July 26, 2009

 

THINKING INSIDE THE BOX

Hello everybody.

“And the beat goes on.........."

THINKING INSIDE THE BOX

I surf the net a lot. A lot of it is just aimless wandering, going from one link to another, sometimes just to see where it will lead me. I came across a column by a business consultant and author – Naomi Karten – about "thinking inside the box." http://www.stickyminds.com/sitewide.asp?Function=edetail&ObjectType=COL&ObjectId=8279#authorbio

Her thesis was that: “The problem with urging outside-the-box thinking is that many of us do a less-than-stellar job of thinking inside the box. We often fail to realize the options and opportunities that are blatantly visible inside the box that could dramatically improve our chances of success. Thinking outside of the box can generate innovative and ingenious ideas and outcomes, but the results will flop when teammates ignore the ideas inside the box.”

The column listed some ideas that came out of a workplace exercise that were all inside the box skills:

1. Listen to each other's suggestions.
2. Don't be so quick to dismiss each other's ideas.
3. Challenge assumptions.
4. Create team norms that improve working together.
5. Build a relationship with the customer before building the product.
6. Consider the customer's perspective when asking questions.
7. Spend more time talking with the customer—and listening.
8. Spend more time planning before starting to build.
9. Ask more questions about what's expected.
10. Ask better questions about what's expected.
11. Draw from each other's strengths.
12. Collaborate with other teams and learn from each other.
13. Consider what we've learned in other similar projects.
14. Consider what we've learned in other projects unlike this one.
15. Relate this problem to other problems team members have had experience with.
16. Have a team member observe how the team is doing and give feedback.
17. Seek advice from others who have already undertaken similar projects.
18. Stop periodically and assess how the team is doing.

"Great ideas—and not a single one required venturing outside the box." Ms. Karten concluded: “Our challenge is to look around from our perch inside the box and ask, "What options and opportunities are right here for the taking?"

I wonder if, in our zeal to think outside-the-box, to be creative in our responses to our problems, we aren’t straying too far from the most basic of business precepts and in so doing moving farther away from solutions to those challenges we face. Admittedly, we face unique business situations that are different from traditional for-profit circumstances, but in the final analysis we have more in common with small businesses than we differ. Should we take a step back to basics as it were, and take a fresh look at our most pressing business problems to see what responses and solutions standard business applications have historically applied in the past – if only in the ways we attempt to address those issues? Could we at least improve our out-of-the-box thinking by adopting some of the traditional business protocols in moving towards being more creative?

Are our organizations doing all they could to improve how they work as teams? Are we methodical enough in our approach to analyzing what has gone wrong and what we might do about it? Do we systematically build on our lessons learned or do we keep mindlessly repeating the same mistakes over and over. Are we challenging our assumptions on a regular basis or are we clinging to old, and perhaps, worn out and tired beliefs about ourselves and our audiences? Do we really listen to our customer bases and consciously work at building a relationship with them, or do we continue to make assumptions about them that serve our own pre-conceptions about who they are, how they act, and what they want? These are, I think, good questions to stop and ask ourselves every once in awhile.

It is arguable that we never spent enough time in the box in the first place; that we never honed our basic business skills, never kept pace with the for-profit business world in terms of efficiency and productivity, and never really spent enough time and energy (and still don't) learning how to become better managers. Many have observed that we still don't do that good a job at training our leaders in all the business skills necessary to compete in today's marketplace - from entreprenurialship to being good public policy advocates; that we have only a surface level understanding of managing from inside-the-box, that we have far too little training (initial or on-going) in basic business skills, and that we have no mechanism to provide systemic opportunities for our leadership to become better trained.

There are increasing clarion calls for us to provide more business training to both our emerging and existing leadership -- on-going training. Some organizations have small budget line items to allow for continuing education and training - but most do not. And the amount we spend on continuing to train our people pales in comparison to the private sector. And that lack of training is harming us. There may just be some advantages to going back in-the-box – perhaps for many of us for the first time -- if only for awhile.

Have a good week.

Don’t Quit
Barry

July 19, 2009

 

WHAT'S WRONG WITH THE ARTS BUSINESS MODEL?

Hello everybody.

“And the beat goes on...........”

NOTE: We are in the process of reviewing new software options for this blog so that we might correct some of the things that don't seem to be working well with the current platform. Hopefully the new software - when we decide on one - will allow us to use fonts and styles that are easier to read, will solve the nasty problem of not notifying people of new blog posts even though they are subscribed, etc.) Thanks for your continuing patience.

THE NONPROFIT ARTS BUSINESS MODEL

Bloggers love to feed off other bloggers. Last week Doug McLennan, in his blog diacritical, (www.artsjournal.com/diacritical/2009/07/attention.html) opined on the nonprofit arts organization business model of selling tickets to consumers as: “If you believe your business model is the classic consumer transaction (I make the performance, you buy the ticket) then you're done. Sorry.”

In his blog, The Artful Manager, (www.artsjournal.com/artfulmanager/main/what-exactly-do-you-sell.php) Andrew Taylor commented on Doug’s observation and added: “The deeper challenge for arts organizations is that they DO sell a product, even as they DON'T. That is, an important segment of any arts audience doesn't recognize the complex bundle they're seeking when they buy a symphony or theater ticket. They've come to use that event as a placeholder or proxy for that bundle, without even knowing it. To this core group (often the most passionate about the art form, the most loyal buyers, the most committed donors) the bundle IS the product. And as you innovate around the delivery or context of your creative work, you challenge their passionate connection to the discipline's tradition.”

And Andrew added further: “There's clearly a need to redefine and reframe what an arts organization delivers, and why people recognize the value of that effort with their time, attention, and money. But we're not so fortunate to have a clean break and a fresh start.”

In a follow-up Sunday www.artsjouornal.com/diacritical/2009/07/of-ticket-sales-business=model,html Doug clarified his argument that in the "Attention Economy" products and services compete for consumer's 'attention' -- not just with others in the category but across categories - i.e., a jazz concert competes with other jazz concerts, with other arts performances AND with You Tube or video games or whatever. He offers that relationship building was, and remains, one of the keys to getting the attention (and ultimately the sale and loyalty) of customers. He goes on to offer some specific suggestions - by way of example - of how organizations might approach dealing with the complexity and increased competition for people's attention as one flaw in the current arts organization business model. I applaud Doug's moving the discussion of business models to offering concrete, specific suggestions as to what might be done.

This is not the first time we have all heard that the nonprofit arts organization business model is outdated and desperately needs revision. It’s time to move the discussion beyond what is wrong, to figuring out what to do. We need to dig deeper into what we mean when we talk about a failed business model. What should our model be?

Before we can talk about what specific changes are required, we need to come to some common understanding of the concept of a ‘business model’. I'm not sure we all mean the same thing when we discuss the issue. What does the term mean exactly? I think most people assume by ‘business model’ we are talking about a compilation of how we create and deliver a product or service – the “something of value” and convert it to an economic value. But, of course, in the nonprofit arts sector that conversion is perceived of as only a necessary evil as the means to our real purpose which is to foster and promote both the creation of art and its wide dissemination. The for profit world contents itself with the conversion of something of value to the economic value of bottom line profits which, in turn, usually results in the increase in shareholder value in the company. So for example, Blockbuster Video was a ‘bricks & mortar’ business model for the delivery of videos – now outdated by the advent of DVDs and the Netflix model of online rental and postal delivery. The creation of the content of the (mostly) movies is another business entirely. The arts sector is, by and large, in a business that combines these two examples – i.e., we create the art and deliver it to the public. So obviously the whole concept of business model is different for the nonprofit universe than it is for the ‘for profit’ world, and therein lies some of the confusion.

Wikipedia defines a business model as “a framework for creating economic, social, and/or other forms of value.” It goes on to suggest (based on the framework created by some guy named Osterwalder ) the following parts of such a model:

Infrastructure

• Core capabilities: The capabilities and competencies necessary to execute a company's business model.
• Partner network: The business alliances which complement other aspects of the business model.
• Value configuration: The rationale which makes a business mutually beneficial for a business and its customers.

Offering

• Value proposition: The products and services a business offers. Quoting Osterwalder (2004), a value proposition "is an overall view of .. products and services that together represent value for a specific customer segment. It describes the way a firm differentiates itself from its competitors and is the reason why customers buy from a certain firm and not from another."

Customers

• Target customer: The target audience for a business' products and services.
• Distribution channel: The means by which a company delivers products and services to customers. This includes the company's marketing and distribution strategy.
• Customer relationship: The links a company establishes between itself and its different customer segments. The process of managing customer relationships is referred to as customer relationship management.

Finances

• Cost structure: The monetary consequences of the means employed in the business model.  
• Revenue: The way a company makes money through a variety of revenue flows. A company's income.

So when Doug talks about selling tickets to performances as too simplistic a business model in the era of the "Attention Economy", and Andrew talks about still having to deal with legacy systems in dealing with our customers, both are talking about the business model in the traditional sense – i.e., the conversion of the creation of our product / service (art) into an economic value that will allow us to sustain our endeavors (because, bottom line, we are like a business – like it or not )– and if we can’t pay our artists and our arts administrators and all the overhead associated with creating art and delivering it to the public, then it’s game over for us. Doug and Andrew may also be talking about several of the above component parts of the business model as well, but principally they are talking about the Distribution channel under the Customers banner, and, on a deeper level, the customer relationship subsection.

Changes in any of the above subcategories will impact and alter all of the other subcategories. So if we change somehow the means of delivering our product, we will likely change the customer relationship, and those changes will likely impact both cost structure and revenue flow (ostensibly for the better).

Putting aside for a moment discussion of our model in relationship to our social and intellectual and other goals, and confining the discussion to the traditional aspects of “business” (i.e., money), what then is really wrong with our model? Should we be looking at both the creativity side as well as the delivery side of the equation, or is what is wrong solely on the delivery side? Does it start at the infrastructure level above? While we arguably possess the creative capabilities and capacities to deliver something of value, do we fall short on having those same core capabilities and capacities to execute on the business model? Do we lack the personnel, the expertise, and the tools to fully exploit and capitalize on the product, and is that but a function of money (or lack of money)? Is that some kind of Catch 22?

Our costs and revenue model has (over the last five decades) diversified our income between public and private funding and earned income. Earned income was never enough in the model to cover all our costs. Was / Is our model too dependent on public funding and is the new reality now driving that home? Or did we depend too much (or not enough) on philanthropic donations – both institutional and individual? And what other source of revenue is there for us? Instead of focusing on revenue, should we be focusing on cost cutting? But where do we cut and how much (more) can be cut? If our biggest expense is people (artists and administrators) how can we cut that any more than it’s already been cut?

How can any arts organization other than the largest and most financially stable ones possibly follow Michael Kaiser’s advice not to cut programming or marketing in the current economic climate? Should, as Kaiser has suggested, we focus more on selling the value of our institutions themselves instead of specific artistic creations and works? Is that part of expanding our 'relationships' and using newer techniques and tools to engage people more so as to get their attention? While perhaps an Alvin Ailey or a Royal Opera can raise bridge funding from the local community based on the intrinsic, innate value of the organization to the community, is it realistic to think that all the arts organizations in a given community can successfully follow that advice? Can communities fully support the huge number of arts organizations that currently exist? Will the market correct the arguably overbuilt arts ecology over the next two or three years as the funding sources for the arts likely experience deeper and more profound cuts and cutbacks (from government to foundation to individual support)?

Is the problem we face perhaps centered not in revenue and expense, but the perceived value of our product – at least to the wider audience we don’t seem to have? Implicit in Doug and Andrew’s observations is the central notion that we need to change the business model so as to make it work in terms of generating enough revenue to cover the expenses. If there is a problem in our perceived value to be shrinking (competitively) can relationship building help to repair it? To what extent do we not offer enough value to our customers (or at least to the universe of those potential customers that we absolutely must have to make this work for us). How do we correct that? Or are Doug, Andrew and perhaps the research of those like Alan Brown suggesting that our model doesn’t market the right product – that, in fact, the product is not just an arts performance or exhibition, it is, rather, a whole set of experiences and in that light our product might really be a ‘service’? And that would be a very interesting debate and discussion, but it would still beg the question of how to market ourselves, of what kind of business model we need.

When we talk about an outdated business model are we talking about the central core issue of what our product (or service) really is, or are we talking about how we should market and sell the product (or service), and if the former, are we talking about such things as newspaper advertising vs. the internet, or Facebook vs. Twitter or something much more fundamental?

So back to Doug and Andrew. If Doug is right and the model of simply trying to sell tickets to performances is outdated and too simplistic, and the complex relationship between our organizations and their customers is not only changing, but is impacted (as Andrew suggests) by both the things we have done in the past to form and manage that relationship and the way we have done those things, then what does the typical (if such a thing exists) arts organization do? Are we talking about ultimately moving to a wholesale revision of the business model, or merely some small tweaks and fine tuning? Do we need to somehow better understand the relationship between us and our audiences, and then figure out ways to improve it so that we can increase the cash flow from the value we offer?

The model has to have some theory and application to it to address the financial issue of revenue meeting expenses, does it not? And if it does, then very likely the model clearly doesn’t work anymore because few arts organizations now have (or are likely to have over the next three years) a cash flow greater than its costs. And does the “typical” arts organization have either the resources or the time to engage in the process of better understanding their audiences and the marketplace (which is changing by day) – at least in the near term? What can be done to help them? Who can help them?

Which leads to that deeper business model analysis – has our product (service) lost its value - relatively speaking - with all but a core audience? Has the perceived value of what we offer fallen in the current economic climate, or are such mundane things as parking, convenience of location, and scheduling more important to our customers than the complex bundle of expectations and values of what an arts experience means and offers? Is the answer to our failed business model that we are too simplistic or that we are too complicated in our approach and relationship with our customers? Are we a less competitive option in the pantheon of people’s leisure choices in the current economic climate? Or are we just failing to adequately market ourselves in a competitive manner.

Rethinking a ‘business model theory’ raises so many questions. I don’t know the answers to any of them. I’m only asking. But we've been talking about the outdated business model for years now - mostly in small bits and in a vivisectionist way. We need to get a handle on the big picture so we can talk about it with an eye to doing something about the systemic aspects of the problem.

The current economic situation is likely to get much, much worse for the arts through 2011. Two plus more years of government, foundation and perhaps even individual cuts in our funding streams (cuts very likely to be far, far deeper and more painful than the cuts we have seen in the past two years), coupled with likely decreases (or flat ‘no growth’) in audiences, is going to dictate changes to our business model well beyond what we anticipate, what we would like or what we can cope with. The pressures on small and mid-sized arts organization leadership will only grow more intense.

Have a good week.

Don't Quit.
Barry

July 12, 2009

THE ARTIST / ARTS ORGANIZATION DISCONNECT

Hello everybody.

“And the beat goes on.................”

ARTS ORGANIZATIONS AND THE ARTISTS THEY SERVE AREN’T ALWAYS ON THE SAME PAGE

I came across an interesting blog discussion last week that centered on the problem that artists aren’t paid enough for their work. The blogger thought part of the problem stemmed from “the close collaboration artists have with nonprofit organizations.” The author goes on to ask: “Do NPOs perpetuate the undervaluing of art by expecting to have artists’ collaboration without paying them What They Are Worth?” This author is sympathetic to the plight of nonprofits and doesn’t set out to necessarily criticize NPOs for a situation beyond their control, yet ends the blog post with the plea that artists must simply demand realistic and fair compensation.

But everyone is for paying artists better. And while we're at it, we should pay arts administrators better too. But there aren't enough funds to do either one, anymore than there are enough funds to put arts teachers in every school. The money has to come from somewhere and unfortunately this discussion, including the very interesting comments to the blog, never really come to grips with this reality - or more importantly what might be done about it - and I find that somewhat disappointing and continually frustrating.

I did find the comments to the blog very interesting nonetheless. Those comments ranged from:

• the frequent suggestion that artists must break out of the nonprofit mentality and stop being beggars and demand decent pay, to 
• urging artists to become more entrepreneurial, to
• a demand / supply observation (and ensuing debate) that there are so many people who want to be artists that (even with the high demand for art) the pie simply isn’t big enough, but that the reason there are so many artists is that being an artist has rewards beyond money, to
• criticism that there is too little training available to working artists so that they might be better business managers of their own careers.

A couple of nonprofit staffers defend the arts organizations that lack the funding streams to offer artists decent compensation for their work, and even question the role of artists in all this.

You can read this original blog and the comments by clicking here: www.technologyinthearts.org/?p=1040

All of this got me wondering about a couple of things. First, to what extent do working artists really understand how the nonprofit arts & culture ecosystem is set up and how it works (or doesn’t work depending, I suppose, on one’s perspective)? Is there real appreciation for what arts organizations are designed to do, and the obstacles and barriers in doing what they are suppose to do? From the artist’s point of view is it their expectation that the primary purpose of nonprofit arts organizations should be to support, facilitate and in other ways encourage and enable the creation of art and to address the needs of artists? But isn’t part of the nonprofit arts system designed not just to facilitate the creation of art, but also to expand and enable public access to that art? And isn’t that particularly true with local, state and federal taxpayer funds?

I understand the frustration of artists over the marginalization and undervaluation of what they do in this culture and that it is so difficult for all but a few to earn a living wage being an artist. I understand too the frustration of nonprofit arts administrators over the marginalization and undervaluation of what they do in this culture, and that it is so difficult for so many of them (particularly at the entry and lower levels) to earn a living wage being an arts administrator. I understand that both of these groups of people feel passionate about art and its role in our culture, and that both put up with less than ideal situations and realities because of that passion and belief and the non-monetary rewards associated with both careers.

I agree with the comments in the blog that suggested artists (and arts administrators) need to demand more for what they do. And though I also recognize and accept the reality of economics, I have for a long time said out loud that we have to stop behaving like Oliver Twist, holding our little bowl with outstretched hands, begging “Please sir, may I have some more.” I have argued that one way to get more is to organize and play the political clout game with the same intensity and sophistication other interests successfully play that game. That of course, involves raising serious funds to achieve clout and that the field has been unwilling, or unable, to do -- at least on the state and local levels.

I think working artists and working arts administrators need to talk a whole lot more about these common issues, about how things work, how we interface and intersect with each other, and how we can more closely collaborate for our mutual gains. Recent efforts of funders and grassroots new organizations – from Creative funds, to the Center for Cultural Innovation to LINC are all encouraging efforts in the direction of providing for artist's needs and for expanding understanding by both segments of our sector as to who we are, how we work, what we face and where we are going.

But a disconnect does exist I think, and so we need to continue to try to explain ourselves better to each other, and we need to ask where we fail to fully understand each other. Maybe someday we will figure out how both artists and arts administrators can be better paid, and how, at the same time, more of the public can have access to more art.

Have a great week.

Don’t Quit
Barry

July 05, 2009

 

CASTING THE WIDER NET - MORE ON MARKETING

Hello everyone.

“And the beat goes on…………………………………”

DATA MINING:

I’ve gotten a number of questions on the blog of a couple of weeks ago about Data Mining and what applications that marketing tool might have for the arts sector. I’ve been asked for specific examples of how it might be useful to performing arts organizations in audience development marketing efforts.

Here are some other examples:

1. X number of people buy (and / or download) music in a given period (e.g. week, month, quarter) in a given geographical territory. If we knew which ones of those people purchased or downloaded classical music, we could target those people with pitches to attend symphonies etc. If we knew which ones opted for Broadway show tunes, we could target those people with pitches for musical theater. Marketing is increasingly all about targeting the “right” potential buyers of our programs so as not to waste money in some blanket approach.

2. Similarly we could zero in on people (within a given geographic al area) who had “googled” anything that had to do with plays, playwrights, or theater and target them with offerings.

3. In both the above cases, if we knew which of those people from outside the territory were likely convention delegates or tourists coming to our area, and had purchased airline tickets or made hotel reservations to our area, within (say) the next two months, we could likewise target them with offers to attend a performance that might interest them.

4. If we knew which people had kids who were taking dance lessons, we could target their parents to attend “family” dance performances.

5. If we knew which people attended any of scores of our theater company performances in the past six months, we could target them with the offerings of other theater groups.

You get the idea.

As I said before - this data already exists. It is available to one degree or another for purchase (though it would entail the set up expense of adapting platforms and applications to our specific and special requirements). Of course, if we collected our own data we could “mine” it deeper than existent data – but we don’t. Our problem in this arena stems principally from our lack of collaboration. We don’t - as a sector or sub-sector - collect (and thus don’t control) our own data. While our discipline based organizations cooperate and collaborate through local, regional and national service provider groups, we haven’t yet gotten to the point where we act as an industry or even a sub-sector of an industry. We lack the mechanisms to track the spending / buying patterns of our own customers. And we don’t cooperate and collaborate in accessing the data that already exists. That is largely because such an enterprise costs money and time, and as individual organizations we are too small and thus we lack both. While the data exists elsewhere, we would need customized platforms and applications to access the specific data we want. To do so would require us to collaborate – at least across some category (discipline, or geography for example) so that we could pool money and resources.

Why we don’t do that is somewhat of a mystery to me. I know that part of the reason is that for a long time we were very territorial in sharing data. Large (and small) organizations didn’t want their audience or donor lists falling in the hands of others, least those supporters be pirated somehow (a likely false base assumption to begin with), but that territoriality seems to me to have dramatically lessened in the recent past. There is the question of scarcity of money to devote to such an enterprise (and the not unfounded fear that the gains from such an investment wouldn’t be immediate and, even in the long run, would be problematic and might not match expectations). And there is the question of time and who would launch, and then manage, such a unified effort on behalf of potential participants (and whose job is that anyway – the NEA? State or city agencies? Service provider umbrella groups?

Loose consortiums of like minded organizations? The question of where the genesis of this kind of initiative (or any kind of initiative that involves or impacts the whole sector or some large portion thereof) should originate is a fundamental question we need to soon address apart from marketing concerns.

Our failure to create mechanisms and structures that would allow us to access this kind of data works against us and puts us at a competitive disadvantage in our quest to compete for audiences, financial supporters and boosters. We are simply missing out on sophisticated marketing techniques and tools that other (mostly private) sectors have. At some point we need to do what is necessary to put us in the position to be able to data mine.

LESS IS MORE?

I read a review of a book entitled IN PURSUIT OF ELEGANCE by Matthew May in Time Magazine (June 29, 2009 issue) that intrigued me. May is a professor and consultant in marketing and based in southern California and his thesis is that “people engage more intimately with ideas and objects that are simpler”. Digging into his book online and at his website and his theory is a little obtuse to me, but I was intrigued by the basic counter-intuitive idea that doing less, providing less information – as a marketing strategy – works. I have long wondered whether or not our marketing messages are too complex, too detailed – that we try to provide too much information of too complex a nature and that our inclination to try to sell ourselves on ever deeper levels might just be working against us. I wonder if some of our basic assumptions aren’t likewise unnecessarily too complex (depth of experience vs. pure entertainment as an example). In our yearning to convey to our audiences all that attendance might offer them, might we not just be scaring some of them away. What if dance was advertised simply as “extraordinary performance” or some such simple thing? Does the theory of doing less as a marketing technique apply merely to the content of marketing or may it also apply to the time, places and areas where one markets. Interesting questions that I hope might be raised at arts marketing conferences in the future as we become more sophisticated in our own efforts.

Have a great week.

Don’t Quit.
Barry