Posts Tagged ‘drivers’

Strategy from the inside-out: the core and the driver

This is a series of articles, of which this is the second installment, from Mike Stone that explores the core concepts of a strategic planning approach for nonprofits. Mike welcomes feedback on these concepts, which will be included in a book manuscript. See the first installment here.

The elements of the organizational core

Traditionally, strategy development has begun with a review of the statements of vision and mission. Without a doubt, vision and mission are indispensable to the process of strategy development. But that value is limited to providing the broad parameters within which a particular strategy is developed. In other words, while vision and mission are valuable in providing the context for strategy, they are ineffective as drivers of strategy.

When developing strategy from the inside-out, defining the organizational core is the foundational task. The organizational core is comprised of the four organizational characteristics contained in the following statement:

  • Your defining qualities aimed at the highest priority needs of your primary clientele within your domain of operation.

Each of the four elements of the organizational core is described in greater detail below.

Defining qualities

The defining qualities are those competencies, values, or beliefs that guide the work of the organization. Though it does not need to be a distinctive quality, a specific attribute must meet three criteria to be considered defining: 1) it must speak to how the organization does its work; 2) it must be recognized by key stakeholders as adding value; and 3) it must contribute directly to the ability of the organization to create impact in the fulfillment of its mission. Defining qualities may be in the form of specialized training, content expertise, or a particular program approach or philosophy.

Primary clientele

The primary clientele is defined by the characteristics and/or circumstances of the people who benefit most from the work of the organization. For purposes of strategy development, an organization’s primary clientele can be categorized in one of three ways: [1]

The general population, meaning that anyone who chooses to participate is able to benefit from the work of the organization. Examples include a public library, a nature preserve and a local theater company.

A targeted population, defined as a group sharing a set of common characteristics or circumstances that result in similar needs or challenges. Examples of targeted populations include low-income families, at-risk youth and low-achieving students.

A specialized population, defined as a group with a unique set of characteristics or circumstances that require expert knowledge or specialized skills to address. Examples of specialized populations include such diverse groups as adults with developmental disabilities, immigrants and families facing bankruptcy.

Highest priority need

Each nonprofit operates on the belief that its actions will bring about a set of desired conditions for its primary clientele (remember the vision and mission statements). Typically, some form of barrier – social, economic or cultural – prevents those desired conditions from being realized. The highest priority need, in simple terms, is the key resource, asset, or intervention that is required in order to remove the barriers that prevent those desired conditions from coming into existence.

Primary domain

This element of the core ensures that the organization understands the market space within which it operates. The domain is recognized as the sphere within which a nonprofit finds its clients, funders, competitors and potential collaborators. Though often defined by geography, a domain can be defined as a specific industry, such as a state mental health system; or as a special interest, such as environmental preservation.

Harvest home example

Below is the organizational core of Harvest Home, an organization founded in the 1800’s as an orphan’s home and which now offers comprehensive behavioral health services for children and youth:

Defining qualities: Expertise in providing intensive, holistic therapy and support in a residential setting

Primary clientele: Children and youth with severe behavioral health issues (specialized)

Highest priority need: Comprehensive support in a highly-structured environment

Primary domain: State-wide, via county-based referrals

Core mapping

Once established, the organizational core serves as the foundation for the remainder of the strategy development process. Core mapping is a process that “forces” nonprofits to make judgments about the relative value of each program or service by providing a sorting mechanism based on a common point of comparison. The basis for the determination of relative value is the relationship of each program to the organizational core. Programs and services are mapped according the following criteria:

Programs that address directly all aspects of the organizational core are considered to be primary.

Programs that deviate from one element of the organizational core are considered to be secondary.

Programs that deviate from two or more elements of the organizational core are considered to be marginal.

The programs offered by Harvest Home are mapped as follows:


Harvest Home has been a residential facility since its founding in the late 1800s. Though its services have changed in accordance with the changing needs of youth, it has always been a place-based service, supplemented by an on-site school so that youth under the care of Harvest Home could continue to attend school regularly. Thus, both the residential program and the school are primary services based on the definition of the organizational core. And while the out-patient counseling programs serves youth in circumstances similar to those in residence, it is considered secondary because it does not include the full continuum of residential support.

Now what?

Several questions usually emerge at this stage of the strategy development process. Among the most common are:

What is the nature of our strategic growth moving forward? Should we do more of the same? Develop new programs and services? Reach new populations?

Should we stop providing the programs that are secondary or marginal?

Should we redefine our mission and organizational core to accommodate what we are doing now or aspire to do in the future?

I offer one response to both questions: It depends. Specifically, it depends on how you arrived at where you are now and, more to the point, where you think you need to be positioned in the future to create the greatest mission impact in the most financially-viable manner.

That is the subject of the next installment.

[1] The development of these categories was informed by Michael Porter’s article, “What is Strategy?”

See also:

Nonprofit Strategic Positioning: Decide Where to Be, Plan What to Do

The Nonprofit Strategy Revolution: Real-Time Strategic Planning in a Rapid-Response World

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Strategy from the inside-out: an introduction

This series of articles, of which this is the first installment, from Mike Stone explores the core concepts of a strategic planning approach for nonprofits. Mike welcomes feedback on these concepts, which will be included in a book manuscript.

“In an effort to save the bottom line, the modern nonprofit risks losing its soul.”– Bill E. Landsberg (“The Nonprofit Paradox: For-Profit Business Models in the Third Sector,” The International Journal of Not-for-Profit Law Volume 6, Issue 2, January 2004)

The Need for a Nonprofit Model of Strategy

One challenge in the development of nonprofit strategy is the absence of an approach that is sensitive to the nuances of the nonprofit environment. Granted, basic business practices and controls are essential to a healthy nonprofit. But the traditional for-profit models of strategic planning do not serve nonprofits because they ignore the fundamental differences between the two sectors. For example:

•          Nonprofit growth is constrained by a social mission. The overriding goal of a for-profit company is to stay in business, usually by expanding markets and increasing profits. For all the social good that may be created by for-profit businesses, the fact remains that they are unencumbered in their desire to shift products and services when a market opportunity presents itself. Not so for nonprofits, which operate under the influence of a governor of sorts, keeping the organization from exceeding the limits of its stated social mission.

•          Nonprofits cannot create uncontested market space. For all the wisdom of the pioneering approach to market expansion, “blue oceans” exist for nonprofits only if those metaphorical waters are populated with potential clients and willing payers. Whereas for-profits can respond to consumer demand based on the traditional free market relationship between buyer and seller, a nonprofit must have both consumer need and third-party support in order to succeed in a given market.

•          Bigger is not always better. The economic reality is that many nonprofits lose money on every client served (which is why the traditional market will not support the work and consequently, why fundraising is so important). For these nonprofits, reaching more people, a common strategic goal, means losing even more money. Strategic growth, a more appropriate goal, may mean doing less, perhaps for fewer people, but with greater precision and intensity. Greater mission impact is always better.

An Alternative Approach to Strategy

The central premise of my approach to strategy development is that nonprofits, like people, are at their best when they start from an inner core of self-awareness and then move outward into the world. For individuals, this means not trying to be someone you are not. For nonprofit organizations, it means pursuing mission impact rather than growth for the sake of growth. Individuals call it vocation. For nonprofit organizations, it is called strategy.

At its base, strategy is about organizational positioning. More specifically, nonprofit strategy is about finding that organizational “sweet spot” that allows for the greatest amount of mission impact in the most financially sustainable manner. The strategic position centers on the formulation of position statements in three areas:

–          The Program Position, which states what you will do, for whom, and to what end.

–          The Market Position, which defines how you will relate to those within your domain of operation.

–          The Resource Position, which outlines the desired mix and sources of funding.

For nonprofits, strategy inheres in the bringing together of the three elements of organizational position into a cohesive vision for the nonprofit. But like young college graduates trying to find their way in the world, the greatest challenge for nonprofits often is knowing where to start.

The Organizational Core

Building strategy from the inside-out begins with two fundamental questions:

1.         Who are we as an organization?

2.         How can we build on who we are to create the greatest mission impact in the most sustainable manner?

The starting point for nonprofits strategy development is the organizational core. The organizational core represents a distillation of the organization’s activities to reveal the basic elements – the organizational essence – from which its impact emanates. The organizational core is comprised of the four organizational characteristics contained in the following statement:

•          The use of your defining qualities to address the highest priority needs of your primary clientele within your domain of operation.

The organizational core is the building block of nonprofit strategy. To begin, the core provides a framing mechanism through which current programs and services are assessed for strategic fit. This is useful particularly in organizations that face challenges related to long-term sustainability. And as organizations look forward, the core provides a lens through which the organization can identify strategic growth opportunities.

The strategy driver is derived from the organizational core and provides the impetus for strategic growth. Using the organizational core as the starting point, nonprofit strategy can be driven in one of three ways:

•          A client-driven strategy builds on current efforts to meet the highest priority needs of the organization’s primary clientele.

•          A service-driven strategy builds on the defining qualities (i.e., competencies, expertise, etc.) and seeks to apply and/or adapt programs and services to new populations with similar needs.

•          A domain-driven strategy takes as the starting point the needs, interests or priorities of the key stakeholders within its defined domain and seeks to address additional unmet needs within that domain.

It takes a great amount of thought, reflection and analysis to define the organizational core and identify the appropriate strategy driver. And once these two foundational elements are identified, there are a host of other considerations, questions and possibilities that will come into play. But if we begin from a point of clarity about who we are as an organization, we are more likely to avoid temptations and distractions that, while attractive in the short run, may in the long-run result in strategic confusion.

In the next essay, I will provide an example of a nonprofit using this approach to organizational strategy. The essay will highlight the process by which the organization developed its organizational core and identified its strategy driver.

Stay tuned!

See also:

Nonprofit Strategic Positioning: Decide Where to Be, Plan What to Do

Nonprofit Sustainability: Making Strategic Decisions for Financial Viability

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