The relevance of strategic management accounting to popular culture: The world of West End Musicals

Outline

• Abstract
• Keywords
• 1. Introduction
• 2. Theorising Strategy in Management Accounting
• 3. Research Context: Cultural Industries
• 4. Research Design
• 4.1. the Study Settings
• 4.2. Sources of Information
• 4.3. Analysis of Data
• 5. Musical Theatre: An Example of ‘strategy As Practice’
• 6. Discussion and Conclusion
• Funding
• Acknowledgments
• References

Conclusions

This study has focused on the launch of new commercial theatrical productions, West End Musicals. Their development is expensive and involves readings, workshops and try-outs before a production officially opens in a major target market such as Broadway in New York City, or the West End in London. As product development is lengthy and costly, theatre owners and producers strategically select the shows they invest in to increase the likelihood of positive returns. In addition, however, as findings presented in this paper demonstrate, theatre owners and producers must also strategically manage the route-to-market which, in the case of theatre, involves managing the creation of expectations. Cultural product industries, including commercial theatre, compete in the market based on product differentiation. Novelty and originality are therefore desired qualities in a show, but these also generate uncertainty. Such uncertainty and unfamiliarity potentially pose a hindrance to successful acceptance in the marketplace, which must be overcome.

Furthermore, theatre is an experience-based good, and the decision-to-adopt therefore carries risk for the consumer. Consumers are required to make a purchasing decision about experience-based goods before they know whether or not they will be satisfied. In order to reduce the risk of disappointment, they will therefore seek out third-party validations and recommendations in order to estimate quality and the likelihood they will enjoy it. In other words, both producers as well as consumers rely on intermediaries; the former to generate awareness, the latter to indicate quality and value. This dual feature of the theatre products market contrasts with the extant management accounting literature on how to incorporate the customer into strategic thinking (Cuganesan, 2008; Ma and Tayles, 2009; McManus, 2011; Ogden, 1997; Perera et al., 1997; Vaivio, 1999).

What does the case study of musical theatre suggest about the social organization of strategy as practice? The findings presented above suggest that in order to be successful at bringing novelcultural-content intensive products to the market, producers not only focus on product development, but also try to shape market development.

“The quality of the product must be excellent, but the ‘package’ must capture demand” (producer 2).

When products are new and unfamiliar, it is especially important for producers to focus on increasing product awareness and they rely on various forms of endorsement and sources of credible validation in order to offset the inherent uncertainty. In the case of musical theatre presented above, intermediaries play important roles in this process of market development by publishing interviews with the actors, by writing reviews, by nominating productions for annual awards, and by talking about their experience with friends and family.

The strategic role of intermediaries in the market development process that is documented in this paper thereby also helps to shine light on the question raised early on in the paper, of how cultural industry products are able to escape the particular urban milieus of their origin and spread to more distant markets. Even though a product high in cultural content is tightly tied to local cultural frameworks and interpretive strategies, it is due to the activities of some market intermediaries (those with perceived expertise and network positions) that cultural content is able to be dis-embedded and translated into value. When the industry association on Broadway nominates a show for a Tony award, this increases interest in markets elsewhere.

By examining strategy as practice as an interpretive and communicative process, these findings suggest that the likelihood of a cultural product’s success in the marketplace is shaped in large part by the organizational structures of the communities that create as well as consume cultural content. Conversations and soft information are central and crucial to the process of curation (Obrist, 2015). In all of this, accounting is secondary, almost fulfilling the role of historian in setting prices and recording annual financial results. This is consistent with that strand of management literature which suggests that conventional accounting practices are inhibitors of product innovation at the ‘fuzzy front end’ of product development and obstacles to creativity (Abernethy and Lillis, 1995; Amabile, 1998; Tushman and O’Reilly, 1997), in contrast to situations in which decisions have already been made on strategic choices and new products are subsequently costed (Jorgensen and Messner, 2010).

The nature of the process by which new products emerge and theatres embark on new product strategies presented a very distinct model of strategy as practice in the world of theatre management, one in which the role of accounting is both ex post and limited. This perspective is also confirmed by the views of leading industry experts, who relegate return on investment and a preoccupation with the bottom line in an end of year review process, so that costs and costings are not intrusive in the creative process (Clement, 2015). This is contrary to the established literature on SMA which contrives to locate management accounting practices into rather dated and instrumental concepts of what constitutes strategic thinking with strategic costing, strategic planning, strategic pricing – a preoccupation with existing accounting models rather than strategic practices.

These findings relate to the very specific context of popular theatre. There is scope for investigations of the existence or otherwise of strategic management accounting in other spheres of popular culture. In particular, where popular culture has creative industries which operate within market settings, there is a case for further research into the manner and shape of such markets and the role of accounting within them and the distinctive nature of the customer in such markets. Furthermore, the idea of strategizing as a process which is socially constructed and takes meaning from the networks within which it operates presents an interesting research challenge for management accountants.

Furthermore, from a practice perspective, the findings of this paper on the multiplicity of actors engaged in strategising, the cross-organizational interactions and the variety of extraorganizational activities in which strategic actions occur, offers a challenging insight into strategy as practice for would-be strategic management accountants engaging in this field. This can be seen as presenting an opportunity for a fresh approach to SMA.

Most importantly, in terms of practice, if management accountants in theatre-land are to act strategically, they need to connect with the wider social and institutional setting. They need to redefine themselves not as isolated accountants but as part of a family of strategisers who work across organizational boundaries to create a vision and perception of new theatre shows for the market. These activities will require ‘artful interpretation’ (Whittington, 2006).

This differs from the strained depiction in conventional SMA, of strategy as a straightforward application of a toolkit. This ‘artful interpretation’ will involve dealing with softer data than conventional accounting, but there may be scope for the gathering of some harder data such as product rankings, ex post analysis of successful runs and short (failed) production runs with benchmarking of the costs of shows. But all of this must be in the context of multiple actors across a range of social space, with the organization de-centred – a bracing, unfamiliar, uncomfortable and challenging activity for aspiring strategic management accountants.