BUSINESS MODEL INNOVATION FOR CREATIVES
This week, I’m excited to be part of the Australia Council for the Arts’ roundtable on business model innovation. It’s a topic I’ve had a long term interest in and one which has the potential to offer transformative change to businesses.
In theory, business model innovation is about understanding and changing the way in which a product (or to be the precise, the value that product offers) is delivered to a customer base. In practice, the term is often appropriated to include any change which a business has adopted to positive effect. Changes to processes or adoptions of new markets might be beneficial for a company, but they don’t seek to fundamentally change a company’s business model.
Want an example? Spotify. Prior to the ascent of streaming services, purchasers of music bought a copy of a song, in physical or digital formats, which they could play as many times as they liked. The business model was a simple fee for service one; you buy a song, you pay the cost of supplying that plus a profit margin to the vendor.
Spotify and other like streaming services altered that business model. Instead of paying for a song, you pay a monthly fee for ongoing access to a library of songs, which you can play as often as you like. The value provided to the customer is essentially the same – I get to hear my favourite music – but the model under which that value is delivered has changed.
The application of this idea for for-profit companies is clear enough; understand the value you provide to your customers and consider new ways of delivering that value to them. Those with a shrewd understanding of what matters to their customers and a talent for coming up with inventive solutions, will find business model innovation easy to adopt (and may have been practicing it for years).
But how does this idea apply to arts organisations?
The difficulty is that the customers of arts organisations – your theatre goers, gallery attendees and alike – often don’t pay the full cost of their ticket. The cost of that ticket is subsidised by government funding, sponsorship, philanthropy etc. I’d argue that it’s easier for for-profit companies to practice business model innovation, because they generate 100% of their own revenue. Innovation is much easier when you’re in control of how that revenue is produced.
This doesn’t mean that arts organisations can’t practice business model innovation, in respect of the portion of their revenue that they do generate themselves. To do so, they will need consider anew the value proposition they offer; what is the nature of the value their product provides and to whom? The business model canvas sessions we offer organisations tackle exactly this question.
Then there’s the question of innovation in the way subsidy is delivered. Arts funding is generally provided prior to the finished product being delivered. This model offsets the cost of developing the product and reduces risk for the arts organisation. But other areas of industries attract government subsidy in different ways; film producers secure a 40% tax offset for investors which helps establish a film’s budget, child care providers obtain a subsidy per child enrolled, health care providers get a different payment for different services provided.
If business model innovation is about understanding the entirety of an organisation’s business model, and changing it for financial success, then all parts of the model should be considered. It’s not just for organisations to innovate; government and other funding partners can and should as well.
These are the initial thoughts I’ll be taking along to the Roundtable. Got any others? I’d love to hear them. Hit me up on Twitter at @sharped.