Posts Tagged ‘business models’

Pete, repeat and me

Pete and Prepeat sat on a fence. Pete fell off and who was left? Repeat.

I don’t know about you but I always found that saying annoyed me more that it inspired me. I got a fresh take on the power of repeat just last week during a gathering of the Consultant Leadership Forum sponsored by CausePlanet and The Denver Foundation. Six times a year we gather to learn from and with each other as we read a selection from CausePlanet’s Page to PracticeTM library. On deck this month was Repeatability: Build Enduring Businesses for a World of Constant Change by Chris Zook and James Allen (Harvard Business Review Press, 2012).

Our discussion revealed that the three key principles outlined in the book are apropos for nonprofits as well as consultants. Zook and Allen’s research revealed that sustainable companies applied three core principles. They have:

  1. A well-differentiated core – clarity of distinction
  2. Clear nonnegotiables – clarity of values
  3. Closed-loop learning – clarity of learning

These principles resonated with me as they speak to the importance of a sustainable nonprofit business model and a successful nonprofit strategy. Where to start? With book in hand, you begin with clarity about what makes your nonprofit unique and what it does well (and what it doesn’t do). You reinforce those via learning from customer and market feedback. Once you set up the learning process you can check-point your core and nonnegotiables to ensure relevance for the future. That’s what Repeat had – and Pete never quite mastered. No wonder Repeat has staying power.

By Karla Raines, Principal, Corona Insights

Read more Radiance blog posts at Corona Insights about nonprofit strategy

CausePlanet members: Register now for our next live author interview with Steve Rothschild on May 29 at 11 a.m. CST.

See also:

Forces for Good: The Six Practices of High-Impact Nonprofits

Do More Than Give: The Six Practices of Donors Who Change the World

Nonprofit Sustainability: Making Strategic Decisions for Financial Viability

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Strategic plan has you seeing red? Try blue.

When most of us think about how to get an edge, we look around at our competition. We strategize about how to outperform our peers and raise more funds from the same donor pool.

Blue Ocean Strategy authors, Chan Kim and Renée Mauborgne would argue that approach is exactly why you’ll fail.

Instead, they ask you to imagine a market universe composed of two sorts of oceans: red oceans and blue oceans. Red represents all the industries in existence today or our current market space. Blue oceans denote all the industries not in existence.

The red ocean or existing market space gets crowded as more compete for a greater share of existing demand. Cutthroat competition turns the ocean red. Blue oceans, in contrast, consist of untapped market space where there is opportunity for sustainable growth and where competition becomes irrelevant.

Ringling versus Cirque:

The premise of Blue Ocean Strategy is aptly described by the authors through the exploration of Cirque du Soleil, one of Canada’s largest cultural exports. In less than 20 years, Cirque has achieved revenues that took Ringling Bros. and Barnum & Bailey—the global champions of the circus industry—more than 100 years to attain. What makes its success remarkable is its achievement in a declining industry. Cirque has succeeded by creating a new, uncontested market space that has made the competition and declining circus market irrelevant. They have appealed to a whole new group of customers: adults and corporate clients rather than children.

While you may feel like you run a three-ring circus that happens to have a 501c3 status, you’re not alone. Kim and Mauborgne encourage you to quit competing with so many peers, and instead, create your own uncontested market space.

A nonprofit planning perspective of Blue Ocean Strategy®

We asked Heather Gowdy, coauthor of The Nonprofit Business Plan: A Leader’s Guide to Creating a Successful Business Model (2012), to discuss the merits of Blue Ocean Strategy with us in light of her unique perspective on business planning.

CausePlanet: Heather, thank you for serving as our guest author for this interview. As a member of the La Piana Consulting team and coauthor of The Nonprofit Business Plan, you bring a unique and welcome nonprofit perspective that’s especially relevant to this business book and to building a successful business model. What do you appreciate most about Kim and Mauborgne’s Blue Ocean Strategy®?

Heather Gowdy: First and foremost, I love the emphasis on stepping back and taking the time to truly think strategically about your market, your customers and your noncustomers. So often organizations get trapped in the same grueling competitive cycles, searching for ways to incrementally adjust what they do to better meet the needs of clients, customers, individual donors or institutional funders. There is real value in thinking “out of the box” and looking for blue ocean strategies that might better enable you to advance your mission–strategies that may not be at all obvious now, but will lead to greater impact and sustainability in the long term.

In what color ocean does your current plan have you swimming? What appeals to you most about the Blue Ocean Strategy®? In my next post, watch for more interview excerpts with Heather and why you should be seeing blue instead of red.

See also:

Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant

The Nonprofit Business Plan: The Leader’s Guide to Creating a Successful Business Model

Which comes first: the partnership or the plan?

Image credit: Cirque du Soleil

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Supplement fundraising by exchanging value

It’s no coincidence our sector is looking at redefining its business models when 88% of nonprofits in 2012 were faced with increases in the demand for their services despite 57% barely having enough cash on hand to last them three months. (1)

In “Pride & Prejudice: (What) Can Nonprofits Learn From the For-Profit World?” by Richard Dare last May in the Huffington Post, I was intrigued by his challenge to fellow nonprofits to reexamine their business models and consider several ideas he’s observed and read about over the years:

1) side-ventures to supplement traditional fundraising (gift shops, space rental, cafeterias),
2) innovative partnerships that exchange value (see www.MissionMeasurement.com by Jason Saul),
3) new money from your core operations (create a model that serves other party’s interests beyond your own).

Don’t wait to consider new options. Increased demand for services and the diminishing ability to maintain three months of cash reserves is a chronic scenario we diagnose when we’re in the field working with Execute Now! clients. Financial strain in the midst of high service demand has no bias—both large and small, as well as seasoned and start-up nonprofits, struggle with this challenge. We also see increasing competition for individual donors and grantmakers within the sector and within specific causes. “There are over 1.4 million nonprofits in the U.S., more than 500,000 of which have been created in the last ten years! Yet according to the Urban Institute, there are only 1,100 different ‘types’ of nonprofit programs. Simple math tells us that, on average, there are over one thousand nonprofits for each type of problem,” states Jason Saul in The End of Fundraising.

Diversify your revenue stream. All three of Richard Dare’s suggestions have a common theme that involves depending less on donated income and more on the exchange of value, either directly with your constituency or with peers who share an interest in your constituency. We spend a fair amount of time helping our clients forecast cash flow so they can accommodate lengthy grant cycles and cultivate large donors. Imagine how those projections might be boosted by alternative revenue arrangements.

Look at fulfilling your mission in new ways. Above all, our most successful clients are those who look for new ways to implement their mission in every strategy they explore. Each new venture enhances their business model and is scrutinized for relevancy and financial sustainability. Additionally, these nonprofit leaders constantly look at the value they provide not only to their clients, but also to their stakeholders. Who are your stakeholders? Jason Saul says they have a vested interest in the social outcomes you produce. Look at your nonprofit community and reexamine who your stakeholders might be.

Learn more about our nonprofit services or download an assessment form to determine your nonprofit’s financial assistance needs.

1: Nonprofit Finance Fund 2012 Survey Results

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So you want more but do you know why?

According to David La Piana and his coauthors, a nonprofit needs a business plan just as much as a business does. “Perhaps more so given the narrower room for experimentation and the high consequences of failure—both of which can be traced back to often narrow operating margins and lack of adequate capital.”

Why do you need a business plan?

A business plan can help you recognize a limited or broken model that may be holding your organization back.

Business planning can also help you assess and prepare for substantial changes in your scope of work.

As nonprofits seek to develop solutions that are repeatable and scalable, business planning becomes the centerpiece of these patterns because you don’t want to replicate or scale up mediocre programs—you want to be sure you’re expanding your reach and your return.

I asked coauthor, Lester Olmstead-Rose about the most important take-away from the book. His answer builds on the reasoning above and challenges you to know why you want a business plan.

CausePlanet: What’s the most important idea you want readers to take away from your book?

Olmstead-Rose: One of the most frustrating things we come up against is nonprofits (and actually, just as often, their funders) saying, “We need a business plan,” but really using the phrase as a kind of catch-all description of a strategy that includes numbers or a program implementation plan or a way to balance the budget. In other words, it has come to mean vaguely, “more.” As in: “I need something more than I’ve been able to describe about planning, growth, how I operate, where I go next, or how to implement.” This book is about demystifying what that more could be around planning, decision making and implementation–and making it accessible.

Olmstead-Rose’s answer reminds me of Veruca Salt in Willy Wonka and the Chocolate Factory. She wants the golden goose (and everything else she sees!) but doesn’t have a reason. Rather than asking for more, figure out what you need so the business planning process has a chance to succeed.

You can read the complete author interview and learn more about what’s inside The Nonprofit Business Plan: A Leader’s Guide to Creating a Successful Business Model by downloading a Page to Practice™ book summary at CausePlanet.org.

For those of you new to CausePlanet, we aim to satisfy professional curiosity in busy nonprofit leaders through Page to Practice™ book summaries, author interviews and relevant discussion by peer contributors. Download this book or dozens of other titles by visiting our summary store or subscribing to summary library. Or try us out by printing a free sample.

Watch for next week’s Page to Practice™ feature of Chris Zook and James Allen’s new book, “Repeatability,” which builds on what the La Piana Consulting team explores about solutions that are scalable and repeatable.

Image credit, Willy Wonka and the Chocolate Factory

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Destination: Sustainability

For nonprofit leaders who are tired of their current decision making paradigm, the more nimble and actionable process of “matrix mapping” explained in the book, Nonprofit Sustainability: Making Strategic Decisions for Financial Viability, offers a fresh and immediately gratifying alternative.

This book will help you examine your current business model, identify areas for adjustments, consider income streams and ultimately assist with ongoing decision making. Nonprofit Sustainability by Jeanne Bell, Jan Masaoka and Steve Zimmerman is an essential tool for CEOs, EDs and management teams.

There was a quote from this book that especially resonated with me because I’ve heard versions of this so frequently during my years in the nonprofit sector. It goes as follows: “A new executive director was told by the board and the staff, ‘There’s a $300,000 hole in the budget that you have to fill.’ Not only is this a dishearteningly phrased directive, it’s an unproductive way to characterize a financially difficult situation. Behind this statement is the unspoken assumption that programs and their funding occupy two separate spheres rather than fitting into an overall business model for the organization.” (p. 109)

This excerpt compelled me to ask the authors, “What is the most common reason why nonprofit leaders look at programmatic sustainability and financial sustainability in isolation of one another?”

Steve Zimmerman responded by saying “It is difficult for board members and senior managers to look at both mission impact and financial profitability primarily because our systems aren’t designed to do so. Program evaluations rarely provide information about the full cost of the program and financial statements don’t reveal the impact that our programs are having. Likewise, in our board meetings we tend to discuss items down an agenda: programs then finances then fundraising. But all of these are deeply interconnected. The Matrix Map is a visual tool that integrates mission and money and allows leaders to make decisions while holding both programmatic and financial sustainability together.”

I also asked Zimmerman, Bell and Masaoka to explain their claim that “sustainability is an orientation, not a destination.” Zimmerman said, “One of the common comments that I receive from boards when we’re doing strategic planning is that they want a “sustainable business model.” It is often said in a way that implies that sustainability is a destination – once you get to the nirvana of a sustainable business model you don’t have to worry anymore and money will continue to come rolling in for perpetuity. We know the reality is that nothing is forever. Funding sources come and go and constituents’ needs evolve. So, what is sustainable today may not be sustainable tomorrow. As a result, sustainability is constantly evolving and requires an orientation of monitoring and decision making to make sure that your organization is sustainable at any given point and time.”

For more discussion about Nonprofit Sustainability, you can follow the authors: Jan Masaoka at Blue Avocado (www.blueavocado.org), which is an online magazine for nonprofits where the discussion on this topic and many others is continuing. Both Jeanne Bell and Steve Zimmerman contribute there and can also be reached via their respective organizations: Compasspoint (www.compasspoint.org) and Spectrum Nonprofit Services (www.spectrumnonprofit.com).

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