The extent to which the view that museums have to conquer the market has turned into a dogma, which few dare challenge any longer, suggests that it may be time for a more critical appraisal of the notion of museum entrepreneurship. There is ample evidence to suggest that the pressure on everyone in the sector to ‘be commercial’ – come what may – has often pushed museums into inappropriate ventures when, on closer consideration, they might have been better served by a more deliberative approach.

At the heart of museums’ attempts to embark on the commercial road lies a systemic dilemma, which can be summarised as follows:

Museums embark on commercial ventures as a result of being strapped for cash and needing new sources of income;

Business development, as a rule, requires up-front investment before payback sets in and comprises an inherent element of risk – a rule of thumb being one successful venture for five failures;

Museums usually cannot muster the up-front investment in capital and staff /skills – being short of money in the first place and, more importantly, without access to traditional sources of capital funding such as bank lending or venture capital – and their statutory position as charities or public sector run facilities tightly limits their ability for financial risk taking. The trading company structure is usually not sufficiently arms’ length to provide a way around this;

As a result, museum ventures end up being chronically undercapitalised, translating into low profitability and an inability to grow as earned profits are not re-invested but used to fill the funding gaps.

This situation is rarely acknowledged by senior management or boards. Combined with funder and peer pressures, this has left many museums trapped in situations that have ended up wasting resources and demoralising everyone involved.

In many instances, the more sensible option is to hand over to an outside operator with the resources and skills to do the job. Outsourcing is, of course, widely practised in areas such as museum catering, with varying degrees of success, but it is much less frequent in museum retail for example.
There is still an engrained myth about the merits of doing things oneself, or the frequently cited issue of control over product and services when you hand over to an outsider. But in the end these are non-arguments. There is ample evidence to show that outsourcing works very well, where arrangements with the contractor are properly structured and based on a clear understanding of both sides’ priorities and objectives.

There are situations where finding a contractor to take on the job to run the shop, café or publishing programme will be a stretch, but that is usually because the business opportunity itself is not particularly appealing. Putting a service out to tender can be a good way to test the underlying commercial rationale for any particular activity. There may still be a perfectly good reason for pursuing a low/no profit activity, e.g. to pursue non-financial objectives such as quality of visitor services. In that case, however, it would help to state this clearly, rather than pretending that one is in it for the money.

Capitalisation and risk profile – a growing issue

The problems of capitalisation and financial risk taking are certain to become more apparent as museums try to increase their commercial exposure and aim for a bigger involvement in the market place. Markets are subject to an ever-faster pace of shortening cycles of innovation and product development. Real financial strength is required to stay in this game.

This applies, for example, to the whole area of e-commerce, which museums have been eyeing – whether for extending their retail activities, marketing reproduction rights or creating on-line education products. The sector’s involvement in the digital revolution is strongly supported by the British Government’s agenda, which, it is argued, will also open up income generating opportunities.

Nice as it may sound, these hopes betray a lack of appreciation for the breakneck pace at which commerce in cyberspace is evolving, and the realities of a market with no/very low barriers to entry and very high costs of establishing and sustaining a market position. The current roller coaster ride of the dot.coms provides ample evidence of this. Museums, even in alliance, are hardly in a position to compete in this area – and yet many are contemplating investing resources to position themselves within this market. One wonders whether these might not be put to better use elsewhere….

This may be an extreme example, but it highlights the basic point that, with few exceptions, museums will find it increasingly difficult to maintain, let alone increase their market involvement from their own resources. It also suggests that commercial activities are likely to involve an increasing level of financial risk taking. Boards and funders do not seem to have begun to embrace this reality.

Next page: QUALE FUTURO PER LE PARTNERSHIP COMMERCIALI?

Magnus von Wistinghausen
mvwistinghausen@aeaconsulting.com
AEA Consulting web site is: www.aeaconsulting.com