The investment is comparatively small, and it can tell executives if a major project will fly or flop.
We’ve all heard stories – and maybe even borne first-person witness – to the exciting new exhibit concept that debuts…and flops. Or the amazing new building expansion that opens its doors…and remains relatively empty after the initial rush. Cultural leaders often blame these failures on the fickle nature of the market, or a project being too “bleeding edge” for its own good.
“There was no way that we could’ve known,” some leaders invariably say.
Of course, that is completely untrue.
Market research in the form of assessing the potential success of a project is called a feasibility study – and it can remove success guesswork and same-page expectations. These are a regular practice among for-profit entities. Maybe it’s our hopeful nature… or maybe it’s our industry’s established tendency to only look at short-term wins and ignore long-term losses…or maybe it’s the “just please the Board Chair” culture within some entities…but there may be a long way to go before these studies are commonplace among cultural organizations. Regardless, being ignorant about realistic outcomes of expensive projects isn’t a moral high-ground – it’s bad business.
And it’s not even necessary!
The importance of conducting market research before carrying out a big project is the topic of this week’s Fast Facts video. Given the relatively modest investment required to acquire decent market research, it’s almost astounding that so many projects fail to reach their stated goals today. Here’s a short video worth sharing with those who may be too accustomed to “hope” as a strategy when it comes to big investments. Today, organizations don’t have to guess about success.
One of the primary roles of market research is to provide information to inform the decision-making processes of an organization. It is due diligence related to a project’s viability.
Note: Lest anyone thinks that this article is in some way an ad for IMPACTS feasibility studies (my parent company that supplies the data here), it’s not. It’s an article encouraging due diligence and a more thoughtful approach to our industry’s biggest investments. But here is a quick plug: If you want to learn more about how to attract and retain audiences in your market, my colleague and I conduct trend workshops and boot camps on these very topics.
Now let’s get back to feasibility studies, which are different animals altogether…
Why invest in this due diligence?
To obtain a realistic idea of if a project will succeed or fail in achieving its stated goals.
Unless the goal of your major project has nothing to do with reaching, attracting, or engaging breathing human beings, investing in research to make sure that these human beings will actually be reached, attracted, or engaged by the project is a good idea. Visitors, supporters, members, and donors are included in “the market,” and market research means making sure that these people will be engaged in the ways that our projects intend to engage them.
Not everything that we hope will appeal to people will necessarily do so. Before investing millions of dollars on projects, it is the responsibility of executive leaders and board members alike to ensure that funds aren’t being raised or allocated in vain.
Market research can help inform:
- If a project will be successful in reaching desired goals
- The segments of the market that the project is most likely to engage
- Provide a sense of expectation concerning a realistic return on the project’s required investment
Consider this: Sometimes the greatest benefit of a feasibility study may not be to maximize gains, but to minimize losses. At times, data will suggest not to proceed with an expensive project. This is where a small investment in research can save an organization from wasting a much, much larger investment in bricks, mortar, and misguided programming expenses.
There are some things that diligent leaders may already know. For instance, most building expansions revert to baseline attendance less than five years after their opening. And remember that many expansions come with permanently increased costs for programming and staffing the space, as well as power, security and other needs.
What is the line item for a project’s successful due diligence?
At IMPACTS, we have worked with a number of organizations contemplating major projects since 2005. These projects have ranged in cost from $1.8 million (for a medium-sized special exhibit) to upwards of $500 million (for a new building). Some of these organizations include entities such as the California Academy of Sciences, Monterey Bay Aquarium, Exploratorium, Carnegie Museums, Tennessee Aquarium, and Naples Botanical Garden.
Our experience reveals an interesting finding: The line item for project’s successful due diligence (including market research) generally equates to approximately one percent of the project’s total cost.
One percent of the project’s total cost is often all that is necessary to best inform the future potential of a major initiative.
And yet, it seems that many organizations seem to prefer spending millions and just hoping for the best.
This guideline suggests that an organization planning a $5 million special exhibit should invest $50,000 dollars at the project’s inception to evaluate its potential outcomes.
Too often, we overlook or undervalue the investments necessary to maximize these project’s conclusions.
On “faking” due diligence
Beware of tasking architects and other partners similarly incentivized in a project’s actualization to manage the feasibility process. Sometimes, these entities have a vested interest in a project proceeding – regardless of the market’s response. The feasibility process should be managed thoughtfully and independently – with true interest and curiosity in regard to how the market will respond.
At IMPACTS, we often receive requests to work on projects wherein it is clear that the organization has already decided that the multi-million dollar project is a great idea that will yield terrific results – whatever those may be. As a rule, we decline these requests for partnership. Sometimes good research is hard to take, and it may turn out that an organization doesn’t truly “need” the thing that it thinks it needs at all! Sometimes research reveals that what it really needs isn’t a $50 million new or updated space, but an increased investment in onsite staff so that they may provide more personalized experiences, for instance. Sure, a new or redesigned space might sound sexy, but maybe what’s keeping people away is parking – and attendance is unlikely to improve unless that barrier is alleviated first. Maybe it’s safety perceptions in the area and the investment is better made in a public safety initiative or partnership.
“If you build it, they will come,” is a mighty fine movie line. It’s not a successful way to run a cultural organization.
If an organization has already decided that it “needs” a thing and moves forward with RFPs for designers and architects – without information beyond the Board’s want for a sexy project and a sense that it’s a good idea – then this doesn’t comprise requisite due diligence. That is the vain, self-important shell of due diligence. It’s how we set ourselves up for expensive projects that do not meet our needs or expectations. It’s also far too common.
If a 1% investment can save an organization from an additional 99% investment on something that may not pan out, isn’t it worth it?! And if it will pan out, isn’t it worth best understanding expectations and potentials?
Research and managing realistic expectations isn’t always the sexiest part of a project’s development, but it may be the most important.