Why Corporate Innovation Teams Should Launch Universities

The price of higher education has increased at rates far greater than both average inflation and the wages at which graduates earn. Despite the spending increase by students, many have a hard time finding work after graduating. In addition, studies have shown employers find graduates underskilled for many jobs.

The problems in higher educations have lead to students to taking on massive amounts of debt, not being able to make enough to compensate, and employers spending large budgets on recruiting and training. These economics may not be sustainable. Some believe education may be in an economic bubble.

There are several potential solutions to the higher education bubble. One of them is for companies to bridge the gap between what students learn and what employers need. Some big companies are actually already starting such initiatives. I’ll first explain what how a corporate university could be structured, then why it would be beneficial to both corporations and students.

What Would A “Corporate University” Actually Look Like?

Below are just a few ideas. There a lot assumptions and hypotheses to be tested here. Specific “features” are all TBD based on market feedback.

Universities offer two primary forms of value to students and employers respectively. First, they (claim to ) “offer” the skills and knowledge that students need to get a job and be successful. Second, they “accredit” the skills and knowledge of their students to signal to employers that they are “hire-able.” Both of these value propositions benefit both students and employers.

A corporate university could provide one or both of these offerings.

a. The education component. A corporate university could hire instructors like a university does. Classes could be online or offline. Course content would be specifically what’s needed for given jobs. Content could even be curated from existing sources.

The education component could also be delivered as internships, apprenticeships or other on the job training methods. According to McKinsey research, students believe the best way to learn is through on the job training.

The educational component is actually getting to be a fairly competitive space though.

b. The accreditation component. A corporate university doesn’t have to look like a traditional university. It could compete just on the accreditation component. It’s a much lower cost business model.

The “university” would basically just be a testing center (online or offline). Because the education component is so competitive, prices of educational content is decreased significantly and is some cases (ie Coursera) is free. The problem with all this educational content is that many employers still don’t see it as acceptable.

Accreditation has been a tough nut to crack because it’s opinion based. But the opinion that most students care most about is employers. Solving the accreditation component would enable students to learn in whatever way they want and to prove their skills in a more efficient way than four years of college and the associated debt.

I believe if students no longer needed a degree to prove that they can be valuable, the education market would change drastically…and for the better. It would enable students to learn from the many other sources of education that are readily available to the world.

c. Revenue model. The corporate university could make money/save money in a number of ways, most of which I will address in more detail in this post. Traditional universities charge enrollment fees. Corporate universities could do the same…or they could charge students only if they get a job after they graduate…or they could just do it as an alternative to recruiting and training spend.

If the university only did accreditation, the university could charge students to take the test. Or they could provide it for free because they would be saving money by hiring people that they know are qualified.

d. Applications/enrollment and employment. If the corporate university acted more like a traditional university, it could require students to apply and screen accordingly or they could simply accept anyone who is willing to pay enough for it to be profitable.

If the goal of the corporation was recruiting or training more than being an education company, it could screen applicants. It could screen/test students again before hiring them.

The below points pertain to any of the above possibilities and more.

How Corporate Universities Would Benefit Corporations

1. Source and Hire More Qualified Candidates

There’s a growing gap between what universities are teaching and what employers actually need. According to Forbes, 45% of US employers say lack of skills is the “main reason” for entry-level vacancies and only 42% of worldwide employers believe new graduates are adequately prepared for work.

The result is that employers are spending billions of dollars on training (more on training budgets later). If employers provided the education to begin with it would ensure that students learn what’s needed. This could lead to greater retention because the company can be sure the person is qualified (also a benefit to job seekers/employees). Greater retention would mean less spend on recruiting (another massive budget item).

2. Huge Revenue Opportunity

There are a few ways corporate universities could be huge revenue generators for the parent corporation.

a. Student revenue. Higher education is about a $500 billion dollar industry. Simply charging students to attend could be a huge business on it’s own.

b. Corporate revenue. Companies spend about $125 billion per year on training and education for their employees. Providing training services to other companies could be a good business.

c. Recruiting revenue. Companies spend about $125 billion per year on recruiting. A corporate university (free, paid, or commission based) would give the company a pool of talent that would be qualified for jobs after graduating. The company could make money by acting as a recruiter for other companies.

3. Attract Candidates, Retain Employees

People like learning. For fun and for career advancement. Job seekers might be more attracted to a university if they knew they would have access to education. It could also improve satisfaction of existing employees and therefore improve retention.

4. Potential Cost Savings  

a. Wages. More educated people means a greater supply of labor. Greater supply of labor (all else equal) should lower wages. Employees would get more value/purchasing power from the wages because they wouldn’t have as much debt.

b. Training. Having an education business would reduce the need to spend on training. Per above, companies spend billions of dollars training their employees. They would have less need to train if they had universities. They could also just make their private training programs public.

c. Recruiting. A corporate university could be a great recruiting channel which might reduce the need for budgets currently being spent on that. It would certainly reduce the evaluation component of recruiting/hr.

5. Branding and Social Good

Starting a university could be a tremendous benefit to students and job seekers and solve some of the many problems with higher education. Student loan debt also has a drag on the economy by preventing people from spending. It’s “socially good” and could improve brand and therefore profits if other products/services.

6. Diversification

Technology is drastically changing many industries and more and more companies are trying to build new products and diversify. Companies are increasingly starting innovation teams and labs to build new products and businesses to execute on it. A university could be a great initiative for an innovation team.

7. Competition is Crumbling

The current higher education industry looks a lot like the newspaper industry. The newspaper industry was going great…and then the internet happened. Newspaper companies had accumulated large sums of debt and had over invested in physical assets that could not be easily adapted. When the revenue started declining the debt payments stayed the same.

Similarly, universities have taken on debt to pay for construction…and tuition prices, their primary revenue source, are finally starting to be questioned by prospective students as the value of the degree hasn’t kept pace with tuition.

I believe the higher education industry will change drastically in the coming years. New corporate universities would be well-positioned to capitalize.

How Corporate Universities Would Help Students and Job Seekers

1. More Valuable Education

It’s a huge problem that universities aren’t connected to industry because they may not know what industry needs. Employment, after all, is why most people go to college.

Who would you rather be educated by – someone you wanted to work for, or someone who dropped out of the industry years ago? Learning about something that can help you get a job is more valuable than learning something that can’t.

2. Alignment of Incentives

Depending on the specific business model of the corporate university, the company would be more financially incentivized to serve its students than a traditional university. In fact, traditional universities are more financially motivated to keep students from graduating then they are to help them get a job. Corporate universities could make money through recruiting, or only charge students if they get a job afterwards. Would you rather be educated by, someone who is financially incentivized to get you a job?

3. Decrease Prices

Corporate universities would create more competition in the education industry. The increase in supply of universities would lead to universities competing for students on the basis of price, quality, etc.

4. Get Jobs, Make More Money

Per above, lack of necessary skills is a big reason why people can’t find jobs. Additionally, research has shown employers would be willing to pay new workers 22% higher salaries if they had the skills they need.

5. Better Way to Prove Qualifications

A college degree is a highly inefficient way to prove one’s qualifications. It costs lots of money and takes lots of time. In addition, degrees aren’t as attractive to employers as they used to be because there are so many of them. In fact, a degree from a sub-ivy league can act more like a dunce cap than a badge of honor. Some jobs simply won’t accept applications without a degree from a top school.

The accreditation component is particularly interesting here. Isn’t what you know and can do more important than where you learned it? There is an abundance of ways to learn. If hiring was based on skills or competencies tests, job seekers could more effectively display their qualifications and employers could more effectively assess them. To solve this, a corporate university would look more like a testing center than a school. This would have a big impact on the education industry and legitimize many of the alternative forms of education currently available.

Key Takeaways

  • Problem: There’s a huge disconnect between what universities teach and what employers need. A college degree is a highly inefficient way for one to prove job qualification and for employers to evaluate it. These are problems for both employers and students/job seekers.

  • Market: Employers spend massive amounts of money on training and recruiting and people spend massive amounts of money on education. Tuition inflation and the internet are major forces changing the industry.

  • Opportunity: If companies started universities it could be great for students/job seekers as well as a big revenue opportunity and cost saving for companies. A more effective way for people to prove job qualifications and for employers to evaluate could drastically change the higher education industry.

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