Eight Business Innovation Essentials for NFPs
17 April 2014 at 11:13 am
Embracing commercial best practices can take Not for Profits from good to great, writes Westpac Social Sector Banking’s National Marketing Manager Lali Wiratunga.
Cash flow is the lifeblood of any organisation – all businesses need cash flow to buy, sell and provide products and services to their target market.
Cash flow is critical to a Not for Profit or for-purpose organisation so it can deliver on its mission.
The Givewell Forums for Purpose five-city tour across the country concluded last week. With the theme of ‘Redefining the Social Sector’, attendees from the for-purpose sector were challenged to think critically about sustainability and innovation within a challenging operating environment.
As Westpac Social Sector Banking’s National Marketing Manager, I joined the tour and believe embracing commercial best practices can take the for-purpose sector from good to great.
The Key Challenge
In a competitive environment with limited support from government and donors, plus society’s increasing needs for its services, the for-purpose sector must embrace a business model that prioritises cash flow, efficiency, flexibility, and innovation.
Business Model Innovation
Innovation – whether small, incremental or large – is about change. Business model innovation within an organisation is a process that:
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clarifies the value proposition – what the organisation offers to individuals or society;
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leverages its people, technology, facilities and other resources to deliver value;
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defines the activities and processes needed to deliver the mission – planning, development, marketing and so on; and
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produces a revenue model – the budget an organisation needs to support its mission.
Success in business model innovation is a journey across the following stages:
Stage 1 – Opportunity Identification
Stage 2 – Adaption of Ideas into Business Models
Stage 3 – Testing the Business Model
Stage 4 – Scaling, Learning, and Repeating
The Eight Top Tips for Business Model Innovation
Stage 1 – Opportunity Identification
Tip 1: Reframe the problem around a broader objective
Think about the true reasons your organisation needs to exist.
For example, an organisation that rescues food from going to waste and distributes it to feed the hungry in society might broaden its operating objective to food waste prevention.
This action opens the potential for change across all parts of the organisation’s operation, and for action to be taken with partners across the food value chain.
Tip 2: Take a supporter centric approach to ideation
Give your supporters permission to create value with you.
This could involve allowing your employees, volunteers and/or members to submit and collaborate on ideas to help increase efficiencies in your processes, reduce costs, and use your resources more effectively.
For a process you could adapt to use in your organisation see the Human Centered Design Toolkit.
Stage 2 – Adaptation of Ideas into Business Models
Tip 3: Align your revenue with sustainable growth plans
For example, the newly-opened social enterprise, Inside the Brick, earns revenue by hosting construction play sessions and themed children’s parties using LEGO®.
The organisation caters to kids with or without social learning difficulties – the cognitive and social benefits of construction play for children on the autism spectrum are particularly notable and well researched.
As a social enterprise, 50 per cent of the profits from Inside the Brick go towards helping establish construction clubs in local communities.
Tip 4: Partner with organisations with the resources to help you deliver on your social mission
Identify organisations that have the resources and shared values to create the positive change you seek.
When Westpac launched the inaugural Westpac Lifesaver Rescue Helicopter Service Schools Program, it was with the aim of partnering with the education sector to teach 50,000 Australian primary school students the importance of Not for Profit emergency services to their local community.
Stage 3 – Testing the Business Model
Tip 5: Small is beautiful
The experience of trying to get a new idea off the ground may quickly become overwhelming without a sustainable plan.
Break your big idea into small, manageable actions and take action according to specific, achievable, realistic goals.
Tip 6: Creating something new requires testing and adapting
Sometimes start-up organisations or new projects wait until they have finished building a ‘perfect’ product or service before interacting with their customers, only to discover some important details that require fixing.
Experimentation will help your organisation get more information, test the market, and build momentum for the big master plan. For more, see Lean Startup Tools by Pollenizer.
Stage 4 – Scaling, Learning and Repeating
Tip 7: Design for scale
After testing that a business model works, the next milestone is achieving scale.
A for-purpose organisation’s approach to trade-offs plays a critical role in their ability to scale. According to the Harvard Business Review: “Organisations should seek to design business models that align financial and social goals as closely as possible to minimise trade-offs”.
Organisations can ensure scalability during the early design phase of their business model, by incorporating elements like flexible cost models and diversified revenue streams.
Tip 8: Build a culture of flexibility
Building your organisation’s agility to adapt can help your organisation thrive, not just survive, in a dynamic environment.
Leaders of organisations that are able to adapt share certain key characteristics:
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they recognise the opportunity in a challenge
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they focus on the right priorities
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they are committed to clear and open communication
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they value accountability, and
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they promote creativity.
After a change management process, translating the learning into decisive action is the ultimate way a for-purpose organisation goes from good to great.
About Westpac Social Sector Banking: Westpac Social Sector Banking is deeply committed to the For Purpose sector, and can proudly say we have a national team of dedicated specialists and customised banking solutions to service the sector. The sole aim of our bankers located across Australia is to deliver better banking experiences for Social Sector customers. For more information, visit Westpac Social Sector Banking.
About The Davidson Institute: It is Australia's First School of Money, backed by Westpac Banking Corporation. It provides an extensive range of financial education, from free seminars to facilitated sessions on Cash Flow to Superannuation, and accredited courses in finance.
For more information visit www.davidsoninstitute.edu.au for a number of useful articles. Short courses are also available.
Sources for information:
· Human Centered Design Toolkit
· Lego Enterprise Assists Autistic Children
· Westpac Announces Extended Partnership with Westpac Lifesaver Rescue Helicopter Service
