Charity
When a venture lacks many of the elements that make it a business, but still has "staying power" in society, we generally find a Charity. A Charity is uneconomic without help because, though a long-term benefit to society (notice in the prototype--target or "bulls-eye" diagram --that Net Buyer Benefit is medium to high) there is insufficient Volume and Margins to make it a self-sustaining business (evidenced in the prototype by low Product Market Match).
So we find as charities organizations that vary from opera and symphony companies to other community, educational, or religious groups that exist because they depend upon the "charity" of society to make up the shortfalls that come from lack of profitable delivery of their product or service.
You will also notice in the same prototype diagram that (1) the Innovation level is immaterial to marketability, being insufficient to propel the product/service into profit-making status; (2) Scarcity and Appropriability are medium, due to weak economic standing; (3) Uncertainty is medium due to community support, with Ambiguity somewhere in the medium range due to the basically uneconomic nature of the profit-making lack in the organization.
Figure 1: "B/K" Diagram
ADVICE:
To turn a Charity into a business, it is necessary to address the fundamental problems that render the organization unable to exist without help from society. These are: (1) problems with the Product Market Match [there's just not a big market for this stuff]; (2) because of the low Product Market Match there are problems with the Margins [although people value the product/service, the costs are much higher than the few who value it highly can fund by themselves]; which explains (3) problems with the Volume. Though many "purists" resist, the solution is to "commercialize" the product or service, i.e. make it accessible to and desirable for larger portions of society.
Where an organization is likely to depend upon society over the long term, it is an error to promise supporters a return on their contributions beyond that of "recognition" for their help. If used properly, the "sale" of recognition is a "second product" that if properly marketed, can guarantee a Charity the Margins and Volume that come from this NEW Product Market Match. The key is to fund such organizations as charities, and NOT as businesses.
Figure 2: Target "Bulls-eye" Diagram
Venture Example:
This case was prepared by Team Lynx as an entrepreneurship project at the University of Victoria. It is designed to illustrate the venture archetypes used in the New Venture Template through story and case description. Though the case is based on a true story and actual businesses, its name and likeness has been altered. The case is quite brief, so you should be able to read it quickly
Jerry Grant was reading the headlines of the Financial Post. He nodded his head noting an article about new limitations on public funding of non-profit organizations. During the last 10 years Jerry had voluntarily completed the financial planning and management of the Supreme Opera Company, on a part-time basis. It was the first week of October and Jerry was deep in the process of preparing the next year's budget. Winter had arrived early and Jerry was concerned about the adverse effects of an early, cold winter on ticket sales.
BACKGROUND
The Supreme Opera Company is located in the Mountain West, where hockey, basketball, deer hunting and 'Monster Trucks' are the main social attractions. The company's objective is to produce world-class European Opera. As the social environment is not receptive to diverse tastes, the Supreme Opera Company typically presents "light" opera, such as the familiar Madame Butterfly, Merry Widow, and Die Fledermaus. Some previous experiences with modern Italian music were disastrous and only 15% of the seats were sold.
The company performs 3 opera productions each year (fall, winter and spring). Each production lasts 10 days, with four performances each run. Most of the second-tier performers and choristers are from the local community. They take lessons and practice months in advance of each performance. About 3 weeks before each performance the 'marquis' stars come to town for 2-3 days of partial-dress rehearsals. One week before each performance, they return for a full-dress rehearsal with the local choirs and performers before the actual stage performances.
THE THEATRE
The theatre has over 1800 seats on the main floor and nearly 100 seats in the grand tiers and balconies. It was originally built with public funding. A recent up-grade and renovation has put the theatre in a perfect shape and fit for superior performances.
Ticket prices are $15 a seat on average, quite insufficient to meet the costs: A sold out house would cover only 60 % of the budget. Market research had indicated that a price increase would lead to dramatic reductions demand and revenues. The municipality contributes to the opera company in order to make up the deficit. The previous year's budget was $1 million, including $400,000. provided by the municipality.
Charles Moser, the local General Manager, is doing a superb job. He studied theater and opera in Austria and performed in all the major opera houses in Europe. He is widely acclaimed, and has come to the Supreme Opera Company to build a superb opera organization in his hometown. Charles is an expert in listening to, coaching and directing a voice. He and his team have superior capabilities and can perform at a world-class competitive level.
PERIPHERAL BENEFITS
Although the Supreme Opera Company is a non-profit organization, it has a positive impact on the city's economy. About 30% of the audience travels from the surrounding towns. Their transport and accommodation expenditures boost the local economy. The cultural atmosphere created by the opera company has an influence on the people's choice of clothing and their spending on items such as books and musical records. As part of the Arts Community, it also has positive impact on "quality of life" as the community seeks to attract and keep well-educated individuals, families and businesses.
SALES AND MARKETING
The Supreme Opera Company uses the simplest possible methods for generating ticket sales and membership subscriptions. Tickets are sold for single programs, and small discounts are given for yearly subscriptions. Ticket reservation and sales are handled manually. The added expense of an automated system simply isn't in the budget, although Jerry felt modern information technology could provide customers with better services and reduce personnel costs.
As he drove to the office, Jerry considered the benefits of a more effective marketing and soliciting system. He felt that placing a sales manager in this area would at least provide interesting results. He decided to ask Steve Robinson, the Human Resources Manager, to evaluate an organizational change. In his mind, Jerry was searching for revenue generating ideas. He was concerned that the municipality might not continue to fully-compensate the opera company's regular deficits. An idea came to his mind to ask the local businesses to give donations to the opera company. Another idea was to render the theatre for different occasions and special events such as schools' graduation ceremonies. Such events could take place only when the building was idle. A high degree of selectivity would be essential to avoid any damage to the opera houses' reputation.
The next meeting of the board of directors of the Supreme Opera Company was a month away. Jerry was aiming to complete his final analysis and propose the new budget encompassing new revenue generating and organizational change schemes to the board of directors at the meeting. His ideas were beginning to take shape as he reached the office parking lot.
