Planning Framework • CLIR

To engage in business planning, cultural heritage organizations need a framework to guide the analysis, strategy, and planning activities that are appropriate to their public-good missions.

Methodology

Whether or not cultural heritage institutions engage in business planning, they do regularly engage in strategic planning, using a variety of processes.

Therefore, the planning context in which business planning takes place is familiar to most libraries and museums. A business plan is the natural outgrowth of an organizational planning process—a process that is both holistic and ongoing. A survey of the literature reveals there are about as many methodologies for developing business plans as there are templates for them. Almost any of these methods is adequate to the task, and selecting one is a matter of purpose, timing, or organizational or personal style and preference.

This document proposes a business-planning template designed for cultural heritage institutions engaging in digital asset management programs and services. According to this model, the identification and analysis of issues that lead to the development of a strategic plan should be followed by the development of a business plan.

The chart on the following page, based on an illustrated discussion of strategic planning in Bryson (1995, 24-25), lists the components of the planning process and describes their purposes.

This guide identifies two basic models of managing cultural heritage digital access: one for individual institutions, and one for partnerships and collaborative undertakings. Examples of these models, drawn from a telephone survey about current business-planning practices used by a variety of libraries, museums, and historical societies, are presented throughout the guide.

Providing details of the planning process as they apply to any specific organization, program, product, or service is beyond the scope of this document. There is no single recipe for success. Each planning process will be shaped by the organization and its stakeholders, constituents, needs, and culture. Although different organizations will take different approaches with different emphases, most successful efforts will have the same general set of components. Readers are encouraged to consult the works cited by de Wit and Meyer (1998) and Bryson (1995), as well as other material in the References, for additional guidance on constructing a planning process, milestones, and schedules for their own organizations.

Mission and Business Practices

Many early digitization initiatives were undertaken to learn about the new technology; they were not necessarily clearly linked to the organization’s mission, goals, and objectives. The business-planning process requires planners to consider whether the purpose of the digital initiative advances the organization’s mission and goals. Although business planning is important to an organization’s strategic planning, it is also critical to the sustainability of the digital initiative itself. Planning for each initiative should therefore be placed in the context of the organization’s overall plans and purposes.

It is assumed that most readers of this guide work with educational, governmental, or nonprofit organizations that have educational or research missions and a 501c3 tax status from the Internal Revenue Service. The revenue base for these organizations includes federal, state, and local taxes; donations; tuition; visitor receipts; and income from publications and other products and services, including gift shops. The analysis done for the preparation of this report found that digital initiatives within the cultural heritage community are usually established as an additional service or product of the institution, rather than as a separate business unit. However, there are models, such as the Art Museum Image Consortium (AMICO), in which a collaborative effort resulted in a separate nonprofit business entity. Organizations interested in establishing a separate business entity could use the business-planning template presented in this guide or any of the other resources available to assist in creating not-for-profit businesses.

Modes and Models for Organizational Planning

Planning modes and models generally fall into one of three types, or a combination thereof.

Rational. Based on use of data and logic, usually top-down in approach, moving from goals, to policies or programs, and, finally, to actions. This type of planning is typically seen in the corporate world.
Political. Based on issues, by definition involving conflict where no consensus exists, usually bottom-up, building on political decisions to develop policies, programs, and goals. Service organizations, such as public libraries, parent-teacher associations, or the Red Cross, typically use political-planning models.
Creative. Based on imagination, intuition, and vision, with the assumption that analysis, strategy, and planning problems are complex, and that unorthodox solutions are the preferred outcomes. Organizations that use creative-planning models include Brewster Kahle’s Internet Archive and some biomedical research firms.

In educational, governmental, and other nonprofit organizations, conditions usually favor the political or creative process over the rational. Because success in such organizations is not always measured quantitatively—i.e., by financial statements, numbers of goods shipped, or products sold—the rational process seldom drives the change. Nevertheless, it is often possible to begin with a political or creative process to develop a consensus and then to blend these components into a rational process that moves to closure on actions and next steps.

Bryson (1995, 52) advocates active participation in planning by top policy makers, decision makers, and middle managers likely to be charged with managing the outcome and by staff charged with doing the work, as well as by outsiders such as donors, funders, and the public. Whatever planning configuration and process is adopted, its principal purpose is to clarify desirable outcomes and focus attention upon what is important to the successful operation of the organization.

Strategic problems are those that lend themselves to more than one solution or course of action. Strategic planning is the process of resolving strategic problems. It involves more than making simple choices from among clearly differentiated alternatives. It is critical that cultural heritage institutions be able to weigh one set of choices and outcomes against another and to follow this up by modeling business plans that can support one choice or the other. For example, an organization might have to choose between digitizing a collection for use by museum staff and creating an interactive visitor exhibit and kiosk. Strategic solutions are choices that positively influence other factors and thereby lead to desired results.

Organizations and Community Involvement in Planning

When engaged in planning and decision making, the organization’s managers and staff are accountable to constituencies of several kinds. These constituencies include external audiences or markets (library users, museum visitors) and informed and affiliated individuals and bodies, such as governing boards, advisory bodies, volunteers, and donors. Typically, decision makers are insiders. The entity engaged in planning might be the overall organization (university, library, or museum) or one of its subdivisions, such as the digital resource unit, a new service program based on digitization activities, or staff of a digital collection that will serve a new audience. The library world tends to use the word stakeholder in a general way for any group that cares about, or can influence the outcomes of, the organization. The museum world tends to use the word constituency in the same way.

The greater the number of constituencies, the more difficult it is to achieve a consensus and the more likely will be the need to resolve strategic issues with political solutions or to make decisions on the basis of a distinct plan for each constituency. Resolving these issues requires a range of negotiating skills and, potentially, compromise among all participants. The digital product or service, unit, group, or entity created by a library or museum has insider decision makers and stakeholders, yet those groups are accountable to the external communities that are designated as markets or users of the museum or library.

Both business and strategic planning require an exploration into the needs of the organization’s external communities. Market research, needs assessment, and market segmentation are vital to successful business plan development. If that is not done, decisions may not be appropriately informed. For example, they could be based on faulty assumptions, political thinking about the influence of internal decision makers, a drive for consensus across divergent constituencies, or other factors not necessarily related to the public mission of the organization.

Planning: Models for Sustainability

While the goal of an organization or a unit within the organization might be to offer a self-supporting product or service (such as printing from digital objects), an organization or unit might not necessarily be responsible for recovering all costs associated with the creation of that digital object or for generating excess revenue over expense. A decision may be made to operate the unit at an agreed-upon level of subsidy for a specified period or as a permanent cost center. The only requirements for a successful outcome is that there be a shared understanding of financial expectations at the outset, that entities responsible for providing the subsidy be identified and agree to their roles, and that the planning process account for whatever long-term vision for self-support is adopted for the organization or unit.

Subsidy is not the only notion of support adopted by cultural heritage organizations. If a cultural heritage organization is engaging in digitization projects that are designed to create Web-based access to its collections, it is desirable that those projects contribute to the sustainability of the organization as a whole. Even if the digitization program is entirely funded from the operating budget of the parent organization and exists wholly as a cost center, the digitization program could lead to increased revenue for the parent organization by such means as attracting more visitors to the museum or drawing new or increased corporate sponsorships.

This idea of a discrete activity within a cultural heritage institution, which itself may be engaged in partnership or collaborative business models, can result in a complex strategic- and business-planning environment. These environments demonstrate various notions of sustainability. For example, the University of Michigan digital library unit is financially supported by central library funds and initiative funds. John Wilkin, associate university librarian in charge of the Library Information Technology Division of the University of Michigan commented, “We received $300,000, in addition to other base funds, and we reallocated some personnel from open positions, bringing total base staff funding to more than $600,000.” Michigan’s Library Information Technology Division will be able to grow and change, depending on internal needs (funded by internal funds) and external needs (supported at least in part through external revenue sources.) A second model is represented by the Nebraska Historical Society, which established a separate digital imaging lab within its Gerald R. Ford Conservation Center. Although the lab is part of the society, it must generate its own funding to support staff and infrastructure. Jill Koelling, head of the lab, reported that “we had a written plan for the [1997 Ameritech grant] and a business plan for [the] digital imaging lab . . . we set it up, so [digital lab] people won’t be paid by state funds, but by money generated from the lab . . . that’s why we did a whole business plan—to make sure we could make the lab run in the black.” The lab also received private funds for the digital technology at the center.

A cultural heritage organization typically supports a range of core services, such as reference service in a library or collection services in museums, none of which is self-supporting through generation of revenue directly applied to the costs of the activity. At this point in time, services related to digital assets are not generally considered to be core services. Eventually, however, visitors and users will probably expect that technology-based access to content be a core service. Cultural heritage organizations will undoubtedly evolve their thinking about the strategic value of digital asset-related services and will be more likely to include these products and services among their core services.

Identifying a Sustainable Competitive Advantage

In Successful Marketing Strategies for Nonprofit Organizations, Barry McLeish writes, “Competitive advantages are those qualities of programs or services offered that distinguish your nonprofit organization from other organizations offering similar programs or services.” These advantages come in a variety of forms, including the following:

services or programs of the highest quality available
the most reasonably priced services or programs
the most experienced staff
the most variety of services offered
the most highly endorsed services or programs (1995, 31)

A principal benefit of the business-planning process is that it helps identify a sustainable competitive advantage that can serve as a basis for building and maintaining the organization. Organizations that want to survive must be able to adapt to change in the external environment, to improve on past programs, and to do new and different things—to cope with change. This implies an ability to innovate and to market an organization on the basis of some combination of content, brand, customer service, and cost. Featuring on the Web unique resources that create a competitive advantage can be an attractive element of strategic planning for museums and libraries. A sustainable digitization program can be a strong element in the creation of organizational identity and of a reputation in the community of visitors or users. Museums do compete within their communities for visitors, and many types of libraries compete for resources within their parent organizations (city government or universities or colleges); they therefore often need to explore this concept of competitive advantage as part of their overall sustainability strategy.

Planning Sustainability

Selecting a method or methods of finding sustainability is another strategic decision facing educational, governmental, and nonprofit organizations and the enterprises they host. While some organizations can reallocate existing resources, or redirect effort, this must often be accompanied by consideration of ways to raise revenues that contribute to sustainability. Libraries and museums that have transformed grant-funded projects into ongoing digital resource programs generally seek to reallocate current resources while also searching for new resources. The following sections address some of these non-grant-based revenue sources: sponsorship and advertising, partnerships, and foundations and donors.

Sponsorship and Advertising

Sponsorship and advertising are important ways for cultural heritage institutions to generate revenue. Sponsorship is valuable not only because it brings in funds but also because it implies an endorsement of the institution’s mission by another entity. An institution generally nurtures relationships with sponsors in much the same way it does its relationships with outright donors. Recruiting sponsors may be done as a part of a larger fund-raising or development effort that seeks donations from corporations, foundations, and individuals on an annual or major-gift basis. The Exploratorium⁴ in San Francisco provides opportunities for corporate sponsorships that include a full range of advertising and marketing campaigns and public relations options. Sponsors can have on-site signage and banners, and their corporate materials may be included on the museum’s Web site or in links from it, in its product displays, and in its customized promotions. To entice sponsors, the Exploratorium provides demographics on the museum’s membership, Internet visits, and on-site visits. The concept of corporate sponsorship of in-museum exhibits is migrating to sponsorship of Web-based exhibits. Advertising involves expense (the library or museum has to pay for ads). But if the advertising campaign is successful, the expense is offset by revenue generated by increased sales or rising demand for services. In the case of museums, advertising encourages visits, resulting in gate fees, cafeteria sales, and shop sales. It also generates the interest of potential donors and sponsors. Advertising is done as part of the public relations, marketing, and promotional activities of libraries and museums. In developing a plan for generating revenue, it is essential that the development and marketing departments coordinate their efforts.

Libraries and museums may look at sponsorship as an element of their annual-giving campaigns. Many university libraries, for example, have events, friends’ groups, or other methods of reaching out to supporters for annual funds. Annual-giving programs undertaken by museums and libraries, however, may extend far beyond the seeking of sponsors. Telethons, mailings, pledge campaigns, or even memberships may be regarded as annual fund-raising methods appropriate for libraries and museums. Some of these activities might be especially appropriate for obtaining support for a digital asset management program because of their content affinity with certain funders.

Partnerships

Partnerships and collaboration are increasingly common elements of a sustainability strategy for cultural heritage digitization initiatives. Granting agencies such as the Institute of Museum and Library Services (IMLS) and other federal and state agencies are encouraging partnerships in building digital library and museum collections. Funding agencies see both political and practical reasons for encouraging partnership. Politically, federal funding can leverage funding from many partner entities and show governmental bodies that cultural heritage organizations and the higher-education sector can collectively engage in work with high-profile outcomes that are in the public good and thereby help justify future funding. By encouraging partnerships, funding agencies have helped demonstrate that the digital approach to collaboration can create single, publicly accessible Web-based resources that are easier to find and use than they would be in the absence of cross-institutional collaboration. With such federal and foundation encouragement, there are more efforts at partnership between libraries, between museums, and between libraries and museums than ever before (Allen and Bishoff 2002).

Rackham, Friedman, and Ruff (1996) have identified three characteristics common to successful partnerships:

vision: a compelling picture of possibilities and, specifically, how to get there
impact: the addition of real productivity and value; the ability to produce tangible results
intimacy: closeness, sharing, and mutual trust; a level of closeness that moves far beyond transactional relationships

“Partnering organizations succeed when they actually achieve results, develop a close, almost seamless, relationship, and have an articulated, shared view as to what they can accomplish together. In short, it is when impact, intimacy, and vision come together that partnering works” (Rackham, Friedman, and Ruff 1996, 24).

These authors offer the following pointers on partnerships:

Both parties have to change the way they do business to maximize collective impact.
In a successful partnership, the pie gets bigger and is more equally distributed.
Partnerships start by spending and allocating resources.
Partnering entities must look toward the partners’ customers, direction, and market.
Mutual competitive advantage is an outcome.
Partnerships define powerful, durable ways to work together.
Information sharing occurs on an expanded level and in relationships at all levels of both organizations.
Partners should begin by finding easy entry points on vision, impact, and intimacy and then move on to more-complex areas, as long as the prospects for success in all three areas (vision, impact, and intimacy) are good.
Productivity improvement often lies not within a single organization but at the boundaries between organizations.
If the intent is innovation, partners should start with research and development, not sales functions.
Partnership is about more than getting a better price or a long-term revenue stream.
Partnerships don’t work as short-term strategies.

While not all these points apply to cultural heritage collaboratives, many do, particularly those related to changing ways of doing business. “As digitization moves from small discrete projects conducted within individual institutions to larger multi-departmental, multi-institutional, and international programs, collaboration becomes an increasingly vital consideration” (NINCH 2002, IX). Funding, creation, and sustainability of digital surrogates, and access to them, increasingly depend on arrangements in which institutions work with each other.

The key to success is to find a compelling shared goal with real added value and to orient the partnership and its opportunity-seeking activities around it. Successful partnerships can also be built around goals that may not be equally important to each partner but that each organization can support on behalf of the other. Partnerships as a sustainability strategy work when each entity can contribute resources to the areas held in common. Betsy Wilson, director of university libraries at the University of Washington, provided a good example of such a partnership between the university and the Eastern Washington Historical Society (EWHS): “EWHS didn’t have expertise in scanning and metadata; we could provide that. We didn’t have expertise on the Plateau Indians. The historical society made selections from their collections, bringing expertise to the project on the collections. They also did the publicity. They didn’t contribute technology, but we have incredible technology.”

Other partnerships have broader consortial benefits. For example, the Museum Online Archive of California (MOAC) project, which involves 11 museums participating in the California Digital Library (CDL), not only created cross-museum access to related collections but also focused on building expertise in the California museum community so that each institution has increased capacity for generating digital resources for public access. This type of consortial partnership is also fundamental to the model of statewide collaboration represented by the Colorado Digitization Program (CDP), which provides training to build digitization capacity while encouraging libraries and museums with collections in similar content areas to partner on the creation of cooperative Web-presented collections.

Foundations and Donors

Donors are key stakeholders and constituents for most educational, governmental, and nonprofit organizations. An individual donor may be persuaded to endow some ongoing costs, as well as up-front costs, of a new nonprofit organization as part of a startup package, much like venture-capital investors infuse capital in the for-profit environment. However, it is unusual for donors to give funds for the operating costs of a university or museum; most tend to donate to specific purposes. Foundations generally fund program innovation or improvement, not organizational development or core operating costs.

Nonprofit organizations. Nonprofit organizations face some fundamental challenges in developing funding for digital initiatives. Imagine, for example, that a nonprofit organization decides to approach a foundation for money to anchor a digital project or service at a level of $100,000 per year for four years. The organization’s business plan calls for two or three years to establish its program and attract a second round of funding at $100,000 per year, with the expectation that it would be self-supporting after the fourth year. Foundations typically operate on one-year cycles, with the tacit assumption (but no commitment) that they will renew support for no more than two or three years. They work this way for several reasons. The first reason is to meet federal requirements that they pay out 5 percent of their assets annually. The second is to discourage their nonprofit grantee organizations from becoming dependent on their support. The third is to preserve the foundation’s ability to change funding priorities, thus accruing the public relations benefit associated with a more diverse portfolio.

In terms of sustainability, receiving a foundation grant or a one-time major gift from an individual is not much different from working with one-time grant funding from any source. Project directors, museum directors, and library directors usually need to prepare one- to three-year grant budgets for donors and funding agencies while keeping the long view for other fund-raising opportunities and for business planning for sustainability. Nonprofits often balance numerous short-term funding opportunities with longer-term strategies. Returning to the example in the previous paragraph, assume that in year 2 and year 3, the organization receives an additional $100,000 in grants on one- to two-year terms. The difficulty comes in year 3 or year 4, when the project manager or management group realizes that additional and ongoing funding will be needed to maintain current services, avoid layoffs, or keep the doors open.

In the past, such a problem could be remedied by securing additional donations or grants from federal, state, or local sources. However, in an era when there is less federal and state funding, more organizations are applying for these grants, and fewer foundation dollars are available because of poor market performance in foundation endowments, the nonprofit organization has to rethink its reliance on these funding sources. Sustainability planning offers a solution.

Educational and governmental cultural heritage institutions. Educational and cultural institutions face constraints similar to those facing their nonprofit colleagues; one difference is that the fund-raising activities of the former may be undertaken by their parent organizations. Generally, educational and governmental cultural heritage institutions cannot raise operational monies, with the exception of funds that can be obtained through grants or endowments. Donors and foundations generally fund specific program enhancements. Many major digitization initiatives have been funded through foundations, and many museums and libraries have initiated their digitization programs through grants. Sustaining programs through donations and grants, however, is not a viable plan. A federal subsidy should not be the sole source of funding for any digital asset initiative.

Some nongovernmental funders will respond to the current environment of reduced funding by forming longer, deeper relationships with selected grantees. Cultural heritage institutions need to identify such organizations and approach them with plans that clearly identify organizational needs and provide compelling cases for longer-term support. These proposals should include a solid business plan and a credible plan for achieving sustainability.

Funders must understand that cultural heritage institutions are not, and are never likely to be, attractive for-profit activities. If funders are interested in the mission of libraries and museums, they will have to work with these institutions in new ways to ensure their futures, without trying to persuade them to change their missions just to secure funding. Libraries and museums feel strongly about this point as they consider options for sustainability and undertake business planning. Business planning will benefit the cultural heritage organization when such planning is based on an overall strategic plan and when the organization is clear on its mission, vision, values, and goals. The business plan for digital cultural heritage asset sustainability does not have to compromise any elements of the organization’s overall plan.

Business Dilemmas

The fundamental principles on which planning is based can present dilemmas for organizations selecting a planning approach, and these dilemmas are not easily resolved. For instance:

Public and academic libraries generally find it unacceptable to sell or otherwise profit from their digital or physical resources.
Museums may consider competition with other museums for visitors a major issue; for libraries, however, competition is seldom a key factor in planning. In fact, libraries base many services on collaborative efforts with other libraries in their regions or with similar types of libraries.
Libraries and museums need to expand efforts in market research. Libraries generally do not consider their users in the same way in which other not-for-profit organizations consider their markets or customers. In fact, within the library community, there is an ongoing controversy about what to call a “user.” He or she might be called a patron, a visitor, a user, a client, or a reader. The library literature reflects the somewhat more-than-semantic concerns reflected by the choices of language. Museums are fairly uniform in calling their primary markets visitors; they are more interested in putting visitors into categories than are libraries. Museums must have a good understanding of their markets to develop strategies to maintain or increase gate receipts, an essential source of revenue. Libraries do not have this problem.
Both libraries and museums have concerns about making services available free of charge and, conversely, about charging for anything.

In short, libraries and museums present some interesting variations for the typical guides to success for nonprofit organizations.

The examples just cited are only a few of the viewpoints that must be taken into account when launching a planning process that includes business planning for sustainability. Business planning must fit the organization’s internal and external environments. Business planning must also be based in both the present and the future.

FOOTNOTES

³ In the classic business environment, a value proposition refers to added value, or opportunity for favorable return on investment, for a stakeholder group. The meaning of this concept in the context of nonprofit organizations is discussed on page 18.

⁴ The sponsorship area in the Exploratorium Web site is http://www.exploratorium.edu/support/sponsorship/index.html.