2020 was a wake up call for cultural entities to better prepare for disruptive events.
It’s been a year since the national emergency was announced and Americans hunkered down indoors for what we were told would be a two-week coronavirus disruption. (Remember that?) Between March of 2020 and today, museums and performing arts organizations have seen major changes: closures, reduced capacity, new safety protocols and procedures, and new ways of engaging with audiences who are encouraged not to leave their homes. Some of our beloved partners at IMPACTS Experience have not been able to reopen their doors at all due to the pandemic. They’ve been closed for over a year.
When the pandemic first struck, we also discontinued “business as usual” over here, and began collecting research on desired safety protocols, redistribution of demand, digital engagement, and other key metrics. We began reporting these findings more than once a week for several months to help cultural institutions adapt during this challenging time. Perhaps the most alarming finding over the last year, though, was how woefully unprepared for disasters many of our most beloved institutions really are. “Why?” you may ask. “These kinds of disruptors are rare! There’s nothing we can do!”
But there is something we can do: Recognize that these disruptive events are not as rare as we tell ourselves they are. We experienced the 2008 housing market collapse, the dot com bubble bursting, 9/11, the global pandemic – and that doesn’t even approach the scores of hurricanes, storms, fires, and other events.
A Black Swan event is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. According to Nassim Nicholas Taleb, author of the book The Black Swan: The Impact of the Highly Improbable, a Black Swan event fulfills three conditions: (1) it is outside the realm of regular expectations, (2) it has an extreme impact, and (3) it has only retrospective predictability. That is, our human nature concocts explanations for it after the fact.
We think that Black Swan events are so rare that they never happen. But that’s not true. In just the last few decades – well within the professional experience of today’s leaders – we’ve experienced the housing market collapse, the dot com bubble burst, 9/11, a global pandemic, and scores of hurricanes, storms, fires, and other severe weather events. To tell ourselves these major disruptors “never happen” is more than a failure of imagination, it’s a denial of reality.
Whether or not the pandemic is a true Black Swan event is beside the point. (There are conflicting views on this.) The point is that at least one major disruptive event occurred in 2020, and it’s a good time to evolve business practices to be adaptive in the face of growing threats (i.e. climate change, a politically polarized nation, etc.). We can better protect the future of museums and performing arts entities by underscoring adaptive business models, valuing market research, and championing agile leaders.
Major disrupters happen and are predicted more often than leaders may realize
At IMPACTS Experience, we commonly run complex models to predict projected attendance patterns for individual organizations. To do this, we work with our university research partners – experts with access to supercomputational capacity – to run millions and millions of simulated trials to develop a data-informed estimate of future attendance potential. In a nutshell, these simulated trials leverage data about potential visitors and their environments against similarly data-informed models about an organization and its experiences millions and millions of times.
These models contemplate actuarial overlays that recognize the potentiality of various Black Swan-type risks such as major climate events (hurricanes, etc.), labor disruptions (employee strikes), civil unrest, crime (active shooters, etc.), other mass casualty events (plane crash), natural occurrences (seismic activity), terrorism… the list goes on. In essence, they contemplate not only the likelihood of more usual factors but also the things that can make a bad day a bad year.
Take a look at the example below. This is an example of a market potential analysis for a visitor-serving organization that we have anonymized. The analysis dates back to 2016 and is the product of more than 12 million trials simulations. The outcome of this type of trial informs the organization’s expected annual daytime attendance.
If the above modeled year did not suffer any major disruptors, then this organization could reasonably expect between 350,000–399,000 attendees. And with 368,294 attendees that year, that’s exactly what happened. (This outcome is consistent with similarly realized, actual results compared to market potential estimates borne of this type of data-informed modeling processes. Of the more than 12 million trials, the single most common outcome – rounded to the nearest 1,000 daytime visitors – was 366,000. In this example, the variance between the most common outcome and actual attendance was 0.6%.)
But consider this: There was nearly a 28% chance that life’s messiness would intervene and this particular organization would welcome fewer than 350,000 attendees. And, on the optimistic upside, there was approximately a 28% expectation that the organization would welcome 400,000 or more people through its doors!
A closer examination of the findings reveals that the expected outcome range was far narrower – nearly 72% of the outcomes fell within the 300-450,000 daytime visitor expectation – and the actual attendance was near the midpoint of this projection. However, it is critical for organizations to note is that a meaningful percentage of outcomes fell appreciably below the expectation. Unusual events occur, and in the indicated example, they account for approximately 56% of the expected outcomes. In nearly 4% of the trials, attendance dipped below 250,000 visitors. This is a significant departure from typical attendance levels, but something that one might reasonably expect to encounter (based on the math) every 25 years or so.
While 4% isn’t a high probability, it’s far from an impossibility. Just ask somebody who has lost a loved one from the coronavirus – a disease with an estimated 2% mortality rate in the United States – if being impacted by low probabilities is impossible. Just as some individuals of various ages and preexisting conditions may be at greater risk of infection, some museums are similarly located on fault lines and near shores with rising sea levels.
As a reminder, Nate Silver’s FiveThirtyEight predicted a 29% chance that Donald Trump would win the 2016 presidential election. And that’s exactly what happened. Some may argue that it was our own personal cognitive biases that led us to believe that a 29% chance was impossible and that Nate Silver completely missed the mark.
Disrupters can happen. They do happen. And we’ve always known that they happen. The data is unassailable even in high-confidence projections. They happen on national levels (such as the coronavirus), on regional levels (such as Hurricane Sandy in 2012), and on local levels (such as the death of Freddie Gray and related unrest in Baltimore in 2015). There are countless other examples…
Moving forward, let’s prepare our people, our cultures, and our business models for the unlikely-but-disastrous.
Predicting the unpredictable: What can cultural organizations do?
Disruptors will likely keep happening. (Oh! Hello, climate change.)
A goal for cultural institutions may be to recognize Black Swans as Grey Swans, whenever possible. Because a Black Swan event is one that we do not see coming and thus one for which we’re unprepared, the impact is staggering. A Grey Swan event, however, is a very significant event that is considered unlikely to happen but is still realistically possible. Some of the things we may consider Black Swan events may truly be Grey Swan events, which we can responsibly consider in our planning and preparation. Severe weather due to climate change represents a Grey Swan event. We hope it won’t happen, but it could. Increasingly, it will.
When entities have greater reserves, more agile and data-based practices, and healthier revenue efficiency, they are better able to weather disruptive events.
1) Understand that the unlikely is not impossible
The first step is a brain-training item, and it involves recognizing the importance of statistics as well as how tricky our own cognitive biases can be. As our climate changes, it will be beneficial to prepare for more unforeseen closures and disrupting events. Climate change is but one example, but it’s certainly one that may be more foreseeable (Grey Swan) than, say, a massive terrorist attack. This certainly does not mean entities must be engaged in doomsday preparation! It simply means becoming slightly more comfortable with uncertainty and how our own brains help or hinder this preparation as a matter of regular practice and planning.
If we’ve met, then you know that I (and others at IMPACTS Experience) cannot go long without touting praise for Daniel Kahneman’s work, and particularly the book Thinking Fast and Slow. If you have pandemic-brain and need a narrative to keep your attention these days (we’ll take all the help we can get, right?), then Michael Lewis’s The Undoing Project may help onboard you to behavioral economics. If you’re interested in concepts related to this article, in particular, then you may be interested in the aforementioned The Black Swan: The Impact of The Highly Improbable by Nassim Nicholas Taleb. This book is more philosophical than entirely empirical and the author’s tone is a bit repetitive and aggressive, but it shares some interesting ideas to deepen thinking. (And now I shall digress from my bookish tangents…)
2) Develop more agile business models and save for a rainy day – literally
While none of us may be so bold as to be grateful for the pandemic, it’s worth considering the value of some lessons learned. Namely, the importance of revenue efficiency and intelligent budgeting for potential disruptions, as well as elements of disaster planning.
This year, many entities were forced to learn the hard way how little reserve they held, the consequences of some rigid organizational cultures and mindsets, and how to handle anxious board members (to say the least). Some bad habits got worse, like disregarding the importance of marketing when times are tight. But some got better, too. Many entities were able to meet their audiences where they were – largely online – and elevate the perception that they are credible sources of information.
The pandemic has happened. Civil unrest has happened. 9/11 has happened. Hurricanes, floods, and fires have happened. They are rare, but they’re possible. Over a period of time, some combination of them continuing to occur is likely. It is our mistake to continue to be surprised by the inevitability of the unlikely.
What I hope we’ve taken away as a sector is to be always learning and to be evolving with the knowledge and wisdom of our experiences… however unforeseen and unpleasant they may be.
3) Follow the research and make data-informed decisions
Market research and market potential analyses aid in understanding likelihoods, contributing factors, and trends on the horizon. This information is increasingly critical for budgeting, planning, and optimizing business and mission-based practices. It can help you understand the likelihood of disruptive events and better prepare for them.
Understanding our audiences and the world around us isn’t only helpful in aiming to predict the unpredictable. It’s also critical for recovery.
During times of disruption, findings can change quickly. Prior to the pandemic, many of the trends around how people behaved surrounding cultural organizations were highly durable. But in 2020, we saw unprecedented changes in the perceived trust of institutions, the top barriers for attending (there’s a pandemic, after all), and massive shifts in intentions to visit. Staying on top of these changes is helping many organizations recover.
Consider that when we first started collecting data on what people say will make them feel safe visiting during the pandemic, masks didn’t even make the list. Now, they are the top necessity, and not enforcing them is leading to negative visitor experiences. This is but one of the many examples of how understanding changing behaviors during this time is critical for recovery.
Disruptive, unlikely events happen… and they will happen again at some point. When they do, entities need to have structures and cultures in place to help them adapt and survive. Market research is increasingly important for understanding risk, but also for recovery.
There are many lessons at the one-year anniversary of this global emergency. But this one is particularly worth noting: To thrive long-term, we should be willing to get comfortable being uncomfortable.
As we recover from 2020, let’s hope that it’s a long while before there’s another year like it.
But let’s do our best to learn from the last year and be ready, just in case…
IMPACTS Experience provides data specific to organizations or markets through workshops, keynote presentations, webinars, and data services such as pricing recommendations, market potential analyses, concept testing, and Awareness, Attitude, and Usage studies. Learn more.
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