The case study: Added value attracts visitors The story. Beamish Museum, England's biggest open-air museum, tells the story of working life in the northeast region in the two centuries before the first world war. As a "living museum," the 350-acre County Durham site includes a working tramway, two farms and a village based on those that were near the area's coal mines. Costumed interpreters portray life in earlier eras. In 2008, the museum, a registered charity, was under financial pressure. Most of its £4m annual operating budget was met by admission fees but visitor numbers had plateaued close to 300,000 a year bringing in about £2.5m. Operating costs were rising and there was competition from the UK's network of publicly funded, free-entry museums. Case Study The challenge. In 2008-09 the museum was forecast to lose £300,000, increasing to £500,000 the next year. Richard Evans, the new director, needed to reform operations, cut costs and increase visitor revenue. Public funding has traditionally supported about a third of the operating costs of UK cultural institutions but Beamish's subsidy-dependent model was no longer viable. Its unchanging offer was also at the risk of losing the public's interest. Beamish would have to to use its own knowledge and assets to achieve sustainability. The strategy. Mr Evans made the organisation more flexible, sustainable and customer-focused. A refreshed vision was set out to differentiate Beamish's offer, based on a core strength as a living, open- air museum. Despite a few management redundancies in 2009 most staff were retained and placed into visitor-facing teams. Staff were not replaced by volunteers but a trained and lively volunteer base was nurtured, allowing the museum to do more. From 2009, a day ticket allowed visitors to return free of charge for 12 months. To encourage repeat visits Beamish introduced new attractions and festivals including a Christmas season. The museum used to close in winter and lay off most seasonal staff. From 2009, it opened year round. In three years, £4m was invested in catering, retail and exhibits. Funding came from capital reserves, with the programme sustained by annual operating surpluses. Next year, a early 1900s-era bakery will open and the restoration of a medieval church will be completed in 2014. Beamish plans to invest more than £20m in new attractions over the next decade, with additions including a 1950s town complete with cinema, shops and houses. Accommodation is planned so visitors can stay in the comfort of a coaching inn set in the 1820s - or, for the more hardy, a 1900s miner's family cottage. Beamish encourages local business and residents to donate objects to the museum, building its collection while strengthening local ties. The result. Visitor numbers increased by 70 per cent in three years to more than 500,000 per annum; annual turnover more than doubled to £7m-plus; and Beamish makes an operating surplus of more than £500,000 a year. The museum has cut its reliance on public subsidy to less than 5 per cent of operating costs. Growth has created more than 100 new paid jobs, making it one of the largest employers in the local area with 275 full-time equivalent staff. The lessons. Although Mr Evans" strategy to reinvest reserves was risky, the alternative was continuing decline. This would have forced Beamish to rely on government subsidies that today are being dramatically reduced across the sector. Self-reliance is a key strength for the museum, as is designing new developments in keeping with Beamish's values and brand, connecting people to the region's history. Mr Evans recognised the value of a loyal audience by encouraging them to return repeatedly. Every second visitor who returns for free on their "unlimited" ticket, brings along a new, customer who buys a ticket: they both spend money in the restaurants and stores - and experience a bit of the northeast's history. The writer is fellow in arts and culture at the University of Cambridge Judge Business School