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|Submissions to Eli's 4th Riddle (with comments from Eli)|
Congratulations to Vivek Chopra, winner of Eli's 4th riddle!
The winner will be featured in the TOCICO newsletter, and, considering they are a TOCICO member, will be a featured member on the website for one month. The winner will also receive $100 off of their conference fee for the 2012 International Conference in Chicago!
The Museum for Sheer BeautyRIDDLE: During his life the multi-billionaire Henri Octagonal was known for his eccentric behavior. Until the age of 47 he was not known for his love of art. Then he suddenly started to collect variety of pieces of furniture that were famous for their distinctive design. Later he fell in love with Japanese art and purchased huge amount of Japanese art of all kinds.
At the age fifty-six, he married the beautiful Anna Bostock. Henri bought for her a large collection of paintings by Salvador Dali and some other known painters from the beginning of the 20th century.
Just one year later Anna died in a mysterious car crash with another man, which some gossip claimed was her lover.
After Anna’s death, Henri decided to build the Museum for Sheer Beauty for the memory of his wife. He contracted the well-known architect Mario Piccini to build the Museum. The unique building, in the middle of a residential area, with very limited parking, opened its gates to the public five years later. Six known curators were given a budget of $500M to purchase a variety of items to show the many sides of beauty.
The Museum was specially designed to deeply impress any visitor. Thirty instructors, in twelve different languages, were hired to lead the visitors into the treasures of the museum. The minimum size of a group is six people, and it should not be larger than 12. Henri himself has clearly outlined the process of visiting the museum. The relatively expensive entry fee was set to $25 to emphasis the value of being exposed to such beauties. The fee includes the ride with a special bus from the central station to the museum to overcome the limitation of parking. The buses go every 15 minutes from the central station and back throughout the opening times of the museum. The museum is open for six days a week, eight hours a day.
Henri organized free special tours of school children to the museum. All the instructors went through 2-weeks training of how to lead children through the museum.
Every visitor has to fill a short form of his/her appreciation of the experience of going through the Museum. It takes about one minute to fill the form. Filling the form is a strict requirement, on top of paying the fee, to enter the museum.
Both Henri and his celebrated architect died about one year after the opening. Adriano Piccini, the son of the architect was named in Henri’s will to become the general manager of the Museum for Sheer Beauty. Adriano, who had successfully managed a large chain of restaurants, was glad with the new nomination because of his affections to the building, which he thought was his father greatest achievement.
Adriano’s first big problem is how to settle the budget. Henri left a special fund to finance the Museum with the fixed sum of $3.5M per year. Adriano has to look for the rest, assuming that the minimum appropriate budget is around $10M. In previous year the gross average of 600 paying visitors per day was achieved. This would generate total annual revenue of $4.68M. Still, the budget is still short of almost $2M.
Adriano has quickly found out that it is not easy to increase the average daily number of visitors. While many tourists and students from all over the world wanted to come and visit the museum there were some physical limitations to how many could be in the building at the same time. The narrow corridors, leading to very wide rooms with the beautiful items, were designed to impress, but poses some logistical problems. Adriano had to agree that it is impossible to have more than 1,200 visitors in a single day, assuming the average stay is one hour. Another fact is that most visitors prefer to come in the late afternoon. During the weekends the pressure is very high, but not so in the weekdays. Adriano also learned that too many people hate to wait outside for their turn to enter. Many potential visitors decide to take the ride back with the same bus when they see the length of the queue.
What are the alternative revenues such a unique museum can generate? The government is not willing to finance a private enterprise of a billionaire.
A kind of alternative is to sell, from time to time, some of the items that belong to the museum. Adriano is well aware he might be forced to do it in order to be able to buy new items. But, should he do it just to survive?
Adriano also wondered what changes would do good to the museum? In what way he, Adriano, could prove himself a real good general manager of a unique museum of art?
Can you help Adriano?
Eli's Answer to his own riddle: It makes me happy that most answers have enough practical ideas for Adriano to get enough additional revenues to balance his $10M budget. It seems that the TOC messages have wide understanding so dealing with a very different environment does not create an obstacle. What is still important is to learn how to focus the analysis of an organization starting with the true basic question:
What is the goal?
Looking through all answers there are some valuable insights that many answers have cited:
1. Use pricing differentiation to reduce the pressure on the weekend by moving people to the weekdays and even move them from the afternoons to the mornings.
2. Increase the opening hours (including opening on Sunday etc.)
3. Find new solutions for people in the queue to enter the museum. Several ideas have been proposed on what kind of space to dedicate to the waiting people and what activities to do.
4. Improving the exploitation of the space constraint.
The above are good ideas. They would do some good to the museum and will eliminate the immediate problem of being unable to achieve the budget.
Can Adriano do even more?
In order to understand what we mean by "more” we need to understand the goal.
In most cases we face a regular business organization and then we do not need any more to verbalize the goal. The classic Goldratt’s verbalization of the goal of a business organization is "make more money, now and in the future” is usually good enough. But, here we speak about a non-profit organization, and the main cry for help is for "… what changes would do good to the museum? In what way he, Adriano, could prove himself a real good general manager of a unique museum of art?” I believe that given this question we do need to dig into the goal of the museum.
Only few answers mentioned the issue of what is (or what should be) the goal of the museum. I believe this should be the first question and the answer should lead the improvement processes. Using the five focusing steps without a proper definition of the goal could be misleading.
Let me state my own observation at quite large variety of non-profit organizations:
The ultimate constraint for most non-profit organizations is MONEY.
This means when the organization has more money it can, and should, achieve more of its goal. Exploiting the constraint means to run the museum with whatever available money while trying to achieve as much of the goal under the active constraint of the available money.
All the answers for this case are focused on elevating that constraint. This is not necessarily wrong when you see relatively easy and immediate ways to elevate the constraint. However, even when you elevate the constraint of MONEY for a non-profit organization – it would usually still be the constraint. So, exploiting the available money in order to achieve as much as possible from the essence of the goal is a must. So, there is no way not to clearly verbalize the goal!
Kevin Kohls answer’s does refer to the goal: "Henri’s goal is (probably) to expose as many people to art to increase their appreciation for beautiful things”.
Another, rather long answer, by Vivek Copra defines the goal in this way: "To unearth objects of sheer beauty and win appreciation for them from the world at large, now and in the future.”
From both definitions one could deduce that there are two critical parameters that impact the goal of the museum: the number of people being exposed to the art and the intensity of the excitement (appreciation). So, if Adriano would succeed to bring many more people into the museum we could assume that more of the goal has been achieved. Also, if more people would testify how great their pleasure is from visiting the museum then also more of the goal has been achieved.
Recognizing the goal could lead us to additional insights:
Insight one: Increasing the opening hours makes it possible to many more people to visit the museum. While this idea has been brought up by many answers, I don’t think it got the right emphasis. It is not just the money – it directly improves the goal! More, in the area of The Performing Arts, theater, music and dance, it seems natural that the time to be exposed to them is in the evening. Why should not museums be open in the evening, to give chance to people who are busy during the daytime to enjoy the artistic pleasure of watching closely great art?
Insight two: How long should people stay in the museum? What about people who do not particularly enjoy the museum? There is no added value in having them inside! Why not letting people pay only half the regular entry fee if they come out after less than half-an-hour? When there are many people waiting to enter, it makes sense to "get rid” of those that do not add anymore to the goal and let people who might be more excited to go in. Then, of course, if someone would like to stay for more than, say two hours, that’s fine, but ask the person to pay just a little more for the extra value.Insight three: Breaking the geography limitations. Some answers have stated ideas of exchanging some artifacts with other museums. It could be done with a whole exhibition as well. Some answers mention videos and catalogues as ways to make more money. Not just money friends: it is more of the goal!
Vivek Chopra's answer (winner): I have tried to explain things in detail. But in case the details become dreary, you can just go through the injections and the last section called the Goal, and skip the rest.
The analysis: Let’s start with the primary, evergreen constraint of the system which is the market (Without getting into too many explanations, market is a perennial constraint of any system, which should always be subordinated to. Market is at best a CCR and at worst a constraint. In either case mentioned, the actions to be taken are similar to the those taken if it were it a constraint).
Considering the market as a primary constraint, the next question that we need to ask ourselves is whether we are exploiting the primary constraint fully? In this context the case clearly states that there are people who return without being able to explore the museum. This clearly shows that the market in this case is not being fully exploited. There is probably a constraint within the museum itself which is preventing it from fully subordinating to the market demand. Looking within the system, we find 3 entities- the buses which carry the visitors, the museum itself and the instructors who guide the visitors through the museum. Which one of these is a constraint? Let us look at all the three one by one:
1) The buses- the buses cannot be a constraint since they carry more visitors than the museum can service (that is why some are turned back from the museum)
2) The museum – Let’s look at the following points:
- Based on Adriano’s analysis, the museum can accommodate a maximum of 1200 people in one day
- Previous year saw an average of 600 paying visitors a day which is half of the maximum capacity of 1200. I will also go ahead and assume that the no. of non-paying visitors (children) is not enough to completely fill this gap since data on children is not available.
- Visitors are turned back
Despite a maximum capacity of 1200, the museum is currently satisfying only little more more than 600 visitors (including children). This implies that there is something else, other than the museum capacity which is constraining the system. However and most importantly, in the long term, museum capacity is the ideal strategic constraint of the system and we shall keep this in mind from hereon.
3) Instructors: There are 30 instructors and each of them can lead a maximum of 12 people in a group. Assuming that they can turn around 8 times in a day (a visit lasts an hour), we have a total capacity of 30X12X8= 2880 people a day. Based on only their overall numbers, the instructors do not seem to be a constraint. However there are aspects around instructor "mix” based on their spoken languages (12 in no.) which we do not know much about from the case facts. If the language "mix” of the visitors does not synchronize with the language "mix” of the instructors, there may be a failure to deliver the service. For example, if there are 30 Japanese visitors who speak only Japanese and just one Japanese instructor who can only lead 12 people, the remaining 18 will not get the service immediately and will have to wait for an hour for the Japanese instructor to come back. The above statement gives us a clue on what could be amiss. The ability to cater to the language mix demanded by the market (which may change on a daily basis) based on a pre-determined language mix of instructors in the museum can be a potential constraint here. In order to examine the synchronization between the demand and the supply (instructors) one shall have to closely look at 2 elements- demand volumes (no. of visitors) and demand schedules or timings of the demand.
The synchronization problem: If we look at the following statements:
-We do not have the data on the average language mix of the visitors but that should not deter us from doing the analysis at an overall level. The museum has a maximum capacity of 1200/day which implies an average group size of 5 people (=1200/8 hrs/30 instructors) if all instructors are working all the time
-The minimum allowed size of a group as per policy is only 6 people, more than the average of 5 calculated above! This looks strange. This very clearly implies that in order to guide even a maximum of 1200 people with the current policies in place one does not require all the 30 instructors most of the times. Some of the instructors are "forced” to sit and be idle because of the minimum group size policy. This is a perfect example of an "excess” capacity NOT being "protective” capacity. There is no real protective capacity but only excess capacity here, which is wasteful.
-People are being turned back.
If one combines the fact that the people are being turned back with the fact that some instructors are likely to be idle most of the times, one realizes the conflict here. Probably the minimum group size is sometimes preventing the instructors from servicing the visitors even though the instructors may be sitting idle. In order to convert this excess capacity to real protective capacity, the minimum group size has to come down below the average size of 5, preferably to 0.
Here are the actions that can be taken:
Injection 1: bring the minimum figure required in a group to zero from 6 -abolish batching
Injection 2: make the instructors multi-lingual (knowing atleast 3-4 languages or more), so that people speaking a given language, if in minority, can be included in other groups as long as the instructors of those group know the language
Injection 3: Provide printed booklets to visitors in their language before they enter the museum. This will further reduce their dependence on the instructor since the booklet will guide them through the museum. This may make it easier for people speaking different languages to be included in the same group. The booklets, with high quality pictures of museum objects along with description/history may be developed into a collector’s item. The visitors may be given an option to either return the booklet at the end of the visit or buy them at a cost- which provides the museum with a revenue opportunity.
Negative branch reservation to injection 1: Reducing minimum group size to 0 may result in wasting the protective capacity at the instructors, especially with the current scheduling policy of buses arriving every 15 minutes. Please note that since the average stay within the museum is an hour, the instructor who takes a group inside is not available to take another group for that time.
-Currently, the buses arrive at an interval of 15 minutes- there are 4 buses arriving in an hour, the time it takes to complete one round of the museum.
-From the case facts, one can infer that when a bus arrives, the group getting down from the bus is either taken immediately into the museum or they go back in the same bus if instructors are not available. This is because visitors are not willing to wait for the next bus to arrive.
-As per the above facts, every hour there are 4 buses arriving at intervals of 15 mins each. If the minimum size required of the group is reduced to 0, then by the time the 3rd bus arrives, there may be few or no instructors left to take them in, since many of them would have already been assigned to visitors, in smaller groups of 1 or 2 inside the museum (based on spoken language). Unavailability of instructor will directly hit the availability of our "strategic” constraint, the museum, since the visitors cannot enter the museum if the instructor is not available. Therefore, reducing the minimum group size to 0 may result in our not being able to exploit the limited museum capacity to the hilt (max of 1200 visitors a day).
Injection 4: Change the frequency of bus arrival from one every 15 minutes to 4 every one hour so that all 4 of them arrive together at the beginning of every hour. Provide hourly slots and schedule the buses such that they arrive at the beginning of every hourly slot. Since more number of visitors arrive together, this will provide a greater pool of visitors who can be divided among the 30 instructors, while keeping the language requirements in mind and at the same time ensuring that all visitors are serviced in the best possible manner. The next hourly slot will see another larger group of visitors arriving together and will be divided among the same set of 30 instructors who will be available again (since the visit time is 1 hour). This will help achieve better synchronization between supply and demand.
Injection 5: Provide group discounts to visitors so that they themselves form larger groups before visiting the museumDemand peaks and troughs:Another aspect of synchronization that is evident from the case is that there are peaks in demand, particularly during the afternoons and the weekends, which make it difficult for the instructors to manage the peaks, resulting in visitors being turned back.Proper demand management actions may help ensure that the load on the instructors is uniform and not subject to sudden peaks during afternoon and weekens. Here are actions that can be taken:
Injection 6: Provide discounts to people visiting in the mornings or on weekdays. This may help reduce the peak loads in the afternoons and during weekends
Injection 7: Open up advance bookings facility online or though a call center. Advertise this aggressively and tell people than on the spot bookings will be accepted only of capacity is available. Provide discounts to encourage people to book in advance through internet or through call center. This will help us achieve detailed scheduling at our strategic constraint, the museum.
Injection 8: There are 8 one hour slots in a day. Do not allow bookings greater than the available capacity for every 1 hour slot. Since we would like our strategic constraint to be the museum, which has a capacity of 1200/day, more than 150 bookings (1200/8 hrs) overall should not be accepted if applied for online. Same should be done for bookings at language level where hourly limits can be set based on number of instructors who can speak that language. In cases where the limits are breached, options for other hourly slots or other languages should be provided to people booking.
Injection 9: Children should be accommodated in slots where excess capacity is available. If most people start doing advance online bookings, it will be possible to inform the schools in advance about the visit.
The Goal: We cannot guess what Adriano’s goal exactly was since he did not verbalize it for us. But based on what I have read so far, if I were to verbalize the goal of the museum, it would go something like: To unearth objects of sheer beauty and win appreciation for them from the world at large, now and in the future.
The goal mentioned above provides a visibility to the high-level actions that the museum should take in order to be "successful”. Some of the actions that immediately come to mind are:
- the museum should unearth new objects of beauty continuously
- the museum should be instrumental in helping the objects of sheer beauty win appreciation from the people
- once the appreciation is achieved, the museum should not rest on the accomplishments of the current set of objects that it possesses. On the contrary it should actively search for new ones and bring them to the notice of the world.
- The actions of the museum should be such so as to compel the people to keep coming back to appreciate the new objects of beauty added to the museum as time passes
- the museum should try and reach the maximum no. of people possible
The people can show appreciation by:
- turning up in large numbers and paying for the tickets (be it $25 or less)
- registering their appreciation of the individual items in the museum
- assigning higher and higher dollar market values to the antiques in the museum
The case states that the amount spent in buying the objects for the museum was $500 m. If the museum has been succeeding in its objectives, the market value of all the objects in the museum should be much more than $500 m currently. The value of the objects in the museum would have appreciated with time.
The measure of the success of the museum will depend on its Throughput T, which will be a function of the following:
a) Amount of money collected from the people in terms of tickets or the booklets sold- this will be easy to calculate
b) "Real” (not notional) dollar appreciation of the objects of sheer beauty as determined while selling them- The only way in which the museum can get money to continuously unearth and buy new objects of beauty is by auctioning the objects that it currently owns. Once an object is universally recognized as a "classic” the museum can sell it off. The appreciation in the value of the object from the time that the museum bought it (as determined from the price paid by the buyer) will be included in the museum’s T. It can use the proceeds to buy new unknown items and to even partially fund its maintenance requirements of 10 m dollars.
c) Since one of the derived objectives of the museum is also to reach maximum no. of people, it can lease the objects to other museums at other places for limited periods of time. This could be another source of revenue to the museum.
Eli's Comments on winning answer: Let me chose the answer of Vivek Chopra as the winner. The answer not only mentions the goal, but also recognizes how important it is. By the way, Vivek, your idea of scheduling four buses to arrive together every hour is NOT a good idea, but this is not the place to discuss this tiny detail. Generally speaking I like your answer best.
Below are the submissions from all participants, with the exception of the winning answer. For your convenience, they are listed in alphabetical order by last name.
Orlando Aguilar: My cloud:
The objective is to manage well the museum. In order to do that it is necessary to make the visitor be satisfied with the visit; in order to achieve this it is necessary to limit the number of possible visitors. In the other side, To manage well the museum is necessary to protect the budget, and to achieve this it is necessary not limit the number of possible visitors.
The assumptions between B and D, are: 1)There is only one entry. 2) There is only and fixed one route to visit the museum. 3)The visitor pay at the entry. 4) It is mandatory to fill a form.
So, the injections are:
1) Have another entry.
2)Have different routs to visit the museum.
3)Visitor do not pay at the entry. Pay in the bus or at other place.
4) Fill the form only if it is possible. Make it Optional.
Tell the market that if the visitors come in the morning, can stay longer than an hour with a personal route.
Have a entry, comfortable room to accommodate the standby visitors entertained before it is suitable to initiate the tour.
Melvin Anderson: Smooth out the flow! Use an online scheduling system that brings people to the museum at specific hours. This would even the flow for the buses and the museum itself. Then more people would want to come when they know they don't have to wait in queues to get on the bus or at the doorway. This would regain revenues that are now being lost from people turning away at the parking or the door. Also offer "early bird special" rates to attract visitors who come in the usually-slow periods.
Rajeev Athavale: It seems that the constraint is in the market. The museum has much more capacity (1200) than the average number of visitors (600) per day.
Here are some calculations to see the theoretical revenues:
No. of working days in a year : 6 days * 52 weeks = 312
Total theoretical revenue could be : Maximum no. of visitors per day (1200) * No. of working days (312) * Entry Fee $25 = $9360000 i.e. approximately $10M.
Minimum appropriate budget is also 10M.
It means, it is not enough to maximize revenues, but it is also important to have some more revenues if Adriano wants the museum to survive on its own.
Here are some ideas:
1. See if it is feasible to keep the museum open on all Sundays (rather all 365 days of the year).
2. See if the timings can be changed to start late in the day and close late in the evening.
3. Increase the entry fee for the weekends and other public holidays.
4. Offer discount on weekdays.
5. Tie-up with travel companies by offering them commission for bringing tourists during weekdays.
6. Have a sales team in place to contact schools, colleges, companies, artists’ organizations etc. to visit the museum during weekdays.
7. If feasible, consider multiple routes for the incoming traffic of visitors. If multiple entrances can be created, it will help to spread the crowd and people may not feel that the place is over-crowded and very few people will go back without visiting the museum.
8. For waiting visitors, consider providing some entertainment, may be for a fee.
9. Create and sell different albums to suit different tastes.
10. Create and sell replica of certain items.
11. Charge for photography.
12. Create a good reason for people to visit again e.g. replace about 20% items every year.
13. Create a brand; Make people feel that they are missing something great in their life if they have not visited this museum.
This way, Adriano can exploit and subordinate.
If the narrow corridors are posing the limit of maximum 1200 people per day, it may be the internal CCR and it may be worthwhile to see if the corridors can be widened without adversely impacting the beauty of the museum.
The objective of "Sheer Beauty” may not be "to make more money now as well as in the future”. But it certainly needs money to sustain its reputation and to enhance it. And it may not want to go out and collect donations for survival.
Narayan Choudhary: Following ideas will help increase revenue,
1. Increase the visiting time to 12 hours.
2. Improve efficiency of tour and bring it down so as to accomodate more visitors everyday.
3. Charge extra fees for visitors during afternoon hours, this will increase visitors during morning hours
4.Restrict students free entry only to morning 1~2 hours
Vijay Gokhale: Do not keep too many people waiting in queue outside the musuem. Vacate one of the wide rooms and make that room as a waiting room.This way the museum will be able to retain more visitors.
Vaneet Gupta: Applying the Five Focusing Steps to the issue
o Step I: Identify the Bottleneck : The bottleneck is the narrow corridors ( otherwise the space is sufficient perhaps)
o Step II : Exploit the Bottleneck :
- Keep the corridors occupied by avoiding waiting time ( no grouping/ no batching to take place , let it be continuous flow with instructors always being inside the Hall carrying the tag of the language they know so that people seeking that language can flock to them, the instruction for the same can be given in the Bus itself)
- Happy hours pricing during Idle time ( which can be $10 or $ 12)
- School visits to be in idle hours only
o Step III : Subordinate everything to Bottleneck :
-Create Buffers at the entrance –Cafe, Some musical events etc.. these buffer trigger the bus movement
- Buses not to be in batches of 15 minutes , different route buses should not reach together as this will create batches. Buses either move or stop as per the buffer signals
o Step IV : Elevate the Bottleneck
- More entry points / corridors
- Extended hours in evening as more visitors like to visit in afternoon
o Step V : Go back to step I to check if the constrained has moved.
Alex Gutsaga: First question ti the riddle is: Where is the constraint?
Obviously it is the tourists which see the museum from inside. As more tourists comes, as more throughput it does generate.
Second TOC step: Exploit the constraint:
More tourists should enter to museum. In order to improve the flow, we should check if there an opportunity to have different groups in different rooms. The question is, is it possible to have some parallel groups inside of the same museum?
If there are some kids willing to see the museum for free, it could be organized in first part of the day, while there is not so many commercial clients.
Third: Subordinate to the constraint:
1. Some part of the form could be filled on the way from the Central Station to Museum. A given to leave thoughts on the way back to Central Station.
2. It could be, there is not enough of trained instructors, which lead group inside of museum, It takes only two weeks to train them. If we have additionally 5 another instructors, it would cost us some increase in budget. But, at the same time it will generate additional internal capacity, and allow more people to visit museum without a queue. In parallel, more trained groups will go from one room to another having for each room for example 6 minutes, where 3 minutes is given to tourists to spend at their own.
Additional 200 visitors per day, 6 days a week, in four weeks generate: $ 120 000. Let’s say $20 000 are spent on additional resources in instructors, and additional bus + driver rent. Pure additional profit is 100 000k in one month.
Also, in the peak hours could be used outsourced force, as instructors. For example students will have time on the weekend, and afternoon. Those students which speak more languages are selected, and trained for two weeks.
3. Add additional places, from where to take tourists. For example from some places in the center of the city, where could be available additional possible tourists. The bus could go over those places and maybe more often. This will make for tourists easy way to reach museum.
4. Bus driver will inform in advance, how many possible groups are on the way to come to museum. Instructors, which know in advance how many groups are coming, will meet tourists when the bus comes. So there is no queue to museum.
Four: Elevate the constraint:
Investment in logistics and additional aggressive marketing for this museum will amplify the amount of tourists willing to come. For example: strategic agreement with international touristic companies on cooperation. Those companies are interested in their own profit, and track customer’s satisfaction. Even giving a discount of 20-30-40% from 25$ still generates additional throughput. As more touristic companies will cooperate, as more final customers would know about the museum, and would like to come to see it.
Stan Heard: Assuming the max number of people through the museum in an eight hour day the hourly capacity is 150 people or 15 ten member parties/groups.
Establish a ticket station next to the Central Station where the ticket agent collects money and groups people into 6-12 person parties for the bus ride. The art appreciation form is completed at the museum before the return bus trip and serves as a kanban to notify the ticket agent that the number of people inside the museum is being decreased by that number. The ticket agent maintains a running count of the number of people inside the museum and creates a new party to maintain the 150 people inside during the day. Run the busses every 8-10 minutes with smaller groups to keep the flow in and out of the museum maximized.
Petri Huitti: some thoughts:
- reduced price for weekdays to free capacity for late afternoons and weekends for more visitors in total fee (long queues can lead mouth-to-mouth to the situation that some interested people don't even come to check, therefore this can have big potential in increasing sales). If can guide e.g. 200persons from rush hours to weekdays with 20USDs fee and get similar number of full-paid visitors in place for rush hours, would increase revenues by some 1.2MUSD (200x20USDx300days)
- allow school children visits only on weekdays when lots of free capacity- frees up capacity in rush hours - more revenue
- Sundays open too to spread weekend high demand for longer time-more capacity & sales. if needed, can delay opening time from weekday mornings or close e.g. Monday. if e.g. 600 more visitors achieved, revenues increased some 750kUSD. (three first bullets enough to fill the budget gap?)
- could allow some visitors to visit museum without instructor, maybe supported with paper guide showing the visiting process(which was predefined). This could be restricted to the local people who have already visited there with instructor and knowing the place. Simple personal card showing this could be provided to those filling the form. They could even enter with reduced price if coming with a friend(s) and work as an instructor to his/her friends.("subcontracting" instructor capacity, if this is causing queues. probably increasing revenues further)
- selling some items to purchase new ones seems to make sense, why to stock items which you don't need anymore for long time?
- leasing or loaning(kind of sponsorship) some paintings possible for certain time rather than investing on them?
- sponsoring contracts, visibility in the form with possible discount tickets or so (should be attractive when so many visitors)
Kevin Kohls: Adriano objective is to meet the budget, but since this is a non-profit, it is a necessary condition, not the goal. Henri’s goal is (probably) to expose as many people to art to increase their appreciation for beautiful things. But we can always ask.
The key issues for Adriano is to balance price and demand. Increase the price during periods of high demand, and reduce them during periods of low demand.
In order to break even, the revenue per week must increase by about $1,820,000. The current patrons per day are 600, which is about 75 patrons an hour. In reality, the number of patrons per day on M-F for regular hours is less. Let’s say a bit of data collection has shown that only 560 patrons per day are showing up at that time. But it’s clear from the description that we can take advantage of the increased demand on the weekend.
Our first step is to add 2 hours on Friday, which is the beginning of the tourist weekend. A conservative estimate is that 40 more additional patrons from the given average. We’ll also advertise that this is the best time for tourists to see the gallery, since it will only be $25 dollars to get in, avoiding the higher weekend rate.
On Saturday we can increase the number of hours to 10, and increase the price to $32, since demand is high. Then we can add another 8 hours on Sunday, with the same higher price. Tourists will probably not come during the later hours on Sunday, but we can start with 10 hours and budget for eight.
Since Adriano has a restaurant background, we can take advantage of his reservation system on Saturday, and Sunday. We’ll plan on a certain number of reservations, perhaps at a "reduced” cost, back to $30. Patrons who pay ahead will only have to pay $26, since there is always a certain rate that will be no shows.
Then we’ll reserve extra tour space for surge capacity of tourists showing up at the door, and we can charge more for those tourists, say $32. For the sake of insuring our profit necessary condition, we’ll just plan on that money being additional profit. We plan on meeting the budget without the surge capacity and at the $30 conservative rate. The reservation system will also reduce the number of patrons sitting outside waiting to get in the gallery.
We can also take advantage of the larger demand in the afternoon, keeping a "matinee” fee of $25, but increasing it to $27 in the afternoon. Again, we’ll not put them in the budget.
The projected number of patrons is about 560 Monday through Thursday, 640 on Friday, 960 on Saturday (giving Adriano 240 ticket surge capacity), and 840 on Sunday. If we take all of those numbers into consideration, the profit for the year should rise to $6,552,000 at the very least, allowing him to meet his budget. Surge capacity at higher prices will ensure profitability.
The key here is to watch demand, and change the cost of tickets to ensure a strong flow of revenue. Seasonal demand can be part of this decision making process. Surge capacity must be built in to the process.
Guides are not a constraint, since they are only busy about 30% per day. Adriano experience will allow him to manage the tour guides by moving around to the weekend. They may work fewer hours than the guides that work during the week, but it’s to the gallery’s benefit. The number of guides should not change.
Having special parties at the gallery in the evening can generate another source of revenue. This could be held once or twice a week, with additional profit being generated from the catering his restaurants will provide. Plan more events during late November and December due to the holiday season.
If the gift shop is at the gallery, move it to the central station. If there is not one, create one at the central station. This will create additional revenue and give patrons something to do besides standing around. Use this space once additional work has been obtained.
Students will still be free, but distribute passes for a reduced rate at non-peak demand periods for the parents, such as Friday and Sunday. The coupon could also include a dinner one of Adriano’s restaurants, to allow Mom and Dad a date night. The coupon’s will obviously cover the cost of the meals, and be half the price of a Friday/Sunday gallery ticket. Selling reduced price tickets at the restaurant will also be an opportunity, as well as giving discounts for those who buy a "loyalty card” to both establishments.
Minor changes – fill out the form on the bus. It only saves a minute, but you may be able to squeeze a few more patrons in on Saturday. Or you can make this day an exception for the form, but this is in the noise. Do everything else first.
Do NOT sell the artwork. Use the extra profit above the budget can be used to purchase additional art. Don’t buy artwork in a down year that just meets the budget. Create a special patron class that can contribute to the fund to buy artwork, with a free pass to the gallery and one sponsored evening event when they wish. Calculate the minimum required to break even. Once additional artwork has been acquired, Adriano can put some of the original work "on tour”, charging a fee to have other galleries show the work instead of putting into storage.
With the additional profit, it may be time to move from a residential area to the local "art and theatre” district. This will draw more patrons as well, and perhaps reduce some costs. This can be evaluated as part of the long-term plan.
Bottom line for Adriano is that he will become a very good GM – balancing price and demand to meet his budget, and implement additional revenue methods that are tried and true. Plan to break even in the worst times, and take advantage of the good times to invest in the future.
Oded Livneh: Identify the constraint: The museum is subject to Peak management situation, sub-type: expected peaks (Schragenheim Ronen and Coman, 2001, http://www.boazronen.org/PDF/Peak%20Managment.pdf). That is, it has two different modes of operation, where in one of them the constraint is the market (most of the week) while in the other the constraint is internal (part of the weekend).
Implement peak management standard solution elements:
Price differentiation: the price of 25$ came from Mr. Octagonal, not from god. The price may be higher in weekends.
While differentiation resolves the price conflict, there is another conflict, where the other branch may be formed as:
Not differentiate prices --> be perceived as fair --> … --> maximize revenues.
Well, just say it: "in order to be perceived as fair you must not differentiate prices" – of course it does not hold: you can differentiate prices and make some small differentiation in the service itself. For example, there may be a room to which you enter only on weekends.
Internal pressure flattening: Make sure and any action that can be done before or after peak-times, is not performed on peak times.
Focus on internal constraint in peak times:
First, just make sure all the stuff is available.
Then implement the five focusing steps. For example, if the narrow corridors are the problem, solution can range from designing an obligatory walk-path were all corridors are one-way to conveyers on the most restricting corridor to even a bit of re-build.
Flatten demand: beyond the price, demand can be flattened in several ways. For example, organized groups may be negotiated for their visit time, and short-term effect advertising can be timed accordingly. Special activities can be scheduled to other days.
Exploiting the demand: people escaping the queue must stop. One option is a 30-minute video about the museum that is interesting no matter when you start watching it. This video is presented in the entrance hole, where people wait for their turn. This way, the waiting in the queue is more tolerable.
Joy Montgomery: Virtual tours for a fee
Virtual Art History classes based on significant collections
Small weddings after hours
Buy the house next door for a "first class waiting room" to avoid waiting outside
Gift shop in the first class waiting room with replicas and greeting cards
Ramakrishna Munagada: The following are a few changes that would do good to the museum-
Entry: The entry formalities of filling the entry form, paying the fee, security formalities, and selection of instructors can be finished and finalized either before boarding the bus or on the bus. This would enable the visitors directly enter into the museum as soon as they get down from the bus. This would eliminate, at least reduce the length of the queue at the entry gate. The delay in identification of instructor with visitors can be further reduced by giving a colored (different colors to different language/country flag symbol instructors) cap to visitors according to their choice of language. The availability of instructors, selection, grouping with colored caps can be done before entering into the bus.
Visit hours: 1. One hour visit time afternoon can be increased simultaneously reducing one hour visit time before noon, by keeping 8 hours total visit time.
2. Visit hours can be increased to 9 hours (without lunch break, assuming lunch break of one hour)
3. Visit hours can be extended to 7 days a week.
4. Restricting school free visits to weekdays before noon only or a particular weekday before noon only.
Transportation: 1. The buses can have a frequency of ten minutes instead of fifteen minutes.
2. New buses can be introduced from airport, prominent hotels, and major tourist spots.
Others: 1. A donation box can be kept at the museum to collect donations from art lovers.
2. A nominal fee for school children visits can be collected from the school administration.
However, the above suggestions might not give required relief to Mr Adriano as far as budget is concerned. Given an average of 600 paying visitors, increase of $ 10 in entry fee would generate $ 1.88 M, wow!, this is exactly what Mr Adriano needs. A quick look at the entry fee of various museums - for example Louve Museum’s entry fee is 14 Euro (20 $), the entry fee of Museum of fine arts, Boston is 22 $, the entry fee of Polo Museum, Italy is 15 Euro (20 $), the entry fee of Museum of Natural History is 19 $ to 33 $, and the entry fee of Metropolitan Museum of Art is $ 25. By saying entry fee is relatively expensive is only a wrong perception. And most of the museums charge half their normal fee as student entry fee. Hence, different combinations of increasing the entry fee can be thought of.
a) The entry fee of The Museum of Sheer Beauty includes travel charges from central station. Mr Adriano must split the entry fee into Museum Entry fee (30 $) and travel fee (5 $). This splitting of the fee convinces the visitors that entry fee is not relatively expensive, but it is reasonable. An attempt to manage ‘perception’.
b) Instead of increasing the entry fee abruptly, fee can be hiked in two-phases of $ 5 each in an year’s time. Again managing the ‘perception’.
c) Student fee can be introduced in two phases, with a $ 5 and increase to $ 10 depending on the response of the students.
However, there are two undesirable effects -
UDE1: Paying visitors silently protest and the demand goes down
UDE2: Students silently protest and do not visit
When the fee is hiked there may be a dip in the turn out of the visitors, but the desire to experience the unique art will take over the frustration of fee hike, and ultimately average rises to 600, because the number of paying visitors is closely related to the total number of tourists visiting that city. Unless there is a drastic decrease in the tourist population due to terrorism, seasonal variation, airline disturbances, natural calamities etc, the average remains more or less constant.
The dip in the student turn out will take longer time to even out, ultimately it will also even out as the students will realize that there is nothing like a free lunch in this world.
Carl Peeters: It seem clearly that Adriano needs extra throughput.
1) Analysing the queues to see when we have long lead times ==> have higher price that day's/moments ==> Saturday & Sonday we will higher the price, you can ask in the questionaire what the people would like to pay if there were less queues on Saturday & Sonday ==> Lets assume that on Saturdays & Sondays we had an average of 1000 people visiting (since there where queues) and we could easy change the price to 35 $ in the weekend.
Extra T = 2000*52*10 = 1.040.000 $, Extra OE = 0, Exta I = 0 ==> Extra profit = 1.040.000 $
2) Still there are moments that we are not so well occupied (from the morning to the late afternoon during weekdays). ==> Lower the price during weekdays in the morning. Clearly there were very little visitors during weekdays in the morning (average of 6 days = 600 per day, weekends queues ==> close to the full amount of 1200 = at least 1000 visitors ==> the other 4 days on the average (3600-2000)/4 = 400 visitors mostly in the afternoon. ==> Weekdays before noon we ask 17,5 $ ==> extra 300 visitors a day ==> Extra T = 1.092.000 $, Extra OE = 0, Extra I = 0 ==> Extra profit = 1.092.000
3) Open 7th day : 300 visitors in the morning en 400 in the afternoon ==> extra T = 793.000, extra OE = 300.000, Extra I = 0 ==> extra profit 493.000 $
4) Also the opening hours can be changed to more then 8 hours a day (you can try to have evening openings and see which days are popular). This creates again extra T but will also cost some extra OE. As long as the extra T is bigger than the extra OE without having to do investments this brings more profit.
Probably there are still more options, but this would be my starting recommondation to Adriano which will bring him certainly on a positive result.
David Peterson: There are so many ways to improve the situation, but pricing seems to be one of the best levers.
The museum is popular and the high entry fee does not appear to be off-putting. On the contrary, it sends a signal of quality. One simple way to close the financial gap might be to raise the price significantly higher, say to $50 or even $100. People are accustomed to paying similar amounts for theater or opera tickets.
For those who cannot afford or don't wish to pay such a high price, the museum may wish to offer cheaper "off-peak" tickets. This would also help to reduce the pressure at the weekends.
An online booking-system could enable even more dynamic pricing and allow individuals to specify their language and the number of tickets they need and then be given a choice of slots. The software could help to ensure that people are guided through the museum in reasonable group sizes and nicely spread out.
As well as peak/off-peak, there may be other ways to segment the market and charge different prices - students, recent visitors and locals could be offered very good deals to come along and make up the numbers during off-peak times.
Another approach would be to open the museum for longer; by increasing the hours, opening seven days instead of six, or opening for special VIP guests in the evenings.
Abdul Majid Thaufeeq: Increase the museum opening hours..
Vishal Tiwari: 1) Smoothen Demand through the week and day :- Since we know that there is heavy rush during late afternoons and weekends so we can have differential pricing for peak periods so that people are encouraged to visit at other times and revenue can be increased. Children tours to be organized in dull periods
2) Reduce Cost - For peak periods only the frequency of buses plying should be increased that is every 15 mins, at other times it should be every half an hour considering average stay is 1 hour
3) Waiting time - Provision for collecting entry fee and filling the feedback form should be made for passengers travelling on the bus whilst they are on the bus and not on reaching the museum.
4) Since group size is 6-12, people can pre-book if they are visiting in a group and would be entitled for some discount. Also online booking should be implemented and should also reflect, apart from seat availability at different time slots, average time it would take to tour the museum so that people can select their slots based their convenience.
5) Once profitable, recyclable RFID cards can be given as entry pass to customers, and sensors attached at different parts of the museum to know how much time people spend in a particular area. Based on this analysis, decision can be taken that which items can be replaced for new items.
Alta Vos: Henri ‘….outlined the process of visiting the museum’ – assuming that since his death neither the process nor the entry fee is cast in concrete, Adriano can consider the following:
In terms of alternative revenues:
• Lend some exhibits at a fee to other carefully selected museums or exhibitors domestically as well as internationally. While a reciprocal arrangement may dilute any direct financial benefit, it will bring new exhibits into the museum and that can draw new visitors and encourage previous ones to return.
• Larger corporates (with good security arrangements) may be interested and willing to pay handsomely to display (and regularly change) some exhibits at strategic positions in their offices.
• Travelling exhibits are also an option. The museum certainly has adequate qualified staff (30 instructors) to undertake this.
In terms of general changes:
• Why do people have to wait outside for their turn to enter the museum? Either Adriano finds a way to increase the flow so that people don’t need to wait at all or he considers developing somehow a facility (pre-processing area) where some of the 30 instructors that currently lead visitors through the museum can rather accommodate the waiting crowd indoors and prepare them for the wonders of their visit which is to follow. They cannot afford to lose visitors.
• Instead of the current ‘batch processing’ of visitors consider a steady flow where a new visitor can enter (from the pre-processing area) each time one departs.
• Flow can potentially be increased by having one-way traffic in the ‘narrow corridors’ if at all possible – or consider a particular flow arrangement and clearly indicate a visitation route.
• Having 30 knowledgeable instructors available only to lead batches of visitors through the museum is not necessarily the best use of these skilled people. Redeploy some to the undercover/in-house pre-processing (or waiting) area to start the museum experience, install electronic commentary in various languages at the various art pieces and have one instructor in each big hall, ready to support visitors.
• Appreciation forms can be completed on the buses on their way back to the station – or for the few visitors who arrived by car, on their way out of the museum.
• As late afternoons and especially weekends show the highest numbers the flow could potentially benefit from increasing the entry fee for weekends somewhat, retaining the current fee for weekday afternoons, but decreasing the fee for weekday mornings. There is no mention of what days and times the free school tours occur, but these should be limited to weekday mornings.
• If weekday mornings are very quiet, consider opening the museum later and staying open until later to allow visitors after normal office hours – this could encourage more visitors.
How can Adriano prove himself a real good general manager of a unique museum of art? By making the art more accessible to the public – see above.
Satish Zope: In previous year the gross average of 600 paying visitors per day was achieved. This would generate total annual revenue of $4.68M.But capacity is 1200 visitor per day. This would generate total annual revenue of $9.36M.so no shortage of fund.
also form of appreciation can be filled in return journey to central station.It will save one minute per visitor.