Brian Kenny: Circuses certainly had a golden age, but it seems like that was long ago. In the modern era where clowns are creepy and taming wild beasts is more likely to spark protests than ticket sales, the survival of this age old entertainment form seems more in doubt than ever before. Today on Cold Call, we'll discuss Professor David Fubini's case entitled, Big Apple Circus: Time to Fold the Tent? I'm your host Brian Kenny, and you're listening to Cold Call recorded in Klarman Hall Studio at Harvard Business School. David Fubini teaches in the MBA and Executive Education programs at Harvard Business School. Prior to teaching, he had a long and distinguished career at McKinsey Consulting where he helped clients with major transformation programs stemming from acquisitions and mergers. Thanks for joining me today, David.
David Fubini: I'm glad to be here. Thank you for having me.
Brian Kenny: So, I really enjoyed this case. I never did see the Big Apple Circus, but I remember distinctly going to see the Barnum and Bailey Circus when I was a kid and it's an overwhelming experience for a 10 year old. So really, I think many of our listeners have probably been to a circus, and many have probably been to the Big Apple Circus. So, they'll probably get a lot of insight from hearing you describe what's going on there. Let me ask you to start by, how does the case begin? How do we start off here?
David Fubini: Well, the case begins at a time when the Big Apple Circus is experiencing an enormous amount of problems, which is why the case got written. Because after having been founded as an alternative to the traditional three ring, slightly overwhelming circus where participants are usually pretty far away from the action, this was going back to the European model of a one ring circus where you're right up front. You're right there. You're feeling much more participant than an observer of the circus, and they had been wildly successful for a long time in putting forward that new approach to a circus. It really was engaging for large numbers of people, usually started in New York and then expanded to several other cities. The problem was that it never really made that much money, and it was always, strangely enough, and I think this is the surprise of the case, this was a 501(c). This was a not for profit organization, and so they were actually trying not to lose money. They were trying to break even and obviously make some surplus that they could reinvest back in, but they largely were focused on how to actually deliver this product and at the same time be able to encourage a number of other audiences that wouldn't normally come to the circus, to come. Generally lower income and children that wouldn't otherwise get a chance to see the circus, which is really why it was a 501(c), but like many circuses as you've said, they were struggling. They particularly were struggling after the '07, '08 recession period where many of the people who would give money to support it, primarily corporations, were withdrawing that support. So the case is set in, what do you now do post '07, '08? Circuses in general are losing out to other entertainment opportunities that people now have on their computers or on their phones, as opposed to going and buying a ticket to go to the Big Apple Circus, and the withdrawal of corporate support, and the really tenuous situation they found themselves in financially. That's where the case sits.
Brian Kenny: What prompted your interest in writing this case?
David Fubini: Well, I have created with Ryan Raffaelli, another professor here at Harvard Business School, a course called Leadership Execution and Action Plan. This is a course that really focuses on, what do you do? Less on strategy, much more on execution. We have a module around turnarounds, and this struck us as a really interesting example of a turnaround that also has the benefit of being a case that isn't in the norm. This isn't another case about a technology company that's struggling, or a packaged goods company that's struggling where many of those cases might have been already available to the students. This was a chance to bring a different vehicle forward that they might remember. So, that was the initial thought. The second was after I met the participants. They're very colorful people, as you might expect.
Brian Kenny: Of course.
David Fubini: Given they're in the circus, and I just thought they would be wonderful in the classroom, and they've proven to be just such.
Brian Kenny: Yeah. Have you been to the Big Apple Circus?
David Fubini: Yes. I've experienced it several times both as a child and then as a parent.
Brian Kenny: So, is it unusual for this to be set up as a nonprofit? That struck me as unusual.
David Fubini: It's very unusual. Obviously all the other circuses are for profit. They were largely heavily subsidized by corporate sponsorship, because the other thing that Big Apple Circus did was something that was unrelated to the circus itself. It's something called Clown Care which was, they would literally have some of their clowns who would actually go and visit hospitals. This became a very, very popular thing for hospitals, particularly children's hospitals, to have the opportunity for Clown Care to come and actually wander through the wards and really cheer up the kids and children who were ill. So, that was a major part of what they were doing, and something that we highlight in the case when we teach it.
Brian Kenny: Clowns get a bad rap, I think.
David Fubini: They do, just in passing, whenever you write a case there are always external variables that come into play, and there's a particular beloved character in the Big Apple Circus, which is the Grandmother, who is by the way played by a gentleman. It turns out later that he had a number of challenges that were outside the circus that actually impacted the circus, so you always have that issue as well.
Brian Kenny: So, how did the founders meet? It's been around for quite a while.
David Fubini: Yeah, been around for a while. Yes. The founders met was largely through a gentleman by Paul Binder who was himself a performer and very interested in the European model, as we described earlier. So, he is the force behind the Big Apple Circus. The other two primary characters in the case, Will Weiss who was hired in as the head of development. They then went through a number of attempts to bring in professional management, which unfortunately failed, and so they reached back out to Will and they asked him, "Would you step up to be CEO?" He is about two years into that job for the first time at the time of the case. He's also joined on the board by a gentleman by the name of Rick Mayberry, who is a pretty prominent investor in New York, and who by this point in time has been brought on the board and has increasingly been drawn in to the challenge of the leadership of the entity. In part because of the challenges of moving to professional management, away from Paul Binder, and in part because of their financial situation.
Brian Kenny: What was Binder's vision for the circus when he was just starting out?
David Fubini: Oh, he really wanted to double down, if you will, on the notion of this European one ring circus. The connectivity with the crowd and the sense that this was less of a distantly viewed entertainment option but something that really captures the youth and the excitement by being up close. It chose, as you can imagine, acts that were much more appropriate for a very close in audience. So as opposed to the Ringling Brothers, which would have the lions, and the big trapeze artists which can be observed from far away, here they were doing a lot of very visual, our gymnastics and other related acts that were when viewed up close were still really exciting and impactful. That was his vision. He himself, being a performer, thought this was an undervalued vocation and he wanted to really try and make a statement, and has and even to this day still feels pretty strongly about that.
Brian Kenny: How was he as a business leader, as a manager?
David Fubini: Well, I wouldn't say this was his great skill. His great skill was the envisioning of the acts, the recruitment of people to participate as performers in the circus. He was, however, the major force around fundraising, because he was very compelling in a way that I probably haven't been in describing the vision. He was extremely good at it, and so whenever they really needed a big gift, he would somehow be the one to go find it and get it. Unfortunately, that wasn't enough to get them out of their troubles.
Brian Kenny: Yeah, so he's still very present in the case.
David Fubini: Very.
Brian Kenny: Will is having to figure out how to manage Paul on the one hand, but also starting to see things that he never knew about the business. Can you describe some of what he uncovers?
David Fubini: So Will has never run an organization either himself, so he is now elevated from the head of development to this role. That's a challenge in itself because now he's an internal individual who has to step up into this role. It's very hard to deal with a founder who's very present and very demanding, and by the way has strong views, and is willing to and states them frequently. Also, has an independent relationship with many of the performers, and so that makes it very difficult for Will in his CEO role to actually provide guidance and oversight to the performers when they're actually going after the fact or before the fact to Binder and saying, "Listen. What do you really want to happen here?"
Brian Kenny: It reminds me of some of the cases that I've read where you have an entrepreneur who's founded something and it's time for that entrepreneur to step back and let other managers come in, but they can't quite bring themselves to do it.
David Fubini: This is a classic case of how difficult it is, they call it the founder phenomenon, to actually play through here. It's very difficult for founders to step back. That step back is quite difficult, and it proves to be one of the major things that is a problem here, which of course is then why we introduce the board in the form of Rick Mayberry. If I could just take a moment, it's helpful to visualize these individuals. Paul Binder is a very, as you can imagine, animated personality with lots of personality and lots of showmanship, as you would expect. Will is a lovely man, smaller in stature, very studious in his approach. Then Rick Mayberry sort of comes out of the central casting for a board member, particularly the chair of the board. Tall, debonair, obviously somebody who's used to being heard and followed. So, it's a wonderful visualization to go with what actually happens here, which is there is a triangle of relationship that is established here where Will says to Rick Mayberry, "The board should deal with Binder," and Rick Mayberry says, "That's not the role of the board to do this. Your job is to work with the founder and actually make all this work." In the meantime, Binder is basically saying, "It's my show, even though I'm not really running it anymore." So, there's the triangle that really is much of the conversation that happens in the classroom, and probably not unusual in other circumstances.
Brian Kenny: Sounds like somebody should be following them around with a camera and making a documentary of the whole thing.
David Fubini: It would be wonderful.
Brian Kenny: So, what are some of the financial issues? What's the financial pressure that's taking place here?
David Fubini: One is that they've lost, obviously, the ability to raise money through charitable foundations. So, that puts an enormous crimp on cashflow. Then secondly, there's an additional problem with cashflow in the sense that this is a very seasonal entity. You have to secure the talent so they can do the rehearsals in the anticipation of actually performing. So, you're paying them when they have no income coming in, and then of course you actually put the performances on, and then you pay back the performers, but that's a cashflow problem. So, you have to take out obviously bank loans to support that. Those have covenants in them. Those covenants are coming to fore and they looked like they were going to actually have trouble meeting the covenants of some of their loans. Then third, there was the problem of expanding into other cities and away from just the Lincoln Center location, which had been the primary focal point of the Big Apple Circus. So, it's so affiliated with New York because it was very prominent in that it's literally a tent in the middle of Lincoln Center. It's hard to miss, but now they've been expanding to Boston, Philadelphia, and Washington and other cities, and that is costly. Then the question was, really were they making money in these other cities? One of the issues that the case raises is, are you actually making money in those other cities? Which, it looks like you're not. So, that's the additional financial challenge.
Brian Kenny: What's the morale like in the people that work there? Not just the performers, but there's other staff I assume.
David Fubini: these are people who are really committed to the 501(c) element to this circus. Not only do they want to put on a wonderful performance, and they actually thought they were and quite appropriately felt they were, recognized for being really superior performers. On the other hand, the Clown Care and the fact that they were doing so much for inner city youth was a really big motivator. So, this held a lot of people that otherwise would not have been attracted to be a part of this.
Brian Kenny: So, he has some decisions to make.
David Fubini: Well, it comes down to really a central debate, which is can they survive as a one city circus? There's a big debate that actually occurs between, in this case now, Weiss who is clamoring for a one city approach, and the board which continues to believe that they have to do multiple city to work. The reason this is important is because when you're in financial straits, you usually want to go down to a profitable core, and the profitable core here might have been just the single location, New York City approach. And Paul Binder was insistent that the performers and the quality of the performers, we could not get if they went to only offer them one city location. They wouldn't be able to secure the talent that they needed. So, this was the big debate and the big issue in the case.
Brian Kenny: In your experience having worked with lots of different organizations over the years, are these kinds of challenges fairly common with organizations, enterprises, that just aren't able to innovate in different ways?
David Fubini: Yes. I think that's part of the peel of this case is that we have a tendency sometimes, and this is something we fall into even here at Harvard, is that we want to always study the leading edge of companies. So we ask, take your latest favorite technology company that's the flavor of the month and say, "How are they doing? What are they doing with their social media presence? What are they doing with all their online and digitization?" We forget that there's a huge tail of other companies out there that are not as facile in that area or frankly never had to deal with it. I think it's important to continually make students recognize that there is a very big distribution around these topics and thus the Big Apple Circus plays that role.
Brian Kenny: Yeah. So, back to the case. They brought some consultants in.
David Fubini: They did, they did and I found them to be, and I'm self critical of course because I do feel like I do know something, this is probably the only thing I know about circuses, is at least how to read a consulting report. They were particularly unhelpful. They basically did say that they should be able to one, survive easily if they were just to get additional funding from corporate sources, which is unhelpful. This is the equivalent of an economist saying, "Well, we're on a desert island. Let's assume we have a rowboat." That's just not helpful. That was not particularly helpful. Then they did also weighed in to the question of one city versus multiple cities, and they felt that a one city approach was fine for the short term, but would have long term challenges. So again, they really didn't resolve the debate because the debate now still rages about the topic.
Brian Kenny: So, can you reveal the outcome here?
David Fubini: Well, the outcome here is bankruptcy, which they do indeed go into bankruptcy. They do go into chapter 11, they actually do have to shut down the Big Apple Circus. Now many of your listeners might say, "Well, wait a moment. I just saw an advertisement for them," and they would indeed be correct, because they then as one does when you're in Chapter 11, you do sell as many assets as you have. In this case, they sold a number of assets including the name. So the name has been sold and the tent and a whole bunch of other associated materials and items have been sold. Another group of people have tried to recently reenact the Big Apple Circus. They had announced a very long series of various East Coast cities that were going to be involved in this, centered around New York, and that has all come undone as well for this. So, I'm afraid that even the sequel here has failed.
Brian Kenny: It's almost like without Binder, there's no way to bring it back to life.
David Fubini: Yes, and I think it's also telling, and I don't think Will Weiss or Rick Mayberry would mind my saying this to them, that they've been very kind. They've come to class when we taught this case, and they debate this question about one city versus multiple cities in front of the students, which is of course wonderful for the students. Then as I often have coffee with them or walk them back to their cars, they're still debating it. Even after all this time, because they really do still agree to disagree about the way forward, which I think is also interesting because I think that is also the way of many management teams and their boards. I mean, there are some of these things that go along for a while, and they're hard to resolve.
Brian Kenny: How do the students think about a circus? I mean, are many of them familiar with it?
David Fubini: No, they aren't to be honest with you. This is part of the challenge.
Brian Kenny: That's indicative of something, isn't it?
David Fubini: Yes. I was going to say, this is particularly challenging for somebody with my tenure and age is that I have to be careful about my references, because often I'll say something and I get these blank stares looking back at me. Thankfully I have children now of the age of many of my students and I'll say, "Is this a good reference?" They go, "No, dad. Don't use that." So to help that along with the Big Apple Circus, we do show some videos at the front end to remind them what was the circus, and how did it look, and also we do show a short video of the Clown Care so they can actually see the clowns in action in hospitals, and they can have a relational moment to understand just how powerful that was.
Brian Kenny: Yeah, and realize that not all clowns are creepy.
David Fubini: Exactly, yeah. That's very important for them to see that it's not a horror movie.
Brian Kenny: Right, right. If you look at Cirque du Soleil and other forms of entertainment that build off that circus model, there have been innovations that have kept that sort of entertainment alive but it's very, very different than what the classic-
David Fubini: Extraordinarily different, and one of the unusual things about this case is that it actually started out with my interest in writing a case about Cirque du Soleil, because they were as you just had pointed out re-envisioning themselves in order to survive.
Brian Kenny: Well, it's a very interesting case.
David Fubini: Well, I hope so. It certainly was fun writing it, and it was even more fun teaching it.
Brian Kenny: Yeah, thanks David.
David Fubini: Thank you.
Brian Kenny: If you enjoy Cold Call, you might like other podcasts on the HBR Presents network. Whether you're looking for advice on navigating your career, you want the latest thinking in business and management, or you just want to hear what's on the mind of Harvard Business School professors, the HBR Presents network has a podcast for you. Find them on Apple Podcasts or wherever you listen. I'm your host, Brain Kenny, and you've been listening to Cold Call, an official podcast of Harvard Business School on the HBR Presents network.