The Not for Profit Year That Was 2015

In a year of amazing change for the Not for Profit sector, the journey has led to a greater understanding of how new models can address social challenges, writes entrepreneur and strategist, George Liacos from Spark Strategy.

What a year it’s been… Ask anyone in the Not for Profit sector and they’ll agree this was a big one.

Massive policy reform, new funding models, cross sector partnerships, mergers and acquisitions, spin offs and digital innovation made 2015 the year that NFPs got serious about sustainable business models.

From disability to mental health, youth to the arts, we have been inspired by the sector’s response to significant challenges, and how many have been able to turn this pressure into an advantage for both financial viability and greater impact.

We’ve seen a resilient sector. An innovative sector. An optimistic sector. And so we have put together this piece to share some of what we saw in our world (the strategy domain) and share learnings so that we can all power into the new year for even greater impact.

The four letters that have dominated the NFP policy space have undoubtedly been NDIS.

We’ve run workshops in Canberra, Sydney and Melbourne around a number of facets of this reform, and from service providers to peak bodies, there remains much uncertainty as to what the world will look like as this scheme rolls out.

One thing that is certain is that the disability sector, much like many others in the NFP space, has to shift to a more commercial mindset, developing capabilities such as marketing to attract business that did not previously need to be fought for.

And new markets altogether are opening up, such as the CALD community, as was made evident at the recent NDIA/ Practical Visionaries conference at which we were fortunate enough to speak.

The other major policy highlight this year, of which we are extremely proud to be a part, is the recent announcement by Prime Minister Malcolm Turnbull regarding mental health reform.

Last year we partnered with one of our long-term clients, the Young and Well CRC, to co-author a briefing paper to the National Mental Health Commission Review.

We were extremely excited to see many of our recommendations, (including using technology to address the supply/ demand imbalance of mental health services taken up) in this speech.

Over the next three years we should see more people receive the right care at the right time, in the right way.

Aside from policy, the other major influence that the government has had on the NFP sector has been to open up many traditional tenders to competitive processes.

This has seen many NFPs lose their funding security and changed the conversation of sustainability from a “nice to have” to a “have to have”. (Read our whitepaper: In Search of Sustainability.)

Out of this external pressure we have had the pleasure of working with many organisations that have taken novel and brave steps towards autonomous funding.

Key pivots in the mindsets of NFPs who successfully transformed included:

• Understanding that, in developing new business models, customers are not necessarily the same as beneficiaries.

•  There are a range of innovative funding models and structures available to generate revenue and increase impact, such as leveraged funds, commercial spin offs and public private partnerships.

• Incorporating Participatory Design / co-creation workshops into the ideation phase of strategy development has the potential to unearth insight as to what beneficiaries need and what the market values, both of which lay the foundation for a solid value proposition.

• Harnessing the power of digital can open up new markets, increase efficiency and enable disintermediation. Mat Fitzgerald from social digital business Squareweave notes, “A lot of the more progressive and nimble NFPs are now starting to use digital methods effectively to expand their reach and test new approaches to generating revenue in a financially sustainable way. In a world of uncertainty, digital methods present the best way of trialling new programs, gathering data and improving overall impact”.

From a financing perspective, there were also many exciting inroads this year.

While Social Impact Bonds have still been somewhat slow to kick off, impact investing as a movement on the whole has taken off, thanks to the likes of Impact Investing Australia.

Numerous funds have sprouted up to encourage the growth of this movement, from NAB’s Impact Investment Readiness Fund to the $100m Social Enterprise fund, launching just this month.

There are also many great innovative initiatives on the smaller scale, which are harnessing the popularity of crowd funding. Our team had a few great nights out at crowd pledging nights, in which social entrepreneurs pitched their ideas then the audience pledged amounts of support.

And on this topic of entrepreneurship, this year also saw new approaches to incubation adopted. We have helped design new models that encourage knowledge translation so that research more quickly turns into real life interventions, and we are currently working on a world first incubation method to address social challenges at the macro level.

The trend seems to be moving away from relying on one hero entrepreneur with a light bulb idea that will be a panacea for a problem, to more sophisticated, iterative models. Watch this space.

It would be remiss of us in a piece about the NFP sector in 2015 not to mention mergers and acquisitions.

Possibly the hottest topic in the NFP media space, with Tim Costello and David Crosbie telling organisations told to ‘merge or shut down’, there were some great success stories in this area such as Launch Housing, White Lion and Save the Children, to name a few.

Of course, mergers are just one of many strategies NFPs can implement to achieve their mission.

The fact that one-third of boards have mergers on the agenda, however, tells us it’s something we can expect to see more of.

But it wasn’t just M&A’s that made waves. All different types of partnerships have formed to move the sector forward this year. (Read our whitepaper on effective NFP Partnership: Perspectives on Partnerships.)

Many are trying collective impact and joint projects.

We’re experiencing this first hand on a Movember project, in which we’re partnering with seven other organisations.

One area that we have noticed is still underutilised, however, is the matching of corporate resources with NFP need. As we launch Sydney operations in the new year, brokering these relationships and bringing shared value to life will be a key focus of our new office.

And the final observation to mention that has been pivotal to NFPs and private sector alike, has been the B Corp movement.

B Corp is to business what Fair Trade certification is to coffee.

We were proud to join the growing community of Australian B Corps this year, all of whom have met rigorous standards of social and environmental performance, accountability, and transparency.

We joined a delegation of 22 others from here and across the ditch to represent Australia and New Zealand at the international B Corp Champions retreat in the US, where it was inspiring to see whole ecosystems of organisations using business as a force for good.

In a nutshell we are humbled to have learned a lot from NFPs this year. Our journey has deepened our understanding of how new models can address social challenges and this has helped refine our own purpose.

We have seen evidence that society has the resources and know how, that if applied and combined correctly, would be more than sufficient to solve these problems.  

What’s needed is an alignment of interests, from a coalition of courageous leaders, unearthing and trying models of practical, sustainable and enduring impact.

This involves:

• A strong, dynamic and sustainable social sector.

• A purposeful private sector.

• A solutions-focused philanthropic sector.

• An enabling and bridge building public sector.

All are aligned and working together to eradicate the old problems, and solve new ones as they emerge. We believe in a future where no social problem is permanent.

This year has lead us to the belief that, with the right models, each member of society can pursue their own outcomes whilst addressing social problems.

The key is to align the self interest of individual groups with the solution of the social problem. The solution, not annual funding and servicing.  Alignment must not just be at a moral level, but in a manner that plays directly to the rationale for being for each societal member, otherwise it will not be sustainable.

Our shortcut for this is "profit and purpose".

The amazing work across the sector has set the stage for the blossoming of the new economy. Let’s make 2016 the year of profit for purpose.

Contact Spark Strategy on +61 3 8804 1731 Email:info@sparkstrategy.com.au