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Developing Business Cases for New Services in Research Libraries

Appendix: Full Literature Review

1 Leave a comment on paragraph 1 0 Part I: The Library Literature

2 Leave a comment on paragraph 2 0 The conventional library literature has long been noteworthy for reports from the field, generally featuring successes, but not for financial planning or for the background business steps that precede putting new services in place. The large body of literature on data curation and publishing generally follows this model. Service models are just emerging, and, while there has been little time for reflection or hindsight, such reporting would be instructive for the community. Fortunately, professional organizations, independent bodies (such as Ithaka), and governmental agencies are particularly productive in this area: ARL, SPARC (Scholarly Publishing and Academic Resources Coalition), JISC (formerly the Joint Information Systems Committee), and NSF have all produced or commissioned many studies on these topics. Ithaka has been commissioned to study questions of sustainability and business models for services in the digital era. These reports address the development of sustainable models for data curation and library publishing programs on a variety of levels. North American and British agencies have spent considerable effort in raising the discussion around funding and the future of scholarly communication.

3 Leave a comment on paragraph 3 0 It is instructive that North American as well as British reports envision government as the main funder in the area of data curation and management. The UK Research Data Service Feasibility Study (2008), submitted to the Higher Education Funding Council for England (HEFCE), expects centralized governmental funding and outlines a first adopters structure similar to NSF’s DataNet Partners program in the United States. Fry et al. (2008), writing from a UK higher educational perspective, provides a business case framework again predicated on centralized funding and large-scale cooperation. Fry et al. draw heavily on Beagrie, Chruszcz, and Lavoi (2008), whose HEFCE- and university-commissioned work sets the stage for the Research Data Service study by constructing a service model and key cost variables.

4 Leave a comment on paragraph 4 0 North American, primarily U.S.-based, studies articulate service structures to provide support for decision makers. The Blue Ribbon Task Force Report (2010), which treats digital preservation broadly, including data curation, is a primary example of this literature. The report uses standard economic terminology to describe the preservation landscape, enabling a clearer view of problems and responsibilities at the macro level. This is an essential first step. Action agendas that address broad sets of stakeholders require a level of cooperation and funder leadership that has not yet been realized, and, as the authors acknowledge, “there remain significant gaps in knowledge that require further investigation.”

5 Leave a comment on paragraph 5 0 In a similar vein, Friedlander and Adler (2006), in a report to NSF on a two-day workshop held by ARL, are clear that data curation and management pose a discontinuous service development for research libraries. The various discussions during the ARL workshop demonstrate the need for multi-institutional, multiconstituency engagement and solutions. The economic sustainability session developed high-level recommendations that address necessary cultural and economic questions that precede the development of institutional services, but did not provide extensive discussion of building institutional capabilities. The report is explicit that economic models and business models operate on different scales, and both perspectives must be developed and understood. It must be noted that the workshop participants shared the view of data as a public good. This presents particular challenges in the development of business models. One might also argue that this view is not shared by the private sector, where data may be seen as valuable assets for profit generation. What view will predominate will depend on the ability of research institutions and funders to build sustainable models to keep data in public hands. At the institutional level, the ARL E-Science and Data Support Services report (Soehner, Steeves, and Ward 2010) documents service development at six libraries and identifies four models for service provision: institution-wide or centralized, unit-by-unit or decentralized, hybrid, and multi-institutional. This report notes anxiety in regard to funding or resource management needs for these services but does not describe solutions.

6 Leave a comment on paragraph 6 0 Brown, Griffiths, and Rascoff (2007) provide an insightful overview of publishing activities in university presses and research libraries, outlining several strategies that would help both collaborate to provide valuable publishing services to their campuses and beyond. However, this study focuses more heavily on revitalizing university press publishing than on libraries’ services. Hahn (2008) identifies a significant number of library publishing projects, but the majority of these are very small or “experimental” and still in the process of identifying what services could be offered . Hahn notes that “all of the respondents who currently utilize library budget funds anticipate continuing to rely on this funding. In addition to base budget and overhead support from the library, other sources of revenue include grants, charge backs to units or organizations, royalties and licensing fees, print on demand revenue, and other forms of sales of some kind.”   However, no follow-up studies have been conducted to explore how these projections have played out over time.

7 Leave a comment on paragraph 7 0 Library leaders looking for starting points for sustainable publishing models will find assistance in Crow (2009a). Crow examines the development of university press-library partnerships, reviewing past and current collaborations and setting out guidelines for new partnerships. He is clear that presses and libraries have sometimes had adversarial relationships, but also notes that there are compelling reasons to work together:

8 Leave a comment on paragraph 8 0 Collaboration, unlike more passive working relationships, can transform a sometimes adversarial relationship into a shared exploration of alternative publishing models that allows libraries, presses, and other stakeholders to ensure that their interests are adequately represented. To advance their mutual interest in addressing problems with the current system, collaboration will require libraries and presses to coordinate their own interests and those of other stakeholders—most notably, their faculty and university administrations—and to act multilaterally, potentially ceding some operating autonomy. Still, libraries and presses share an institutional culture, and a commitment to facilitating the communication of scholarly and scientific research, that should make participation in a collaborative search for solutions appealing.

9 Leave a comment on paragraph 9 0 Crow’s list of value indicators could assist libraries in building their value proposition as well as understanding what to assess. Similarly, Crow (2009b) breaks down particular aspects of business model creation and explains a variety of funding models. While neither report was written to discuss all the steps libraries must take to build sustainable services, or to make suitable service decisions, both would be extremely useful for decision making. Crow’s most recent work (2011), a set of case studies and best practices produced for the Institute of Museum and Library Services Library Publishing Services: Strategies for Success grant, offers clear assistance in achieving sustainability. The best practices that Crow describes are applicable to a variety of financial and mission models. A very real advantage of this work is the case studies, which hold real programs (at Purdue, Georgia Tech, and Utah, the IMLS grantees) up against his sustainability model. There is a wealth of assistance for administrators and program designers looking to learn from others and to build services successfully.

10 Leave a comment on paragraph 10 0 Ivins and Luther (2011) report on their study of small, long-tail print journal publishers who are currently under extreme pressure due to constrained library budgets and offer a clear-eyed assessment of areas of disagreement and differences between publishers and library publishing programs that would inhibit collaborative solutions. They conclude that very small presses needing to bring a journal online may not find a suitable partner in a library, having “determined that there is seldom a one-to-one match between a journal needing support to offer an electronic version and the library publishing services offered on a given campus. When this is taken into account in conjunction with the very wide array of potential publishing services a library may consider offering—plus the fact many of these are new activities that are not necessarily a ready fit with traditional library skill sets—it is not surprising that there is rarely a one-to-one match between what is needed and what is available at an institution.”  Libraries interested in working with small publishers will need to understand the print publishing environment as well as business practices needed to build readership and sustainability. Libraries must also realize that inflexibility on open access will not help start a fruitful conversation about services.

11 Leave a comment on paragraph 11 0 Two reports from Ithaka, sponsored by JISC, explore sustainability and business concepts in some detail. Guthrie, Griffiths, and Maron (2008) emphasize the need for an academic form of transformative, entrepreneurial leadership:

12 Leave a comment on paragraph 12 0 Acting as the principal investigator of a research grant project is a very different responsibility from operating as the organisational leader of a sustainable enterprise. The issue of “impact” is just one example. In our opinion, delivering impact is the key factor in the potential for achieving long-term sustainability; only high impact and highly useful materials will draw the financial support from beneficiaries needed for long-term success. Yet the importance of impact is often underestimated by leaders of not-for-profit digital resource projects. Much attention is given to making material available and very little attention is given to doing the work to make sure that people will become aware of it, that they can find it, and if they do find it that they will actually use it. . . . They risk developing services that are not what people want or that go beyond what people are willing to support.

13 Leave a comment on paragraph 13 0 A follow up report (Maron, Smith, and Loy 2009) presents case studies of online academic resources, illuminating a variety of models that projects have taken to support their expenses. The authors identify several key factors for sustainability: dedicated and entrepreneurial leadership, clear value proposition, minimizing direct costs, the development of diverse revenue sources, and clear accountability and metrics for success.  While these two reports are very useful, neither of them focuses on the unique context of research libraries and the development of ongoing, core services. Yet Guthrie, Griffiths, and Maron (2008) do offer an acutely accurate reading of what is missing in most academic service planning, particularly in research libraries:

“There is no formulaic answer or single approach to achieving sustainability. No study can lay out a “one-size-fits-all” plan that any organisation can follow to reach a point of financial stability. There are, however, a variety of processes and procedures that can help to improve the likelihood of entrepreneurial success. These include establishing organisational mechanisms to develop accountability in leaders, setting measurable goals and objectives, reviewing progress on those objectives on a regular basis, and assessing the performance of both the project and its leaders… In our experience, we have been surprised by how few not-for-profit initiatives rooted in the academic environment have such procedures in place. Clearly the leaders of these initiatives are competent professionals; why do they not rely on processes that have proven effective in both commercial and not-for-profit contexts? . . . Accepting and even embracing the mechanisms of the marketplace, if properly placed in a mission-oriented context, can enhance the value that a project generates by sharpening its understanding of where need is greatest and how it can most usefully deploy its resources. The project leaders that are most likely to succeed in this environment are those who can operate successfully under the pressures of competition and accountability, and in the messiness of innovation and continual reinvention.”

15 Leave a comment on paragraph 15 0 There could be no better introduction to a review of the business and nonprofit literatures.

16 Leave a comment on paragraph 16 0 Part II: Commercial Business Case and Business Plan Writing

17 Leave a comment on paragraph 17 0 The literature on creating sustainable services in the commercial world follows two tracks. The first track is the business case for new products or services within an existing company. The second track is written for entrepreneurs writing a business plan that proposes a new business.

18 Leave a comment on paragraph 18 0 The business case literature offers few general works on principles and generic structures for the business case, but it offers a massive literature on the business case for specific aspects of business (e.g., diversity, sustainability, records management, etc.). In contrast, the business plan literature offers works on the general principles of the business plan (including canonical works) and business planning on specific topics such as small business, software startups, etc. The business plan literature even contains a substantial subliterature challenging the value of writing business plans altogether.

19 Leave a comment on paragraph 19 0 Finally, there is a literature on reinventing businesses (Johnson, Christensen, and Kagermann 2008). This literature provides guidance to the business decision maker on defining the current business model and exploring alternatives to respond to changes in the current business landscape.

20 Leave a comment on paragraph 20 0 The Business Case

21 Leave a comment on paragraph 21 0 Within the first track there is a rich body of work on the business case for almost any aspect of business. This includes topics from human resources diversity, where there is a large literature (Kandola and Fullerton 1998; Richard 2000; Thomas 1992), to sustainability (Hopkins 2010), to records management (Saffady 2011), and everything in between. Much of the literature is itself making the case for some aspect of change—generally trying to prove the benefits of something like a new technology, a new business model or a different demographic component of the workforce. Again, human diversity in an organization is the best example of this, where there is a rich and well-researched literature.

22 Leave a comment on paragraph 22 0 Also within the first track is the “how-to” literature on making a business case: research and commentary that provide guidance on the principles and mechanics of how to make the case for some change in business practices or product offerings. This literature provides detailed models, templates, and commentary on how to maximize the chance for success in making a significant business decision (Maul 2011; Schmidt 2002). These works on presenting a business case to an existing organization provide useful definitions of the business case itself and step-by-step instructions on the execution of a business case. Maul provides a succinct definition of the business case: “A business case is a tool for identifying and comparing multiple alternatives for pursuing an opportunity and then proposing the one course of action that will create the most value.”  Her guide then provides the reader with a step-by-step guide for executing the business case including templates for selecting the best solution and documenting the details of the implementation plan. Schmidt too provides a concise definition: “A business case is a decision support an planning tool that projects the likely financial results and other business consequences of an action or decision.”  He also provides a useful summary of the elements of a “good business case”:

23 Leave a comment on paragraph 23 0 A good business case:

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  • Defines the case subject, purpose and scope, up front, in clear practical terms.
  • Shows expected cash flow consequences of an action or decision, organized around a time line
  • Presents the rationale and methods for identifying and estimating benefits and costs
  • Includes all important benefit and cost impacts, even those that are not easily described in financial terms.
  • Discusses critical success factors that must be managed in order to bring predicted results.
  • Identifies and measures risks.

25 Leave a comment on paragraph 25 0 Core Elements of the Business Case

26 Leave a comment on paragraph 26 0 Maul (2011) documents a seven-step process for making a business case:

27 Leave a comment on paragraph 27 0 Step 1: Define the opportunity

28 Leave a comment on paragraph 28 0 Step 2: Identify the alternatives

29 Leave a comment on paragraph 29 0 Step 3: Gather data and estimate time frame

30 Leave a comment on paragraph 30 0 Step 4: Analyze the alternatives

31 Leave a comment on paragraph 31 0 Step 5: Make a choice and assess the risk

32 Leave a comment on paragraph 32 0 Step 6: Create a plan for implementing your idea

33 Leave a comment on paragraph 33 0 As with the business plan literature, there is a keen emphasis on defining the opportunity for decision makers. After defining the opportunity and making a compelling case that the opportunity should be pursued, Maul provides a useful framework that emphasizes the value of analyzing the alternatives to reaching a business objective. Absent this framework, the individual might pursue the business case as a tool for justifying a preselected model for exploiting the opportunity. Rather, this method emphasizes the importance of analyzing a full range of approaches and providing the pros and cons for each approach. Maul provides a structure for this step by detailing the required elements of analysis:

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  • List the costs
  • List the benefits of expected additional revenues
  • Point out any cost savings to be gained
  • Identify when you expect to see costs and anticipated revenues
  • List the impacts on other corporate metrics, such as customer satisfaction, customer retention and operational efficiency
  • List any unquantifiable benefits and costs
  • Conduct your business impact analysis
  • Organize the information into a table for comparison

35 Leave a comment on paragraph 35 0 The principle behind this model is that the business case author will fully explore the alternatives to exploiting a defined opportunity. The decision arrived at in Step 5 can then be defended in the context of the other alternatives and the decision-makers will have confidence that the most appropriate solution has been selected. This approach is in contrast to the intuitive approach which builds an argument for a preselected option. Maul’s model includes detailed templates for defining the opportunity, identifying the alternatives, defining the pros and cons of each approach, documenting an implementation plan, and an overall business case document template that includes all aspects of the seven-step model. Maul’s model does not include detailed templates for cost estimation or a framework for making a go/no-go decision. Presumably, those components are components of the local business practice.

36 Leave a comment on paragraph 36 0 The Business Plan

37 Leave a comment on paragraph 37 0 The second track of the business case literature is designed for founders of new businesses—both entrepreneurs and small business people. These guides are part how-to and part motivational input for individuals who are starting a new business outside of an existing organization (Chambers 2008; Stutely 2002). There is a vast literature in this category, in many formats and subtopics. The thrust of the business case literature for entrepreneurs is rhetorical in the formal sense. These works provide the entrepreneur with a framework with which to convince funders that the business idea is sound, that a market exists for the product or service, that the entrepreneur has the organization and organizational skills to be successful, and that there will be a long-term return on investment for the funder. This literature is explicit about its goal of providing the entrepreneur with the tools to get a positive response from a funding organization or individual. As with the how-to literature for existing organization, there is a very accessible toolset and templates for the process of making and documenting the business case.

38 Leave a comment on paragraph 38 0 Within the canonical business plan literature, Rich and Gumpert (1985) argue for a business plan that addresses the viewpoint of three constituencies: the market, the investors, and the producer. They argue that too many business plans are written from the perspective of the producer and that the burden is on the writer of the business plan to prove that there is a market for the new business and that the investors will be rewarded for their financial support of the endeavor. Sahlman (1997) argues for a business plan framework that addresses “the four interdependent factors critical to every new venture”: the people, the opportunity, the context, and the risk and reward. These two approaches can be seen as overlapping in emphasis on the people, the market/opportunity, and rewards to the investor. Sahlman emphasizes the context as demonstrating the entrepreneur’s depth of understanding of market conditions or highlighting the appropriateness of the timing of introducing a new venture.

39 Leave a comment on paragraph 39 0 The contrarian literature argues that extensive business plan writing does not predict the success of a new venture (Lange et al. 2007). Lange et al. summarize the literature on the efficacy of business plans by writing, “there is little convincing evidence on whether or not business planning before a business is up and running subsequently produces superior performance.”  From their study of 116 ventures that did not require external investors, they draw the conclusion that “writing a business plan before a business began operating made no difference to the subsequent revenue, net income and number of employees.”

40 Leave a comment on paragraph 40 0 Gumpert (2002) provides a litany of reasons why the traditional business plan fails to provide a lasting impact on the success of business. Among his reasons is the fact that “No one uses them to run their business. In other words, the business plan has been used to raise money, not to plan the business.”

41 Leave a comment on paragraph 41 0 Core Elements of the Business Plan

42 Leave a comment on paragraph 42 0 As mentioned above, there is a massive literature on writing business plans for all types and sizes of businesses. The canonical literature describes the need to provide the full context of the proposal from various perspectives. (Sahlman 1997; Rich and Gumpert 1985). Chambers (2008) identifies the core elements of the traditional business plan:

44 Leave a comment on paragraph 44 0 Stutely (2002) recommends including these financial elements scattered throughout the plan itself and in the appendix:

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  • A graph showing the “break even” point
  • A graph showing cash flow projections
  • Financial summaries in the appendix including:
  • Production and sales figures
  • Capital outlays
  • Staff costs
  • Non-staff operating costs
  • Income Profit & Loss statement
  • Cash flow

46 Leave a comment on paragraph 46 0 The contrarian literature argues that it is only the financials and the leadership skills of the people proposing the business that provide the argument for funding to the investor. In the development of a business plan, Gumpert (2003) argues that the business plan “sells your business and its executives to potential backers of your business.” The implication is that success in the actual business lies in the qualities of the executives and the strength of the product and the business model relative to the market conditions. Gumpert’s business plan outline roughly follows the canonical model. He argues for brevity in the preparation and length of the document. Further, he argues that the success of the proposal process will be in the formal presentation to investors and investor confidence in the business skills of the management team.

47 Leave a comment on paragraph 47 0 “The Classically Balanced Venture”

48 Leave a comment on paragraph 48 0 Finally, Timmons and Spinelli (2009) argue that success in business planning lies in understanding the balance between opportunity, resources, and the team that is founding the venture. This is described as the “Timmons model,” and it argues that “success in creating a new venture is driven by a few central themes.” The themes are:

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  • It is opportunity driven
  • It is driven by a lead entrepreneur and an entrepreneurial team
  • It is resource parsimonious and creative
  • It depends on the fit and balance among these
  • It is integrated and holistic
  • It is sustainable

50 Leave a comment on paragraph 50 0 The diagram of the Timmons model illustrates the principle that balance in the share of opportunity, resources, and team is critical to success. It shows those three elements balanced on the fulcrum of the founder or lead entrepreneur and is influenced by inputs such as leadership, communication, exogenous forces, creativity, and the business plan itself. The argument is that on the one hand, if any of the core elements are out of balance, then the entire venture enters into risk of failure; and on the other hand, balance in those factors increases the chance for long-term success.

51 Leave a comment on paragraph 51 0 Using the Timmons model as a point of departure, Zacharakis, Spinelli, and Timmons (2011) suggest that the entrepreneur ask these questions of a new venture: “what pitfalls will I encounter to get to the next boundary of success? Will my current team be large enough, or will be over our heads if the company grows 30 percent over the next two years? Are my resources sufficient (or too abundant)? Vivid examples of the failure to maintain a balance are everywhere, such as when large companies throw too many resources at a weak, poorly defined opportunity.” The authors argue that careful business planning help “tie together the three spheres.” They note that the “planning process helps you shape the opportunity and understand its full potential.”

52 Leave a comment on paragraph 52 0 Part III: Nonprofit Approaches to Business Planning

53 Leave a comment on paragraph 53 0 A Business “Mindset”

54 Leave a comment on paragraph 54 0 The nonprofit sector has borrowed heavily from the management theories and methodologies of the business world, and nonprofit business planning does not differ fundamentally from that of for-profits (Massarsky 1987). Most nonprofits now see an “entrepreneurial mindset and investment thinking” as critical to their success as they supplement their revenue streams by embarking on income-generating ventures, establish new fees and contracts to cover costs for traditional services, or secure additional funding from individuals, corporations, or foundations (Rouson 2005; Brinckerhoff 1990). There is even an emerging recognition that the two sectors are “blending,” as nonprofits continue to clarify their identities in order to compete with some rival organizations while pursuing collaborations and partnerships with others, including for-profit entities (Rouson 2005). However, not all nonprofits have pursued “businesslike” and systematic methods, and those that have have been contrasted with others retaining so-called “build it and they will come” and “seat of the pants” approaches (McNamara 2006).

55 Leave a comment on paragraph 55 0 Planning for Complexity

56 Leave a comment on paragraph 56 0 Their missions and goal orientations are the major differences between nonprofits and for-profit businesses: the main goal in the private sector is to generate profit for shareholders, while nonprofit organizations usually pursue a “plurality of goals” that can complicate their planning processes. Nonprofit business plans often reflect “dual agendas”: combining an overall commitment to benefit society with the need to earn a profit through venture products or services (Massarsky 1987; Moore 2000). Arguably, according to Rouson (2005), for-profit sector business plans typically have only one “real audience”—potential investors—while nonprofits have to appeal to an often broad spectrum of stakeholders, including funders, board members and staff, constituents, partner organizations, and the larger community. For this reason, nonprofit business planning may have to address soft concerns such as motivation, human behavior, and social value as much as financial figures and economic analyses. That said, nonprofit business planning is still looked upon as the primary way to “garner money from investors,” while it may also assist in achieving such desired side benefits as enhancing organizational management, initiating new programs or projects or facilitating mergers (Rouson 2005).

57 Leave a comment on paragraph 57 0 Sample Plans Adapted from For-Profit Models

58 Leave a comment on paragraph 58 0 Much of the relevant literature consists of efforts to revise existing for-profit planning models to fit the nonprofit environment. One example of this approach is Pinson (2008), who views the planning process as essentially the same for any organization, and suggests only a few minor modifications for those working in a nonprofit environment, the most important relating to formulating the business plan to reflect a nonprofit’s distinct mission and goals. Pinson indicates that while, for example, the for-profit target market is the customer, nonprofits have to address the needs of both program recipients and funding sources. While a nonprofit is more likely to conduct a situational assessment or environmental analysis than a SWOT analysis in the course of the planning cycle, Pinson’s outline for creating a business plan is otherwise applicable to either sector:

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  • Executive summary
  • Organizational plan: business summary including mission, business model, strategy (objectives, activities, current resources), strategic relationships, and SWOT analysis (or situational assessment or environmental business plan)
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  • Program services and products (and why they are unique)
  • Administrative plan: location, legal structure (including legal, accounting, intellectual property, insurance, and security concerns), management and personnel, and board of directors
  • Market analysis: determining target markets or audience (program recipients and funding sources), and competition, and conducting market research or needs assessment
  • Marketing strategy: branding, advertising, sales, public relations (given greater emphasis in a nonprofit), and networking
  • Customer service (including expected outcomes of achieving excellence)

63 Leave a comment on paragraph 63 0 Although written from an explicitly nonprofit perspective, Rouson (2005) sees the “division” between for-profit and nonprofit as “very artificial when it comes to strategy and planning requirements.”  Rouson considers strategy to be “merely a trip plan” requiring the organization to answer four basic questions: What is the organization’s purpose or mission (the reason for the trip)? What is its destination or vision (where does the organization want to end up)? What are the rules for the trip (the organization’s guiding principles or values)? And what is the route and what are the means (the business model) for reaching the selected destination?

64 Leave a comment on paragraph 64 0 Rouson’s (2005) list of business plan components also follows a basic for-profit outline, although assigning a higher priority to benchmarking and evaluation than Pinson (2008). Importantly, Rouson sees the components of a business plan as the means of operationalizing a nonprofit’s goals in guiding performance and ensuring financial success and sustainability:

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  • Definition of the venture (identifying programs, products, operational activities, and their impact)
  • Market analysis (of customers, constituents or beneficiaries; needs and opportunities; scale; reach or absorption; competitive environment and possible collaborations)
  • Staffing and management structure, roles and responsibilities (including relevant skills, experience, and accomplishments)
  • Time frames and benchmarks for performing and evaluating work
  • Financial requirements (initial capital, cash flow, revenue, record keeping)
  • Revenue projections (break-even point, profitability, reinvestment or reserves)
  • Marketing plans (branding, pricing, distribution, customer or constituent relations, public affairs and media relations)
  • Analysis of current and potential risks, and mitigation strategies.

66 Leave a comment on paragraph 66 0 Others, such as the Enterprise Foundation (1999) and the Center for Nonprofit Excellence (2009) have offered similar outlines and recommendations and have produced guides for preparing and executing nonprofit plans.

67 Leave a comment on paragraph 67 0 Dual Bottom Line Matrix

68 Leave a comment on paragraph 68 0 CompassPoint’s Dual Bottom Line Matrix planning outline, although originating in a for-profit environment (Bell, Masaoka, and Zimmerman 2010), is, with its major assumption that business planning should focus on the tension between mission impact and program or project viability, more specifically geared toward the nonprofit world (Allison and Kaye 2005). CompassPoint holds that nonprofits should develop programs that have both “high mission impact” and “high viability” or profitability, and that their products or services must be of high quality and capable of clearly distinguishing the organization from its competitors. Accordingly, products or services should produce tangible results that directly contribute to the nonprofit’s core mission, including the capacity to generate a revenue surplus, while having a financially viable business model and a high potential for future sustainability. A product or service with low mission impact and low viability does not attract funding opportunities and should be discontinued, while one with high mission impact but low viability that may nonetheless result in a good program will also not generate support (Allison and Kaye 2005). Recently, Bell, Masaoka, and Zimmerman (2010) have demonstrated how the use of Dual Bottom-Line mapping and analysis in business planning can lead to nonprofit financial sustainability, allowing an organization to identify impact and revenue strategies for new or existing products and services.

69 Leave a comment on paragraph 69 0 Critical Decisions Matrix

70 Leave a comment on paragraph 70 0 Similar in approach to the Dual Bottom Line Matrix, but differing in its assumptions and proposing additional criteria for nonprofit business investment decisions, is Snow and Phillips’s (2008) Critical Decisions Matrix, which is based on three guiding principles: minimizing risk, maximizing leverage (defined as return on investment), and ensuring sustainability. Snow and Phillips claim that their approach can be used either for exploring and developing new opportunities or for overall organizational planning. Their four stages of decision making (determining feasibility, conducting the pilot, implementation, and the cutback should, at some point, the program be found to be no longer viable) can be applied to a variety of scenarios.

71 Leave a comment on paragraph 71 0 Through each stage, sixteen “due diligence” criteria or elements are applied, weighed, and adapted to developing situations, ideas or solutions (strategic alignment, feasibility, available expertise, reasonable cost, fit, measurable impact, appropriate scope, personnel pool, practicality, measurable productivity, risk factors, possibilities for collaboration, broader benefit, financial health, impact on organizational development, and broad oversight).

72 Leave a comment on paragraph 72 0 Because of its level of detail—and with many of its criteria shared with more conventional business plans—the Critical Decisions Matrix can be considered as both an overall decision-making model and an applied tool for service or project development. Librarians might consider combining aspects of the Critical Decisions Matrix and the Dual Bottom Line Matrix with more conventional business planning efforts when contemplating the profitability and impact of their services.

73 Leave a comment on paragraph 73 0 Venture Capital Approaches

74 Leave a comment on paragraph 74 0 Larson (2002) places nonprofit business planning within a venture capital framework, and outlines four basic planning steps:

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  • Identify who will be in charge of the venture (with responsibility for preparing a business plan)
  • Identify the audience for the business plan
  • Produce the business plan, composed of:
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  • Business summary (descriptions of the organization and proposed venture)
  • Market opportunity (what the venture will sell to whom, how it will be profitable, growth projections, and assessment of the competition)
  • People (responsible for development, marketing and operations)
  • Implementation (start-up, operational, marketing, and financial plans)
  • Contingencies (assessment of risks and uncertainties, including plans to minimize undesirable factors)

78 Leave a comment on paragraph 78 0 Rather than organizing their model around the elements of a written plan, Bronfman and Solomon’s (2010) focus is on idea generation, research, and demonstration, and on the crucial role of partnership development. Bronfman and Solomon see the venture process as a series of discrete steps or “decision points” at which to determine whether to continue or abandon a new program or project:

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  • Needs assessment (to understand the market and unmet needs)
  • Idea generation (identifying operating assumptions, including goals and objectives)
  • Research (to test and reassess operating assumptions and prepare for the development of the demonstration phase)
  • Demonstration phase (the new initiative’s risk capital phase—this is the moment to “try to be bold, welcome noble failure, and measure everything”
  • Go or no go decision whether or not to implement the project (seen as “analogous to new business development”), and either:
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  • seek funders beyond initial angel investors or
  • sunset project and make “experience and findings available to those who might learn from the experience”
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  • Partnership development (become “enthusiastic salespeople” to attract partners to fund the initiative’s development and scaling)
  • Sustainability (the emerging initiative becomes independent, permanent, and evolving)
  • Get out of the way (founders and initial funders do not stand in the way of further program development)

82 Leave a comment on paragraph 82 0 Bronfman and Solomon’s perspective can be particularly important for libraries struggling with the high levels of risk often associated with new technology applications, and with the necessity of “selling” partnerships and responding to the demands of funding agencies. Their model also reminds librarians of the issue of scalability, which is not extensively covered in the nonprofit literature but remains relevant to project design (Tucker et al. 2005).

83 Leave a comment on paragraph 83 0 Social Enterprise Models

84 Leave a comment on paragraph 84 0 A “social enterprise” is defined as a “part business, part social” hybrid organization that “breaks down the traditional boundaries between the nonprofit and private sectors (Alter 2003). Alter explores how institutions have combined a mix of social values and goals with commercial business practices to design ownership models, income and capitalization strategies, and unique management and service systems that maximize social value. This so-called integrated approach is intended to encourage innovation, increase an organization’s impact and effectiveness, and improve its overall performance. According to Alter, a social enterprise is distinguished by its “dual value creation properties—economic value and social value,” and possesses several unique characteristics.

85 Leave a comment on paragraph 85 0 It uses business tools and approaches to achieve social objectives, blending social and commercial capital and methods and generating income from commercial activities to fund social programs. Being market-driven and mission-led, it measures financial performance in addition to social impact, meeting financial goals in a way that contributes to the social good. A social enterprise can enjoy the financial freedom provided by unrestricted income, while situating the enterprise strategically to accomplish its social mission.

86 Leave a comment on paragraph 86 0 Dees, Emerson, and Economy (2001) argue that a nonprofit should create a social enterprise business plan for a variety of reasons, including to attract investment and identify risks. In measuring the dual outcomes demanded by financial and social “double bottom lines,” it can appeal to supporters from the business sector, as well as provide stakeholders with clarity about how the social enterprise can move rapidly toward its social mission. Showcasing the abilities of the management team, it can facilitate building alliances and the collaboration necessary to leverage resources, and “check” not only feasibility—defined as both market viability and financial stability—but, by following a critical path model, management thinking. A social enterprise business plan can provide detailed knowledge of the marketplace, tying together market feedback and financial projections to identify relevant opportunities, and can facilitate the development of a framework for interpretation. It can enhance communication among all stakeholders and “energize” the entrepreneur.

87 Leave a comment on paragraph 87 0 Forth Sector Development’s Social Enterprise model (2011) frames the business planning process as a “journey” of six stages, placing most emphasis on the first four stages an organization must travel through and consider in detail: motivation, or organizational readiness; preparation, or organizational culture, capacity and risk evaluation; assessment, or idea generation and market analysis; and exploration, the feasibility study and marketing strategy, before embarking on the fifth and six stages of preparing the business plan; and implementing and periodically reviewing the start-up.

88 Leave a comment on paragraph 88 0 Forth Sector Development’s emphasis on motivation and organizational readiness cautions libraries to thoroughly evaluate their culture and capacity so as not to undertake services they cannot sustain or that stakeholders may see as peripheral. And, in explicitly operationalizing assessment and periodic review, a social enterprise approach assures that startups and ongoing services are continuously evaluated for viability. Within higher education institutions increasingly required to demonstrate value to taxpayers and funders, and where libraries are usually considered non-revenue-generating cost centers, having an accountable hybrid library organization capable of achieving profit as well as social good may resonate well when considering how to justify new or enhanced services.

89 Leave a comment on paragraph 89 0 Social Entrepreneurship and Brinckerhoff

90 Leave a comment on paragraph 90 0 According to Brinckerhoff (2000), social entrepreneurs are nonprofit leaders who are constantly looking for new ways to serve their constituencies, and to add value to existing services, and they are willing to take reasonable risks on behalf of those their organization serves. They understand the difference between needs and wants, and that resource allocations are stewardship investments, and they weigh the social and financial return on each investment they make. They consider mission first, but know that without money there is no mission output.

91 Leave a comment on paragraph 91 0 Unlike for-profit business planning models, Brinckerhoff maintains that his seven-step process for nonprofits is mission based:

  • 92 Leave a comment on paragraph 92 0
  • Review the organization’s mission
  • Assess the organization’s risk willingness
  • Establish the organization’s mission outcomes
  • Generate ideas for new business
  • Conduct feasibility studies
  • Preliminary: determine what your product or service is, and whether the target customer will want it; explore the industry, and ascertain whether the organization has the relevant core competencies to undertake the project
  • Final: gather information on the business, industry, competition and market (conduct market research on potential markets, and anticipated hurdles and pitfalls), costs, pricing, capital and pro forma financials; make final assessment of feasibility
  • Write a business plan (including financials)
  • Implement the business plan with accountability.

93 Leave a comment on paragraph 93 0 Brinckerhoff  also claims that his social entrepreneurial model provided an extensive set of tools for constructing better mission-based policy as well as for realizing improved operational, financial, and service planning, and it has been cited frequently in the literature as offering a step-by-step means for nonprofits to achieve their planning goals. As well, because the model is well-known and contains many of the basic components included in the other approaches we reviewed in this chapter, this study will rely largely on Brinckerhoff for its definition of business planning.

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Source: http://mcpress.media-commons.org/businesscases/appendix-full-literature-review/