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Strategic Planning in the Arts: A Practical Guide
Understanding the Environment External Analysis
An external or industry analysis reviews the structure of the business environment in which your organization operates. Given the characteristics of success defined by the organization's mission, the external analysis answers the question, "What does it take to be successful in this environment?" More than a catalog of descriptive data about the organization's business environment, the external analysis provides critical insights that guide the internal analysis.
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Since the early 1970's, it has become very fashionable to use the modifier "strategic" whenever one discusses planning. While it may seem sophisticated to talk about "strategic" planning or "strategic" marketing, few people using the word know its meaning. What turns old-fashioned, "long-range" planning into "strategic" planning is the explicit analysis of the environment in which the organization operates. Strategic planning came late to the business community but has been a primary tool in other forms of competition for centuries. Who would consider developing a military or sports strategy without first analyzing the field of play and the strengths and weaknesses of the competition?
For an arts organization, a thorough review of the environment includes two distinct activities: analyzing the industry and analyzing peer organizations. Industry analysis reviews the structure of the field in which the organization operates and answers three important questions:
- What are the constraints placed on the organization by its environment?
- What are the requirements for "success" in the industry?
- How is the industry evolving?
Peer analysis typically follows industry analysis. It allows the organization to learn from the behavior of other similar arts institutions and provides benchmarks against which one's own performance can be measured. An environmental analysis performed by the Detroit Institute of Art, for example, may include an analysis of the art museum industry and peer company analyses of the Los Angeles County Museum of Art, the Boston Museum of Fine Arts, and the Philadelphia Museum of Art.
INDUSTRY DEFINITION
Before proceeding with an industry analysis, one must answer one basic question: in which industry does the organization operate? Despite the simplistic example above, there is not one single arts industry, nor is there one "museum" industry, "opera" industry or "ballet" industry. An industry is a group of organizations offering a similar product or service to the same customer group and/or drawing from the same resource pool. By this definition, the Chicago Symphony is not in the same industry as the St. Joseph (Missouri) Symphony while American Ballet Theatre is in the same industry as the New York City Ballet. Determining the correct parameters of the industry is not simply an academic exercise. It defines the data that needs to be obtained for the planning process and, more important, ensures that the results of the analysis are pertinent to the organization. For example, the St. Joseph Symphony can probably learn very little from examining the Chicago Symphony. In fact, it is likely that improper implications can be drawn from such an analysis. The fund-raising and marketing methods that are successful for the larger orchestra will probably bear no fruit for the smaller one, for example. The New York City Ballet, however, must take American Ballet Theatre into consideration when it develops its plans, learning from its counterpart's successes and failures.
While it is dangerous to broaden the industry analysis to include organizations that face very different situations, one loses an important opportunity if one defines the industry too narrowly as well. Two major museums, opera companies or theater companies in different regions might not serve the same customers but they do draw from the same talent pool, compete for national funding and serve similar types of customers. The Seattle Repertory Theatre can learn a great deal from evaluating the Guthrie Theatre, and vice versa.
Although defining the industry is a crucial step in industry analysis, frequently the correct definition of the relevant industry will only emerge after some data collection and analysis has been initiated. Just as an organization's mission is fine-tuned throughout the planning process, so the definition of the correct industry boundaries becomes clearer throughout the environmental analysis process and after important strategic decisions are made. For example, if a regional ballet company decides to pursue an ambitious path to world-class quality, the relevant industry segment and peer companies will change. The Pacific Northwest Ballet in Seattle, which has become one of the country's leading companies, provides a good example of a company that must begin to broaden its industry definition. With frequent tours to major cities in this country and abroad, this dance company can no longer limit its analysis to other regional companies or those in its home territory.
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