Defining, and Scaling, Our Terms

Posted by Andrew Taylor On December - 5 - 2012

Andrew Taylor

Before we can have a useful conversation about taking cultural enterprises or community arts efforts “to scale,” we need to define what we mean by that. “Going to scale” usually means serving more people in more places with the same service structure. But that can happen in a number of ways.

First, a single organization can successfully increase its reach or impact by expanding. Second, other individuals or organizations can replicate successful projects or programs to serve more people in more places, while the original organization remains much the same. Finally, you can scale through a hybrid of the two approaches above, where a successful program provider creates a “franchise” to license or sell or support multiple instances of the same program.

In the commercial world, scalability of a project or business has mostly to do with economics, and the interplay of fixed and variable costs (sorry, we have to go there…but I’ll be brief). It all begins with the fixed investment required to build the project or process…how big the machine or system or service network needs to be to launch.

After that, it’s all about incremental revenue. Projects can scale if the incremental revenue from additional users is large enough to surpass the fixed costs quickly, and leave them in the dust (the customer pays you $10 and they only cost you $1, for example). When incremental revenue is slim (customer pays you $10, but cost you $9 to serve), a project can’t capture its fixed costs quickly, can’t surpass those fixed costs dramatically, and therefore can’t scale very well.

So, our first stop is to wonder whether “incremental revenue” has an analog in nonprofit or public cultural enterprise. The lively arts certainly have high fixed costs (the costs to construct and prepare the performance), and can have high incremental revenues (the cost of selling one more ticket is low, so the ticket price is almost all incremental revenue per user). But the annoying detail of limited capacity, each performance having only so many seats, kind of blows the scalability.

To make more seats available, you have to run the performance multiple times, increase your fixed costs, and your margin is gone. The problem is made worse by the challenge of demand…you could certainly hold your theater performance in an arena that seats 30,000…but good luck filling the seats.

Further, more person-to-person cultural activities—like art or music lessons, or individualized support for working artists, or grantmaking—have a high cost per user, and are therefore impossible to scale. You can save some of the fixed investments in these programs by copying planning and strategy from similar successful programs (which we do all the time, and should do more). But “scale” will always be elusive and expensive.

Despite the economic doom and gloom, the nonprofit world in general (and the arts world specifically) has many examples of all three types of scaling I mentioned above:

Single Organization: Successful projects expand their work under their own umbrella all the time. In Texas for example, the arts/imagination/education nonprofit Big Thought built a prototype service, and grew it into more and more places over the past 25 years. In New York, Fractured Atlas offers its support services primarily through fixed-cost efforts that can scale. The Metropolitan Opera has famously scaled its live performance strategy beyond its theater walls and into movie theaters (although both fixed and incremental costs are rather extraordinary).

Replication: The arts industry is also full of borrowed or copied initiatives drawn from the success of other organizations. Springboard for the Arts had local success with its Community Supported Art program, for example, and shared a toolkit for anyone anywhere to replicate it. The Wallace Foundation and other funders make significant efforts to identify successful strategies and disseminate them to the field.

Franchise: A central program office supporting regional or local “owners” is perhaps the oldest form of scaling in the U.S. nonprofit world. Girl Scouts and Boy Scouts are essentially franchise businesses, authorizing local providers (aka, parents and scout leaders) to run a small version of their projects and processes. And in many ways, national coalitions or associations, like the Kennedy Center Alliance for Arts Education Network, are versions of the franchise model…coordinating best practices in advocacy and advancement through a loose-knit affiliation under a common name.

So, given all this, will the growth of digital communications and global networks of professionals, funders, and governments increase opportunities in any of these categories for taking good ideas “to scale”? Probably yes. But without a focus on the underlying economics and dynamics of each potential enterprise, there will most certainly be lots of stumbling along the way.

I’ll look forward to this conversation to explore these and other issues more deeply.

2 Responses to “Defining, and Scaling, Our Terms”

  1. [...] with end users, then open the system or service to large volumes of users to rake in the cash. # My post makes an effort to define what ‘scaling up’ actually means, and how it might mean [...]

  2. Isn’t scaling dependent on demand? The central problem for many sales-dependent arts organizations isn’t how to grow to serve more people, but rather how to find more people who are interested in being served.

    I can understand the examples of service organizations expanding to meet unmet demand, but I’m wondering how valuable the scaling conversation is in an industry that’s growing in some areas and shrinking in others.

    Wouldn’t it be useful to talk about scaling in both directions – without judgement – so cultural organizations have a framework for understanding how to scale up or down as the circumstances warrant?

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