Part One introduces the concept of institutional differentiation and examines how high-performing systems in other countries use role clarity, funding models, and labour market alignment to support excellence, equity, and innovation.
Overview
Canada’s post-secondary institutions play a vital role in solving societal needs (curing diseases or developing new tech), national needs (responding to the economy, global security, immigration, and talent pipelines), and regional needs (community and labour market demands).
Currently, Canada’s post-secondary policies and funding models push all institutions to answer all three kinds of needs, despite the fact that a university, polytechnic, or college might have strengths that are better suited to addressing particular priorities over others.
International evidence shows that institutional differentiation — a deliberate policy move to leverage institutions’ distinct strengths by focusing on the needs they can best meet — can increase efficiency, alignment with labour markets, strategic collaboration, research excellence, and educational access.
We’ve identified six design principles based on compelling international examples for what differentiated systems do well:
Canada’s research-intensive universities are globally competitive, but asking every institution to pursue the same mix of research, teaching, and community roles dilutes excellence and spreads resources too thin. A stronger approach is to make space for certain institutions to go deeper into discovery research, while enabling others to double down on teaching, employability, applied research, or apprenticeship training.
International systems show how this can work. Germany maintains a clear binary structure between Universitäten (research-intensive) and Fachhochschulen (applied and industry-connected), while Finland separates traditional universities from universities of applied sciences, the latter tightly aligned with regional labour markets. These models ensure resources for workforce development are intentional, not an afterthought.
For learners, clarity of roles makes the system easier to navigate. They know where to find world-class research opportunities and where to pursue applied, career-focused education, allowing them to choose pathways that fit their ambitions with confidence.
In strong systems, applied institutions are pillars of innovation and workforce development. Canada’s polytechnics, colleges, and teaching-focused universities do critical work to meet regional labour needs and national priorities in fields like health, trades, and technology. Yet they are too often treated as second-tier, reflected in lower funding, limited recognition, and policy frameworks that privilege research universities.
International peers show another way. Germany, Austria, and Switzerland position their Fachhochschulen as central to both education and innovation. These applied universities offer professional training in engineering, applied sciences, and applied arts, while being fully integrated into national R&D strategies and industry partnerships. Their success demonstrates how applied institutions can be elevated in status, funding, and strategic value.
For learners, this recognition matters. It means access to programs that connect directly to careers and innovation pipelines, ensuring that applied research and career pathways are seen as vital to the economy, not secondary to it.
High-performing post-secondary systems fund institutions based on what they do best, not on one-size-fits-all growth. Canada’s current funding models often reward sameness, pushing institutions to expand indiscriminately instead of deepening their distinct strengths. Reforming these systems isn’t only about efficiency — it’s about impact.
Nordic and European models provide clear lessons. Finland, Sweden, and Norway tie significant portions of funding to differentiated performance metrics, such as graduation rates, research output, knowledge transfer, and equity safeguards. Ireland uses strategic performance agreements between government and institutions to align funding with national priorities, rewarding mission clarity rather than duplication. These approaches, which carefully choose achievable performance metrics to steer the system toward fulfilling needs, ensure institutions specialize and collaborate.
For learners, funding tied to institutional focus means programs are better resourced, teaching quality is strengthened, and credentials reflect the institution’s true strengths. Instead of spreading resources thin, differentiated funding produces clearer pathways and higher-quality learning outcomes.
High-performing post-secondary systems embed hands-on experience across disciplines. Much of Canada, by contrast, still treats work-integrated learning (WIL) as an add-on rather than a foundation. If we want graduates to succeed, employers to find talent, and research to connect with industry, WIL must become core system infrastructure.
Switzerland offers a strong model: its dual-pillar system integrates WIL into both universities and vocational institutions, supported by deep employer partnerships. Germany’s duales studium (dual study) programs go further, combining paid employment contracts with academic learning in an apprenticeship-style model for many fields beyond the trades. Students earn income, build networks, and gain practical experience while studying, so they graduate with both a credential and a resume.
For learners, treating WIL as core infrastructure means practical experience is not a privilege limited to a few institutions or programs, but a standard feature of every credential. Students enter the job market with both academic knowledge and employer-validated skills.
High-performing post-secondary systems don’t just differentiate institutional missions — they also differentiate delivery. Flexible, hybrid, and lifelong learning pathways let students start locally, study part-time, stack credentials, and re-enter education throughout their careers. This is critical not only for equity and access, but for helping workers keep pace with rapid labour market change.
Germany’s Weiterbildung programs and Singapore’s SkillsFuture initiative show how this can be done at scale. Both embed reskilling and upskilling into national policy, with strong digital platforms, funding incentives, and employer partnerships that make continuous learning a system expectation.
For learners of all ages, differentiated Canadian systems that treat digital and lifelong learning as core infrastructure would ensure that everyone — from rural learners to mid-career workers — can access flexible, portable education across their lifetimes.
Canada is producing too many graduates without clear career pathways, while employers struggle to fill critical roles. This mismatch stems from how little labour market alignment is built into university systems. While polytechnics and colleges use employer advisory committees, these mechanisms should be a standard across all institutions. In differentiated systems, industry would play a structured role in shaping programs to meet societal, national, and regional needs.
Switzerland and Finland offer strong models. Switzerland uses industry councils and real-time labour market tracking, while Finland applies regional foresight to anticipate future skills and adjust offerings. These approaches give systems the flexibility to stay ahead of change.
For learners, this means confidence that their education leads to real opportunities and reduces the time between learning and earning. Programs shaped by labour market data and employer partnerships prepare graduates for in-demand jobs, not outdated ones. Canada, by contrast, has yet to fully connect education and workforce strategy.