Too many variables cause irrational solutions, especially where impact is involved. Analyze and know your company’s place in your ecosystem, but then stop analyzing and just do.
I have many friends in the nonprofit arts business who are searching for a replicable set of actions that predict success. Much like the flocks of flaks that worshiped Danny Newman’s Subscribe Now! (exclamation point and all) as the only, best, and fundamental grail… oops, I mean guidebook… for reaping lots of ticket money all the time forever and ever, most of the great thinkers in the industry seek for a new guidebook that answers all the millions of equations, in a repeatable way, that face any arts organization. Stick to that guide, the prevailing thinking goes, and you’ll never go wrong.
Except that there is no such guide. There are too many variables in the equation to get you to predictably replicable success. With technology moving faster than ethics (which has always been the case, mind you, but now technology moves far more swiftly than fifty years ago), it is a fool’s errand to look for a system that can reliably work. I fear for some of those friends who believe their work depends on such a system to be developed, or worse, for them to develop it themselves.
There are no easy answers to the problems facing nonprofit arts organizations in America. As it turns out, there never were. Only recommendations, tenuous claims on “best practices,” and, every now and then, a success story, albeit temporary.
What, then, connotes success in this industry?
Pitiable executive directors and board members will tell you that success is financial. Financial well-being, they’ll insist, is the benchmark for success. Survival and sustainability conquer all.
However, money is not the coin of the realm for any nonprofit organization, even an arts nonprofit. If your community is measurably better off by your charitable activities, that’s called “impact.” Impact, then, is the main thing. And, as Jim Barksdale once said, “The main thing is to make damn sure that the main thing is the main thing.”
But we need money to have impact, don’t we?
You do. However, you need to ask your company, “Why?”
Why do you need money? Why do you need more money? Why will money aid your impact?
How do you know?
Perhaps this is the problem. In most, if not all business school programs, undergraduate or graduate, Michael Porter’s revolutionary 5 Forces diagram is taught. It’s a basic understanding of where your company is in the market. It applies to nonprofit organizations as well, with the understanding that buying and selling usually refers to underserved or unserved people in the community.
It’s a great tool for anyone opening a business. The (short and completely imperfect) descriptions of the forces are these, if you’re an independent coffee house in Kirkland, Washington:
- Existing competitors: other coffee houses in Kirkland, including Starbucks
- Bargaining power of buyers: what’s the balance of power between your coffee house and your customer base?
- Bargaining power of suppliers: what’s the balance of power between your coffee house and the bean suppliers, equipment suppliers, and the trained baristas?
- Threat of new competitors: Is it easy or difficult for another coffee house to open in Kirkland and become another competitor?
- Threat of substitutes: what other kinds of businesses might your customers choose to patronize instead of yours – restaurants? Small storefront shops? And, of course, what about not going at all and making coffee at home?
In a special session for nonprofit arts organizations which I attended, a decidedly sticky problem arose. We discovered that the 5 Forces Framework, a theory that applied to every single company we could imagine, didn’t exactly fit the model for our scope of work.
If we set the scope of businesses to be something like “live theaters in Kirkland, Washington,” and just looked at ticket revenue as the measuring stick, it was easy.
- Existing competitors: other live theaters in Kirkland
- Bargaining power of buyers: what’s the balance of power between your live theater and your ticket buyers?
- Bargaining power of suppliers: what’s the balance of power between your live theater and the performers; set designers, builders, and materials; costume designers, builders, and materials, etc.?
- Threat of new competitors: Is it easy or difficult for another live theater to open in Kirkland and become another competitor?
- Threat of substitutes: what other kinds of businesses might your customers choose to patronize instead of yours – Every category of movies? Every category of music? Every category of dance? Every category of Opera? Every category of museum/gallery? What about just choosing to have a leisurely meal at a restaurant instead? And, of course, what about staying home and not going to see a live play?
It didn’t work.
None of that took into account the donor revenue, which constituted (in some arts organizations) up to 75% of the income. How do you fit that second stream in?
At the time, there was no good answer. Some tried to make it a 6-force structure. That really didn’t work because the substitutes for donating money are different from the substitutes for seeing a play, for example. There was enough difference that shoe-horning a 6th force caused more confusion.
Others created two separate 5-force structures – one for ticket revenues, the other for donated revenues. But that took into account only the revenues and not the results from educational programs or other community issues. How do you wedge in that force? This caused some of the thinkers in the group to create multiple 5-force worksheets for one company, some of which offered conflicting information on how to proceed.
What’s that old saw? “A person with one watch knows what time it is; a person with two is never sure.”
That applied to this process, which never ended with a conclusive solution.
Now, with the passage of time, a global pandemic, and the lack of essential nature to any and every arts organization (so non-essential to the public that they’re closing, causing a hue and cry… but mostly just to arts organization people), I see what happened.
We framed the original scope incorrectly.
A real nonprofit organization trades in impact. If we replace revenue with community impact, how does that change the 5-force structure? Let’s say that the scope is now “arts charities that solve or mitigate a key Kirkland, Washington issue, as chosen by the people of Kirkland” and you run a nonprofit company that happens to produce live theater.
Toss that around for a while. For example, what if revenue were considered a necessary supply to achieve impact rather than the goal? Who has greater power in the relationships between your company (in the same box as “existing competitors”) and each of the other forces?
Stop searching for the holy grail of some non-existent system that works for everyone, all the time, everywhere. The messiness of a tried-and-true business evaluation shows that there isn’t one. Instead, concentrate on this: your company has the status and ability to make the world a better place for entire communities of people who need your help. Do that.
Alan’s new book, “Scene Change: Why Today’s Nonprofit Arts Organizations Have to Stop Producing Art and Start Producing Impact” will be published in just a few short weeks! CLICK HERE TO PRE-ORDER IN THE UNITED STATES. (It makes a great holiday gift, so I hear.)
If you live in the UK, CLICK HERE. If you live in Australia, CLICK HERE. And, of course, it is available for pre-order on Amazon, Barnes & Noble, and other large bookstores. If you can’t find it, just give the bookseller the ISBN: 978-1-80341-446-1. They’ll know what to do.
A few advance copies may be made available for those booking conferences, reading engagements, and speaking engagements. Recruit your local bookstore, conference panel, or boardroom to get a visit from Alan.
For a limited time, Alan can offer a free copy for every board member of your nonprofit arts organization when you sign up for a consultation. Contact him at alan@501c3.guru for details.
Leave a Reply