Posts Tagged ‘The Nonprofit Business Plan’

Minimize your “big idea” risks by asking 4 questions

Have you ever loved a new idea so much you’re willing to forgive the nagging uncertainty of its financial viability? I’ve been there. You’ve already created the catchy name, bought the URL and outlined the program details. To ease your conscience, you tell yourself you’ll just work harder at selling it.

The authors of Blue Ocean Strategy would say a great idea isn’t enough. They’d put you through what they call a strategic sequence of questions.

Blue Ocean Strategy (BOS) emphasizes a focus on blue oceans of uncontested market space. In contrast, red oceans or existing market space get crowded as more compete for a greater share of existing demand. Cutthroat competition turns the ocean red. Blue oceans consist of untapped market space where there is opportunity for highly profitable growth and where competition is rendered irrelevant. As nonprofits more frequently turn to alternative funding sources, they don’t have the luxury of crashing and burning on a bad idea. That’s why the BOS methodology is essential for nonprofits during any form of planning/forecasting.

An integral part of BOS approach is creating a business model that is viable and makes a healthy profit in the blue ocean. If you follow the correct strategic sequence and test your blue ocean ideas against criteria in that sequence, you can minimize your risk. The sequence stems from the authors asking the following questions.

If you answer “no” to any question, your blue ocean potential stops.

Buyer utility—Is there exceptional buyer utility in your business idea?
Price—Is your price easily accessible to the mass of buyers?
Cost—Can you attain your cost target to profit at your strategic price?
Adoption—What are the adoption hurdles in actualizing your business idea? Are you addressing them up front?

We asked our interview guest, Heather Gowdy, and coauthor of The Nonprofit Business Plan: A Leader’s Guide to Creating a Successful Business Model (2012), to discuss the merits of the strategic sequence in light of her unique perspective on business planning.

CausePlanet: The strategic sequence (on page six of the Page to Practice™ summary) reinforces a closer look at the financial aspects of a potential blue ocean. We know from The Nonprofit Business Plan, you would endorse thoroughly understanding the financial aspects of any potential strategy. Will you comment on the importance of questions like these in the strategic sequence?

Gowdy: It is absolutely critical to understand the financial implications of a potential strategy—just as it is important to understand the implications for mission advancement. Many nonprofits excel at doing both, but just as many struggle with aspects of business model analysis. Which is understandable: doing so can be even more complex in the nonprofit sector than in the business sector. A nonprofit organization’s “buyers” or customers are not just the individuals and groups availing themselves of a particular product or service. Given that those customers typically do not pay market rate for what they receive, the nonprofit must make up the difference with funding from other sources. Those third-party payers are also customers (buyers) although they may not receive anything directly in return. Nonprofits must continually consider, attract and satisfy both types of customer. The price versus cost question can be equally challenging. Nonprofits can, do and often must provide services that do not in and of themselves generate a financial profit. The question becomes, does the mission value of doing so warrant moving forward, and if so, what other aspect of the business model will support that? Jumping to implementation without having clear answers to these questions is risky at best.

When you’ve considered launching a new idea, have you asked yourself questions similar to these contained in the authors’ strategic sequence? If you answered “no” to any of the questions, did you still carry on with the plan or make adjustments?

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?” by Heather Gowdy

Image credit: newmediaandmarketing.com

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Strategy is a 24/7 endeavor

As nonprofits began adopting successful practices from the business community, they grabbed hold of one with an iron grip:  strategic planning.  However, in our efforts to embrace the practice, we confused the process of planning with the real work of setting and implementing a strategy.  The planning process became the proverbial junk drawer.  We tossed the odds and ends into the drawer with the expectation that a single process could address them all – the disconnected board that wouldn’t raise money, the staff in need of team building and the need for relevance in a changing market.

The hidden cost?  We’ve become accustomed to thinking strategically only on an episodic basis – when it’s time for the annual board retreat or when our strategic plan has “come due.” It was simply too time consuming to update the plan document.  So we let it gather dust on the shelf or sit idly in the drawer as we went about the real work of running our nonprofits every day. It’s time to take that dusty or irrelevant plan off the self – and throw it away.

We’ve muddled the essence of strategy with the process of plan development.  They are not the same.  To make matters worse, we’ve allowed multi-faceted organizational issues to distract our strategic focus.  The result?  A drawn-out process that causes us to live in suspended reality.  When the process is over, we find ourselves digging deep for the energy to implement.

We could get by with that “process in lieu of strategy” approach when the external environment was more settled.  Gosh, looking back the 1990s and early 2000s seem almost idyllically stable, don’t they?

You simply cannot afford to confuse planning with strategy in today’s dynamically complex world. It’s time to create the game plan – the play book – the “use it every day ‘til it’s dog-eared” handbook.  The strategic direction that truly guides your monthly and quarterly endeavors – the one you “truth test” against.  The resource so valuable that you’ve uploaded it to your tablet and smart phone.

We’re talking about an organizational strategy.  Not tactics.  Strategy can be defined as a coordinated series of actions.  The operative words are coordinated and series.

Now is the time to adapt.  Today’s nonprofit leaders need to find the true connections between the external environment and your organization’s real competencies and vulnerabilities.  As you craft your strategy real-time you’ll need to consider your organization’s unique position in the marketplace.

One of the best resources we’ve found in the strategy setting arena is the article “Can You Say What Your Strategy Is?” by David J. Collis and Michael G. Rukstad from the Harvard Business Review (April 2008).  This seminal piece presents three key concepts:

A hierarchy of statements that illustrates the relationship between mission, vision, values and strategy.  Board members will thank you as you give them something easy to understand.  Strategy wonks will love it as a tool.

A visual of the strategic sweet spot – the market and customers your organization serves best in consideration of what others provide.

A strategy statement that clearly and succinctly describes who you will serve, how you will serve them, and the comparative advantage you will embrace.

The exercise of writing a strategy statement – and we at Corona Insights have written numerous with our clients – is harder than you’d think.  Organizations tend to think they have clarity only to find a lack of agreement and buy-in. The problem?  Our strategy isn’t precise and simple enough to remember.  Imagine if the folks at Apple designed your strategy.  Ah yes.  A strategy statement so clear and concise that you’ve memorized it – and so has your team.

You’ll find the hierarchy of statements is really helpful when articulating your strategy as you ask yourselves, “Is our strategy distinct from our mission?  Might we have confused our vision with our strategy?”

Now that you’ve defined and committed your strategy to memory, it’s time to use it – 24 hours a day, 7 days a week, all year long.  This means you’ll be testing against it and adapting it as required.  Imagine an executive staff or board discussion that goes like this.

We said we were going to pursue ____ strategy.

Does Opportunity A really fit our strategy?  Does it augment or strengthen our business model?  If it doesn’t we shouldn’t pursue it.  If it does – or could with a tweak – then we should.

Are we forecasting changes in the external environment that portend vulnerabilities to our business model?  Revenue sources that were certain two years ago aren’t even likely today.  Eek they’re risky.

Have conditions changed substantially enough to warrant a reality check of our strategy?

As you anticipate the New Year, I encourage you to make the following resolutions.

We’re going to have a strategy – and it’s going to be clear enough that I can articulate it regularly and ensure my team (board and staff) get it too.

I’m going to use a strategy play book – and I’m going to update it as needed to take advantage of opportunities and address threats real-time.  Our whole team is going to be operating from the same play book.

I’m going to anticipate a continually high level of uncertainty in the external environment and will act accordingly – that means we’ll reality-check our strategy on a regular basis.

Best of all, your board will l-o-v-e you when you tell them they don’t need to participate in another day-long retreat or months-long process that leaves them thinking “what’s this all about anyway?”  Like you, they’ll see that strategy is a 24/7 endeavor.

See also:

Nonprofit Sustainability

The Nonprofit Business Plan

The Nonprofit Strategy Revolution

Image credit: worldsoccertalk.com

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Maximize your business planning with “repeatability”

Every once in a while the planets align. And when they do, it’s exciting to share about it. Two books we’ve recently added to our library of recommended titles reinforce one another and make a strong case for 1) purposeful business planning and 2) keeping it simple by adhering to three principles.

We recently featured The Nonprofit Business Plan: A Leader’s Guide to Creating a Successful Business Model. This book does a tremendous job of differentiating strategic planning from business planning and justifies why the two work in tandem to provide your board and executive director with more certainty in, well, an uncertain world.

I had the good fortune of landing one of the coauthors, Heather Gowdy, for a live and in-person interview at the LANO (Louisiana Association of Nonprofit Organizations) annual conference in Baton Rouge this week. The interview was met with a great deal of questions and input—many thanks to those of you who participated.

Consider the merits of The Nonprofit Business Plan while I introduce you to our newest feature at CausePlanet: Repeatability by bestselling business authors Chris Zook and James Allen. This book was recommended to me by one of our readers (we always welcome requests) and its applications in the nonprofit sector are undeniable. The premise? Complexity is the silent killer of innovation.  If you adhere to three simple principles, your nonprofit can be more nimble and responsive to approaching opportunities without succumbing to protracted process or limited information.

Adhering to your well-differentiated core, clear nonnegotiables and closed-loop learning allow your organization to adapt to constant change from a source of stability. Your consistent bond with these key principles becomes your rudder as waves of opportunities present themselves or the changing environment demands a fitting response. If you worry about mission drift or charting unfruitful territory, consider how repeatable your business model is.

For those of you new to CausePlanet, we aim to satisfy professional curiosity, inform better book choices and promote best practices through Page to Practice™ book summaries, author interviews and relevant discussion by peer contributors. Download these book summaries or other titles by visiting our summary store or subscribing to summary library. Or try us out by printing a free sample.

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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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Business planning is the new black

In our monthly Management Café discussion, I was reminded about our current Page to Practice™ feature because the executives on the call were discussing how they constantly evaluate the financial impact (earning power or appeal to donors) of their programs.

This month’s Page to Practice™ feature of The Nonprofit Business Plan: A Leader’s Guide to Creating a Successful Business Model underscores the discussion of financial impact by addressing the economic logic of your nonprofit business model. In other words, business planning is the new black. Authors David La Piana, Heather Gowdy, Lester Olmstead-Rose and Brent Copen argue that business planning is not strategic planning. Rather, it’s the next step after strategic planning—a way to test the economic viability of your strategies. I asked Nonprofit Business Plan coauthor, Lester Olmstead-Rose, to discuss the difference between strategic planning and business planning as well as how they interact. Here’s what he had to say:

CausePlanet: Your book discusses the difference between strategic planning and business planning. Can you briefly touch on this?

Olmstead-Rose: Strategic planning is focused on articulating a strategy or creating a response to an organizational opportunity or threat, which is something organizations need to do all the time. A strategic planning process might identify a business model that isn’t working, such as where the mission impact is low or the organization is not able to pay for its work. But the emphasis in strategic planning is on how you will coordinate your activities and coordinate them to what end.

Business planning specifically tests the operational and economic viability of a major change. It is true that a business plan may pick up where the strategic plan leaves off. Your strategic plan might say, “We need to develop sources of earned revenue.” You can then use the business planning process to identify and test options for doing this. The value of a business plan is in the rigor of the process you go through to test the proposition that a particular undertaking–a program, partnership, new venture, growth strategy, or the entity as a whole–is economically and operationally viable.

CausePlanet subscribers: Don’t forget to register for next month’s live author interview via webcast with Lester Olmstead-Rose about this book.

See also:

Rippling: How Social Entrepreneurs Spread Innovation Throughout the World

Nonprofit Sustainability: Making Strategic Decisions for Financial Viability

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