Teague Hopkins

Mindful Product Management

Nonprofit organization

Nonprofits Are Harder

Nonprofit startups face all the challenges nonprofits face, plus all the challenges of for-profit startups. The compounded nature makes it more difficult, not less, to start a successful, lean, and sustainable nonprofit compared to a similar for-profit. One of the key pieces that nonprofit founders frequently forget is that not making a profit doesn’t mean you can ignore the revenue side of the equation. You still need to raise enough money to pay for the services you provide (and to fuel growth), whether that is through donation-based fundraising, corporate partnerships, grants, or a fee-for-service model (or some combination of several of these options).

With a for-profit model, when you convince someone to pay money for your product or service, you have also convinced them that you are providing them value equal to or greater than the cost. You have succeeded in creating value, and identifying a revenue stream.

Donation Box by Katherine Harper

In the nonprofit world, value is often provided to one party, while another party pays for it. With few exceptions, beneficiaries are not customers. Of course, donors also receive some value in this transaction, but it’s an indirect value proposition. If you’re starting a nonprofit startup, you need to find a way to create value, convince one party to be the recipient (not always as easy as it sounds), and another to pay for it. Further, sophisticated funders demand proof that the actions your organization takes are, indeed, providing the promised value, so you must measure the results of your value creation and compare them to other methods of value creation to ensure that you’re being as effective as possible.

Have you started a nonprofit organization? We’d love to hear your story.

It’s Time for Nonprofits to Get Lean

Want to change the world, but have limited time and money at your disposal? Join the club.

You can’t drive change if you pour your heart and soul into an inefficient engine. You need to get lean.

Nonprofits and social movements need to learn from the lean methodology, or risk wasting resources and throwing away the most precious commodity, attention. The principle of lean methodology is to produce maximum value with the minimum amount of wasted resources, and nonprofits are often guilty of failing this test.

You’re not always building something for your constituents. Whales don’t use web apps.

Nonprofits have a vision of a better world, and a theory of how to remake this world into the one they envision. For a nonprofit, the goal is change, and waste is any resource spent that doesn’t help achieve that change.

Is Occupy Wall Street a Lean Nonprofit?
Occupy Wall St. has garnered a lot of attention, but is it lean?
 Photo by Bob Jagendorf

Waste can cost you money or human resources, but when your goal is change, waste can also squander attention. If your organization is getting attention and failing to use that to drive change, you are wasting attention.

In an era of nonprofit proliferation, it is even more important that nonprofits learn to be lean. Attention is a finite resource. If your organization or movement is getting attention, some other organization is not. If two nonprofits are competing for attention around a specific issue, the problem becomes even more pronounced. If you capture attention but don’t turn it into change, you are not only wasting the attention, but you are preventing another organization from catalyzing that attention into change.

Don’t just demand attention. Create change.

The Origins of Lean

The lean methodology began in the manufacturing industry. The basic principle is to produce an increment of value with as little waste as possible. In manufacturing, an increment of value is a high-quality physical good. Waste takes many forms – including defects in production, excess inventory, unnecessary processing, and rework.

The lean startup movement, pioneered by Eric Ries, applies these principles to the startup community. In a lean startup, value takes a different form. To paraphrase Steve Blank, a startup is an organization searching for a business model. Since the purpose of the organization is to discover something, not to create a product, the increment of value is validated learning. Startups create value by testing assumptions and proving or disproving hypotheses. After the business model and growth model are validated, the business ceases to be a startup, and can focus on scaling.

[For a good introduction, checkout Ries’s book, The Lean Startup]

Lean for Nonprofits

Nonprofits and social movements are another animal. They still need to reduce waste – but value lies neither in validating hypotheses (unless the nonprofit also happens to be a startup, a topic for another post) nor in producing physical goods. You’re not always building something for your constituents. Whales don’t use web apps.

For a lean startups, it’s about learning. For a lean nonprofit, it’s about impact. Lean nonprofits create increments of value by enacting, provoking, or inspiring change with as little waste as possible.

It’s time for nonprofits to be more lean.

Less waste, more change.

Want to learn more? Let THG help you change the way you change the world.

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