Wednesday, September 26, 2012

The Law of the Few

About a year ago, I began designing a graduate certificate program for American University focused on technology issues in arts management, and this past summer, I taught my first course focused on the intersection of technology and marketing. To open the course, I asked students to read Malcolm Gladwell's The Tipping Point, which if you haven't read it, describes how social epidemics evolve, providing a great platform to discuss word-of-mouth marketing and how technology can be used to ignite a movement.

Early in the book, Gladwell discusses "The Law of the Few," which boiled down is a riff on the 80/20 principle - 20% of the people are responsible for 80% of the work. As marketers, we latch onto this principle, as it correctly argues that if we can identify and cultivate relationships with a select group of influential people called "connectors," then our returns can be maximized. One connector can be worth his weight in gold, and easily as valuable as ten non-connectors.

As I was giving my lecture, it struck me that most non-profit arts organizations have designed their business models on the "Law of the Few" principle, not just in their approaches to marketing, but in how we program, fundraise and communicate. A previous supervisor of mine used to say that a grassroots movement begins with the grasstops. But if we are all focused on the few, are we ignoring the many?

I ask this question, because as society shifted away from a one way, web 1.0 world towards an interactive, web 2.0 one, the ways in which we do business and view the world radically changed. Previously companies had much more control of their brands as they could carefully craft messaging, but today, brands have a life of their own in the virtual universe. We used to seek out experts when we needed information, now we rely upon the collective of Wikipedia or Google (when was the last time you consulted an encyclopedia?). At one time knowledge was proprietary, but presently, a growing number of us look to the commons (and companies trying to maintain business models built upon charging for knowledge are struggling). We used to rely on authority figures to inform us, but now in moments of crisis, millions flock to Twitter, where we learned an hour before President Obama confirmed it that Osama Bin Laden had been killed.

I believe that many of us used to defer to the knowledge and experience of a small few, placing trust in their expertise to guide the rest of us. But when a handful of very powerful and experienced bankers plunged the world into a global economic crisis resulting in the loss of 40% of the world's wealth, the masses started to wonder if the few could be trusted to lead. In the web 1.0 world, most were passive recipients, willing to receive content as delivered. Today, the least among us now demands a seat at the table, and via web 2.0 technologies, an even playing field has begun to emerge.

So how will this affect the non-profit arts? Here are just a couple of examples:

The Citizen Critic (and the Future of Arts Journalism)
A couple of weeks ago, Barry Hessenius, former director of the California Arts Council, issued his annual list of the most influential people in the arts. On the list were a handful of notable bloggers, including Ian David Moss, Diane Ragsdale, Clay Lord, Doug McLennan and Thomas Cott, however not a single traditional journalist was mentioned as there wasn't a category for journalists. Was this an oversight, or a trend? Nielsen recently reported that 92% of consumers trusted word-of-mouth from friends and family, while only 58% trusted editorial content such as newspaper articles. Harvard University recently published a study that contended that average reader reviews on were just as trustworthy as book reviews from professional critics. Even Maura Judkis, a writer for the Washington Post, in her article for the NEA's blog ArtWorks states "readers of my generation, the Millennials, are more likely to want to see a movie or play because their friends like it than because a critic does." Word of mouth has always been powerful, but advances in technology have allowed connectors to broadcast their thoughts to followers instantaneously, and others, the opportunity to feed into social networking, user review sites like So where does that leave us? Ask yourself - if you were visiting New York, and thousands of patrons had described a Broadway play positively in online reviews, would it have more of an impact on you than negative reviews by professional critics? [could this explain the mysterious success of Spiderman?]

Crowdfunding and Microfinancing
In her article "It is Broke, We Should Probably Fix It," Alexis Clements argues that many non-profit organizations chase a few, large foundations, whose money would have been public via taxation but is now controlled privately. She goes on to say that via grants from private foundations, wealthy individuals can "funnel money to organizations that will uphold their personal beliefs." That is a pretty charged statement, but I do wonder how often arts organizations manipulate their missions in order to receive a large grant or donation from a private funding source? How many arts organizations are alive today primarily due to the generosity of one or two major donors, and for those, do the donors in question wield too much influence? In 2008, President Obama demonstrated the power of the collective when he raised unprecedented amounts of money from small donations. As of August, the crowd funding website Kickstarter has raised $275 million in funding for projects, and has grown exponentially since its founding in 2009. And we aren't just talking about tiny amounts of funding either. The top 10 projects funded on Kickstarter all raised more than $1 million. And Microfinance website Kiva has leveraged $346 million in funds from 823,474 lenders to launch projects aimed at combating poverty in 63 different countries.

Crowdsourcing Curation and Programming
When I was at the Smithsonian, an internal debate was occurring about the "Art of Video Games" exhibit at the American Art Museum. The Smithsonian invited the public to help curate which video games would be featured in the exhibit, and in doing so, more than 3.7 million votes were cast by 119,000 people in 175 countries. Pretty impressive. However, questions began to arise about the role of the curator. For the most part, non-profit arts organizations are lead by artists with extensive training and sometimes decades of experience. As the resident experts in their fields, they are regularly called upon to make value judgements on what art to present, and how to present it. In the past, the public has remained a passive receiver of said art, but a growing number of patrons today would like to play a more active role. Technology has changed what used to be a one way conversation into a dialogue, and in turn, many community stakeholders now expect to be able to exercise their voice. I believe this phenomenon prompted Arts Journal editor Doug McLennan to host the "Lead or Follow" debate early this year. If you didn't catch it, here is a good recap.

Understandably, non-profit arts organizations have built models based on the "Law of the Few," and I am not advocating for the abandonment of those models. I am however suggesting that there is wisdom, money and resources to be found in the collective as well. This isn't an either/or proposition between the few and the many; it's a both/and situation. There is a significant role to play for the few and the many. But to tap into the collective, I believe we must become vital and essential to our communities again. I fear that for many non-profit arts organizations, if they were to disappear, we'd barely hear a whimper, when there should be protests in the streets.

Monday, September 17, 2012

The Myth of the Ubiquitous Solution

Today I tread lightly into the “new models” discussion which has recently been at the forefront of chatter among arts managers. For a good recap, please read the following:
“Why Arts Managers Short of Cash Are Looking at Detroit,” by Terry Teachout, The Wall Street Journal
“Theaters Look for New Ways to Draw in Subscribers,” by Nelson Pressley, The Washington Post
“The New Model, Part 2,” by Michael Kaiser, The Huffington Post
“Swimming Downstream in the Current of History,” by Adam Huttler, Fractured Atlas Blog

As Michael Kaiser states “the world is changing – but it has always been changing.” I agree with Mr. Kaiser to a point, but I’d like to point out that the amount of change organizations have faced in previous decades probably pales in comparison to the change they have confronted in the past ten years. In a one decade, pretty much everything we have been taught is now in question. How many of us were taught that the key to financial stability was saving money in order to purchase a house? For those of us who purchased prior to 2007, becoming a homeowner could be the dumbest financial decision we make in our entire lives. Who knew that we would experience a global economic crisis so severe that it would destroy
40% of the world’s wealth, or that people would actually opt for negative investment returns in order to move monies into safer investment vehicles? For the first time in the history of the United States, Standard & Poors downgraded the credit rating of the federal government to below AAA status, and the youngest Americans will most likely be worse off than their parents. Staples of American life, such as Social Security and Medicare, seem to be imploding, and new college graduates are entering the work force with record high student loans.   And this is to say nothing of the arts. States and municipalities are slashing funding, arts education barely exists in school curriculums and the lack of discretionary income is affecting ticket sales.
As they say, necessity is the mother of invention. It shouldn’t come as a surprise to anyone that arts managers are engrossed in discussions about new models. Many organizations had reserves to weather a couple of bad years, but recently we’ve begun to ask – what if this is the “new normal?” And how arts managers describe the “new normal” reminds me of the Hindu tale of the Blind Men and the Elephant. As the story goes, six blind men were asked to touch and describe an elephant. Each man’s description varied widely depending on the part of the elephant the man touched, and as the tale says “each in his own opinion exceeding stiff and strong, each was partly right, and all were in the wrong.”
Our descriptions of the “new normal” are as different as our points of views, and thus our responses to our changing environments should be as unique as each of our institutions.  I fear anyone who offers a panacea to all proclaimed from his or her own mountain top, as the view from my mountain may be different. For example, in his mostly excellent article about the Detroit Institute of Arts, Terry Teachout chides theater companies that “cling to the old-fashioned subscription model.” Similarly, in Nelson Pressley’s article “Theaters Look for New Ways to Draw in Subscribers,” Tony Heaphy, Director of Marketing at Centerstage, describes subscribing as “a chestnut.” I have no doubt from their perspectives these comments are valid, but theaters that have experienced significant growth in their subscription base might view the situation differently. What works for one, rarely works for all.

Therefore a customized approach tailored to your institution is wise. W
hen looking at possible adjustments to your business model, I would suggest:
1)      A test a day. Test a new idea, small in scale, each day. Every day that an organization doesn’t test, is a day that it doesn’t learn.
2)      Test small, miss small. Identify a challenge. Develop a hypothesis. Test a solution. But don’t bet the farm on it. Conduct each test fully expecting a negative result.
3)      Test ideas that are easily scalable. In order to minimize risk, I’ve tested ideas that performed very well on a small scale only to realize that putting them into play in a larger way would be cost prohibitive.
4)      Identify your sacred cows, and test those first. Often times we shy away from testing solutions to a known issue simply because that issue is a sacred cow. If you are looking for meaningful impact, identifying sacred cows is a good first step.
5)      Be informed, but question everything – even “experts.” Read everything you can. Follow experiments at other companies. Conduct research. Analyze data. But don’t accept anything or anyone as infallible. Even the best are human, and they speak only from their experience.
6)      Be careful of “one size fits all” solutions. I can’t tell you the number of times I’ve heard marketing directors wonder why something that worked so well in one city, bombed in the next. There are few universal truths in the marketing world.
7)      Overcome your fear of change. As humans, we are all programmed to fear change. You’ve identified a challenge. Formed a hypothesis. Tested a solution with impressive results. Developed a plan to scale the solution. And now it is decision time. Some people are paralyzed by fear of change. Be comforted by knowing that if you desire different results, you must act differently. Some difficult decisions are easy because they are demanded by circumstance.

Thursday, September 13, 2012

The Perfectionist and the Jack of All Trades

I've been called a perfectionist, and until recently, I've always accepted that description as a compliment. However as a leader, one of my primary responsibilities is to help prioritize the work of the departments that report to me, and in doing so, it is very important to understand that most nonprofits are under resourced. In a world where there is never enough, either in terms of money or human time, where and how nonprofits commit their limited resources becomes very important. Perfectionists struggle in these environments because by nature, when we start something, it's hard to walk away with even the slightest flaw remaining. On the other hand, marketers routinely leave projects behind when a greater return on one's resources can be found in other places, bowing to the law of diminishing returns. To be both a marketer and a perfectionist has caused a few schizophrenic debates for me over the years, but I've come to learn to focus on core competencies, and to strive for excellence, rather than perfection, in those areas.

I've chosen to write about this today because I've recently worked with two very well respected marketers that I observed struggling with the same issue. The first was a technology specialist who was known for making even the most complicated systems work. He was part of a team that over time found their marketing costs rising while their returns fell (not a good place for anyone). I was brought in to conduct a marketing audit. In my first week with them, I observed this marketer spending 25 hours working on a fix for a technology enhancement that this organization was hoping to roll out to their members. After inquiring, I learned that he had been working on this fix for over a month, and had put in well over 100 hours on it. When I asked him if this particular technology enhancement was worth so much effort, he replied that it was to him because he had never failed to deliver before. From an outsider's perspective, it was easy for me to see that he was chasing perfection to the detriment of the organization. After looking at the demographics of their members, and the usage statistics from the previous technology enhancements the organization had launched, it was easy to project that less than one half of one percent of their membership base would likely use this new feature. So why focus so many resources on it?

At almost the same time, I was advising an organization who had hired a strategic planning and market research firm to audit marketing and membership operations. The organization had selected one of the best firms in the business, but was experiencing cost overruns on projected labor expenses in the early stages of the project. The organization in question was large and complex, and one of the first things the firm did was request financial information in a variety of formats. Once delivered, a new junior member of the firm started analyzing the data sent, but in doing so, she couldn't get the financials to match perfectly between the various formats. She continued to work on the financials in an effort to get them to match to the penny, and in doing so, soared past the projected work hours set aside for the initial phase of the project. When I discovered the issue, I asked her how far off the financials were, and the gap was less than $1,000 on a $40 million operating budget. Even if she had found a way to reconcile the remaining funds, the conclusions from her analysis wouldn't have changed in the slightest. Her fear was that if this data was shown to the board of the directors, she would be held at fault because they didn't balance perfectly.

Perfectionists sometimes lose their way in an attempt to achieve something that might not be achievable, or if achievable, probably isn't worth the cost of the achievement. Perfectionists struggle with concentrating too much on one task, while others (I'll call them Jack of All Trades) struggle with just the opposite - not being able to decide where to focus their attention. During times of strife, marketers can find themselves getting friendly advice from a wide-range of well meaning others - board members, executive directors, senior staff members, artists and even spouses. People love to brainstorm, and send all their ideas to the marketing department. This isn't to say that ideas should be ignored. Great ideas can come from anyone, but the same can be said of poor ideas.

A couple of years ago, I spent some time with a new managing director of a mid-size regional theater. It was his first time leading a company, and he wanted to get it right. The company was known to have serious challenges, and when he started, everyone started sending him helpful hints on how to solve the issues. When I visited, he confided he didn't know where to start, and most important to him was pleasing the board that just recently hired him. So he vigorously pursued each idea that was sent to him from board members, and hadn't achieved much except exhausting himself. Over lunch one day, I asked him what the theater's most important challenge was; the one that if left unaddressed, would result in catastrophy. His answer was quick and clear - the theater's debt. I asked him what would happen if he focused all his energies on eliminating the theater's debt. He was afraid the general operations of the company would falter. He feared that the board would be upset because he wouldn't have time to focus on each issue they brought to his attention. And he was afraid of failure, so he tried to be a jack of all trades in an attempt to be everything to everyone. In the end, he decided to concentrate on dealing with the debt issue, and six months later, had identified a foundation that was willing not only to eliminate the theater's debt, but also wanted to establish a working capital fund for future operations.

Deciding what to focus on and more importantly what not to focus on takes courage of conviction. Perfectionists get lost in single projects, and Jacks of All Trades try to address everything at the same time. I've been both in my career, and over time, have become better at prioritizing. Below is a basic matrix that may help:

In priority, concentrate on solutions that provide the following:
High Impact on Critical Issues/High Revenue Line Items - these should be few in number but receive the most amount of your attention.
Low Impact on Critical Issues/High Revenue Line Items - even a small improvement on a critical issue can result in an excellent return on investment.
High Impact on Minor Issues/Low Revenue Line Items - only spend time on these projects if all critical issues and high revenue areas are performing well.

If you are in a nonprofit, and have the time to concentrate on solutions that will provide a low impact on a minor issue/low revenue line item, then perhaps you are overstaffed (or have reached the holy grail of the nonprofit sector).

Monday, September 10, 2012

The Assembly Line and Failure

I've recently returned from Theatre Communications Group's Annual Conference, where the theme was "model the movement," focusing on new models and transformative ideas from the field. I was particularly excited to attend this year, as the speakers included Woolly Mammoth Theatre Company's Artistic Director Howard Shalwitz and author/marketer extraordinaire Seth Godin.

Howard kicked off the conference with his speech "Theatrical Innovation: Who's Job Is It?," in which he compared the systems of our regional theaters to that of an assembly line, a theme that would resurface multiple times over the course of the conference. As regional theaters grew and became more complex, often times non-profit managers were encouraged to borrow best practices from corporate entities, designed to improve efficiency, streamline processes and increase return on investment. And it worked...until it didn't. You see, the process of creating art cannot be controlled by an assembly line system. We don't create widgets. And as one artist said to me, "if I was exclusively concerned with return on investment from a monetary perspective, I wouldn't create art, and I certainly wouldn't have had children."

This isn't to say that theaters shouldn't have systems. Systems have helped us reduce waste, maximize time and better utilize our resources. But an over reliance on particularly inflexible systems can also guarantee failure, at least from an artistic perspective. Theater is a particularly risky business, even when producing so called "cash cows," as I have previously written about
here. To quote one artistic director, "theaters eat risk for breakfast." But as the economy has contracted, have we become too reliant on our systems? and if Woolly Mammoth is wrestling with this issue, a company that is known to be nimble and innovative, then it must be a significant challenge for others. How often do we as marketing directors get handed a project that we can't wait to work on, knowing that we will need to call upon all of our creativity to develop innovative audience development strategies, only to think - shit, if I give the time and attention this project requires, the next three shows will suffer? Which then results in trying to pound a square peg into the round hole that is our assembly line, which is a disservice to both the artist and the marketer. Great work will push boundaries across all departments within an organization, and senior managers need to create systems and budgets that not only allow space for custom approaches, but that encourage them.

As managers, we like to mitigate risk, thinking that if we could just control our variables just a little more, that we would reach a utopia of risk free theater producing. It's a fool's errand. Since the beginning of the global economic crisis in 2008, the stakes have risen so high that it can feel like we don't have room to fail.
But in failure, we find success. It sounds counter intuitive, but making today as failure free as possible will ensure a less successful tomorrow. Even Mr. Godin, a titan in the business world, in his bio proudly proclaims "as an entrepreneur, he has founded dozens of companies, most of which failed." So the question we should all be asking, particularly in the budget process, is - are we building enough room for experimentation and failure?

Recently, I had the opportunity as a consultant to work with a few senior managers who were tasked with reinventing a business model for a program that was part of a much larger institution. Due to funding cuts, the program needed to become revenue neutral over time, and pro formas were developed to guide that process. Along the way, the program hit some unforeseen challenges, but as the pro formas were the only measurement of success, decisions were made that allowed the organization to "stay on target" by hitting financial benchmarks as scheduled at the expense of future operations. When I began my work, I was asked if I thought the program could reach revenue neutral status on the timeline outlined in the pro formas. I said that I believed it was possible, but then followed up by saying the question asked really should be whether the program can remain a going concern after hitting revenue neutral status given the short-sighted decisions that would be necessary to get there. In other words, does it really matter if we got the patient to the hospital in record time if the patient dies in route? How many decisions do we make each year that only considers the financial position of the company during the fiscal year in question? and would we make different decisions if we considered the pros and cons over multiple years? The financial strain on many arts organizations is tremendous, but if we continue to sprint to obtain single year targets while we ignore the conditions that wait for us at the finish line, over time we can snatch defeat from the jaws of victory. Unless an organization is under dire financial constraints, and death is literally knocking at the door, all major decisions must be viewed in a multi-year context.

Studies have shown that people are motivated more by
avoiding failure than by achieving success. As this article states, some professional athletes like winning, but they really hate to lose. This would explain why limiting risk is so appealing, even if it jeopardizes our ability to succeed. But I would argue that mindset breeds mediocrity, and that artists and arts administrators are different. We know that our best work comes from taking risks, and this is something we need to remember as we head back into work tomorrow.

Friday, September 7, 2012

The First Key to Success

Without clear direction, success can never be achieved. We’ve all experienced situations where we run toward a goal as fast and furious as we can only to have the goal posts moved on us in route. When this happens over and over again, an organization is guilty of foolishly wasting precious resources at a moment when most are under resourced as it is.
Success begins with leadership. As Michael Kaiser discussed in his Huffington Post blog, there must be a leader. All too often, arts managers try to lead by consensus. They don’t want to be the bad guy. They don’t want people to be upset with them. In complex situations, many times the answer isn’t clear, and trying to get a wide variety of stakeholders moving in the same direction can be tough. But this isn’t a time to postpone critical decisions in an effort to get senior staff, board members and other various stakeholders to agree on a course of action. The executive has been hired to lead, and lead they must. Part of leadership is gathering all the data necessary from various perspectives, and then making a timely decision. Waiting for full consensus is folly because more often than not, time does not bring consensus.
When a problem reaches the desk of an executive director, usually it means that an easy solution isn’t available, because if there was a simple answer, senior managers would have resolved the situation. The life of an executive director involves making imperfect decisions daily. It isn’t a job for the lighthearted. Failure is often public and wide reaching. But make no mistake about it – inaction or a delay in decision making is a decision in itself. Taking no action in an attempt to build consensus around an issue that will never result in a consensus decision is even more costly than setting a clear course toward a defined goal.  As an outside adviser, I was once asked to participate in a meeting where senior managers from an organization were divided on a particularly divisive issue. Each argued their position passionately and articulately. At the conclusion of hours of conversation, the room looked to the executive director for a decision, at which time he asked for a vote of hands. I about fell out of my chair. Unfortunately for them, there were an even number of people in the room, and it was hopelessly deadlocked with a leader who would not make a decision because he desperately wanted consensus.
Someone has to lead, and one of the most important decisions a leader makes is defining success for the organization. Senior managers can and should be relied upon to develop strategies for success, but the leader must define the destination before a map can be created.
When defining success for arts organizations, here are just a few things to consider:
Growth vs. Sustainability. In a previous post, I asked if “right-sizing could be as sexy as expansion?” We live in the country of manifest destiny, super-sized meals and McMansions. Bigger is always better. But this mentality has led to obesity being an out of control epidemic, people purchasing homes they could not afford, and boom or bust economic trends. I see the same success metrics in play at non-profit arts organizations. Chief marketing and development officers are measured solely by growth, and if an organization tries to right size, top talent will leave because their numbers will shrink, not because of sub-par work, but merely because of a decrease in tickets to sell or programs to fundraise for. Why do we constantly equate success with growth, when it is entirely possible to demonstrate significant growth to the detriment of sustainability? If it costs you $2 for every additional $1 in growth, and that equation doesn’t equalize over time, then you will demonstrate growth until such time as your lines of credit are maxed out, your board becomes unwilling to conduct emergency fundraising campaigns, and the community becomes tired of your pleas for help. This is how once stable and reputable organizations get into trouble. Success should be defined, at least in terms of business models, by sustainability, not growth, which is not to say they are necessarily mutually exclusive, but all too often, we succumb to pride and make growth the more highly prized success metric.
Quantity vs. Quality. Similar to growth, I’ve found that some arts organizations in part define themselves by the quantity of work they produce. I’ve never understood this. Most artists are motivated by creating the highest caliber of work, but then arts organizations feel pressured to produce a certain arbitrary amount of plays, concerts or performances each year, with an increase in offerings usually regarded as a sign of success by board members, funders and the press. The highest quality products in the world are not produced in mass as mass production doesn’t usually dovetail with world class quality. Case in point, if asked, I’m sure Steve Jobs would have been happy to have the best computers on the market, even if his market share was significantly less than competing products. And today, TedX is experiencing brand erosion because of quick expansion resulting in it losing in part its competitive advantages. Long ago, I used to work for a company that only produced one or two plays a season because the average gestation time on a project was several years. Although some objected to the avant-garde nature of the work, the company was almost universally lauded for artistic excellence. However, if quantity of productions were the litmus test for success, it wouldn’t be considered a successful theater.
Impact vs. Financials. Alan Brown, Clay Lord and Theatre Bay Area have spent the last two years working on measuring the intrinsic impact of live theater. I won’t go into the specifics now as this study deserves its own blog post, but I must say that I am excited that the study is changing how people, especially funders, are defining success. This study has developed a new system to quantifiably measure the intrinsic impacts theaters are having on audiences, and funders are starting to understand that previous metrics, such as audience members served, might not deliver the full picture. Along with financial and attendance data, what if theaters started to define their success by the impact they are having on their communities, which for the first time can be benchmarked, measured and tracked year over year.
The first step on any journey is to clearly define the destination and to establish success metrics.

Leaders —set the course and the direction. Don’t fear lack of consensus. Be bold. Be ambitious. And be decisive.
Senior managers—establish clear success metrics, and track them relentlessly over time.
I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the earth.” – President John F. Kennedy, in an address to a joint session of Congress on May 25, 1961.

Wednesday, September 5, 2012

Lost in the Crowd

Direct marketing practitioners know that success is primarily a numbers game. That's not to discount the work that goes into tweaking a control package, testing messages, building list models and analyzing data. However, the foundation of any direct marketing campaign, be it for ticket sales, subscriptions, memberships or donations, is the number of qualified leads in your database.

A few months ago, I wrote a post about how many of us didn't know who are best customers were. Since that time, I have come to realize that many of us don't know who many of our regular customers are.

Performing arts organizations have a distinct advantage over a majority of museums as gathering leads usually stems from capturing information during the ticket buying process, although challenges do exist. Organizations that have a robust group sales business know that it's all about personal relationships as one group contact can bring in hundreds of patrons, and although that's good for revenue, it is a challenge for lead development. For the most part, performing arts organizations have no clue as to who attends as part of a group as they don't gather information for each attendee. And in some cases, private group sales agents don't want to release information as it would require handing over lucrative contacts. And aside from groups, performing arts organizations are becoming more reliant on third party vendors to move unsold inventory, but in doing so, in most cases, they sacrifice the ability to collect contact information. And how many of us track individual people attached to multi-subscription packages? If the leader of the subscription group decides not to renew, we don't have the ability to contact the others.

We estimated a couple of years ago at Arena Stage that at any given time, on average we only had the contact information for roughly 60% of the people in the house. I always wondered what the value of the other 40% was.

Over time, we put into place various mechanisms to assist in collecting more leads. Group leaders were given financial incentives to provide contact information for each individual in their group. We reached out to subscription purchasers and asked them to identify the other people on their account. And we instituted a policy that required complete contact information for all comp tickets, and started ticketing almost every free event.

Now that I've been in the museum world for all of two months now, I've noticed that their challenges are much more significant than those that face performing arts organizations. Some museums have millions of visitors each year, and they only capture contact information for a very small percentage of their visitors. Highly popular free admission museums don't want to institute time consuming procedures to capture information for fear that it would impede timely access to the museum (can you imagine the lines that would form?). On the other hand, most free museums have membership and fundraising circles that rely upon qualified leads. How do you fundraise in a cost effective manner if you don't know who your visitors are? It seems that I am by far not the first to stumble upon the holy grail of marketing challenges that museums face, but given my newness to the field, I was surprised how daunting capturing information could be.

Here are some possible ideas to collect information from those lost in the crowd:

1) Collect information at multiple contact points. Prior to getting to a museum, most people visit a website. Take public transportation. Park their vehicle. Why not identify new visitors to your website and feed them a small roadblock ad asking them to sign-up for information from your museum, including future discount offers and exclusive content. Could you station "visitor concierges" outside subway stations who offer tips on exhibits and museums, and collect information during the process? Could you partner with your parking lot to develop a way to capture visitor data?

2) Offer exclusive content. Exhibits are becoming more and more interactive every day. With more than 100 million smart phone users in the United States, could exhibits feature exclusive interactive content using QR codes that also captures data in the process? As museums build out content online, what if you placed some exclusive content behind a free "pay wall" that requires registration to access? or what if an exhibit offered to send you a free memento of your experience via email?

3) Ticket events. Many museums offer a large variety of free and popular educational programming and docent lead tours. Even though they are free, why not require a ticket or an RSVP? Visitors can register well in advance, or they can do so quickly on site at ticket kiosks.

I am sure these suggestions only offer a way to make a small dent in the overall problem, but the challenge is clear -- finding easy, affordable and efficient ways for visitors to self identify themselves as wanting more information from musuems is of utmost importance to our direct marketing strategies.

Monday, September 3, 2012

Planning a Turnaround

Deficit budgets have started to accumulate. Core audiences have began to slip away as smaller and smaller houses become the norm. And there is a palpable sense that a once formidable company has lost its way as a growing group of stakeholders from donors to press start asking what happened?

Almost certainly, the marketing department is pointing its finger at the artistic staff laying the blame for the downturn solely at their doorstep, while the artistic staff believes that if they only had better marketing, the issue would disappear. Reality is that if a company is experiencing a significant decline, usually there are issues in both areas that need to be resolved.

At some point, the financial position of the company becomes untenable, and a turnaround team is brought in, usually in the form of a new artistic director, but sometimes a new executive director and marketing director as well. If executed well, strategic shifts in programming along with a well thought out rebranding and promotional campaign can lead to exceptional results. But a turnaround is only as good as its implementation.

Some things to consider when planning a turnaround...  

Identify Toxic Assets. The new guy hired to design and implement the turnaround knows one thing--what the company has been doing isn't working, and that the board desperately wants a change and they want it quickly. It can become overwhelmingly tempting to cut old programs immediately, and start from a completely fresh slate. However often times even the most struggling company has positives in which to start building from. Cutting everything quickly in an effort to rebuild from a new baseline can eliminate valuable assets. In for-profit turnarounds, the idea is to separate toxic assets from the others in an effort to give a new leader at least some base to work from. Throwing the baby out with the bathwater may be quick and it might provide an immediate signal that there is a new sheriff in town, but it usually isn't the most efficacious strategy. Instead of a hatchet, bring out the scalpel. Make precision cuts in an effort to save what can be used to help regenerate a new future.

Develop a Bridge for Audiences. When considering radical programming changes, make sure to design and implement a bridge for your current audiences. In a turnaround, the new is always given priority over the well established, but loyalty is something that takes years to cultivate, and I'd rather reinvent from a partial base than none at all. This is not to say that one should shy away from making needed programming changes, it is only to say that as much thought needs to go into how to introduce them into the market as went into designing the programs themselves. I've seen companies attempt to reinvent themselves overnight with little thought to patron migration, and as a result, they lost a majority of the base they had cultivated over prior decades. Major donors can provide venture capital to introduce new programming if engaged well, and audiences can be successfully transitioned into new programming if done so in a gradual and considerate manner. I know because I've done it on multiple occasions.

Market Research Doesn't Have to Influence Programming to be Helpful. When asked about market research, Steve Jobs famously told Business Week that he doesn't conduct market research because "a lot of times, people don’t know what they want until you show it to them.”  Similarly, Julie Taymor in an interview with The New York Times said she didn't believe in focus groups stating that "if focus groups had been used on The Lion King there would be no death of Mufasa because groups would have reacted negatively." Given that The Lion King is Broadway's top earner of all time, and at the time of Mr. Jobs' death Apple was the most valuable company in the world, there is wisdom in these remarks. However, I bet the marketing people working with Ms. Taymor and Mr. Jobs would have loved market research, not because they wanted it to influence product development, but it would have informed them on how to message the introduction of the product into the market. Even though in many cases "the new" is absolutely necessary and people may desire it without knowing, marketers have to break through an initial resistance barrier. 

Artistic Planning is Where it all Starts. I attempted to rebrand a company once without a clearly articulated artistic strategy. We were told that exciting new programs were going to be introduced to replace well worn ones, but when pressed, there were very few details. Feeling that we couldn't wait any longer, I started the first phase of the rebranding process thinking that the details could come later. Boy was I wrong. Two months later, everything came to a screeching halt when we were trying to develop a communications matrix around an amorphous programming change. We couldn't message what didn't exist. Luckily for everyone, the artistic team came to the same realization, and within a short amount of time, a brilliant new artistic strategy was developed, and we were back on the fast track. I learned an important lesson that day--for a complete turnaround to be successful, it all starts with a detailed new artistic strategy.

Cultivating New Audiences is an Expensive Proposition (at first). Marketers know that retention is cheap, and acquisition is expensive. We also know that both are absolutely critical. When introducing new programming, it is important to know that acquiring audiences for newly developed programs will require a dedicated effort over an extended amount of time as well as considerable resources. The "build it and they will come" assumption is flawed. Audience development is a process, and in the short term, often times it will result in a negative impact to the bottom line. New programming and audience development are investments in the future of the organization. That said, depending on the severity of an organization's finances, the necessary resources for such an investment may not be readily available, which can lead to the premature cancellation of new programs. If that occurs, it is a waste of time and resources.

In his book The Art of the Turnaround, Michael Kaiser discusses his classic mantra "good art, marketed well" as a centerpiece for a successful turnaround. I agree with Mr. Kaiser that often times turnarounds require adjustments to programming or marketing, and in some cases, both. But over time, it has become an alarming trend to see an increase in the number of failing organizations that do both relatively well. I've started to wonder, as many others have, if mature organizations are failing because their business models haven't fundamentally adjusted to the rapidly changing external environment in the past fifty years.  In moments like these, I'm reminded of a quote from Buckminster Fuller, who said "you never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.” I'm fearful that training institutions are teaching models that are dying a slow death, and that major institutions continue to look to senior managers entrenched in failing systems for the cure. I believe that co-management hybrids pairing the wisdom and experience of more senior leaders with the inventiveness and curiosity of Gen X'ers and Millenials could be the best bet. But one thing is for sure--rearranging the chairs on the deck of the Titanic won't save the ship. For that, you have to find the fundamental cause of the problem. It could be programming. It could be marketing. It could be both. Or, it just might be that we are clinging on to a business model that is rapidly failing us.

Saturday, September 1, 2012

Can right-sizing be as sexy as expansion?

On Thursday of last week, Thomas Cott featured several articles on "right-sizing" in the arts in his daily "You've Cott Mail." As many of his emails tend to do, it has stuck with me for days. See his email came at an opportune time for me. I had just given the plenary speech at American University's Emerging Arts Leaders Symposium which partially focused on NEA Chairman Rocco Landesman's "supply and demand" speech, and soon thereafter, Rebecca Novick authored a blog entitled "Please, Don't Start a Theater Company."

A central theme from these various sources began to emerge, which was packaged quite nicely by Rebecca when she said: "In the past fifteen years, the number of nonprofit theater companies in the United States has doubled while audiences and funding have shrunk. Neither the field nor the next generation of artists is served by this unexamined multiplication of companies based on the same old model. The NEA's statistics on nonprofit growth, set against its sobering reports on declining arts participation, illuminate a crucial nexus for the field, a location of both profound failure and potential transformation."

If data indicates that the field continues to expand at an unsustainable rate propagating the continuance of a model that is considered by some to be out of touch with current realities, then why do we continue in such a manner? My thoughts below...

It's as American as apple pie. Let's face it, expansion is sexy. We are the children of manifest destiny. Starting from nothing and growing an empire. Conquering new frontiers. These are all American ideals. Hell, many of our childhood boardgames indoctrinate this philosophy. Is it any surprise that as adults we equate expansion with success? And this perception of success is handsomely rewarded. Grow your audience and your revenue, and you will increase your likelihood of additional contributed revenue. But if those metrics decline, you'll need to do some explaining.

Follow the money. In the 1990s, educational programming became a funding priority, so every theater across the nation rushed to create an education department. To some, it didn't matter if the programming was sub par, they just knew they needed a department to be competitive. In the 2000s, capital projects became a priority, and more than a decade later, we have new buildings all across the country. Some were desperately needed as aging infrastructure was failing, while others were less of a necessity but were built on hopes of significant future returns. After opening, some organizations thrived in their new facilities, while many others struggled almost from day one. In his article "New Facilities Aren't Always a Qualified Success" in the Kansas City Star, Scott Cantrell discusses the challenges of several major new performing arts centers, including Dallas's AT&T Performing Arts Center, Philadelphia's Kimmel Center and Miami's Adrienne Arsht Center. All of which opened without finishing their fundraising campaigns and operated with multi-million deficits. Two years into the new decade, it seems that funders have started to realize the magnitude of the problem, and are now beginning to focus on sustainability as a priority, providing working capital to companies to right-size, rather than providing incentives to expand.

Build it, and they will come. Prior to launching a capital campaign, most organizations commission at least one feasibility study to determine whether or not the company has the capacity to raise the necessary funds to pay for capital improvements. But how many thoroughly study whether or not there is enough support in their communities to sustain an expansion for decades to come? When Arena Stage opened the Mead Center for American Theater, I was thankful that the new building only increased overall capacity by 6% in comparison to the previous structure. Although renovations and improvements were desperately needed, I wasn't convinced that we could introduce a large amount of additional inventory into a city which was already trying to support five previously built new theater complexes. If desired and demand warranted, Arena Stage was able to increase inventory by expanding beyond its typical 9 month season, but they weren't forced into an expansion due to a large increase in the capacity of the new complex. The challenge for Washington at this moment is clear--we have dramatically increased supply over the past decade, and with our capital projects now complete, we must develop and support new audience development campaigns with as much gusto as our capital campaigns. We have to build our audiences, which up until now, we haven't successfully done in the last decade. This is the real challenge. Ten years from now, will our new theaters be empty?

Can you display it? I find it fascinating that many museums have an aggressive acquisition plan but only display a very small percentage of their current collection. There seems to be a commonly accepted premise that major museums only display 10% of their collection because they are limited in terms of space and resources. I can understand acquiring new objects that aren't in display condition for research purposes, but why expand a collection of display quality objects if you don't have the opportunities to display what you currently have? Again, I'm a novice in museum studies, but it would seem to me that before expanding, a museum might consider shifting its resources to developing traveling exhibits so its current collection can be seen. What's the point of acquiring items with very little likelihood of every displaying them to the public?

What's going on in Ohio? I've been closely following two non-profit arts organizations based in Ohio over the past few years, as I believe they can be an example to us all. The first, the Columbus Symphony, was featured in Thomas Cott's aforementioned email. After struggling for years, they conducted a study that indicated that the city of Columbus could only support a symphony with an $8 million operating budget instead of the $12.5 million budget they currently had. From this, they decided to "right-size" their organization to match the current demand in their market by joining forces with the Columbus Association for the Performing Arts. Meanwhile across the state, the 90 plus year old Cleveland Playhouse laid off several senior staff members, dropped two productions from its season and trimmed its budget by 18% in 2009, prior to moving to the newly renovated 515 seat Allen Theatre in 2011. Previously, the Allen Theatre boasted 2,500 seats, but when the Cleveland San Jose Ballet left town, the Cleveland Opera downsized and Broadway tours dried up, the Allen Theatre was only in use 90 days out of the year because it was too big for most productions. The solution--the Cleveland Playhouse, Cleveland State University and PlayhouseSquare partnered resulting in a newly renovated Allen Theatre with 1,985 fewer seats! And it seems that it has worked out quite well for all involved. Revenue for the Cleveland Playhouse more than doubled and an underused space became the new talk of the town.

This isn't to say that expansion is always bad,  sometimes it is absolutely necessary. However, it isn't always beneficial, even during moments of great success. If your theaters are playing to capacity, perhaps you have discovered the sweet spot for your organization. Push just a little further, and too much of a good thing could tip the scales in an unfavorable direction, leaving you wondering how you managed to snatch defeat from the jaws of victory. Expansion can be attractive, but stability is pretty damn sexy too.