Monday, December 9, 2013

Chris Bilton and the Boundaries of Creativity

Below are two quotes from the start of Chris Bilton's excellent book, Management and Creativity, that describe tensions between the creative act and the environment it occurs in. 
...Creativity is not to be located in one state of mind, one room, one type of person, one individual. Rather it lies in the transition points between different ways of thinking.

Chris Bilton, Management and Creativity, p. 2
First, creativity must produce something new. Secondly, creativity must produce something valuable or useful. (This is the duality of creativity).
It is through the combination of different styles of thinking that the duality of creativity is likely to emerge. Similarly, creative work is more likely to meet our criteria (of value or usefulness) if it takes place within certain boundaries, working within but also challenging expectations. If positioned too far 'outside the box', creative thinking is novel without being valuable and can no longer connect with an assessment of its value... Positioned towards the edge of the conceptual space, the creative idea can build upon what is already known and understood while at the same time pushing those boundaries a little further. 
Chris Bilton, Management and Creativity, pp 4, 5

Tuesday, October 15, 2013

Apple's Design Option to Disrupt the Cell Phone Industry

With iMessage and FaceTime Apple has built an internet-based high quality parallel communications channel that bypasses traditional cell phone services. For any two iOS 7/ OS X Mountain Lion users who are connected to the internet, an integrated parallel channel for video, voice and text messaging is already available. What's more, these conversations already take place with much higher fidelity than current cell phone calls via American carriers that highly compress their phone signal. And the conversation can be carried on across multiple devices--iPhone, iPad, laptop and desktop.

The logical evolution of this is that an Apple device will be able to determine if it is communicating to another Apple device, determine whether or not an internet channel is open between the two, and if so, move the conversation over to the internet channel.

If Apple is successful in creating a smooth running high fidelity WiFi based replacement for the cell phone based carrier, consumer demand for WiFi on a municipal level could drive WiFi adoption to levels that would support an entirely Apple based multichannel communications based ecosystem with message, voice and video integrated into the operating system of each device. Communications between homes outfitted with Apple products can already move over to this channel. We recently attended a kids birthday party via FaceTime. With cupcakes and candles on both sides of the video connection, it was a brilliantly smooth, live and entirely internet-based media experience.

The piece missing in this equation for true mobile disruption is broadly available municipal WiFi. In the years just before the recession there was a move to offer municipal WiFi with serious proposals considered by San Fransisco and attempts by Earthlink to launch a service in Philadelphia. In Philadelphia Earthlink eventually abandoned the project after sustaining low adoption rates and higher than expected costs. Earthlink experienced low adoption rates in part because its service offered little advantages over home based WiFi, so the motivation to switch to a city-wide system was low. In 2007 internet based communications were largely dependent on laptop and computer devices which are less portable and were only recently untethered from the wired network. Smart phones were still relatively new and the integration of services across devices was weak.

In the years since, Apple has built internet based video, voice and text features into OS X and iOS 7, essentially creating a superior quality parallel channel to the cell phone networks right inside of their operating systems. Now it is conceivable that those design features would enable customer demand to drive the viability of wide spread municipal WiFi.

Just how much could this be worth in monetary terms to both a city and its residents? First the current cost structure. Apple currently offers the iPhone 5C for $99 with a two-year contract that ranges from $70 to $530 per month, depending on your data usage. Let's assume a target segment that lives in a major city such as San Fransisco, Chicago or New York City, and uses at least 2 GB of data per month. That person is going to pay $95 per month on AT&T and $100 a month on Verizon. This user is single and doesn't share a plan with anyone. For each user I assume the $99 upfront cost plus $100 per month in use fees. Additionally, they are paying for internet in their home at a rate of about $50 a month. This is an online native with media rich browsing needs--streaming music, television and movies. Bandwidth intensive.

The cell phone alone over two years is going to cost $2499 without taxes. Add internet to that and you have a total bill over two years of $3,699. That's a lot of loot for one person to have phone and internet.

Apple also currently offers a 16GB 5c for $549 with a contract free carrier. That's the unsubsidized cost of the phone (in the two year contract the cost of the phone is recovered in the $1200 per year payment).

Let's imagine for a moment that you live in a large city with publicly available municipal WiFi. With wireless everywhere, you could buy the phones outright, detach from the cellular network and use the local WiFi for long periods of time. In theory your cell phone provider would become a secondary service, only needed for times when you are away from the city. In cities at the scale of San Fransisco and New York City, that could be very little indeed.

Then, under the current cost structure, a phone at full price plus municipal WiFi at $50 per month would cost $1,759 for the two years, a savings of $1,940. Additionally, you could pay $10 a month for a very generic cell phone plan through a company like Consumer Cellular to cover calls needed when WiFi is out of reach (no data transmission). Now, the total cost for the use of the premium consumer smart phone on the market is still at a savings of $1,820 over the current 2-year contract offering from a major carrier, all using existing technologies that just need better implementation and integration.

How viable is this? When Earthlink installed its municipal WiFi in Philadelphia it anticipated 20 to 25 nodes per square mile to supply adequate service to the entire city. In reality they had to install an average of 42 nodes per square mile, approximately double the cost estimated. The 2007 Earthlink bid to provide municipal WiFi to San Fransisco estimated a $6 million to $10 million capital investment plus $1.5 million to $2 million annual maintenance costs. If we double those estimates based on their experience in Philadelphia, we get a $20 million capital outlay plus $4 million a year in operating expenses. If the service charged moderately heavy users $50 a month it would take less than 7,000 of our target users to break-even on the monthly costs. If the same 7,000 users went off of their monthly cell phone plans to use Apple's wireless based video, voice and text features with a low cost ancillary cellphone contract as described above, their combined savings would be $13.5 million in the first two years. Theoretically that's money directly into residents' pockets and into the local economy.

Using the above numbers, with 14,000 users at $50 a month for a total of $8.4 million in revenues and $4 million in operating expenses per year, the city would have a positive cash flow of $4.4 million over 12 months. That would pay off the $20 million investment in less than 5 years while injecting $13.5 million each year in cash into the local economy through cost cutting for residents. And that is with a fairly narrow segment of adopters. Add a graduated pricing structure to that with lower costs for lower income and lower data intensive users plus higher costs for the high end 50 GB+ user and you have a very viable business model. In a city like San Fransisco with hundreds of thousands of potential customers, you can see where this quickly goes.

If multiple cities were to invest in their residents this way, demand for a pay-as-you-use-it wireless service would go up as urbanites migrate away from cell phone companies as a necessary central service for their smart phones. This would reposition cell phone companies as an ancillary service to be activated and paid for only when and where municipal WiFi is unreachable.

FaceTime and iMessage only work from one iOS/OS X device to another. Making WiFi based calls and texts outside of the iOS/OS X ecosystem currently requires Skype or another add-on app or service. We could assume that the integration of those products would improve, although as WiFi expands, Apple's superior design by integrating communication tools directly into its operating system only reinforces the advantages for consumers to purchase Apple products. Additionally, it will be customer adoption and demand that drives the transition. Apple has no investment in municipal WiFi one way or the other. But it is guiding demand for it through design in its operating systems. Keeping the integration focused on communicating between Apple devices reinforces the future advantages of the iOS/OS X platform.

Apple has a history of disrupting through a similar process. In the good old days when a removable disk was required to transfer files between computers, every computer came with a built in removable disk drive. To move away from this, Apple first started building network transfer features into its operating system. As users became used to the idea that one day network transfer would be the solution, Apple simply stopped providing any built in removable storage. This effectively repositioned the disk manufacturers as external to the integrity of the computer itself. The disk drive became an add on that you had to purchase separately and attach externally to your computer. At this point a low-cost USB flash drive is all you need for most external file transfer needs. Everything else is handled via the network. A similar process may be at work here, with cell phone carriers, which are currently essential to a mobile communications device, being eventually repositioned as ancillary or even optional.

To be clear, for this to work municipal WiFi would have to provide sufficient coverage within the city so that a user could move freely without losing their connection to the signal and without interruptions to login or reconnect. It can't be an anemic partial coverage with holes and weak spots. The coverage has to be complete and seamless in order to convert our above target user who wants data rich coverage and ease of mobility within the city limits. If the city designs for that user, so many others would benefit as well.

In typical Apple fashion, minimal discussion has been made around this. The user is left to demonstrate the demand in a pull system where Apple both guides and responds to their needs via design refinement. Adoption will drive the service with minimal additional investment from Apple. If adoption rates are high, it will pull users in through the user experience. This only reinforces Apple's dominance in the smart phone industry in the form of an increased advantage to owning the phones. If adoption rates are lower, there is minimal cost. Build now for the option to disrupt as demand dictates. Here a real options strategy meets product design with extremely low operating leverage and a finance strategy to back it up. Whether you are rooting for or against Apple, that's brilliant strategy.


This is by no means the final word on the viability of the cost estimates provided by Earthlink in their bid to the City of San Fransisco nor does it evaluate how suitable the coverage proposed there would be to our target user. But it does demonstrate that design improvements in the past six years have refined a target segment of early adopters who could pay for such an investment at reasonable adoption rates.

Monday, August 12, 2013

The Picture and the Workflow are the Same

A recent post over at DLK on the current ICP Triennial exhibition summed this up beautifully as follows:
In the previous age (which we might call "analog", but that might be misleading), there was generally only one workflow: start with a point of view or subject, take out your camera, and deliver your artwork as a final print. Right now, in this moment, there are a seemingly endless set of workflows available to photographers, artists, and anyone else who wants to mix together disparate media. Once again, we start with a point of view or subject, but then both the choices for methods and outputs quickly multiply. Images can be captured with a camera, drawn/appropriated from a physical or digital archive, generated with a computer, constructed in a darkroom, or recombined as a mutant hybrid. Artworks can take the final form of traditional prints, moving videos and films, self published books, physical objects of nearly any form, or digital files with only an Internet presence. The photographic reality of this moment is "freedom of workflow" and this exhibit offers countless examples of how this idea is manifesting itself as innovative artwork.
For those who are interested in achieving targeted change or social impact, this is a critical time to innovate, for the entire ecosystem of the image is in flux, and with the flux comes opportunity. On the one hand this can be a process of open ended discovery, and on the other hand it can be a process that strategically targets specific issues to drive a desired outcome or change. There is a symbiotic relationship between these two with distinctly different ways of working.

In 2009 I read a paper at Northwestern University titled Representing the Unrepresentable that concluded that it was not only the workflow, although that is essential, but the business ecosystem that work is produced within that is the ultimate limiting factor on how images exert social influence. Underneath the workflow is a business model, and that unseen flow of money, resources and access is the foundation that ultimately shapes the flow.

Because business models deal with the flow of money and ultimately power, this next phase in the development of the image promises to be the most disruptive yet. It will not be technology that guides this, although it is essential, but strategy. I can't wait to see the next Triennial. Boom. 

Wednesday, May 30, 2012

Discovery and Planning: The Essential Tension of Innovation

In my previous two posts I wrote about an intersection between the arts and an emergent form of business innovation that is not yet fully defined. In this space a kind of venture model is possible that draws on the strengths of both paradigms, maximizing creative possibilities while minimizing uncertainty and risk. I affectionately and irreverently call it the Cake Machine. Cake being profit, of course.

The process is abstract, combining the best of several powerful frameworks--Stanford's design thinking, emergent strategy and Rita McGrath and Ian MacMillan's discovery driven growth.

First some definitions. 

Discovery: what you practice when you don't have the data to do anything else. The process of going where there isn't a lot of information to guide the way. It is often led by hunches, intuition and incremental discoveries.The process is uncertain or leads to uncertain outcomes.

Planning: the process of making decisions and strategies that yield desired results over time. The process is predictable.

There is an essential tension between these two. Discovery wants to be an open ended process to maximize its ability to explore and make amazing things. Planning wants to reduce uncertainty to measurable risk, producing desired results next month, next quarter, next year.

The process of creating innovative companies and brands is structured as a cycle that utilizes this tension between discovery and planning. To give this rigor and structure, design thinking is formally articulated as a problem solving tool while discovery driven planning is used to model the business and define the design parameters.

This process throws off creative energy by considering design as a critical component of the entire business ecosystem and by defining design parameters using sustainable business models. It is more of an engine than an incubator. The design, discovery and planning processes are in play simultaneously.

Design thinking, emergent strategy and discovery driven growth are generally formulated as linear processes. By reconstructing them into an iterative loop, I create a cycle which holds at its center a fully formed venture whose final form is, at the start, something of a mystery. As we circle the center, considering it from all angles, we continually refine the entire business and design ecosystems using what we find there to define our design parameters.

Design thinking engages in a process that has been organized by the as follows:

1. Empathy
2. Define (focus): create a clearly defined problem statement
3. Ideate (flare): generate as many solutions as possible to the problem as defined above
4. Prototype
5. Test

In this engine, design thinking is used as an essential framework for problem solving once the problems are defined more clearly by the financials. Reverse financials bring problems to light early in the process, generating clear problem statements and then flaring to generate previously unrecognized solutions. This process of focus and flare, using the business financials as a way of setting design focus early in the process, maximizes innovation within the entire business ecosystem, from the design of the user experience through the supply chain to the overall finances of the organization.

Here is a rough step by step pass through the first cycle.
  1. Start with any basic concept for a product or service offering.
  2. Define the basic unit of business and any alternative units. The unit of business must differentiate.
  3. Build a set of reverse financials--an income statement and balance sheet--that makes the venture worthwhile. 
  4. Back out of the financials as many of the assumptions that you can that have to hold true for this venture to succeed.
  5. Rank assumptions by order of importance, with the most critical assumptions, the ones where everything falls apart if you get it wrong, at the top. 
  6. Design tests to discover the accuracy of your assumptions.
By now you have made a circular pass around the loop with basic definitions of everything that has to hold true for your venture to succeed. You have a sketch of your variable and fixed costs in place, a required income, a sense of return on assets which gives you an allowable amount of fixed assets, and a basic model of how your entire supply chain and marketing efforts have to behave for this to work.

With these inputs you go back to your design concept and refine it based on the cost and price information that your financials have modeled. You calculate your break-even point and evaluate your offering in terms of its potential market. Using design thinking you maximize your creative input into the design within the parameters defined by the financials.

How does this work? The process can be adapted to any venture. Here is one example.

Imagine a designer who believes she can build a disruptive product to fill a perceived hole in the market at a price point of $800. The product is disruptive and differentiated because it will bring a level of quality to that price point that currently only exists in products offered by competitors at a much higher price. How will she go forward?

Her business unit is defined as a product purchased by the consumer for $800. We start with the assumptions that to make this worth the effort, the company should generate $1,000,000 in net income with a contribution margin ratio of 45% and a return on assets of 25%. To start, she believes manufacturing can be achieved with fixed costs of $600,000 per year. Now we work the income statement backwards.

Net Income  $1,000,000.00
Taxes (40%)  $666,666.67
Income  $1,666,666.67
Fixed Costs  $600,000.00
Contribution Margin  $2,266,666.67
Variable Costs (55%)  $2,770,370.37
Sales  $5,037,037.04 

At an $800 price point with $600,000 in fixed costs and a contribution margin ratio of 45%, the venture must sell just over $5 million in sales or 6,250 units to make the desired net income. For this to happen, each unit must have $440 or less in direct labor and materials.

Now that we have used the basic financials (backwards) to define our design parameters, we come back to the design to ask the question, what amazing things can be done in this product space for $440 per unit? How can we disrupt and capitalize in this space? Is there an innovation in manufacturing or distribution that would allow us to disrupt the competition? What does our potential market look like? How could we sell 6,250 units a year? We have nothing so far invested in fixed assets, but our basic balance sheet will allow us up to $4,000,000 in property, plant and equipment. Can we come in under this? What is possible for that amount? How much can be outsourced? How can those investments be delayed while we refine the design?

If the initial pass around the loop is successful, then the project enters the next level in the cycle, making more detailed financial documents, more specific designs and prototypes, while testing assumptions and doing everything possible to delay major investments and keep real options open so that you can refine and discover along the way.
So why are discovery based processes and design so critical to this next wave of profitable ventures in the United States? It has to do with an understanding of how money is created by firms. So much press has been focused on the amount of money made by banking and investment firms of late. What is missed in that is just how narrow the margins are in those transactions. Contribution margins for banking firms can run as low as 3%, which means that to make $3 million they have to move $100 million. That is an amount of capital that is unavailable and those are returns that are unreasonable for most business ventures. 

A well designed venture can produce contribution margins of 50% or more. With lean business plans this can be hugely profitable. It outperforms the financial markets by orders of magnitude. In our above example, the company is represented by $4,000,000 in fixed assets and let's give it another $1,000,000 in net working capital. With $5,000,000 tied up in capital, the company spends $440 to receive $800 in income for a contribution of $360 per sale. That is a return of 80% on money invested in direct materials and labor. If this were successfully implemented it would produce $1,000,000 in net income with $5,000,000 in total assets. Of course you can't just wave a magic wand and make that happen. But you can make it happen if you structure it by design. Or at least you can work through potential projects, avoiding the ones that don't make the cake until you find the ones that do.

What cake machine does is structure the modeling of innovative ventures in ways that focus and maximize the creative input to the process while minimizing uncertainty and risk. You want to quickly discover your major problems and hurdles so you can focus your problem solving and design energy on them first, either solving them to overcome barriers to entry or stopping the process before you spend in other areas.

Giving the process rigor and structure provides discipline for the transfer back and forth between discovery and planning. If we imagine it the way the brain works, this activates both sides, giving equal weight to analysis and innovation throughout. This system is like the corpus callosum, connecting both sides of the brain at the center, with directed and disciplined discovery on the creative side and open ended financials and planning on the other.

By iterating in this way an organization can cycle through any number of ideas at a time, learning from each and focusing on the projects that have the most likelihood for success. Most importantly, the design parameters are set up in sync with the operating and financial goals of the enterprise which focuses creative activity in ways that increase the likelihood of success. To succeed, the process needs leaders who can design the entire business models and drive superb design within the financial parameters. It is a rare breed who can do both, but that is where the cake gets made.

Thursday, May 10, 2012

The Avant Garde and Finance

These two disciplines seemingly couldn't be farther apart both in methods and in orientation to the world. But consider what they both seek to achieve. Finance attempts to look ahead into the future to determine the likely outcomes of investments that are dependent on the future performance of a host of variables including entire markets. Art makers attempt to make culture, which is a similar process of working towards a future encounter with a wider audience, attempting to interpret the impact of works that are also dependent on a host of variables, also attempting to create something of value. Each navigates exceedingly complex terrain using dramatically different tools.

The essential functions of finance are to determine what are, and what are not, worthwhile investments of money over time. The essential functions of design are to produce a superior user experience that also extends itself out over time, past the point of purchase and into the life of the product, process or service. The essential functions of art, or at least a major current problem being explored, is how to produce better culture and possibly better outcomes for everyone involved.

Over the past months I worked to build an iterative model that would give structure to innovation while maximizing realizable options. It is possible, with the right conditions and tolerances for innovation, to create teams that combine the strengths of all three disciplines. Bringing discovery driven planning in at the early focus stage of the design thinking process will apply profitable parameters early on. This focuses the idea generation by ruling out as many unprofitable avenues as you can, before you invest in exploring them. 

Let me try and explain how this works in plain English. First you assemble a design team to address a problem or need.  At the earliest stages in the design process, you create a set of financial statements that build on your ideas, only you build them in reverse. And this is the key. You in effect take your idea and create a ghost company or business unit entirely on paper, working backwards through all the calculations to arrive at a sense of what that idea would have to look like in order to be profitable. Within these reverse calculations will be a host of assumptions that must prove to be true in order for your idea to work profitably. With them laid out on paper, you can begin to test these assumptions upfront, working from the most consequential to the least consequential.

Testing concepts in this way has two significant benefits over implementing first and testing as you go. First it minimizes the cost of exploring a concept or idea by increasing the speed and accuracy of initially evaluating its viability. And second, by minimizing the cost and reducing the risk, it increases the number of ideas that can be explored without the expectation that every idea will be a success. By providing something of a safety net for your innovation efforts, this encourages your design teams to be more innovative, to push out to the edges of their own abilities and beyond.

This already happens in some combination in every successful venture, but it tends to happen latently and over time. There is a kind of Darwinian weening out of the weaker concepts as they are implemented. In this other model we are able to create a kind of three dimensional virtual model of an idea and back out it the assumptions that have to hold true in order for it to be a success. We are looking for the problems before they become problems.

Here we get finance and design working together at the very beginning. What happens is a very quick cycling of ideas that allows for the generation of the most possible solutions you can come up with the least possible cost in exploring how viable they are. What is absolutely critical for maximum success is to have someone in the middle who speaks both finance and design and can translate the concepts across disciplines. 

Design thinking is an extremely powerful tool for innovating. Its weakness though is that every step is very dependent on the outcomes of the previous steps. The end result is very dependent on the questions asked or problems raised at the start. Discovery driven finance adds the capability of focusing the early stages of the design thinking process to produce a greater likelihood of a profitable outcome. 

All innovators push the boundaries of their fields. By focusing design activity we actually encourage MORE innovation. When you have those kinds of people at work on your project, they are going to push the limits. Steering them in that activity increases the likelihood of smash hits and radical disruptive moves forward. 

Next week I will post one more time with a more concise how step by step description of how this works.

Wednesday, May 9, 2012

Where I've Been, New Avenues, and a Major Discovery

In 2009 I read a paper at a conference at Northwestern University's Department of Communication Studies. In it I sought to build a global model that would describe everything I knew about how images operate in the world, from conception and creation, through editing and distribution, to their impact on far flung audiences throughout the world.

In the end I succeeded in sketching out my understanding of how mass media, business, psychoanalytic theory, aesthetics, and so on interact in ways that define a process. It is a sort of model of how change can be made through media. This model was informed by a broad range of professional experiences from my work at Time Inc in a critical production role at a billion dollar magazine to independent and freelance image making for a wide range of clients, to my own personal work that answers to more personally defined terms of making and audience engagement.

As I was working through this paper, I intuitively sensed that something was happening along the intersection between art making and business. I was hearing about it in a broad range of terms, from evolutions in social media, to user interface design, to changes in audience engagement strategies, to instability in the global economy, to predictions that the US economy itself needs to and is transforming itself into an innovation based economy that will be able to generate profitable innovations in a turbulent world market.

As we passed through the recession and continue to transition into the new economies made possible by computers and the internet, it was becoming increasingly clear that the possibilities for cultural innovation were almost entirely dependent on the funding sources and business models that quite literally define and shape their outcomes.

You cannot innovate outside of the business models and ecosystems in which you operate. They are designed to protect their own success and survival. Your efforts to disrupt them will be defeated unless you can address the business on its own formal terms.

On a deep ontological level this is reminiscent of the problems that painting encountered as it transitioned into abstraction in the early parts of the last century. It, along with all the arts, to evolve out of the avant garde, first faced itself on its own formal terms. Something similar is happening in business.

My conclusion in my paper at Northwestern was that one cannot innovate on a large scale in ways that significantly escape the business models that you are dependent on. I had not yet read Clayton Christensen's book, the Innovator's Dilemma, in which he explores this problem for large corporations that succeed wildly, growing to dominate their industry only to find themselves irrelevant or losing to competitors that are more innovative and nimble. But I had already lived inside or around that cycle of innovation through my decade in publishing in New York City. My intuitive understanding of the problem led me to confront it on stage at Northwestern.

Plain and simple. You cannot innovate beyond the restrictions of your business model. Therefore, you must design new business models if you want to innovate. A simple, logical conclusion.

I chewed on that conclusion for almost a year, looking for ways to work around it. There wasn't any way around it. If you can't work with the finance and the accounting, you can't build innovative organizations.

At this point I quietly enrolled in a Master's of Business Administration program at Western Washington University with the intention of studying accounting and finance. The first year I just put my head down and worked hard on the quantitative skills. As an artist with an MFA, I was an unusual addition to the mix, but I brought significant personal experience and was able to quickly translate concepts into my own real world experiences.

About nine months ago I began an independent study on innovation and the arts. At that point there were 20 or so Master's of Arts Administration programs throughout the United States. I pulled all their curricula and worked through what it was that they were teaching. Almost without exception, they were extremely light on the hard quantitative business skills like accounting, operations and finance.

By now I had worked through substantial portions of all three and could recognize what a loss this was to the entire field. The weakness of the whole field was summed up in the introduction to one of the leading textbooks on arts administration. It a field that is an amalgamation of ideas where no one key differentiating point or strength has emerged. The potential weakness was that you could get light versions of an MFA and an MBA without getting the full strengths of either.

I asked myself the following question--was there something happening at the nexus of art making and business that was uniquely powerful and strong, in which the best of both worlds would come forward and new and valuable models would emerge that would contribute to both fields?

From there began nine months of research that yielded the following answer; Yes, and the possibilities are incredibly exciting. They also are not restricted to non-profit or for-profit equations. And as more and more states in the US start to adopt the formation of social purpose corporations, the possibilities only continue to grow.

I wasn't the only person asking these questions. The entire field of arts education had been shifting towards audience engagement and the recognition that art making is a conversation with the public, with broader implications and consequences. The field of social entrepreneurship emerges out the interactions between art making and current evolutions in development and social innovation. This fall the School of Visual Arts is offering the first MFA in Social Entrepreneurship. There is a clear recognition that art making is not restricted to a material or image making event.

Concurrently the business world is experiencing escalating levels of uncertainty and a need to innovate disruptively as an almost normal condition in the markets.

By combining models of design thinking, emergent strategy and discover driven planning that have been developed at Stanford, Harvard, Wharton and Columbia, and tested at places like IBM, Apple, IDEO, and Ashoka, it is possible to integrate art, accounting, finance and design in powerful ways.

Tomorrow I will post on what this space is starting to look like from my perspective, how it works, and why you need someone who speaks art, design, accounting and finance on your team, no matter what it is you are trying to do in the world.

Monday, January 9, 2012

The Coming Wave of Change for US Non-Profits

In the next five years US based non-profits are going to be faced with a wave of leadership transitions as baby-boomer executive directors retire. For the smaller and more innovative organizations, this is going to be an absolutely critical set of transitions. At the same time as the mantles are being passed, organizations are going to be faced with an increased need to increase efficiencies and run leaner. This will require the use of partnerships and contract relationships as organizations downsize and operations go online and into the cloud. There are many risks ahead, but the single largest risk for visionary and innovative organizations is that the core visions and values that the executive teams have nurtured over their tenure will be lost or diluted in the upcoming turmoil.

To increase the challenges, there are fewer qualified people to inherit these positions than there are people who are going to be retiring. The good news is that universities have recognized this deficit and are launching extremely innovative programs in social entrepreneurship, human driven design and social change that are graduating people with the raw skills and the creative methods to start to fill the void. Their entry into the work place will increase innovation, with all the problems that disruptive change brings.

The next wave of innovative non-profits will need to run extremely lean, be highly creative, work in partnerships as well as independently, and contract out critical portions of their operations. At the same time, they will have to be rapidly scalable as large influxes of money come their way in pulses.
As executive teams head into retirement, they need to set up their successors with a core set of strategies that are designed to embrace this more turbulent environment and still carry the core visions and values forward.

These next wave non-profits will be able to receive highly evolved strategic input and move it forward. A critical problem is communicating to those partners in ways that carry the vision to them. The best thing that an executive team can do to prepare for this is to engage in a strategic distillation of their expertise into a set of core documents that can communicate their vision in terms of internal accounting, internal and external communications strategies, and scalable growth plans. Without that strategic distillation, those core components discovered through years of work will at the very least be transformed if not lost altogether.