January 2016 LMN Online Press
Self-Sufficiency — A Dream or Realistic Goal to Support Great Impact?
Admit it — many science centers and museums struggle financially. There is still a gap for most in acquiring adequate resources to meet mission goals. And this is despite years of working to achieve financial sustainability with a strong revenue mix typical of non-profits. COSI had been no different in that quest and struggle.
So we started to question our financial model assumptions. “Can we be operationally self-sufficient?” “Could we serve our mission better with a different business approach?” Could we, as Jim Collins in Good to Great challenges, move from being a good institution doing good things but still struggling financially to go further in developing as a sustainable and differentiated great institution? And in the process create a stronger blend of operational self-sufficiency and successful, focused and strategic fundraising.
Responding to the Changing WorldWhy would we look at the concept of self-sufficiency differently today?
Our analysis of trend-lines and community dynamics offer a number of reasons:
- Social service and educational needs (among others) continue to increase, potentially pitting science center support more and more against compelling social needs.
- Corporate and foundation philanthropy appears to continue to shift away from general operating support to very project specific interests.
- As more and more organizations take on the STEM learning challenge it is possible for the science center to be marginalized as a “field trip” or “rainy day” destination.
- There is more need than ever for the services of science centers and museums to help create a scientifically literate citizenry and workforce.
- Many of our institutions are actually stronger and bigger in our facilities, program capacity and brand from investments and positioning over the last 20-30 years.
- IF we could be self-sufficient, couldn’t we control our fulfillment of mission even better? — Moving from good to great serviceunfettered with inefficiently pursuing and delivering on a scattering of small grants, individual programs, and meeting corporate supporter and/or government objectives that push us out of our sweet spots of impact.
IF we could be self-sufficient, couldn’t we control our fulfillment of mission even better?
So operational self-sufficiency is not the end game, but the discipline that comes with thinking that way could be a tool towards great and sustainable impactserving our community.
In looking at these questions we came to what might seem an audacious decision — we have set a goal of being operationally self-sufficienton our way to being a great institution with higher impact!
To achieve this we had to look at where we were and then project forward — looking for adjustments in model, culture, organizational alignment and more.
COSI’s business model was very typical of most science centers/museums and other non-profits that have some level of service mix between revenue based and free/discounted services. Looking at our model, it looked like Diagram 1.
Diagram 1 – Typical non-profit science center financial and service model
In response we set out to rethink our approach with the following objectives:
- Leverage operational self-sufficiency to
- Create a sustainable future
- With greater impact
This led us to a series of questions as we looked at ourselves through a new lens – what would we look like as a self-sustaining business? To do this, we consciously set aside services that we knew would most likely not have the potential to be financially self-sufficient through earned income, such as access initiatives, inner-city outreach and teen programs to name a few. The sustainable approach to these would be very different even though they are key to our mission related services (more on that later). But both sides of the financial equation would benefit from a focus on differentiated service/product and greatness as an institution known for high impact in those areas we focus upon.
Our “business” then must be built in the same fashion that has been put forth in Built to Last and Good to Great –the hedgehog concept of finding the intersection of:
- “What is it we are deeply passionate about?”
- “What can we be best in the world at?”
- “What drives our economic/resource engine?”
This comes in recognition that science centers and museums live in Quadrant 4 of Jim Collins’ framework of Economic Engine in the Social Service Sector –high potential business revenues and low charitable donations and private grants (Good to Great and the Social Sector). We have buildings, specialized staff, brand and community goodwill to apply toward the ability to drive revenue as we work in sectors that society deems are important (e.g. education, STEM and family learning). And we often also serve as destinations for families and tourists and as community anchors. There is money flowing in all of those domains and we felt that with the right approach and strategic partnerships we could be both more impactful (great) while securing more earned revenue and dedicated funding streams (sustainable).
Chart 1 below shows the types of comparison analysis regarding COSI’s service mix around the core question – Are we just being good, or are we being great?
The Need to Systemically Differentiate
The concept of differentiation is critical. As I put it, drawing on a previous life as a consultant to Apple Computer, “Are we Dell or Apple in our markets?” What does this mean?
I would suggest that with the inherent expensive nature of most science centers/museums, we cannot afford to price our services like Dell because we don’t have the ability to drive the lowest costs. (However, we should always seek operational efficiencies drawn from flexible staffing models and investment in technologies for efficiencies and effectiveness to control our overhead.)
And if a business model is stuck in between focusing on lowest cost or highest value that is where businesses die. Hence, if COSI was going to be more sustainable with our cost of overhead, we had to look to adapting more of an Apple approach—a differentiated array of products and services we could deliver passionately with greatness and with the ability to be paid at a high value perception. (The concept of a differentiated approach for strategic positioning to our museum businesses was presented by Harvard economist Michael Porter in a keynote speech at the 2006 AAM national conference and is a worthwhile read.)
Chart 2 shows the types of questions we need to ask.
Answering the questions in Chart 2 will start to help identify areas of strategic advantage that offer potential to be differentiated and financially sustainable through earned revenue or through partnerships and steady funding streams. Critical strategic programs and initiatives need to be pulled away from the programs and efforts that need dropped, rethought and/or contained.
At COSI we used an intensive, multiple week, open forum approach centered around a “war room” where ongoing discussions, idea generation, charts, and task lists were posted. Anyone could drop in and there was a regular presence of project leads and often executive management. Daily we generated conversation and concepts. We let people self select to organically generated teams. Teams were to quickly test an idea against a potential market and position it for decision making to test further, modify or drop. The concept development and quick market check then led to what Collins and Hansen, in Great by Choice, denote as “firing bullets” to create empirical data from small tests that then inform if an effort is worth continuing, investing in further and/or scaling up.
The COSI “Project Discovery” process, in a less intense and consuming fashion, is being embedded into our system and culture to provide a continual pipeline of ideas and potential new business and relationships. There are several positive side benefits, including encouraging and supporting a culture of continual review of what we are doing, always looking to “trade up” a service. For example can we go from one-off school programs to school contracts to even “select school partners” co-branded with COSI? All at a higher, more sustainable price point.
The change process this brings and requires can be challenging and difficult for the team. It helped to work on the principle in the Collins and Porras book Built to Last that focuses on “Preserve the Core, Stimulate Progress.” Keep in mind the professional development support that your team will need to implement a culture of ongoing improvement to achieve great, sustainable impact while staying true to your “DNA.”
The talented team members in our institutions are passionate about what they do and therefore can be prone to design programs, experiences and services that they want to do or that they perceive are important for the community. This is a factor in the plethora of poorly attended, limited growth programs and services we find filling up our catalogs of offerings. Many of those programs break even at best and often do not cover overhead costs.
What we need, and are developing at COSI, are events and replicable programs that can serve hundreds or even thousands on a regular basis, or smaller audiences in a comprehensive, multi-engagement approach. The success many science centers and museums, including COSI, are finding with whole museum adult evenings versus limited audience/capacity adult programs is an example. COSI’s birth of the whole overnighter movement, now with over 1 million campers just at COSI, is another example of this approach. High impact with net positive revenue.
Done right, this all matches the best practice of top businesses as researched by Collins and Hansen and reported in Great by Choice. Incremental investments in ideas, programs, and initiatives can allow for testing on small, low risk scale (“firing bullets”) to build the evidence and test a market for scalability prior to expanding or overly investing in a direction (“firing a cannonball”).
What About Access And Mission?
Ok, here is where we deal with the elephant in the room for any science center or museum going down this path of more financial self-sufficiency. Our mission is about outputs of impact, not inputs of revenue. Our team is passionate about making a difference. Our communities, even if they may provide little or no public funding (COSI’s situation) expect us to be available and accessible for all.
Consequently, many centers keep their admission fees low for accessibility, starving the overall institution of the resources to provide a great experience in a sustainable fashion. How many of us have “free days” where we feel good with the numbers — as long as we don’t look at the fact that we have probably overbooked the building for a good experience and that the families and children coming may have no orientation to our museum experience and do not feel comfortable about it?
The COSI approach is that we are moving to separate the access and availability issue and address it separately, intentionally and strategically with more impact. In considering the intentional and impactful ways to meet access and assure COSI’s special ability to inspire, engage and support individual, school and family learning for all who have interest we:
- Separated access and specialized programs that cannot generate sustainable earned revenue from our “business” of great experiences, programs and services that we price at a differentiated and more financially sustainable level.
- Identified key partners who can help us access large numbers of individuals, schools, and families who would normally not be able to use COSI. We then seek systemic relationships and approaches that give us the highest impact with the partner’s constituents — and the highest probability of securing together directed funding, grants, and corporate sponsorships. The partners can be school systems, community agencies, or fellow educational service providers.
- Leverage and manage our brand better now as a great and unique learning environment with an array of services to reinforce the need for COSI to be seen as an agent of change worth supporting to help address priority community needs.
With this strategy we are creating a more financially sustainable approach to our programs, access and initiatives that are not sustainable through earned revenue but can be sustainable through a thoughtful, systemic approach. By leveraging the desirability of access to COSI resources, coupled with strategic partnerships and differentiated, high impact programs we are improving our chances of creating sustainable approaches to traditionally underwritten areas from unreliable general funds.
Now is the time to introduce the importance of Brand as you look at your financial future. You have a brand–the question is how strong is it, how you are managing it, and how you are leveraging it?
Jim Collins with his famous “flywheel” observation of companies that go from “good to great” has modified that flywheel in his Good to Great and the Social Sectors monograph. Through his observation and research, Collins has noted that a great social institution has pervasive qualities — not a killer app, program, or opportunity. Focusing on his hedgehog principle builds results in a way that he describes as:
“Success breeds support and commitment, which breeds even greater success, which breeds even greater success, which breeds more support and commitment–round and around the flywheel goes. People like to support winners!”
That is the brand strength that you can create and leverage.
We would all benefit from bringing in brand managers for consultation to learn how to take advantage of our brands that are probably a lot stronger than we perceive.
Our goal should be to create a desire to associate with us by setting a high and beneficial bar for what it takes to be affiliated with our brand. Done right that will provide a filter to whom and how we want to be associated with that further enhances our brand and desirability. For example, think of creating application processes and clear criteria for some of your key programs and affiliations, rather than appearing to be happy that anyone at all would apply or partner.
The COSI New Business Model and Portfolio
At COSI our improvement process, still underway, now has a very different looking model as seen in Diagram 2. We continue to migrate toward financially sustainable, high impact experiences and programs. In so doing we deliver a greater overall impact helping address priority community needs — yielding our improved return of value in social benefit on community investment (Porter).
Diagram 2 – COSI’s new Business Portfolio, strategic fundraising shift
You will notice this is not built around “divisions” but areas of business and assets. Development is particularly called out in its shift from an overall General Operating Support (GOS) emphasis to a mix that also has more targeted alignment with our impact areas and access.
Do we still have broad-based GOS solicitation? Sure. But we are shifting more and more to acting as, and being seen as, an essential resource in meeting key community needs through strategic partnerships.
Corporate partnerships with funding are increasingly designed to provide more of what a like-minded company may want (employee engagement, affiliation with your brand, impact in areas of their philanthropy focus). Also, by going into a relationship you have more potential for longer funding cycles – getting you past year-by-year, project-by-project limitations we often operate within to the detriment of being able to deliver with consistently great impact.
The same approach has the potential to work with new companies, individuals and groups that want to enjoy our experiences priced at a differentiated rate, co-host an event at our site, or contract our specialized services—all supporting and contributing to our sustainability.
This article is introduced as food for thought for any science center or museum to consider. I provide some principles that are useful to anyone taking the path to greater self-sufficiency and impact. Many of us have been blessed with substantial facilities, long history and brand in our communities, and talented and passionate staff and volunteers. It is time to leverage all those attributes to their fullest — and with an intentional level of confidence — even “swagger”. We need to move from a “deficit” mentality and approach to aligning our resources as the strong “businesses” and community assets that we are. We need to offer opportunities to work with us only to those partners and sponsors we select as compatible with our brand, high quality standards, level of impact and sustainability goals.
Non-profit needs to be our mission core and our tax status, not our mentality.
If this all sounds aspirational it is.
Is it approachable? I would suggest it is as well.
And most of that success has taken place before we developed the full approach highlighted here. Our goal is to achieve full operational self-sufficiency complemented by focused and impactful philanthropy around our non-earned revenue, high impact areas as we continue to make improvements.
Each institution’s mix of assets, potential partners, and revenue sources are likely different. But can you create Great, Sustainable Impact with your institution? I suggest that you can make significant strides in that direction, just as we are at COSI.
Dr. David E. Chesebrough can be reached at:
614-629-3230 (office direct)
COSI (Center of Science & Industry)
333 West Broad Street
Columbus, OH 43215
Notes and References
The following are references that have provided guidance and insights into my thinking. The list includes all resources that are mentioned in the body of the thought piece. I encourage you to at least read Collins’ monograph and Porter’s keynote (note that the misspelling in accessing Porter’s piece is as it is in the Harvard Business School website).
Chesebrough, D. E. (1998). Museum Partnerships: Insights from the Literature and Research. Museum News -November/December 1998.
Collins, J. and Porras, J (1994). Built to Last.
Collins, J. (2001). Good to Great.
Collins, J. (2005). Good to Great and the Social Sectors (A Monograph to Accompany Good to Great).
Collins, J., & Hansen, M.T. (2011). Great by Choice: Uncertainty, Chaos, Luck – Why Some Thrive Despite It All.
Porter, M. (2006). Strategy for Museums: Keynote at 2006 American Association of Museums annual conference, Boston.
Dr. Chesebrough is the President and Chief Executive Officer of COSI in Columbus, Ohio and began his leadership of COSI in April 2006. In his role as President, he has led the efforts of the COSI team, Board of Trustees, community supporters and partners to reimagine the organization as a 21st century science, technology and research rich “center of science.” Dr. Chesebrough has led the effort to establish strategic partnerships with The Ohio State University, Battelle Memorial Institute, TechColumbus and others resulting in expanded opportunities for all to explore science, technology, engineering, math, and health advancements in Central Ohio to encourage and inspire youth to pursue careers in these areas. This internationally acclaimed model is now anchored by one-of-a-kind partnerships that have integrated into the public and educational experiences including an operatingHDTV studio (WOSU@COSI), research labs (OSU’s Labs in Life@COSI), Center of Research & Evaluation@COSI, the gallery and programs of the Columbus Historical Society, and the operations of Battelle Memorial Institute’s national STEM Innovation Network among others.