What the Italian opera "business" can teach managers about innovating, according to Harvard blogger Alessandro Di Fiore
Posted on Harvard Business Review: July 26, 2010 1:27 PM
Opera, which was born in Italy at the end of the 16th century, is struggling for survival in the country of its birth. The demand for tickets is falling; according to one estimate, the number of operagoers in Italy has fallen, over the years, by 20%. The costs of mounting operas are rising, and the art form usually caters only to small audiences at a time.
Moreover, Europeans believe that the state should underwrite culture, so there is no pressure on opera companies to make money. Around three-fourths of their revenues in Italy come from public funds. Consequently, the ordinary taxpayer ends up supporting an artistic activity that only the elite enjoy.
When you think about it, many mature industries face similar problems, with corporations fighting for larger shares of a shrinking market and accepting smaller profits. They follow their customers' life cycles and eventually die.
That raises the key issue: Is it possible to stoke demand in mature markets? My recent research shows that companies can use four levers to do so—as some opera companies are starting to do.
Go Beyond Core and Niche Customers. Several operas have developed products for younger and non-expert audiences. For instance, they offer discovery concerts that promote the operatic tradition among children and teenagers. They also broaden their appeal by producing popular operas instead of unknown ones. Milan's Teatro La Scala has reduced the number of niche titles it performs each season, focusing instead on popular operas such as Aida and Don Giovanni. As a result, tickets often sell out the day the box office opens.
Think Beyond Existing Platforms. To extend the customer base, some opera houses are using new channels. This enables them to overcome both geographic limitations (people who are unable to get to Milan or New York, for instance) and limitations on seating capacity. In 2007, the New York Metropolitan Opera launched opera performances that are shown live in cinemas in North America, Europe, Asia, and Australia, called Metropolitan Opera Live in HD at Cinemas. Inexpensive tickets and the availability of popcorn, no doubt, have made these box office hits; last winter, the showings of Bizet's Carmen sold out all over North America.
Look Beyond Existing Geographic Markets. Opera houses are becoming more global by organising international tours; striking alliances; and developing multiple teams In 2008, for instance, a La Scala troupe visited China—which will be a major market for opera in the future—for the first time. Opera houses can multiply reveneus by creating more than one troupe performing worldwide to the same quality standards.
Get Around Constraints. Opera companies face limits because they can hold only a limited number of shows and theatres are often small. To get around these problems, some opera houses now hold open air shows. For instance, the summer season at Verona's Arena and Rome's Terme di Caracalla are held outdoors. The target customer isn't the usual opera lover; the acoustics in the open air aren't the best. However, the atmosphere (you can dress casually); the setting (you sit on the steps of ancient ruins under the stars); and inexpensive tickets attract young Italians as well as foreign tourists. Some opera companies have also boosted the number of performances over the trade unions' protests. For instance, Milan's Teatro La Scala has increased the number of performances, from 160 to 250 per year.
As a rule, if your company is operating in a mature market, move your attention away from existing customers. While they may allow you to survive for a while, growth can come only from new customers. So "unblock" demand and reach "noncustomers" by lowering the geographical, economic, knowledge, and social barriers in your way.