Business Models in Visual Arts Ecology and Public Funded Organisations - Essay Example

Number Business Models in Visual Arts Ecology and Public Funded Organisations The ‘best business model’ for any organisation, community, or a social enterprise is dependent on a number factors. It will depend on factors such as the nature of the organisation and its activities, the nature of the assets held by an organisation, the stage of organisation lifecycles and the context in which it lies. ‘Sound’ business models are however not fixed, models considered as being appropriate by an organisation are bound to change with time as circumstances change (Royce, 2011, p.10). In seeking to establish a working definition of a business model in the not-for-profit sector, it has to be understood that a lot of definitions have been made about business models in the commercial sector but very little has been made about the not-for-profits and also business models in the publicly funded art world. In essence, a business model is greater than the financial transactions of an organisation recorded and presented in its financial statements. A business model provides a clear description of the rationale of how an organisation crates, captures and delivers value. In conducting business, sound business models are a necessary component in the visual arts ecology and most publicly funded organisations. However, there has been a widespread belief that numerous business models in the context of visual arts are relatively weak and have a high possibility of facing reduced funding with time. This beliefs have been backed by available research suggesting the same. Most organisations in the visual arts sector are characterised by undercapitalisation and holding reserves that are too little to support investment and growth and to cushion the organisation during times of crisis (Oakes & Oakes 2012, p.59). In most visual arts organisations, assets are never fully exploited and increased level of activity often translates into increase costs while visitors remain a relatively unexploited source of income. Within the visual arts ecology, there is minimal understanding of what a sound business model is and what it does for an organisation. This indicates the generally lower levels of business skills and understanding within the sector. Despite this, there is, however, a shared ground as to what a good business model should be like. The challenge arises in translating the shared opinion into tangible action. From a total business perspective, the culture depicted in visual art of individualism and a somewhat traditional leaning towards the values of the economic world. This may be problematic as it is difficult to be exemplary in something that you do not have high regard of or have full comprehension of. Business models relating to the visual arts sector and publicly funded organisations are somewhat technical and attention has to be paid to the detail in order to stipulate a viable and sustainable plan for the long run (Townley& Cooper, 1998, p.66). For example key aspects such as free entry into the visual arts organisations can be a blessing but will pose technical business challenges. This is explained by the fact, revenue is not generated directly from customers, let alone the contribution to overheads or surpluses. As a result, increased level of activity would lead to a disproportionate increase in costs compared to the revenues generated. In light of this, the business models drawn up for the visual arts ecology should focus on secondary revenue generating activities in order to supplement their lack of a direct source of revenue and enhance their operational sustainability. In formulating business models in the publicly funded visual arts sector, the key question still remains “what is a sustainable business model in the visual arts sector?” When creating a good business plan for the not-for-profit sector, key factors need to be put into consideration including the mission, the fiduciary perspective, the customer perspective, internal perspective and the growth and learning potential. In analysing the key factors, the organisations mission is paramount in the success of a model. The mission should define how the whole organisation works as the sole purpose of existence of the organisation is to deliver the mission. The fiduciary perspective focuses on the taxpayers and the funders and the impact they will have on the success of the organisation. The customer perspective pays attention to the customers and how the organisation should treat the customers in line with the mission. The internal perspective focuses on the organisations internal processes, it’s concerned with what the organisation should excel art in order to satisfy the customers and donors. The learning and growth element of the model is concerned with how the organisation must constantly learn and improve in order to achieve the mission. The necessity of a sound business model in the visual arts ecology cannot be overemphasized. Sustainability and excellence in the visual art organisation are tied to the quality of the model or models in place. In essence, robust business models are essential for an organisations longevity, sustained audience engagement and a successful stewardship of a publicly funded building (Chen, 2011, p.76). Longevity Longevity is not the ultimate end in measuring the success of a publicly funded visual art organisation. However if the organisations leaders wish to see their goals and ambitions achieved to a great extent beyond the short term, sound business models, are at the very least, of paramount importance. Good business models enable organisations to be able to withstand the shocks that arise from changes in the environment, whether internal or external (Byrnes, 2008, p.74). This provides comfort and assurance to potential donors, supporters and any partners. Essentially, the lifeline of publicly funded visual arts organisations lies on the donor funds in addition to any other secondary sources of income. With a good business model laid out carefully, the model should be able to sufficiently provide assurance to any potential funders of a worthy use of the funds to enhance sustainability. A good business model is therefore a major step to increasing longevity of the operations of a publicly funded visual arts organisation. Sustained audience engagement The development of a successful audience requires a lot of commitment over a number of years. This would in turn require careful planning and a level of certainty regarding future investment. A well-defined and written business model would ensure that a publicly funded visual arts organisation develops the sustained commitment it needs with its audience in order to functionally operate in the long run. Successful stewardship of a publicly funded building Most of the publicly funded visual arts organisations are hosted in buildings that have lease with full repair packages. This thus means that the occupiers, not the landlord, are responsible for the maintenance of the interior and the exterior of the building at their own expense. In order for the organisation to be able to maintain the building in a condition that is deemed acceptable, and to meet the lease obligations as they fall due, organisations need to develop plans to meet such periodic costs. A good business model that is set out in the proper context of the organisation will lay out plans that are necessary to account for the substantial expenditures necessary (Great Britain, 2010, p.15). A visual arts organisation can carry out great work without a business model but they cannot keep doing it for very long especially if they occupy a good-sized building. Competitive Advantage As much as the publicly funded visual arts organisations are not-for-profit organisations, the do require a competitive advantage in order to achieve targets in terms of activity and customer base. A significant advantage of a sound business model is that it can give an organisation the competitive edge over the competitors. Implementing a quality and unique business model would give the organisation a unique reputation in the industry and therefore creating a buzz among customers and increasing the activity levels which may be transformed into secondary sources of income. Financial Sustainability and Donor Funding Another major advantage of a sound business plan is the contribution it makes to an organisation with respect to the organisational financial stability. The model would outline the management of funds to ensure proper liquidity and long term capital safety. This may in turn be an incentive to donors and funders to provide more funds to ensure proper operational functionality of the visual art organisation (Milne Tregidga& Walton, 2009,p.39). The growth plans there in coupled with the assurance that donors get that funds would be put to good use entices more funding and a better chance for development of the organisation. Despite the general positive impacts that have been exemplified by having a sound business model in visual art organisations, there are numerous controversies regarding the necessity of a business model in the visual arts sector. Many hypotheses have been put forward regarding the reason as to why it is not essential to have a business model in publicly funded visual arts organisations. Researchers and scholars have put forth arguments against the necessity of a sound business plan based on numerous factors that underlie the visual arts ecology in the not-for-profit sector. Most of the arguments put forward to discredit the need of a business model in a visual arts ecology involves the fact that the organisations main aim does not lie in profit making but on service provision and customer satisfaction. Some arguments put forth include: Non-profit objective Visual arts organisations core objective is not making profit directly from the customers. The organisation does not rely on direct revenue such as ticket sale since entry is free and thus can only be dependent on secondary sources of income to be able to maintain a sustainable operation (Chong, 2009, p.23). Secondary sources of income would include additional activities such as catering. Due to the fact that the main goal of the visual arts ecology is not to make profit, postulations have been laid down against sound business model due to this fact. Critics of business models in publicly funded visual arts suggest that lacking a profit objective is a clear indication that the level of risk faced by that organisation is insignificant to necessitate the investment of time in developing a sound business plan for the organisation. Fundraising perspective Publicly funded visual arts organisation rely on the source of funding from the donors and public funds. They do not have a primary source of revenue and hence the ability for them to be self-sustainable in the long run without being funded by donors is low. This fact is what critics have also used to discredit the necessity of a business model in the organisation. In the commercial world, good business models are used to woo investors into investing their money into the company. This should not be the same case as that of the visual arts ecology due to the fact that the funders to the enterprise are well-wishers at a greater majority and do not need to be wooed to give donations. Key arguments against business models by Taylor (2006) have also criticised and questioned the necessity of business models in visual arts organisations on the basis of the funding perspective. The argument put across against the need of a business model suggests that the organisations channel and flow of finance are quite uncertain and the cash inflows to the organisation are faced by too much uncertainty that cannot be sufficiently catered for in by a business model. In conclusion, as much as there are controversies regarding the necessity of sound business models in visual art ecology and most publicly funded organisations, the positive impact brought about by having a sound business model cannot be over emphasised. It is therefore an essential requirement for the healthy operations of such organisations. Bibliography Byrnes, W. 2008. Management and the Arts. Elsevier, 4th Edition (26.39) Chen, T. F. 2011. Implementing new business models in for-profit and non-profit organizations: technologies and applications. Hershey, PA, Business Science Reference. Chong, D. 2009. Arts Management Mastering Management in the Creative and Cultural Industries. 2nd Edition, Routledge, Abingdon, Oxon. Milne, M. J., Tregidga, H. and Walton, S. 2009 ‘Words not actions! 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