Looking for the 1%

According to the Organisation for Economic Co-operation and Development, in 2018 Russia was 18th in the world in terms of R&D funding in higher education. One might wonder: why not keep things as-is? Universities are functioning, students are learning, PhD theses are being defended. But if the goal is to compete for the best students and staff, we need to aim higher – and that requires structural changes.

In my view, the biggest challenge for our universities is that we’re falling behind in the race for talents. There are 220-230 million students in the world; about 10 million among them are those who choose to study abroad. A fifth of these are well-educated, have money, and know a foreign language. This is the 1% of desirable students, after whom the world’s 200-300 top universities are always chasing. Keeping in mind that there are approximately  20,000+ universities in the world, you have 1% of elite universities sweeping up the 1% of most talented individuals.

Attracting talents isn’t just a task for universities, but for governments, too; that’s why in the world there are 43 (or so) government programs that support top universities in terms of educational export. And that is why we must be a part of this global competition.

How to attract the best

The university model itself has gone through historical changes. The scholastic university that teaches a specific set of disciplines (rhetoric, dialectics, grammar, then music, astronomy, geometry, and arithmetics), after having existed for 600 years virtually unchanged, didn’t correspond to the needs of developing national governments and capitalism, resulting in the creation of the technical university, which focused on applied training of specialists. This model, which emerged 300 years ago, is still relevant to many industries.

The next big step happened about 200 years ago and deals with the creation of research universities. This is sometimes referred to as the Humboldtian university. Essentially, it was a structural response to the scientific revolution launched by René Descartes and Francis Bacon. At this university, the chief process is the creation of new knowledge; therefore, a new teaching logic is applied. In particular, you’ve got the idea of academic freedoms: freedom of research, freedom of teaching, freedom of learning. If we were to look at the list of the world’s top universities, all of them would be rooted first and foremost in this model.

In the recent 40-50 years, a third model – dubbed “innovation university” – has emerged out of the fusion of applied technical schools and research universities. Within this model, some of the produced knowledge goes beyond theory and is converted into market-ready products. This process is known as knowledge valorization. The result of this “mutation” is a small but dominant group of universities, around 50 in total, that make up the core of innovation-rich regions: think Stanford and Silicon Valley; KU Leuven and the Eindhoven-Leuven-Aachen triangle; or the Cambridge Cluster. It is this model that lies at the foundation of the Russian national program Priority 2030.

This new model calls for a financial and structural transformation of university budgets. Right now, the funding system of Russian universities looks approximately like this: 57% of the funding comes from the state, meaning that the university depends heavily on this money. Extrabudgetary educational activities bring in another 26% of revenue, 10% comes from other sources (capital investments, sports, and cultural activities), and only 7% – from R&D, scientific and technical services, and IPs.

Within the innovation university model, only 40% of the budget comes from the state; 30% is the result of R&D grants, and another 30% is independent revenue from paid education, sale of technologies, or endowment fund investments. A university must be of need to different stakeholders – and its budget should reflect that.

Early adopters

One example is KU Leuven (Belgium), which has an interesting history. Founded in 1425, it is one of Europe's oldest universities. Around 30 years ago, a group of students who had returned from studies at other universities decided that they didn’t want to live in an agriculture-focused province; instead, they’d prefer to develop engineering, microelectronics, biomedicine, and other subjects at a high level. So, they began to conceptualize the university’s transformation. Today, KU Leuven is 43rd in the Times Higher Education ranking and tops the list of Europe’s most innovative universities. At the university, 84% of R&D funding is external ( of which 50% comes from industry contracts), while the state mostly finances the initial level of studies – Bachelor’s programs. Over the course of 15 years, the university originated more than 100 spin-off companies, some of which have become major players on the market.

One of the innovative decisions made at KU Leuven was the establishment of Leuven R&D (or LRD), an independent structural unit with an autonomous structure of management, finance, and HR – as well as its own corporate style and a well-defined, transparent system of profit distribution between project groups, LRD, and the university. This new unit took on a number of responsibilities. To facilitate partnership with tech companies, it established Leuven MindGate, a platform for collaboration between companies, investors, and researchers in healthcare, high-tech, and creative innovations. Collaborations with financial organizations occur via the seed capital fund Gemma Frisius Fund with support from two banks. Meanwhile, the local government uses the university’s technoparks to invest in education and entrepreneurship. And lastly, more than 1,800 specialists work in interdisciplinary project teams within LRD and the university.

The beauty of the LRD model is that it has relieved researchers and professors of managerial strain in terms of innovation activities; now, they can both conduct their research and turn it into commercial products. LRD solves an important problem: as soon as a scientist has an idea, they don’t rush to monetize it – instead, they seek a model in which they can enjoy university work while making money. When working on industrial projects, university staff create independent “internal companies” with their own financial accounts. 83% of the funds in these accounts come from industrial contracts, and the other 17% – from the university. In ten years, more than 100 professors became millionaires. After retiring, they are free to take “their” money out of the accounts, but, notably, the lion’s share of funds remains there to fund further R&D by students and fellow researchers.

Unlike Europe, China was forced to move more quickly towards competing with the USA for talents. Instead of opting for lengthy, organic growth, the country copied the best management models, established modern infrastructure, and brought in teams from all over the world. This, for instance, is the story of Shenzhen – what used to be a fishing town of 30,000 people is now a major metropolis with a population of 12 million, a GDP of $340 billion, and 9,000 operational businesses. The region’s South University of Science and Technology, for example, took very little time to enter the top 200 of the Times Higher Education ranking, taking just ten years to accomplish what other universities did in 30-50 years.

Andrey Volkov is the first rector of Moscow School of Management SKOLKOVO and one of its ideological founders; he is currently the director of SKOLKOVO’s Public Strategy Institute and the scientific supervisor of the national program Priority 2030 and the academic excellence program Project 5-100. Andrey Volkov is also a world-class alpinist; a “Snow Leopard” title holder, he has summited five peaks above 7,000 meters within the former USSR, as well as climbed the Everest. In April, he was a speaker at ITMO’s PI School, an initiative for young researchers training to become team leaders. This year, its students learned about the transformation of higher education, product development (including AI-driven), interdisciplinary project management, and career planning at ITMO.