For me, “profit” occurs any time your income outpaces your expenses and/or you’re in a position to decide where to invest that excess cash. Whether you’re incorporated as a nonprofit or not, this should be happening virtually all the time if you’re running the business well.

The common (and I would argue “simplistic”) nonprofit approach is to raise expenses higher and higher to absorb all that income. But we shouldn’t be in the habit of spending every last penny. We need reserves. We need risk capital. We need funding for both rainy days and for investing in new services when they’re needed to fulfill our mission. What we need is a guideing strategy that controls investments in service of a mission/goal larger than an annual budget or quarterly balance sheet.

From what I’ve seen so far, there are lots of public media companies making enough money to be able to fund new ventures, both out of their own coffers and will help from foundations, the CPB, etc. It’s a matter of priority, a matter of choice.

But let’s go one step further.

We’re in a period of rapid and far-reaching media change, yes? We have income from the old media model that we’ve been using for the past 30-40 years. But that income is beginning to decline (in a macro sense; individual station experiences will vary).

In this situation — falling income / rapid media change– do you…

[1] Take the income you’re still getting and invest further and further into the declining model, in the hopes that you’re just not investing enough and this will turn things around?

or

[2] Take the income you’re getting, maintain the old model, but only make capacity-building investments in the new model?

I would suggest that #1 is doomed to failure. The old model is declining for reasons well beyond your own capacity to execute on that model. It’s not an efficiency or effectiveness problem, it’s a strategic innovation problem.

Apple’s take was to maintain the old model for a long time in parallel with the new model. The Apple II series went on for years after the Mac’s 1984 introduction. Indeed, variations of the Apple II were on sale through 1992 — 8 years after the Mac’s introduction (although the last real Apple I innovation arrived in 1989).

For public media companies, I think the Apple model, with some caveats, still makes broad strategic sense. We should maintain existing services in status quo mode, with a few innovations around the edges. Broadcast media is still profitable and in heavy use (esp. in certain demos) and worthy of support. But all our risk capital, our strategic investments, should be made in new technologies, new platforms — the things that will last the next 10, 20, 30 years.

We won’t get rich building these new interactive community media platforms. And perhaps the scale of public broadcasting’s old success can never be achieved again anyway. But if the spirit and mission of public media is to survive in a new world, we’re going to have to redirect our cash and commitment.

If we operate with a mental model that says “we don’t have the money for that,” then we’re done here.

Imagine how successful the Mac would have been if Apple continued to sell them with floppy drives only…

-=-Ron-=-

It may be that our “Macintosh division” will have to be started outside the company entirely, as Stephen Hill has suggested in other comments on this site and on his own.

I’d like to think we’re smart enough to reinvent ourselves in situ, but that’s definitely a long shot. Most companies are unable to innovate away their history.

My hope is that we’re small enough to be able to turn things around without imploding in the process. By changing out some key positions (employees) and our organizational structure, we might just be able to make it.

Imagine the leadership it will take to take cash from a failing unit. Perhaps that is what it will take, some necessity to mother the innovation.