

Adapted from https://www.burning-glass.com/research-project/underemployment/

Underemployed after graduation

43%Fully employed 57%

The importance of the first job

Underemployment at Graduation

Underemployment After 10 YearsUnderemployed

21%

Fully employed 79%


https://repository.upenn.edu/dissertations/AAI10158551/https://www.burning-glass.com/research-project/underemployment/

The Cost of College Is Increasing at Unsustainable Rates


1970 Average Annual Income $6,186As % of annual income

Annual cost public 4-year institution $358 6%Annual cost community college $178 3%Annual cost private 4-year institution $1,561 25%

2016 Average Annual Income $57,617As % of annual income

Annual cost public 4-year institution $9,970 17%

Annual cost community college $3,470 6%

Annual cost private 4-year institution $24,820 42%

Source: “Department of Numbers”“Average Indexed Monthly Earnings”“Not Your Mother’s College Affordability Crisis”

https://www.deptofnumbers.com/income/us/https://en.wikipedia.org/wiki/Average_Indexed_Monthly_Earningshttps://deltacostproject.org/sites/default/files/products/Delta-Cost-Not-Your-Moms-Crisis_0.pdf

Increased Focus on STEM

-50%

-25%

0%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Change in Humanities Majors

English History Languages & Lit Philosophy Religion

If in 2000 you had

English Majors Over Time

By 2017 you would only have

1000 510

English majors then

English majors

Under Performance Based Funding models, more than 15 states have financial incentives to increase STEM majors


Source: https://www.theatlantic.com/ideas/archive/2018/08/the-humanities-face-a-crisisof-confidence/567565/

https://www.theatlantic.com/ideas/archive/2018/08/the-humanities-face-a-crisisof-confidence/567565/

The Changing Nature of Work

Between now and the year 2030

1 in 3 workers will need to reskillSource: “Jobs Lost, Jobs Gained: Workforce Transitions in a Time of Automation”

75 to 375Million

people will need to change

occupations

The human costs


https://www.mckinsey.com/%7E/media/McKinsey/Featured%20Insights/Future%20of%20Organizations/What%20the%20future%20of%20work%20will%20mean%20for%20jobs%20skills%20and%20wages/MGI-Jobs-Lost-Jobs-Gained-Report-December-6-2017.ashx

The Skills Gap

Adapted from https://www.burning-glass.com/wp-content/uploads/Moving_the_Goalposts.pdf

Upcredentialing

Job Ad’s for Executive Secretaries65% require a B.A. degree 19% of current job incumbents have a B.A. degree

Impact of the skills gap on the economy

400,000 unfilledpositions

1.3 million peoplelooking for work

Cost to Ontario Economy$2.34 billion

Adapted from https://www.ecampusontario.ca/wp-content/uploads/2018/04/eCampusOntario_strategic_Plan_2018-2021.pdf


https://www.burning-glass.com/wp-content/uploads/Moving_the_Goalposts.pdfhttps://www.ecampusontario.ca/wp-content/uploads/2018/04/eCampusOntario_strategic_Plan_2018-2021.pdf

Changing Demographics

Adapted from https://econofact.org/demographic-changes-pose-challenges-for-higher-education

From 2008

10% Birth Rate

Plus shift in population from Northeastand Midwest to South and West

More Hispanic students

Fewer first-generation students

More adult students


https://econofact.org/demographic-changes-pose-challenges-for-higher-education

From This Current Model of Learning

Bootcamps

MOOCs

Continuing Ed.

Bootcamps

MOOCs

Skill-Based Credentials

Isolates higher education Weakens higher ed. finances Mismatch in skills Costly Proliferation of uncertain

credentials

But What Happens Here


MOOCs for Skills

Bootcamps

The Shadow Education Sector

They Do Well Real world

projects and collaboration

Career Coaching,

mentoring and alumni

Alternate UniversitiesMicroskills & Credentials

Corporate Universities

Skills TrainingInstitutes


More to This Model

Applied


Pure

Applied

Continuous learning landscape

Authentic Career Alumni

A New Education and Workplace Landscape Will Look Like

Pure


Informal

Convergence of Traditional Higher Education and Workplace Learning

Pure Applied

Formal

Shadow Education

Sector

Traditional Tertiary

Education

Workplace Learning


What Are Our Biggest Fears of the Melding of Work and Higher Education

Students as Widgets

Too MuchEmphasison STEM

Short-Term Skills


How These Changes Will Affect You as a CIO


You’re going to need to support authentic learning environment tools often at scale and often at a distance. This will frequently be difficult and costly.

Your data world which was already complicated just got more so. Here will be much more emphasis on postgraduation data and workforce engagement and success data.

Supporting the career center will become a bigger and bigger part of your job.

Many of your stakeholders won’t be students, or faculty or staff and you need to be able to support them.

Recommendations


Get on that data governance issue. If you think it's complicated now it is only going to get more so. Start laying the groundwork and anticipatingthe challenges.

Start planning for more complex ways of handling IAM and systems of record.Build scenarios for each of those based on how higher ed. will change. Thereare 3 aspects, policy, technology and practice. Address each of those.

Explore the career support, alumni engagement and collaboration technologyspaces. Start doing pilots and build a plan for each of these.

Model new approaches in your own organization, for example, using your student employees.


“We need to prepare students for their future, not our past.”

— Ian Jukes

Recommended Gartner Research


Digital Business Platform Models in Higher Education Terri-Lynn Thayer and Glenda Morgan (G00353415)

The Future of Work Will Demand Changes to Higher Education Glenda Morgan and Terri-Lynn Thayer (G00349433)

Hype Cycle for Education, 2018 Kelly Calhoun Williams (G00340209)

Why Business Models Matter for CIOsIrving Tyler, Dale Kutnick and Chet Geschickter (G00335979)

A CIO’s Guide to Gartner’s Digital Business Research Don Scheibenreif and Chet Geschickter (G00350802)

For information, please contact your Gartner representative.

https://www.gartner.com/document/3876965?ref=solrAll&refval=203799307&qid=bc58da6d3c6222ca90f7c5778aec15b3https://www.gartner.com/document/3869113?ref=TrackDBDailyEmail&refval=1522072808262?utm_source%3DGartnerTrack&utm_medium=email&utm_campaign=TrackSubscription&utm_content=TShttps://www.gartner.com/document/3882872?ref=solrAll&refval=208200476&qid=d737802f756344eed80dd6ca7e741c29https://www.gartner.com/document/3849969?ref=solrAll&refval=208188315&qid=a47ec76d899c08164b9599ca871b6592https://www.gartner.com/document/3862963?ref=TypeAheadSearch&qid=d398fa1bffa02c6a0f7dd3

For information, please contact your Gartner representative.


Recommended Gartner Research

The Future of Work and Talent: Culture, Diversity, TechnologyHelen Poitevin (G00354454)

Recruit, Renovate and Retrain to Gain the Skills Needed for the Digital WorkplaceBryan Taylor (G00354977)

The Future of Work Will Demand Changes to Higher EducationGlenda Morgan and Terri-Lynn Thayer (G00349433)

How We Will Work in 2028De’Onn Griffin and Mark Coleman (G00349777)

https://www.gartner.com/document/3870503?ref=solrAll&refval=208349953&qid=3692b15fa870448275b82bf3dc0d0e61https://www.gartner.com/document/3873156?ref=solrAll&refval=208349987&qid=e292a8feb44841dca74389789796aa7chttps://www.gartner.com/document/3869113?ref=solrAll&refval=208349714&qid=b351ba88c15a1f3c8a5ebd98cbf3a445https://www.gartner.com/document/3861479?ref=solrAll&refval=208349715&qid=e8c323fb8b40cc9972c5b71e7e753beb

The Road to the Future of Higher EducationSlide Number 2M&A Activity Is a Sign of Business Model PressureSlide Number 4Diversification/FocusThe Irony Is …Education in Practical FieldsThe University is Run Amok!A Business Model Describes How a Business Is Configured to Create ValueWe Supersized the Business Model!Let’s Look at Some TrendsShadow Education Sector Is GrowingGrowth in Nonaccredited SpaceGrowth in Microcredentials and Work-Focused EducationLong and Short of It … There Are Three Clear TrendsHow Do You Traverse This Road to the Future?Three Key Strategies for Competitive AdvantageThe Road to the Future of Higher Education Is Paved With TechnologyUse Technology to Change Your CapabilitiesInstitutions Optimizing and Transforming With TechnologyUsing AI to Optimize the Student ExperienceUsing Education Analytics to Improve Student SuccessUsing Exostructure Strategy to Transform Business ModelUsing Blockchain to Disrupt the Business ModelRecommendationsSlide Number 26The Workplace and Education Being on a Collision Course Is a Really Good ThingWorlds about to collideBoth Internal and External Forces of ChangeIncreased Career Focus of StudentsThe Cost of College Is Increasing at Unsustainable RatesIncreased Focus on STEMThe Changing Nature of WorkThe Skills GapChanging DemographicsFrom This Current Model of LearningThe Shadow Education SectorMore to This ModelA New Education and Workplace Landscape Will Look LikeConvergence of Traditional Higher Education and Workplace LearningWhat Are Our Biggest Fears of the Melding of Work and Higher EducationHow These Changes Will Affect You as a CIORecommendationsSlide Number 44Recommended Gartner ResearchRecommended Gartner Research

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