“The University is no longer a quiet place to teach and do scholarly work at a measured pace and contemplate the universe as in centuries past. It is a big, complex, demanding, competitive business requiring large-scale ongoing investment”
Malcolm Skilbeck, The University Challenged1
1. Quotation sourced from “On the Edge: Securing a Sustainable Future for Higher Education”, OECD, 2004
Universities face a complex set of challenges
Global Mobility
Broader and more diverse student body
Digital Technologies
Integration with Industry
Competition for Faculty,
Students, Funding and
Partners
Reporting requirements
Fluctuating application levels
Model Innovation e.g. MOOCs
Pressure on public funding
Accountability to multiple stakeholders
Market pressure to differentiate
Pressure to Adopt Management
Practices
Universities are exposed to competition and market forces on a number of fronts
Competitive Arena Example Segments
Students
Faculty
Research Funding
Donations
•Undergraduates•Research postgraduates•Professional postgraduates•International students•Distance students
•Leading researchers•Effective teachers•Effective leaders
•Commonwealth •Industry•Other
•Alumni•Foundations/HNW individuals•Companies•Other
For each segment it competes in, a university needs to understand:
• Intensity of competition
• Nature and identity of:
- Competitors
- Substitutes
- Potential entrants
• Basis for competition
• Relative power of suppliers/buyers
North American universities occupy half of the top 30 places on the QS World University Rankings
2012 QS World University Rankings: Top 30
North America
Europe
Asia
Australia
US universities are winning an increasing share of Nobel prizes
Percentage of Laureates by Institution Nationality
75% of Laureates since 1990 have been
affiliated with US institutions
Total prizes 33 24 32 38 30 55 59 77 75 75 52
Notes: Excludes Literature and Peace Laureates (only one peace Laureate and no Literature laureates were affiliated with an institution when their prize was awarded
Source: Sutton Trust, “Nobel prizes, the Changing Pattern of Awards”, 2003; http://nobelprize.org;
Success in competition for talent and for money determine a university’s relative status over time
“A university’s quality comes from the quality of its faculty and its students. Buildings and other tangible assets, as well as the professional and other staff, also constitute essential elements for quality, but all of these elements serve the academic needs of the faculty and students. Quality faculty at the level required to compete among the top American universities exists in limited supply. As a result, the national and international marketplace for research faculty is highly competitive. The university establishes its quality by recruiting, retaining, promoting and rewarding the best research faculty.”
“The acquisition of revenue is another highly competitive markeplace for American universities. Money purchases the physical plant, facilities, quality staff, and competitive salaries that support and attract first-rate faculty. Money purchases the scholarships, fellowships, libraries and student facilities that attract the best students.
Every dollar not required to support continuing operations is a dollar that the university can invest in improving research or student quality. The effectiveness of the university in acquiring these funds and investing them in research or student quality determines the relative success of the university within its competitive marketplaces.”
Competition for Talent
Competition for Money
John V. Lombardi, “Quality Engines: The Strategic Principles for Competitive Universities in the Twenty-First Century”, The Centre Reports, March 2001
There is a clear cycle of success in the world’s top universities
Strong Research
Performance
Strong Faculty Strong
ReputationDonations
Financial Strength
Strong Teaching
Performance
High Quality Students
Successful Alumni
(Endowment + Annual Giving +
Operational Surplus)
Donations, Commercial ventures, fees
Research grants Contract researchIP-related revenue
Scholarships
Competitive salaries
HR Policy
Research funding and facilities
Facilities and support
Less than 5% of US higher educational institutions conduct over 90% of the research
1844
759
658
646
261
US Higher Educational Institutions 2002-03
Source: NCES Digest of Education Statistics, 2003; Lombardi, John V., Quality Engines: The Strategic Principles for Competitive Universities in the Twenty First Century; The Centre Reports, March 2001
Highest Degree Offered
Doctorate
Masters
Baccalaureate
Other 4 Year Qualification
2 Year Qualification
36%
56%
85%
92%
40%
• Exceptional diversity in terms of size (~500 to ~50,000 students), breadth of focus, private vs public ownership, research vs teaching focus, sectarian vs secular orientation
• Highly concentrated research resources, with over 90% of the total federal scientific research funding controlled by just 150 universities
% Private4168
Endowment funds at top US universities are much larger than at UK universities
10.7
6.6
5.4
5.2
4.8
0.1
0.1
0.2
2.0
2.0
Harvard
Yale
Texas
Princeton
Stanford
Cambridge
Oxford
Edinburgh
Glasgow
King's
Total Endowment 20031 (£ Billion)
Note: (1) Cambridge and Oxford include university and college endowment. University endowment alone for Cambridge was £660m and £470m for Oxford in 2002. Source: The Sutton Trust, ‘University Endowments – A UK / US Comparison’, May 2003
Top 5 US Universities
Top 5 UK Universities
Endowment per Student
(£’000s)
550.0
593.0
109.0
813.0
358.0
120.0
119.0
9.0
6.5
6.7
Higher ranking universities tend to have larger endowmentsShanghai Score vs Endowment per Student
R2 = 0.462
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
0 20 40 60 80 100
Shanghai Rankings - Points Scored
En
do
wm
ent
/ Stu
den
t (
US
$ m
illio
n)
Note: (1) Shanghai Ranking data is 2004; Endowment data is 2003
Source: The Times Higher Education Supplement, Nov 2004; ‘Voluntary Support of Education’, Council for Aid to Education, New York 2003; Shanghai Ranking http://ed.sjtu.edu.cn; The Sutton Trust ‘University Endowments a UK/US comparison’ May 2003.
Annual giving also needs to be factored in – it is very significant for leading US public universities
Various factors contribute to US universities’ strong fundraising performance
Factor Observations
Cultural attitudes • Culture of ‘mass giving’ in the USA, with charitable donations amounting to 2% of GDP (0.6% in the UK)
Income levels and wealth differentials
• Wealthy individuals are a key source of donated funds: over half the total value of alumni donations comes from 1% of alumni
• The USA has by far the largest number of wealthy individuals, with over 2.3 million high net worth and 32,000 ultra-high net worth individuals in 2003
– By comparison, there were 0.1m high net worth and around 700 ultra high net worth individuals in Australia in 2003
University environment
• Intense student experience in leading US universities (living on campus, interacting outside faculty, etc.) fosters strong emotional connection to university
University fundraising practices
• Top US universities have very active alumni and fundraising programs, generating extremely high participation rates (e.g. 64% for Princeton)
• Areas of focus include active alumni programs to generate sense of community, high profile general appeals, and targeted programs to attract major donors
Taxation of donations
• USA: donors can claim back all charitable donations directly from income tax• UK: complex tax treatment; donor and the beneficiary share the tax rebate
Note: (1) High net worth individuals are those with more than US$1m in net financial assets; ultra high net worth are those with over US$30m in net assetsSource: World Wealth Report 2004, Cap Gemini and Merrill Lynch; Source: The Sutton Trust, ‘University Endowments – A UK / US Comparison’, May 2003
Alumni, other individuals and foundations provided 75% of donations to US universities in 2002-03
4.3
6.6
4.6
6.6
1.9
Sources of Voluntary Support for US Higher Education 2002-03(US$ billion)
Alumni
Other Individuals
Foundations
Corporations
28%
Percent of total
19%
28%
18%
8%
+20%
Growth over 5 years
+1%
+74%
+31%
-1%
Source: The Chronicle of Higher Education, 2004
Total = US$23.9 billion
Other Organisations
Universities have multiple stakeholders, making it harder to define a single objective functionStakeholder Relationship Key Needs
Students • Customers • Improve future income• Build social / career network• Gain status
Alumni • Donors• Ambassadors
• Association with successful institution
• Ongoing access to social network and new knowledge
Staff • Producers of research and teaching outputs
• Manage university
• Competitive research infrastructure
• Competitive remuneration
Businesses and public sector organisations
• Employers of graduates• Research / commercial
partners
• High quality graduates with relevant skills
• Commercially valuable R&D
Federal Government
• Funds research and teaching
• Sets educational policy
• Contain costs• Contribute to social and
economic goals
Other stakeholders: state government, parents, professional associations, community
Every university needs to decide:
• In addressing stakeholders’ needs, what should we try to maximise, and where can we satisfice?
• Can we assemble the resources to pursue all of these objectives, or do we need to narrow our focus?
• Where should we focus? Which stakeholders / segments are key to our success?
An organisation’s competitive position in its industry is defined by the type of advantage it pursues and the breadth of its market focus
Cost Leadership
Differentiation
Type of Advantage
Low-Cost Differentiation
Segment cost leadership
Segment differentiation
Broad
Narrow
Market Focus
Mass Market
Over-served or under-served segments
A superior competitive position requires superior capabilities; this position is only sustainable if they are based on hard-to-replicate resources
Resources CapabilitiesCompetitive
Position
Hard-to-replicate assets and activity system
Leadership in one or more market-relevant capabilities
Unique, sustainable cost or differentiation advantage in chosen markets
Products and services with a unique price/value proposition attractive to target customers
Assets and activities that are difficult for
other firms to acquire or imitate are the most
secure basis for sustainable advantage
Offerings
Explicit trade-offs usually necessary to
create industry leading capabilities
A cost or differentiation advantage allows a company to generate superior returns
Example of Trade-Offs: Revenue diversification may improve financial performance and strengthen institutional autonomy, but it may also require trade-offs with other objectives
Revenue Source Perceived trade-offs
International students Diversion of resources from domestic students
Full fee paying domestic students Potential lowering of standards
Continuing education fees Distraction from core teaching activities
Bequests and donations Withdrawal of other funding sources
Industry funded research Reduced independence and knowledge sharing
Research commercialisation Reduced knowledge sharing
Consultancy fees Distraction from core teaching and research activities
The strategy needs to be translated into a prioritised set of organisational requirements
Key organisational capabilities required to support business strategy
How important is this characteristic in key markets?
Priority
Market A Market B Market C
Minimise administration costs
Maintain world-class expertise in key areas
Coordinate development and delivery of outputs across divisions
Support customised outputs for specific customers and customer segments
Maintain flexibility to adapt to rapidly changing competitive environment
Facilitate development of new businesses
Enable external strategic and commercial links
An effective organisational strategy should align decision rights, structure and performance management with the business strategy
Business Strategy
Required Organisational
Capabilities
Organisational Structure
Allocation of Decision Rights
Performance Management
Policies
Systems
Processes
People
“How, then, are American universities so successful? Primarily, I would say, by maintaining this ferment, this clash of perspective, and this reliance on the authority of ideas.
And we compete vigorously: for the best students, the best young faculty, and the allegiance of donors. Without this competitive environment, the tendency towards self-replication, towards inbred comfort, could become dominant.
Finally, governing a university is a subtle thing. As we’ve seen too often abroad, and increasingly in public higher education here, efforts by larger government bodies to manage aspects of public life are doomed to fail. Creativity is repelled rather than attracted, inspiration is dulled – and disappointment is the result.
At the same time, we have seen that the team cannot be managed by its players. Too often, universities have been managed as kibbutzim, with academic leaders elected by faculty, students and staff, thus undercutting mandates to impose high standards and the creation of leadership horizons sufficient for true long-term innovation
Success depends on the middle ground. Leadership that is strong, not bureaucratic; leadership that recognizes the best ideas come from creative scholars, not managers; and leadership that knows if everything is a priority, nothing is a priority. For priorities, like energy, like capital, must be conserved.”
Lawrence H. Summers, President, Harvard University1
1. Quotation sourced from Harvard Magazine, November – December 2004
BCG / WFPMA - Global Survey 2012
19/04/23 21
BCG Report – Importance of HR Capabilities
19/04/2322
Economic Impact of HR Capabilities
19/04/23 23
BCG Conclusions
19/04/23 24
Strategic Workforce Planning
19/04/23 25
Recruitment Media
19/04/23 26
Talent and Leadership Management
19/04/23 27
Appendix
19/04/23 28
US universities spent US$36 billion on research in 2003, 60% of which was funded by the Federal Government
6.9%
6.0%
19.6%
7.4%
60.1%
Sources of Funding for Research and Development by US Universities in 2003
Federal Government
State and Local Government
Industry
Institution
OtherTotal Expenditure:
US$36.3 billion
Note: US Federal Government departmental breakdown: Health & Human Services = $13.4bn;National Science Foundation = $2.8bn; Defense = $2.1bn; NASA = $1.1bn; Agriculture = $0.6bn; Energy = $0.7bn
Source: The Chronicle of Higher Education, 2004
Total expenditure on research & development by Australian institutions in 2002 was A$3.4 billion (approx. US$2.4 billion)
Unique resources and capabilities are protected by barriers to imitation
Industry
Barriers to Entry
Potential Entrants
Organisation
Barriers to Imitation
Competitors
• A competitive advantage is sustainable when it persists, despite efforts by competitors or potential entrants to imitate it
– The organisation must possess unique resources and capabilities
– It must be difficult for other firms to acquire or develop these resources and capabilities
• This requires resources and capabilities that are protected by barriers to imitation
Eating facilities
Architectural aesthetic
Lounges
Room size
Reception hours
Room amenities
Bed quality
Hygiene
Room quietness
Price
Low High
Relative Level
Average Two Star
Hotel
Average One Star
Hotel
Formule 1
Source: “Value Innovation: The Strategic Logic of High Growth”, W. Chan Kim and Renee Mauborgne, Harvard Business Review, Jul-Aug 2004
Barriers to imitation include early-mover advantages, trade-offs and other factors
Learning curve Network externalities
e.g. strong alumni network
Firm or brand reputation e.g. customer uncertainty when buying experience products
Buyer switching costs e.g. customer investment in learning to use software
Early-Mover Advantages
Economies of scale Legal restrictions e.g.
patents, trademarks, copyrights, licenses
Superior access to inputs e.g. ownership or long-term contracts
Superior access to customers e.g. location, exclusive distribution channels
Intangible barriers e.g. causal ambiguity
Other Factors
Incompatible product attributes or design features e.g. research vs teaching only focus
Inconsistencies in brand image or reputation e.g. traditional vs innovative image
Limits on internal coordination, measurement and motivation e.g. “culture clash”
Trade-Offs
An effective strategy requires a unique value proposition based on distinctive, inimitable capabilities – most “strategies” fail this test
Source: Michael Porter, Competitive Strategy 2002
What Is a Strategy?
The right goaland
A unique value propositionand
Clear trade-offsand
Tailored activitiesfitting together in
an integrated systemand
Consistent improvement, but with continuity of the strategic position
What Is Not a Strategy?
Best practiceor
A visionor
Learning / flexibility / agilityor
Innovationor
Restructuringor
Mergers/alliancesor
CRMor
The Internet
US universities occupy 17 of the top 20 places in the Shanghai Jiao Tong University Rankings
100.0
72.6
72.5
72.1
69.7
66.0
61.8
58.6
58.6
57.6
55.9
54.1
50.5
50.4
50.1
48.8
48.5
47.7
46.7
46.6
1 Harvard Univ
2 Univ Cambridge
3 Stanford Univ
4 Univ California - Berkeley
5 Massachusetts Inst Tech (MIT)
6 California Inst Tech
7 Columbia Univ
8 Princeton Univ
9 Univ Chicago
10 Univ Oxford
11 Yale Univ
12 Cornell Univ
13 Univ California - San Diego
14 Univ California - Los Angeles
15 Univ Pennsylvania
16 Univ Wisconsin - Madison
17 Univ Washington - Seattle
18 Univ California - San Francisco
19 Tokyo Univ
20 Johns Hopkins Univ
2006 World University Rankings, Shanghai Jiao Tong University: Top 20
Source: Academic Ranking of World Universities 2006, Institute of Higher Education Shanghai Jiao Tong University
USEuropeAsia
Australian Universities in Top 100Rank University
Score
54 Australian National University30.8
78 University of Melbourne26.4
US universities are slightly less dominant on the more broadly-based Times Higher Rankings
2005 World University Rankings, The Times Higher: Top 20
Source: The Times Higher Education Supplemen, October 28 2005
North America
Europe
Asia
Other Australian Universities in Top 50Rank University
Score23 Australian National University
52.9
33 Monash University
46.5
38= Sydney University
42.6
47 Queensland University
38.5
Australia