A University isn't a business, but it operates subject to the same laws of supply and demand, in the same ecosystem, even if its objectives aren't profit. So long what it produces is valued by society, and no competition exists, Universities will survive, regardless of what torments their governments or administrators put them through.
So what do Universities produce that we need so badly? Graduates.
Why do we need those again? It all comes down to employers. By looking at a resume and noting the institution, subject and grade, a prospective employer gets a vast amount of information about a students intellect, knowledge base and approximate character without the expense of an interview. A candidate pool of millions can by pre screened down to dozens with a few dozen characters of text.: BSc (UCC Geol) 1H, PhD. It's beautifully compact, ten to the tweet.
Now, imagine for a minute if Universities didn't exist. The Martians arrive one day and carry them off, leaving nothing but some empty real estate and a few torn flyers for the freshers ball. What would happen then?
Employers would have a problem. How could you filter for people with specific skills, aptitudes and background. How could you figure out who had grown up a bit, and who hadn't? Can't interview them all, it would take too long and cost too much.
The resumes would be like novels, full of odds and end. Imagine how many bits and pieces you would have to do to be, for example, a Vet? At the very least, you'd have to thoroughly read the resume, decide on the virtues of whatever courses they took, whatever work experiences they had, volunteer activities and so forth. It would be tedious and slow. Inefficient.
But this is the 21st century. Now we have machines for that kind of work, don't we?
If I wanted to put Universities out of business, I'd find a faster, cheaper way of filtering candidates for employment. Some way of tracking and assessing the true value of what a potential candidate has done and matching it to closely to potential employee needs. Stripped of the false simplicity of a degree, I could match personality and aptitude test results, more domain specific education at a much more granular level than a monolithic degree. Such a system would select candidates for interview who would be a much tighter fit to my needs than the gross level degree filtering. If we can unzip genomes and read from them useful information, surely we can unzip peoples life experience and map it to the right jobs and careers.
From the student perspective, instead of spending four years chunking through a monolithic primary degree, people could do a more varied mix of things, and have the same system advise them closely on what they aught to be doing to match whatever employment or career path they might be interested in. Instead of a degeee being a thing entered blindly at one end and exited traumatically after big bang finals, with hope and a scroll, it becomes a lifelong process as they student (and never, truly, a graduate) accumulates useful experience to steer them towards whatever they want to be.
Universities can be at the centre of this new model, if they move fast. They are well placed at the centre of a the education web, with strong established brands, considerable (if, presently, overstretched) resources and a strong incentive.
But they probably wont. They are too close to the current model to see anything different as anything other than nonsense, or a threat to be poo poo'd. There is a reason Amazon isn't called 'Waterstones' or 'Barnes and Noble', and eBay isn't called Buy and Sell. It takes an outsider to see the potential, and act on it. Someday, soon, someone will do this. The first few efforts will fail, for mundane reasons. These things happen. You can then dismiss the model, until one year, the applicant numbers start go top off, and then go down, little by little, until one fine day someone who is perhaps now only a middle ranking lecturer find the hard choice is the only one and turns out the lights.
At least you'll have some good real estate to sell.
21st Century Assessment: The University of Farmville
The Qualifications Arms Race