The term ‘innovation’ seems to encapsulate the thinking of the 21st century. With such drastic advancement in digital technologies over the past decade, a new era of globalisation and interconnection is upon us, and with it, the attitude that creative innovation is not only possible for every organisation, but absolutely essential if it wants to continue to stay relevant.
The Not-For-Profit (NFP) sector is often overlooked in the conversation about innovation. Too often, they consist of traditional structures bound by conservative thinking, models that prioritise top-down endowments, with outdated appeals and little investment into innovative fundraising incentives. The result is an industry of organisations that are trying to tackle important social issues, but struggling to break out of old habits, utilise new technologies and grasp opportunities to really improve the way they work.
A Changing Landscape for NFPs
The global community is moving away from the act of simply donating. As the Index of Innovation in the Australian Not-For-Profit Sector Report found in 2015, much of the fundraising of the NFP sector relies on old fundraising methods such as mail-outs and street appeals, methods that just don’t appeal to the technologically savvy generations today. They reported that while giving amongst the Gen X and Gen Y has increased, the largest demographic of donors is still those over 60. Hundreds of thousands of charitable organisations are campaigning for donations that are essential for the survival of their cause, but the younger the donor, the more discerning they are about where that donated money goes. It is now more important than ever to create and utilise innovative and engaging ways to compete for the citizen’s wallet share to build a donor base for the future.
Stephen Mally, fundraising veteran and Director of boutique consulting firm Fundraising Force, believes that there is no where near enough innovation in the NFP sector, mainly because few NFPs have the time or the incentive to take risks. “There’s a lot of copying happening across the sector,” he says. In particular, Mally believes that NFPs are often unwilling to experiment with new strategies, using similar and outdated methods year in and year out. “All you need to do is go to your letterbox this time of year. I’ll have 20 appeals in there and if I lie them across the table, firstly they have all arrived on the same day and second of all, they all look the same,” he says.
Being innovative means taking risks. And in an industry that is characteristically both time and budget poor, it is too often the case that charities just cannot risk the chance of failure. “Charities don’t spend enough time on planning because they’re short staffed, they’re short budgeted, and they just have to do do do. So they do these tasks day in and day out without even questioning whether their fundraising methods are having an impact,” says Mally.
A picture of Innovation in the NFP Sector
Tony Lee from Digital Strategy Agency ntegrity, says that the digital economy and intense competition has sparked a rapid change in the way people engage with an issue. “The marketing discipline has changed, and as a result, we see recurring issues such as skills and resourcing shortfalls, siloed communications, and lack of time and vision to truly take NFPs beyond what they are already doing,” he says. “What is needed for innovation is beyond business or digital transformation: a cultural and mindset shift is the key.”
Lee highlights several ways that NFP should adopt this mindset shift to fundraising. “They must first adopt a growth mindset – that is a desire to evolve, improve and nurture their connections to continue their growth trajectories,” he says. He also believes that NFPs need to have the right communication, tools and procedures to truly engage internally as well as with the customer in a social cause.
In a rapidly changing digital landscape, there can be no doubt that innovation is sorely needed. And while many NFP organisations seem unwilling to shake off old habits and entrenched methods, The Innovation Index last year found that there are also plenty who have taken on new fundraising approaches to newfound success, paving the way for innovation in the NFP sector.
There are several characteristics that make a charity’s funding methods stand out from the rest, but key innovations in the NFP sector include; the implementation of commercial strategies for social impact, the use of social media to creatively crowdfund new startups and the effective collaboration and partnership with external companies to further an NFP’s vision. An innovative charity will utilise these methods to bring in new funding streams and sources. In other words, NFPs are innovative if they adopt a driven, goals-orientated ‘enterprising’ approach to fundraising.
Commercial Strategies for Social Impact – Social Enterprise
A good example of an NFP innovating in these ways is Thankyou, named as one of the top 10 most Innovative NFP Organisations in 2015. Founded in 2008 by Daniel Flynn and Justine Flynn, it sells bottled water, food and body care products, using the profits to provide safe water, hygiene and sanitation to people in need around the world. To date, Thankyou has provided over $4.6 million to projects across 17 countries and it did this by turning the traditional fundraising model on it’s head.
Thankyou is innovative because it applies commercial strategies to maximise social impact. In other words, it identified a consumer demand (we all buy bottled water and sanitary products) and paired it with a social cause (a global need for clean water). This new path for fundraising is known as the ‘Social Enterprise’ and is capturing the young philanthropist’s wallet share. Rather than appealing directly to the public for donations, social enterprises provide a commercial exchange, and we as the consumer are more willing to buy a product if we know the profit is for a purpose.
Professor Fara Azmat is a Senior Lecturer at Deakin University and researcher in corporate social responsibility and entrepreneurship in developing countries. She says that social enterprises are innovative when they secure and diversify funding streams.
“Social enterprises must secure potential source of funding and look at innovative ways – such as crowd funding, use of social media, and the internet – to make their idea happen,” she says. “The advances in technology provide the entrepreneurs with a huge opportunity for passing on their ideas and pitching it to potential investors and also create a positive word of mouth.”
From Social Media to Crowd Funding
An astute use of social media to further existing communication methods is a key innovation in the NFP sector. Obviously, social media has reduced the cost and furthered the outreach of communication methods for charities, but it has also opened up entirely new possibilities for funding streams.
Crowdfunding is a way of using social media and the internet to bring together supporters of a project to pool their money and get something off the ground. In return, donors receive a creative, often personalised reward in recognition of their support. Philanthropy consultant and blogger at ozphilanthropy.com, Sharon Nathani says that crowdfunding and giving circles break away from traditional approaches to donor development. “It creates a different sense of belonging, ownership and pride for supporters, they provide ways of reimagining philanthropic communities,” she says.
When applied to the NFP sector, crowdfunding allows small startup charities to appeal directly to young audiences online, providing a way for supporters to actively participate in a common cause, track process, and feel personally involved with and rewarded for the impact of a project. Crowdfunding is a key innovation to the traditional NFP model and reflective of a new generation of digital savvy entrepreneurs who are applying their technical skill set to social engagement. “The benefits of these types of campaigns are in their ability to touch potentially larger and possibly younger audiences, “ says Nathani. “But as with any fundraising, the test is in donor retention and relationship management, and how to keep the loyalty and attention of those who give through these mechanisms.”
An excellent example of this is Watsi, a crowdfunded startup from the heart of tech-mecca in San Francisco. The app allows anyone to directly fund life-changing healthcare for people around the world. Donors can directly view the stories and needs of patients, pledge a sum towards the medical costs of a chosen sponsor, and every month receive emailed updates of their progress. 100% of every donation made through Watsi goes directly to funding the healthcare of the chosen patient. To date, Watsi has raised over $5 million and helped over 5000 patients. What sets Watsi apart is its mentality towards growth and innovation, prioritising the same technological marketing strategies as a for-profit startup, while still keeping to its core mission as a non-profit.
Partnerships and Collaborations for Expanding Mission Impact
Cambodian Children’s Fund (CCF) is another charity that recognises the need for exploring innovative fundraising methods. Established in 2004 by Australian philanthropist and ex-President of 20th Century Fox International, Scott Neeson, CCF lifts Cambodian children permanently out of poverty by implementing long term education and leadership programs within the community. Recognising the need for external collaboration, CCF has established partnerships with TOMS Shoes and World Housing as an intrinsic part of its fundraising model, innovating and indeed extending the outreach and impact of the CCF core mission.
Much like the Thankyou initiative, these partnerships utilise existing consumer-demand for a positive social impact. TOMS works on a one-for-one model where for every pair of shoes sold, a pair of shoes is donated to CCF who can then distribute these donations through their on-the-ground facilities in Cambodia. TOMS has helped CCF size and distribute thousands of pairs of shoes to children in the CCF leadership program.
World Housing meanwhile, works to facilitate the flow of capital from individuals, businesses, and real estate partners to fund the construction of new homes and communities in the developing world. So far, over 360 homes have been built for deserving families with children studying at CCF, and these are not just homes but entire villages that provide gardens, social areas, clean water safety and security.
Rather than seeing other NFPs as competitors, CCF builds and maintains lively mutual relationships with outside service suppliers. These networks not only provide a way of sharing and maximising resources and funds but also a co-productive way of sharing ideas and creatively collaborating in a way that helps the maximise sustainable impact.
Foregrounding Innovation in the NFP Sector
Innovation doesn’t have to stop with the for-profit sector. The crux of the matter is that new digital potentials have not only furthered existing fundraising models for NFPs, but also opened up entirely new ways for charities to tell their stories, capture young audiences and collaborate across sectors. Charities like Thankyou, Watsi and Cambodian Children’s Fund are taking advantage of these new potentials, just as NFPs everywhere should be exploring these options.
Interview with Stephen Mally from Fundraising Force
What is your understanding of innovation in the NFP sector?
SM: Now you want my opinion on it I believe there is not enough innovation in our sector, particularly in the Australian NFP sector. And that might sound critical but at the end of the day, Australian charities are doing the same thing year in year out. Without any eye on measurement, without determining whether or not the activities that they’re doing are having any impact. Too many charities do the same thing year in year out and also anticipate that they’re going to get different results, when they do the same thing year in and year out. So I find it frustrating that there’s not enough innovation happening and that there’s a lot of copying happening across the sector. All you need to do is go to your letterbox this time of year and I’ll have 20 appeals in my letterbox and I can lie them across the table. Firstly they’ll all arrive on the same day and second on all, they all look the same.
Why do you think it’s hard for NFPs to prioritise innovation?
SM: I think they don’t take to plan and they don’t take the time to measure the impact of their activities. If you look at the reporting and the analysis that happens across the sector, its a bare minimum. And in fact, a lot of the measurement that happens is done by the same suppliers who are hired to generate, in that example, those mailbox appeals. So they’re self measuring and self-reporting. Shame on the charities for not conducting independent analysis of reporting on those activities and shame on them for relying on the suppliers to give that report. So that’s just one example. I also think it’s not only a lack of analysis but also a lack of planning. Charities don’t spend enough time on planning because they’re short staffed, they’re short budgeted, and they just have to do do do. So they do these tasks day in and day out without even questioning. Ask a charity how many appeals they do a year and they’ll say four. Ask five more charities and they’ll give you the same answer, But ask them why they do four appeals and they would never be able to tell you. They can’t tell you if it’s the right number, the right time or if they’re asking in the right way. I mean appeals in terms of direct marketing because it’s so abundant in our sector. They send out mass appeals through the mail or they might do a multi-channel approach in terms of telemarketing and some electronic marketing in that mix and everybody is doing the same thing at the same time and nobody is standing out as a result of that because if you’re not innovative and you’re not doing something that is out of the norm you’re hidden amongst the masses and that’s bound to be frustrating. I think if I was the head of fundraising for a top charity in Australia, Id want to make darn sure that what I was doing was at least slightly different from my colleagues so that I stood out. Whatever it is you gotta stand out because everything blends together.
How have digital strategies like crowd funding and viral social media campaigns changed the landscape for NFPs? Should they be keeping up with those trends?
SM: I think it could change the landscape but not enough charities are jumping on the bandwagon. There are very few charities that one could name that are keeping ahead of the curve. And I think those platforms and those types of strategies could help charitable organisations stand out amongst the landscape. I just think that they feel that they don’t have time they don’t take the time to plan appropriately to execute those strategies.
So what do you think would make someone more likely to give to a charity?
SM: Quite frankly none of this is rocket science. You give to a charity because you’ve got an affinity with them. Whether it’s a health charity because you’ve got a family member or a friend or you yourself and dealing with a health issue, maybe it’s a university where you went to school. Or its a charitable organisation that represents a cause that you believe in, you’ve got an affinity with that organisation and you give as a result. You might also give because someone ASKED you to give. And in Australia, in my opinion as an American transplanted here, we don’t target people’s heart-strings enough and we don’t ask often enough. So if a charity is only asking less than four times a year, they’re not asking enough because when you’re not in someone’s letterbox someone else is. So your competition beats you to the punch so to speak.
How important is a business-minded outlook for NFPs?
SM: Charitable organisations see themselves as very different to the corporate sector, and I believe that we have more in common with the corporate sector than we have differences. At the end of the day, while we don’t return dividends back to our shareholders in terms of stock, we certainly do return dividends back to the public sector. And while we’re meant to be a NFP, we certainly can turn a profit at the end of the year and keep that on our books. So while we don’t have as much difference from the corporate sector as we’d like to believe and therefore there are things that the corporate sector does that we could emulate in the charitable sector, there’s lots of stuff happening out there that we can beg borrow and steal in terms of great marketing strategies that Commbank, NAB or Telstra might be deploying, we can use that and implement it in our sector.
Do you have any imparting wisdom to share?
SM: Lots of people ask me when I’m doing fundraising trainings, how fundraising is different in the US from the UK and Australia. And Australian’s often feel like they’re ‘behind’ other countries and in fact Australian NFPs are quite innovative in terms of their regular giving programs, what they ask donors to give, signing up automatic transactions. Australian charities are light years in front of the US in terms of giving and other areas so I often times get asked how different is it in the US and UK and in terms of giving Australia gets a lot of credit compared to their US counterparts. The key difference is, Australian NFPs are less diverse in their fundraising compared to their US counterparts. US counterparts are raising far more in the nature of gifts, corporate partnerships and trusts and foundations are just more diverse in terms of the fundraising portfolio. So I hope that the Australian sector becomes more diverse in terms of their fundraising portfolio and perhaps less reliant on regular giving so that there’s less risk all around, we’re not putting all of our eggs in one basket.