St/art/up

Arts organisations will build better digital products if they adopt tried and tested processes from the startup sector.

By Steve Taylor

Over the last five years or so several organisations with their foundations in the arts, culture, academic and social sectors have asked me to help them find a solution to a specific challenge that they all shared. In each case, the organisation was running, or planning to run, an incubator or accelerator programme for a cohort of would-be entrepreneurs who were spinning digital innovations out of their regular work practice with the aim of developing them into stand-alone, market-facing businesses.

In the arts, these experiments have not been happening in a vacuum; they are happening in the context of a political economy that is inexorably winding down the funding of public goods. One response — a kind of commercial realpolitik for the arts — is to proactively bolster the capacity of organisations to generate more revenues of their own, thereby reducing their dependence on government, regional or local authority funding.

Sector-wide, this type of activity tends to fall under a banner of resilience, a broader initiative aimed at making arts organisations more financially self-sufficient.

If arts organisations can develop digital products — and the most rational thing would be to develop them for their own sector — then it’s potentially a triple win.

The organisation creates a new revenue stream that can partly offset reductions in external funding.

The wider sector benefits from an innovation that has been developed by one of its members and as a result is optimised use by for their peers. There is the possibility of balancing the need for single-organisation income enhancement with sector-wide benefits by innovating aspects like pricing and business model.

And thirdly, there is potential to reduce dependency within the sector on old-school ‘enterprise’ technology with its reliance on traditional IT skills, expensive kit, costly updates, consultants’ fees and so on. New products now tend to be developed in a world of cloud computing, big data, desktop access, drag-and-drop interfaces, infographic dashboards, smart UI/UX, responsive design et.al.

The problem these incubators and accelerators have been wrestling with — or in some cases anticipating — is one that bedevils many enterprises that are hatched outside of established startup/scale-up ecosystems. These ecosystems exist in time as well as geographical space, incorporating elements that cater to fledgling businesses at each phase of their growth: stage-specific investment vehicles; experienced leaders-for-hire, coaches and mentors; agile, affordable subcontractors from developers to social media specialists.

The problem if you are incubated outside the ecosystem is: what happens to you and your enterprise when the programme ends?

In such initiatives, incubation and/or acceleration are often conceived in isolation, as discreet stages — a sort of business adolescence — that would somehow lead organically and inevitably to commercial adulthood, if not maturity. For some there is, perhaps, a simpler reason; an implicit assumption that there existed another funding body that would pick up where they leave off.

In actuality, businesses encounter a series of yawning gaps: between playing with technology; creating a product; and building a business. And at many junctures in between.

When I ran workshops around the topic of what the innovators felt they most needed next, once the programme in which they were participating came to an end, the dominant response was always; money. Or, to be precise; more money. It would be easy to generate a debate around this answer along the lines of the post-referendum Brexit argument. We did the democratic thing and asked the people themselves what they wanted; but were they in possession of enough information to assess what was really in their best interests?

The innovators with whom I worked and spoke certainly felt a strong need (that’s putting it mildly) for further funds. But when I explored those needs in more depth, one-to-one, more often than not money turned out to be a proxy, a shorthand, for all sorts of other things: like hiring more people; launching marketing campaigns; contracting external agencies; undertaking research with audiences; engaging teams of developers in Belarus or wherever, and so on.

The unfortunate truth is that very few of the individuals concerned, or their nascent enterprises, were anywhere near being able to secure the levels of investment they believed the needed. Or, indeed, anything that resembled real investment. They had no idea where they had got to in the process of turning a raw technological or market insight into an invention, or as it is more commonly referred to nowadays, an innovation. Or what were the stages that they needed to negotiate in order to get from inventing to selling.

Which meant a lack of awareness of what the people holding the purse strings required from both the products and the teams developing them. Or that funding opportunities, the moments or windows when money was potentially available, were closely tied to stages in the entrepreneurial journey, stages that had been codified over the decade-and-a-half since the dotcom crash of 2000/2001 by investors — their fingers burned by participation in profligate funding disasters (or at least by historical and/or anecdotal knowledge of them) — who are focused on mitigating financial risk.

Many technology innovators in the arts are unaware that there is a process. The business of inventing/innovating a technology product and turning that into an income stream has been subjected to so much media hype, obscurantist jargon, ego-driven self-promotion and near-deification of successful young adult entrepreneurs, it must appear to many people working in non-tech sectors– even at a senior level — as impenetrably other.

Of course, technology is very much present in the current arts and culture landscape, but mostly under the aegis of ‘digital’, with the focus on transforming artistic practice, generating new ways of reaching and involving audiences, opening up new distribution channels between creators/producers and audiences, or re-engaging younger cohorts through hybridising ‘traditional’ forms with social media and mobile devices.

Actually conceiving, producing and bringing to market fully-formed digital technology products like apps, platforms, utilities, tools or software-as-a-service offerings, is something else entirely.

More recently my work in this sector has developed in an interesting, and hopefully useful, direction. There have been tentative experiments in taking arts-generated technology products — as distinct from digital evolutions in artistic practice, participation, distribution etc. — further by applying and adapting elements of a reality-tested startup process — the building blocks of practice that take an ‘idea’ all the way to product launch and beyond to rising tiers of growth.

In this piece I focus on some of the initial elements of an entrepreneurial startup process that could help arts-based technology inventions/innovations to move effectively from idea to product, to launch successfully on the market and to generate revenues and other benefits to the originating organisation and the sector as a whole.

“Make something users want”. These four words from Paul Graham, co-founder of the first-ever accelerator programme, Y-Combinator, are still the de facto starting point for any technology innovation. Graham’s mantra is so obvious that it’s easy to miss the meaning — and many would-be entrepreneurs do miss it, by making things that are driven by a technology breakthrough, in response to fads or trends, from a perceived gap in their own work routines, lifestyle, or something they think people ought to want.

You might have to make a calculated bet on what your users (‘audience’, ‘market’, or perhaps just ‘people’) might want; creating new demands or answering un-felt needs is fundamental to much business innovation. Arts venues are all, to some extent, open spaces where managers and team members can speak directly to visitors, gallery-goers or audience members, yielding first-hand insights into their cultural predilections and who, broadly speaking, they are.

Those insights are just the beginning; it’s important very early on to start testing product ideas with actual users. Again, arts organisations have direct access to users in ways that elude many ‘commercial’ startups. This way, assumptions don’t stay assumptive for very long. You can test and iterate, over and over again, trialing conceptual models and/or prototypes in the arts space or venue with actual people long before your developers write a single line of code.

There are plenty of accessible techniques to help understand your users — the people who constitute the market for the thing you want to make. Knowing your users — or at least some of them — as people may help you avoid one of the pitfalls of marketing early-stage companies (of all marketing in fact); over-reliance on stereotypes and ‘personas’ to define your market.

In reality you are always designing, building, marketing and selling your product to real people. The marketing manager of the medium-sized museum to whom you are promoting your wayfinding app is an individual, with a social background, economic status, values, tastes, personal life and so forth. All of these aspects of them as a person will impact on how you best communicate with them, what you say about your digital product and how you engage them emotionally with your proposition.

Sometimes, its not that easy to determine who you users are; you may be creating something for other organisations to use with, or sell to, their gallery-goers or audience members. Those people are not your market. You need to be designing for the people that are going to pay for your product (or use it in their organisation if it’s going to be free). The best strategy is to design it in such a way that they can customise it to fit the requirements of their end-users; in the case of another venue or touring company, their audience. The business world’s awkward acronym for this is B2B2C — business-to-business-to-consumer.

Understanding your real users, the people that can usefully employ, and are willing to pay for, this thing that you’ve made is not about how much money you can spend. As an arts organisation, developing a digital product with limited innovation funding or out of your own resources, you won’t have the budget to commission conventional sample-based market research. But that doesn’t mean you can’t gain insight into the people who you want to love your product.

There are a host of techniques you can use that cost next to nothing: user-centric design research; depth interviews; email surveys; basic landing pages that pre-recruit users who are interested in what you are proposing to build; social media response mechanisms; participant observation; service design user journey canvases and many more. The internet is full of free content outlining these methodologies, demonstrating how to use them and documenting case-studies.

If, like many people in the arts, this is the first time you have got involved in this sort of activity, it’s important to bear in mind that, on its own, your technology is not a product. The history of innovation is littered with stories of brilliant inventors who failed to capitalized commercially on their creations. Often, it took another individual — the entrepreneur — to turn that new technology into a marketable product that people would be interested in paying for. In the startup world this process is known as productisation.

You can progress the productisation of your idea in a number of ways — they’re not mutually exclusive and you don’t have to do them all. However, it is useful to know which you are working on at any given stage, so you know what you are testing and how it moves your project forward.

Proof of concept is usually purely about the technology, the working parts, or a particular core feature. It’s a piece of research, feasibility testing or experimental making that confirms that the core technology you plan to build, utilise or hybridise actually works. There is no attempt to make a product out of it at this stage; users and usability are not involved; it’s an internal exercise to test functionality and do-ability.

A prototype takes things further. If proof of concept is about whether the product or feature can be implemented, a prototype is about how it will be. It is a working model of the final product that users can interact with; which means that you can test it, in a closed small group or individual setting. It allows for the discovery of functional issues that need to be fixed and for key usability glitches to be identified by testers, providing a much clearer direction for the proper build and reducing the risk of heading down distracting and expensive side tracks or rabbit holes.

An MVP or Minimum Viable Product sits somewhere between prototype and fully-functioning product. The key difference — and advantage — is that it is sufficiently developed to be tested in the market. As the name suggests, it is the absolute minimum you can build in order to appraise one or two essential features of the product, the ones users are willing to use and pay for. It’s a vehicle for testing the actual market — your users in their environment rather than in a workshop — utilising your product to do the basic thing you’ve designed it to do. It represents the least budget/time/resources you can spend to achieve Product/Market Fit.

A carefully-evolved product, developed by a team that has used one or more of these early stages models to test and iterate it as often as is necessary will no, on its own, generate revenues and commercial growth. To achieve the goal of monetisation, certain business basics need to be in place, notably at this stage a Business Model and a Value Proposition.

These appear to be familiar tools among arts professionals who run organisations or take responsibility for the business side of a venue or company, people are often experienced in using widely available business model and value proposition canvases, so I won’t risk patronising anyone by reiterating the basic concepts. I would, though, add a couple of relevant insights from wider experience of applying them to digital products.

It is often argued that the current generation of massively successful Silicon Valley ‘startups’ — actually multi-billion dollar valuation businesses that have grown exponentially since launch — are not, fundamentally, built on new technology. They are built on business model innovation. Uber’s operations integrate existing technologies like interactive mapping, online billing, GPS, smartphone functionality etc. But the real innovations — the ones that are also the cause of so much debate and controversy — are in how riders are charged, how drivers are paid, who owns the vehicle inventory, how and where taxes are due, who covers insurance, vehicle maintenance and so on. These are all elements of a disruptive, innovative business model that breaks many accepted rules about how money can be made from people paying to ride in vehicles they don’t own.

Business model innovation has become just as important as the invention of new technology (which doesn’t mean you can’t find an ethical and equable way of doing it).

A word on your value proposition; it is decided and defined by your users, not by you. It reflects the most useful role your product plays in their lives (including working lives) and identifying it is another good reason to test your MVP out there in the market. You need to discover the absolute core benefit that compels people to use and pay for the thing you’ve invented.

Be prepared; that benefit may well not be the one you envisaged when you first conceived of and prototyped your product. People’s actual reactions may sharply challenge your assumptions about what they want to do with your invention.

Discovering its true value proposition could force a substantive pivot of your product and its key features. Painful, but all part and parcel of the iterative process that leads you to ‘make something users want’.

It’s a frequent observation in the startup space that a good team can develop something great from an iffy initial idea but a mediocre team will not execute well on the best idea ever. It’s why investors place a huge emphasis on having the right people running the show. According to received Silicon Valley wisdom, the ideal startup team consists of a Product person, a Tech person and a Sales person.

It’s not necessary for all those people to be either founders or full-timers. And, yes, there are certain individuals who combine more that one of those areas of expertise at a sufficiently high level. But they’re rare creatures. Generally speaking, you need someone to take care of each of those functions.

Let’s break this down on a practical level for arts organisations developing digital products. The project leader will usually be, in effect, the product person — the one that’s come up with the idea and is motivated to make it happen; often the leader of the organisation or a senior manager. The sales person can come later, when there’s something that more resembles a market-ready product.

The tech role is the one that tends to be more problematic. I’ve worked with arts organisations that had, in my opinion, unhelpful relationships with their technology partners. They were utterly dependent on them and had no way of benchmarking crucial aspects of technology implementation like: what tech and tools to utilise; what resource is required; how long the job should take and how much it should cost. When challenged on how they were assessing these factors, organisations responded that the principals in their ‘partner’ developer companies were doing that on their behalf. Which is a bit like negotiating a contract with the other party’s lawyers representing you as well as them.

It’s not that developers are universally out to stiff their clients (although some may be), more that this is an asymmetrical relationship in terms of technical knowledge. If you are going to scope out and build a digital product then you need a tech expert on your side — in Valley terminology a CTO or Chief Technology Officer, in reality more likely an experienced lead developer that can act part-time as your tech counterpart when thrashing out details with your developers. In the R&D phase, all it takes is a few judiciously applied hours here and there.

In conclusion, I’d like to take these considerations full circle, back to all those incubator participants and alumni and their hunger for further funding. They were right, of course. They did need more money, to turn their inventions into market-ready products that they could sell, or at least that the right people could use. The problem was that they had a varyingly fuzzy sense of what they needed to do to get there, or that there exists a massive body of directly applicable experience, best practice, process, models, wisdom, resources, expertise and useful people to help them get there.

Startups deploy the early stage processes and tools I outline above for precisely that reason; to get their business to a stage where it investable. And, once again, there is a broadly agreed model of what you need to be in that state and a process how to get there — potentially topics for a subsequent article.

It is important to say that arts organisations — not only the innovators, but funding bodies and supporting organisations — sometimes display a naiveté about how early in the productisation/monetisation journey investment can be credibly sought. In reality projects need to be further down the line and teams more appropriately constituted before even approaching investors in a general sense — i.e. those outside the sector. Governance issues need to be resolved; external investors will want to put their cash into a commercial vehicle that is separate from the arts organisation from which is has been spun out.

The blunt truth is that many digital product initiatives will need to be funded, pre-investment, for longer — beyond the ‘R&D’ phase — if they are to make it to market.

But does that actually mean spending more money?

In some cases, yes. Some more.

But for many projects, awareness of, application, adaption and adoption of some of the widely-tested, time-validated processes, models, tools and techniques from the world of commercial technology startups have the potential to transform the value that’s delivered from the money that does go in.

The same amount of cash could be used in ways that get some products significantly further down the line, much closer to the point where investors would consider them serious prospects.

Let’s replace the clamour for more money with a deliberate methodology that uses the funds that are available to take ideas further, to productise better, to meet users needs more closely and to create properly investable products, teams and businesses.

After careers in publishing, media and consulting, Steve Taylor has spent the last decade as an advisor, coach, trainer and interim leader for startups, scale-ups and digital creative businesses. More recently he has been applying this expertise to support the development of digital products within the arts sector. This article reflects his personal views and not those of his clients or business partners.

steve@studiostevetaylor.com