Faced with a rapidly changing operating reality and highly competitive funding landscape, how can non-profit organisations adapt their business models to survive, thrive and achieve their mission?
A diverse group of representatives from national and international NGOs, the banking and finance sectors, business, think-tanks, philanthropic organisations and UN agencies, were brought together recently by the Luc Hoffmann Institute to begin to answer this question.
A business model describes how an organisation plans to create, deliver and capture value – be it economic, social, environmental or cultural. It also defines the guiding vision and objectives, target audiences, and how to achieve long-term financial viability.
Many now see non-profits as being able to achieve things which governments and businesses cannot. However, there is growing pressure from donors and the public for non-profits to become more professional and do better at demonstrating impact. Many non-profits are keen to adapt or diversify their business models – but often lack the relevant expertise to do so. Yet there is a growing acknowledgment that, as Einstein put it, “Insanity is doing the same thing over and over again and expecting different results.”
The aim of the event was to explore innovative business models that can allow non-profits to deliver sustained impact; to create a new community; and to help guide the Luc Hoffmann Institute and other nature conservation organisations as they develop new strategies.
With the lines blurring between business and the non-profit sector, many new approaches are emerging – including social enterprise and impact investing. Among the examples highlighted during the convening were Internet of Elephants, a social enterprise that develops online games to engage people with the natural world; digital apps that reduce food waste, connecting farmers to consumers or retailers to charities; and MADE51 which connects refugee artisans to global markets.
Several challenges were cited, notably how to mobilise the relevant financing mechanisms – from philanthropy to impact investing – towards a new understanding of the non-profit sector. A substantial discussion emanated around risk – the flip side of innovation – and the need to encourage risk-taking by the sector. It was acknowledged that donors and investors need to up their risk appetite too, for example by supporting early stages of projects rather than waiting for a project to mature before committing. Other challenges outlined were the need to energise the conservation community with technology and creativity, diversify the management and skill set of nature conservation organisations and agree on what are acceptable commercial funding sources or approaches. It was felt that the concept of ‘conservation business’ is more acceptable now than it was a decade ago.
There was also an interesting diversity of language. Participants used different terminology and had varying perspectives on terms such as value, risk and reward – which do not translate easily from the corporate sector to the non-profit world. This diversity highlighted the richness of perspectives, but also the need to work toward a more shared understanding of language in this space. Perhaps most tellingly, the term ‘non-profit’ itself was seen as a potential barrier to progress, as it did not seem to matter whether an organisation is non-profit or for-profit, so long as it works for impact.
It became clear that until now there has been very little research in the area of non-profit business models – and participants agreed that this was a fertile area for discussion and were keen to promote the debate. We hope many will stay actively engaged in this nascent community.
If you are interested in this issue and would like to be part of the evolving conversation please contact Adrian Dellecker, Head of Programme, Luc Hoffmann Institute firstname.lastname@example.org
New horizons for non-profit business models – blog post by PhD candidate Judith Sanderse