CHAPTER 3

Creating Value in the Performing Arts Industries: A Process for Arts Entrepreneurs

Sara Theis and Mark C. Samples

Introduction

This chapter presents a complete process for designing and creating value in a performing arts industry context, from idea-generation to the point where the project is ready to launch. This means that the process focuses on the foundational stages of a project, its inception and early development, rather than later stages such as promotion, pricing, and technical execution of the performance, product, or service. By focusing on creating value early, artist entrepreneurs can develop a stronger position for their project when they transition from project design to project execution. Some scholarship has been accomplished with regard to the public and intrinsic benefits of the arts, such as McCarthy et al. (2004). Yet a study of the particular processes for creating those benefits, and the specific challenges faced by artist entrepreneurs is lacking. This chapter seeks to begin filling this gap.

Drawing on the authors’ experiences and research, the chapter is organized around the recommended phases that any artist entrepreneur go through in the beginning stages of a venture. Each phase is designed to ensure that value is created for customers.

Examples in this chapter will be drawn from the fields of theater and of music, since those are the authors’ fields of expertise. But the principles and strategies proposed here apply more broadly to entrepreneurs in other artistic domains. In this chapter, the term “artist entrepreneur” has been chosen to refer to this broad and varied set of practitioners, including actors, directors, musicians, composers, and dancers, as well as arts administrators and others.

Following the phases described in this chapter does not guarantee success, for developing a sustainable career in the arts presents many challenges. As emphasized in the following, success requires obtaining constant input from prospective customers, continual analysis of market characteristics, and a willingness to adjust one’s value proposition and mode of delivery when required. It is hoped, however, that explaining these phases and suggesting an order for working through them will provide a model for artist entrepreneurs to develop the skill of identifying, honing, and creating value in their communities.

Clarifying Artistic Philosophy

A crucial difference between entrepreneurs and artist entrepreneurs is that the latter typically have domain-specific skills that guide their choice of industry. Whereas an entrepreneur might search for a need in various markets and choose the most profitable opportunity in the most feasible market, an artist entrepreneur’s search is more focused. A musician with skills in composition and conducting, for example, might consider starting a community orchestra or becoming a film music composer, but she likely would not consider the more classic entrepreneurial options, such as franchising a restaurant or starting a t-shirt business. In addition to opportunities for profit, artists seek outlets that will resonate with their personal artistic values. It is a deeply ingrained belief in artist-communities that there is a difference between successful artists who are true to their core artistic values, and those who “sell out.” By building an authentic personal brand, the performing artist can more clearly pursue a version of himself and his art that promotes natural strengths (Radbill 2017, 96). The goal of an artist entrepreneur therefore is to create a career that is not only financially sustainable, but also artistically fulfilling.

In planning a venture or a career, artist-entrepreneurs must first discover and define their own core artistic values, a concept that can be called one’s artistic philosophy, or in business terms, their “brand values.” Brand values, in this case, refer to the core characteristics of a business. They include not only the basic characteristics of a business’s identity, but also outline how a business distinguishes itself in the marketplace. Brand values link a brand to products and broader concepts, such as peak athletic performance (Nike) or beautifully simple technology (Apple; Jones 2017). These brand values then become a rubric by which to evaluate business opportunities and assess a project’s success.

A good place to start when discovering one’s brand values is to first look back (Reflection), then look forward (Forecasting). First, the artist entrepreneur should reflect on her past activities and search for broader patterns that emerge. Begin by asking the following reflective questions: “What am I most passionate about?” “What do other people come to me for?” “What activities make me lose track of time?” The performing artist can also ask close colleagues to answer the same questions, as sometimes others can see patterns that are invisible to the artist. The exercise of reflection should continue with broader questions: “Which of my artistic activities have led to the most personal, social, and cultural fulfillment?” After reflecting on past successes, she should spend time forecasting future activities through an idealized lens: “If I could design an ideal performance, what would it look like?” “What do my ideal audience members look and act like?” “In 10 years, what activities and projects would I have to be working on to feel artistically fulfilled?” When approaching these questions, be as specific as possible, giving concrete and detailed answers. Also, be sure to record answers either on paper or through a voice recorder. At the end of this phase of Reflection and Forecasting, the artist entrepreneur should know what domain her business idea will inhabit. Just as important, she will disqualify many opportunities from her view, allowing a greater focus and creativity in the domain that matters most.

Though it may seem that an artist’s domain-specificity unduly limits opportunities, it can also work as an advantage. Performing artists have typically spent years in focused skill acquisition, developing their craft to expert level. Scientific research has shown that grit (Duckworth 2016) and deliberate practice (Ericsson and Pool 2016) are skills that accompany broader success in a predictable and even causative way. Professional musicians, and other top performers who have trained extensively such as athletes and chess masters, are often studied by researchers precisely because of their ability to hone skills to a high level over time. By clarifying and writing down one’s artistic philosophy, the artist entrepreneur can leverage the thousands of hours of focused skill development into a business that creates value for others.

Idea Generation

Once the artist entrepreneur has clarified an artistic philosophy, the next step is to generate an idea that will contribute value. In order to do this, it is important to begin considering potential customers. Early consideration of who the customer is will help to focus the business idea, and a full customer profile will be described in full later in this chapter. “Customers,” for this purpose, is a broad term meaning those who will take advantage of the product or offering. Customers could be people who buy tickets to a performance or people who will use a product or service or people who will contract the artist to do work for their existing business or people who will benefit in some way by the offer. Ideas may exist about how customers may view the particular solution to their problem, but until meaningful discussion is had to gain feedback, the ideas are only guesses. There are many ways ideas can be strengthened to create more value for the customer. Based on the feedback, make appropriate adjustments to the product or service. Revise, revise, revise. The fact of the matter is, unless someone else, a customer, sees value in the art and is willing and able to engage in it, it is not a business or a career path. Other people, customers, are the key to success for the artist entrepreneur.

Step two in this process is coming up with a business idea. The idea of creating a business can be scary for artists, because so many of the concepts seem foreign. There are numbers involved, and they are not “five, six, seven, eight.” Later in the chapter, the business model canvas will be discussed to help think through what is required when creating an arts-based business. Each business has a model. It may be simple like baking cookies in the kitchen and selling them to the entrepreneur’s own family and friends or it could be very complex like the federal government.

There are a couple of tools that can help generate better ideas. The first is a game of “What’s Missing?” the authors’ variation of the common practice of looking at the competitive landscape in a given market and searching for opportunities in the gaps. This works well for artist entrepreneurs who want to engage a specific community in the arts in some way. Make a list of all of the arts-based businesses within a specific market, figure out what is not there, and pursue the most feasible opportunities in the gap. This is called opportunity recognition, an important skill for entrepreneurs seeking to create value in their industry. In an ideal world, this is a community need, and it is a business idea that has a higher probability of succeeding because it is entirely missing. A conversation with the customer base is in order at this point in time. It is possible that the particular artform does not exist within a community because there is no interest. If there is no interest or engagement in that artform, a new business will likely fail without cultivation. At this point, the artist entrepreneur should begin to examine if there is a path to cultivating interest or engagement in the offer.

The “What’s Missing?” activity was done with a group of students recently. The idea was to create an arts-based business located in Decatur, Illinois. Each student compiled a list of the arts programming and businesses in and adjacent to this city and, surprisingly, there are quite a few in this urban of 80,000 people. One student identified synchronized swimming as an artform that was entirely absent from the city’s arts landscape. The student dutifully completed his business model canvas and created programming that would support teaching students to swim before entering classes that would ultimately train them to be a member of a synchronized swimming team. The training was similar to what one might see in a dance studio sequence, with the instructor teaching basic skills to younger students and more artful execution to students with advanced experience. The student’s idea needed a little more investigation before it could progress. He was asked to explore what the offerings were for swim lessons, an adjacent industry offering. He discovered a landscape riddled with options. In Decatur, Illinois, one can engage in swim lessons through the local park district, the YMCA, several day care centers around the area, and high schools. Moreover, an interested student could take private lessons through multiple area teachers. Each company offers options for multiple age ranges and skill levels. Swimming is alive and well in this community. There is an argument to be made that this market is saturated and there would be no way to create a successful business in this realm. The student’s market research led to an important adjustment to the model. Instead of entering the market as a competitor, he chose to make the people engaging in those offerings his target market and his programming would be adjusted to build on the skills that they learned through these existing programs. He identified those organizations as potential partners rather than competitors and was able to scale back his own programming needs to focus on building engagement with synchronized swimming specifically. This type of arrangement is called “synergy” (Byrnes 2015).

The second tool for generating ideas comes from design thinking practices and is for brainstorming problems with a specific event or process in mind. This process works best with a group of people with some working knowledge of the question at hand. Give each member of the group a stack of sticky notes and pose a broad question like, “What are all of the problems with theater?” or “What are all of the problems with rehearsal?” Ask each member of the group to list one problem per sticky note (quantity over quality), and give them a limited amount of time (about three minutes) to come up with as many problems as possible. Next, group similar responses together, discuss similarities, identify root/core problems, and create possible ideas for solutions. Next, set to work understanding the problem’s ideal outcome. The problem can be highly complex, such as “arts organizations lack diversity,” or fairly simple, such as “the stage floor takes a long time to dry after mopping.”

Once the problem has been clearly identified, state it succinctly and move into the next step of the process. This step or the previous one can be revisited as necessary. Remember, arts entrepreneurship is a process and bouncing back and forth between steps to clarify or change any part of it is not only suggested but also required in order to reach a sustainable arts business idea.

Visioning

Visioning is the next step in the process of developing an arts business that creates value. “Visioning” is imagining what the world looks like if the venture is successful in fulfilling its mission. There are internal and external components of this process, and both are essential. Artist entrepreneurs need to define for themselves what they believe success looks like, and then, test their assumptions within their customer base.

During the internal part of process, ask “What does success in this endeavor look like? Who are the people impacted? What are they doing? How do I know success is achieved?” Find a visual way of representing the answers. It could be drawing, collage or any other medium. It is important to clarify what success looks like or how the world is impacted because of this business. That will determine what steps are taken to impact the problem. At this point in the process, the broad impact of the arts-based business is what is being considered. The artist entrepreneur can spend time drilling down on specific metrics to achieve later. This information will become the “vision” statement for the organization, which differs from a mission statement in a critical way. A mission defines the organization’s purpose and for whom. A vision statement defines what the impact will be on the world because this organization exists (Rosewell 2014).

For example, suppose the issue being addressed is “arts organizations lack diversity.” That is a very broad problem to solve and it is incredibly complex. Suppose that, based on the artistic philosophy developed earlier, this artist entrepreneur has identified a philosophy grounded in acting and a love of elementary school children. The outcome that is drawn may be as simple as more members of underrepresented communities in leadership positions of existing organizations. The way that one might approach this goal is to create a program that follows specific students and creates resources and opportunities over time that allow them to be better prepared to take on leadership positions. Alternatively, the vision might be to have large audiences composed of members of underrepresented communities. The way that one might approach this vision is programming aimed at engaging those community members early to develop a love of the arts and, in turn, create their own arts organizations. For both outcomes, the artist entrepreneur’s artistic philosophy is intact.

Once the internal test has been completed, the artist entrepreneur must test her ideas externally by talking to potential customers. The focus group of customers that was identified needs to be engaged in a conversation to gain a better understanding of the issue at hand. The goal is to get to the heart of the problem. What is the big headache? For example, if the discussion about slow-drying stage floors is being had with stagehands, a discovery may be made that a new fast-drying mop solution is required to solve the issue. Alternately, the discovery may be that there is too much stuff on the stage when mopping begins. Drying might take a long time because the stagehands have to stop every 30 seconds to move something and it would be better if the stage were cleared the night before. The solution to the latter is a process improvement aimed at benefitting this specific group. No matter how amazing a new mop product is, it will not solve a process issue. This new understanding of the problem would not come about without listening to and absorbing what the customers say. As a result, the team can make whatever adjustments are necessary to better serve the customer base.

Beyond internal and external tests, another tool that can be used to clarify a business’s vision is an exercise called “Headlines” (Allison 2005, 104–105). Imagine it is 10 years in the future and the organization has just made the national news. Write a headline to describe what that is. Acme Corporation sells One Trillion Mops is quite different from Five-Minute Preset: A New Standard for Live Performance. If the goal is selling one trillion mops, an expansion of the customer base is necessary to hit that mark. If the goal is a five-minute preset, mopping is not the only process that will need to be addressed.

Developing a Customer Profile

Knowing one’s customer is crucial to refining a vision into one that will ultimately provide value. The big hindrance here is that entrepreneurs typically think they already know their customers, but are often mistaken. All entrepreneurs struggle with this, but artists have an extra barrier. There is a long-standing cultural belief that artists should only think of themselves, and changing one’s art because of customer need or desire is a form of selling out. This, however, is a historical and cultural myth harbored by amateurs, not professionals. There is a difference between compromising one’s artistic values and philosophy (which is strongly advised against) and communicating one’s art in a way that is valuable to others (what this chapter is about). Knowing one’s customers cannot replace the work of preparing an artist’s craft, but it is essential for the sustainability of an arts venture.

How does one go about knowing customers better? Ask them. Asking can take many forms, such as surveys, informal interviews with community members, or interacting with prospective customers where they congregate online. One simple way to understand a customer’s perceptions of value is to simply ask two questions: (1) “What are your greatest fears or frustrations?” and (2) “What are your greatest hopes or desires?” (Be sure to limit the domain of the question to the issue that is under investigation.) Beyond this, one should complete a thorough customer profile in the beginning stages of any major project. A customer profile, if accurate, will provide a lighthouse reference for deciding what elements of one’s art will ultimately be delivered to customers, and how it will be delivered.

Another useful approach to a building a strong customer profile was developed by Osterwalder et al. (2014). Readers are advised to refer to the full resource, but a summary of the steps here will provide a start. First, define the business’s customer segments. In the case of a violin teaching studio, for instance, the two main customer segments might be the young students as well as their parents. Next, collect what Osterwalder and Pigneur call “customer jobs.” These refer to the tasks that customers want to get done. In the case of the parents of a violin student, customer jobs might include anything from wanting child care for an hour to wanting to give their child a well-balanced life. Finally, make separate, ranked lists of “pains” (pain points with regard to the customer jobs) and “gains” (desired benefits to the customer with regard to customer jobs) that each customer segment feels.

The first draft of a customer profile will likely be completed internally, but the real power of a customer profile comes when it has been tested against real prospective customers and refined in an iterative way.

Goal Setting and Strategies for Execution

Based on the developed customer profile and vision, it is time to begin to further define what success means and how the artist entrepreneur determines that it is achieved. One of the great things about arts-based businesses is that the artist is the one who decides what metrics will be used to measure success. The concept of clarity in goal setting has been around at least since Peter Drucker’s classic guide, The Practice of Management, was first published in 1954. The objective in whatever method is chosen to construct goals is to make them clearly accomplishable. They should be defined in a way that allows clarity to know when they are done. This is the difference between “get work out there” and “integrate arts education programming aimed at engaging underrepresented communities into three schools in urban Chicago within two years.”

A strategy for execution is the means to an end. That is to say, it is the way that one will go about achieving a goal. There are a lot of factors at play in determining a strategy. The first step is to engage in a self-study of sorts. What are the tools the artist entrepreneur, herself, brings to the table? Entrepreneurship professor Heidi Neck, in a keynote address at the 2016 Society for Arts Entrepreneurship Education in Decatur, Illinois, offered a series of questions to uncover one’s strengths in this regard. “Who am I? What do I have? Who do I know? What can I do today, this week, this month?” Answering these questions helps to develop strategies of execution that match with an individual’s skill set and experience.

The next step is to get feedback once again from the identified customer base. The proposed goals and strategies need to be measured against the problem that has been identified. To this end, Alex Bruton of the Straight Up Business Institute offers The Critique Pad, a valuable tool that measures the impact and feasibility of a business idea (www.straightupbusiness.institute/toolkit). To assess an idea, ask customers to rate the proposed solution with regard to impact and feasibility, each on a scale from 1 to 10. Impact answers the question, “Will the proposed solution fix the identified problem?” Feasibility answers, “Can the proposed solution be delivered?” Combine the two scores to get an overall impact and feasibility score: high value can be obtained with high scores on both questions. This rating should come from the customer because the customer is the one who will ultimately decide the value of the product or service offered. If one or the other is lacking, make the necessary revisions and try again.

Defining a Business Structure

Once a value proposition has been developed and tested and the business’s vision and brand values have been clarified, the artist entrepreneur should go to work on the structure their business will take. Should the business be structured as a non-profit, a Limited Liability Company (LLC), or another type of corporation? Will the business make one-time sales or use a membership model? What are the key revenue sources and cost structures of the business? What are the business’s key resources and partners? Honing a business structure that is appropriate to the venture is critical for success, because it is the apparatus through which one can deliver value to customers and create a sustainable business. If the artist entrepreneur does not have previous training in business, this is the time to begin researching what resources are available, including industry business and legal guides (e.g., Hearn 2017; Halloran 2017), and the chamber of commerce in the state or province where the business will be located. Although they do not address arts entrepreneurship directly, general entrepreneurship textbooks might also be useful, since they cover standard business practices such as budgeting and accounting (see for instance Kuratko 2014; Bamford and Bruton 2016)

At this point in the process, the artist entrepreneur may already have ideas about how the business should be structured, and it might be tempting to rush through this process and choose the first option that comes to mind. This would be a mistake. First, the artist entrepreneur should widen her options and seek counsel from an experienced and trusted business owner. Then, she should carefully consider how her business structure will support her in the short and long term. By taking time now to plan and define a business model, the artist entrepreneur can avoid major structural problems in the future.

There are many resources available for developing a business model, ranging from a simple brainstorming session to a complete business plan (for an example of a shorter business plan template that an artist might use, see Cutler 2010, 43–48). The most complete and approachable tool for the arts professional is the Business Model Canvas. The Business Model Canvas was developed by Alexander Osterwalder and Yves Pigneur for the purpose of clarifying an entrepreneur’s understanding and relationship of the essential components of a business (Osterwalder and Pigneur 2010). With this tool, all essential components of a business can be represented on a single page. Additionally, the model is accessible to artists who have had little or no previous experience with business models or business plans. There are nine categories, described as follows. A value proposition is a statement that communicates the value delivered to the customer. Customer segments refer to primary and secondary customer groups who receive value provided by the product or service. Customer relationships define the nature of the business’s relationship with customers, such as memberships, enrollment, or one-time sales. Channels are the means by which value is delivered to customers, such as store-front, classroom, or shipping. Key Activities refer to all important and repeating activities needed to deliver value to the customer. Key resources are the human, material, and knowledge resources needed to deliver value to the customer. Key Partners are the external companies and people needed to sustain the business. Cost Structure refers to the cost categories required to make the business structure sustainable. Revenue streams are the sources of revenue created by the business structure. A final crucial step is to compare the model to its surrounding marketplace environment. It is important to consider what other businesses are providing similar services, and develop a value proposition and model that is distinct and competitive in the local landscape.

Note that the business model canvas allows for categories to be approached in any order, and can each be updated continuously in an iterative process. Nevertheless, the authors encourage a special focus on the value proposition early on, because a clear and refined value proposition will lead to clarity in other areas of the business. Each category in the canvas can be turned into a checklist that will guide the artist entrepreneur through a complete consideration of the business’s structure. Note that while these are in list form, they can be approached out of sequence given each artist entrepreneur’s specific situation.

Another benefit of developing a business model is that it helps the artist entrepreneur identify resources, time, money, and people that are still needed. By working through a complete business model, the artist entrepreneur will have the opportunity to resolve resource deficits early through acquisition, building a team, partnering with other businesses, or developing vendor contracts.

The Premortem

Once the initial business model and all of the previous steps are completed, the final step in the process is to conduct a “premortem” for the project. Often, arts professionals do an exercise after a venture fails, analyzing what went wrong and fixing it for next time. This is sometimes called the “postmortem.” Entrepreneurs can also perform a premortem, a thought experiment that helps them identify the key points of potential failure in the project before they begin, then to design strategies to avoid those problems. The premortem concept was developed by psychologist Gary Klein and described in his book Streetlights and Shadows: Searching for the Keys to Adaptive Decision Making (Klein 2009). The procedure presented subsequently follows Chip and Dan Heath’s detailed discussion of the practice in their book Decisive: How to Make Better Decisions in Life and Work (2013). Because the exercise assumes an already-defined project, it is best to do this activity in the later stages of a project’s development.

Klein describes the premise of the premortem technique: “In a premortem, you ask your team to pretend that a crystal ball shows that in a few weeks or months your new venture has failed. The team members then write down all the reasons why it failed.” (Klein 2009, 63). By identifying potential failure points for a venture or project, preventative measures can be put in place beforehand, increasing the ability of the entrepreneur to respond. Following is one way to perform a project premortem.

Use the solutions created in the premortem process to either update the Business Model Canvas designed earlier, or as contingency plans during the execution of the project. By taking the time to identify potential pitfalls before the project begins, artist entrepreneurs can proactively prepare to respond to a wide variety challenges, and therefore will be more likely to succeed in creating value for their customers.

Conclusion: Reflect, Revise, Repeat

Though this chapter proposes an overall process for value creation in arts entrepreneurship, further research is needed to demonstrate the particular challenges faced by artist entrepreneurs in each phase. Moreover, each arts industry has significant differences in the way its products are produced, distributed, and consumed. A look at individual industries such as music, theater, or the visual arts through the lens of value creation would be a fruitful exercise. Nevertheless, the process introduced here aims to capture elements common across the performing and visual arts.

Approaching an arts entrepreneurship venture through the lens of value creation can make the process of launching a business more efficient and artistically fulfilling from start to finish. By following the process outlined in this chapter, an artist entrepreneur can increase the odds that her undertaking will succeed. To implement this proposed process, follow the steps subsequently listed.

In addition to the aforementioned steps, two overarching principles should be implemented throughout. First, test all assumptions and decisions by talking to customers. By seeking and analyzing external feedback, the artist entrepreneur can avoid the common pitfall of creating a product or service that does not have a market. Second, be open to revising business decisions when the evidence warrants it. Through reflection and data analysis, the artist entrepreneur can create an iterative development process that is responsive enough to meet the needs of customer segments but still affirms the entrepreneur’s artistic philosophy.

By following the processes and applying the principles herein, more arts businesses can be created that add value to their communities, and more artist entrepreneurs can successfully design a career for themselves that is both financially sustainable and artistically fulfilling.

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