Universities can no longer afford to be ivory towers but must become "supply-driven" by students, Higher Education Minister Bill Rammell said during a visit to the West Midlands yesterday.
Flexibility was vital if they were to succeed in the vital task of increasing Britain's skill base and face the competition from emerging economies, he added.
Mr Rammell emphasised the need to do things "radically different" during a conference of university leaders at the University of Warwick.
"It is not a given that Britain remains the fourth largest economy in the world," he said.
"We have to strive for it and work towards it. A failure to increase higher education participation would be bad social policy and crucially bad economic policy.
"We have to be prepared to be radically different in how we change to meet the needs of students."
Mr Rammell said it was unacceptable that still too many people did not see higher education as an "opportunity for people like them".
Therefore, transforming how it was delivered would be vitally important in the future.
"We can't expect to persuade everyone to consider higher education if we don't change our models.
"The more flexible approaches will give more people an opportunity to learn when and where and in ways that meet their particular learning needs.
"Provision has to be supply-driven. In the past potential students may have been able to express a choice but it was the supplier that chose students.
"The assumption was that study was driven by university needs rather than student needs. That model doesn't fit at all. We live in an age where service providers should provide flexibility not uniformity."
Against this background, two-year "compressed" degrees were an option that needed to be considered, said the Minister.
Trials will start in September at Staffordshire University, the University of Derby, University College Northampton, Leeds Metropolitan University and the University of Kent.
A greater emphasis should also be placed on colleges of further education as venues for degree level education, said Mr Rammell.
"In many instances FE colleges offer the only access route to higher education. They may be more attractive for students seeking a small-scale environment."
This September sees the introduction of tuition top-up fees tripling the annual amount universities charge students from #1,175 to #3,000.
Critics including the National Union of Students claim this will deter people from entering higher education, particularly those from poorer backgrounds.
The Government says the move was necessary to plug a #10 billion funding shortfall in the sector.
It maintains its reforms will encourage more to enter higher education by removing up-front payment of fees and making repayment linked to salary upon graduation.
"The previous Government failed to face up to the financial realities that the sector was facing," said Mr Rammell.
"By contrast we have faced up to the politically difficult decisions. We have invested in higher education and we have provided stability. We have introduced a system that is skewed to those who need it the most."
Mr Rammell refused to comment on industrial action over pay by lecturers including a boycott of coursework that threatens to prevent students graduating this year.
Unions claim university bosses are failing to pass on the extra money from increased tuition fees to lecturing staff.
"The level of pay is a matter of negotiations between the universities and the unions," said Mr Rammell.
"It doesn't help anyone if the Government interferes in that."