law of survival in the jungle is simple: you don’t have to be faster than the
lion, just one step faster than the slowest zebra.
mantra of the underachiever? To the contrary, this is the wisdom of a creature
that has figured out what game it is playing–what the threats are, who its
competitors are and (literally) what it must do to live to see another day.
Likewise, the key for nonprofit survival is market awareness: knowing the
larger environment, being aware of who else is competing for space and knowing what
you need to do to position yourself to succeed.
of markets among nonprofits often elicits slightly repulsive responses. “We are
not about market dominance,” is the refrain. “We are about creating impact.”
Markets, after all, are the domain of the McDonalds and Starbucks of the world,
those companies in constant search for higher profits.
enough. But without knowledge of the nature of your particular market and your
place in it, you may spend unnecessary time and energy trying to outrun the
lion instead of finding your survival spot within the herd.
What Markets Are
market is the primary domain (defined as a field
of action) within which your organization operates. Less formal is the
notion of market as “the sandbox” within which your organization plays. In
either sense, markets have two fundamental characteristics: a) they are closed
and finite, and b) within those boundaries is the collective population of your
clients and competitors. In simpler terms, your market is comprised of the
people you wish to serve and the other organizations to whom they may go for similar
some, the market is defined geographically,
such as a community center whose mission is to serve a particular zip code or
sector of town. Competitors in this market are the other sites in the same area
that provide similar services, whether or not any one site provides all of
them. For others, the market is defined demographically,
as in an outreach program to low-achieving middle-school students across a
school district. Its competitors are the range of youth programs offered by
churches and youth-serving agencies.
yet, a market may be defined by the mandates of a specific industry, such as a government funded youth-service agency. While
the organization exists to improve the lives of youth, what it actually does
for the youth is determined by what the state is willing to pay for.
How Markets Matter
should be obvious that markets do matter in the formulation of nonprofit
strategy. But how do markets matter? First, it is impossible to develop a
strategic position without an understanding of the type of market you are in. Second,
it is difficult to assess your standing within your market without knowledge of
those you are “trying to outrun.” That is, you can’t differentiate yourself
within a market unless you know who your competitors are. And third, program
shifts often unwittingly throw nonprofits into markets for which they are
unprepared to compete. To illustrate, consider the case of Harvest Home, a residential facility
for youth with behavioral health issues.
Home has been in the same location for over 100 years, doing basically the same
thing for the same population. But it is not a “local” nonprofit. Why? Because
its clients and its funding both come from counties around the state. In fact,
less than 10% of its clients come from its county of residence. Thus, it would
be a strategic mistake for Harvest Home to strengthen its market position by
trying to raise local awareness of its work. Instead, it has chosen to
strengthen its market position within the behavioral health industry by
demonstrating low-cost, relevant outcomes to the state agency that funds its
recognition of its market, Harvest Home is left to deal with the reality of
declining state support for residential treatment, its core strength. Its
strategic response to these changing external conditions is two-fold. First, it
adapted its treatment model so that it can be offered in non-residential
settings, such as the family home. Second, and more to the issue at hand, Harvest
Home decided to take its core expertise in the provision of intensive therapy and
offer it to the general population.
are the implications of this strategic move? The most significant is that it
has now entered into a new market. Or, if you prefer, Harvest Home is now
playing in someone else’s sandbox. To be successful, Harvest Home must be able
to differentiate itself from. i.e., compete with, the numerous mental health
centers, clinics and private therapists in the local community.
Harvest Home has encountered a second lion.
key to survival for the zebra is its ability to blend in with the herd. That
is, its basic survival strategy is to confuse the predator through the absence
of differentiation. And it is designed to do just that. Paradoxically, the
exact opposite is true for nonprofits. But without recognition of its actual
market and subsequent differentiation within it, nonprofits are unable to
design a strategy that, in the long run, may be the difference between survival
Michael E. Stone
See our new Page to Practice book summary on "Repeatability" by Chris Zook and James Allen for more on differentiation in markets, expanding your influence and building an enduring organization.