Ten questions to open the door to better margins and greater impact…
You can’t cut your way to success, and with the continued downward pressures on sector income, neither can you assume that a rising tide of philanthropy or state funding will raise your particular boat. Charities who are struggling to balance budgets will have to make any reversal in fortunes happen by themselves, and one way to do that is by growing profitable earned income.
As most service delivery charities well know, making profit on earned income is hard, particularly if other organisations are offering similar solutions to you – margins are the first casualty in any commoditised market. The only way to avoid being a casualty, is to avoid becoming a commodity, which means offering something distinct, something uniquely valuable, something innovative.
Research has shown many times, that businesses who invest in R&D and innovation during the toughest phases of their economic cycles come out the strongest. And those that don’t innovate, either in their core markets, in new markets, or by developing new business models, often don’t make it out of the cycle at all. Since over half of the sector’s funding comes from earned income, I’d hazard that these insights are every bit as relevant to charities as they are to businesses.
Innovation capability is patchy in most organisations. A charity might innovate well in some of their front-line services, but not in their operations, sales process or pricing models. And organisations rarely look to innovate around the fundamentals of what they choose to do. But taking a more strategic approach to innovation can increase margins, accelerate growth, and open up new ways to have a positive impact.
Here are ten questions to will help unleash your capacity for strategic innovation.
- Clear scope for action: Knowing clearly where you will play, and where you won’t, makes innovation decisions simpler, faster and more objective. How clear are you on your scope?
- Pipeline of ideas: these might come from employees, beneficiaries, partners, academia, paying customers or entirely different industries. Who in your organisation is continually searching, soliciting and refining ideas?
- Strategic challenges: a clear strategy should be based on the big challenges you are aiming to solve. Are you clear on your greatest opportunities for impact? The most profound gaps and needs within your theory of change?
- Ambitious priorities: earned income ideas should be prioritised on their potential impact and potential profit only. Quick wins kill strategic investment. How ambitiously do you prioritise your projects?
- Dedicated people: part time teams don’t innovate well – they have too many draws on their time and will always be measured on their day-job. Do your innovation projects have dedicated people who are passionate about making them work?
- Senior sponsors: new ideas are fragile and easily destroyed. Innovators need air-cover from senior players in order to thrive and succeed. Do your executives promote their innovation portfolios?
- Fast route to failure: failure is inevitable in innovation. The faster and cheaper you fail, the more time and effort you can invest in successes. How quickly do you expect projects to prove themselves, one way or the other?
- Frequent gateways: at Shell, less than 10% of innovation ideas make it to market; the pipeline is aggressively weeded right the way through. How frequent are your gateway reviews?
- Second chances (and third): occasionally great ideas will be kicked out too soon. The archives of 3M have dozens of examples where great ideas refused to die. Would you resurrect an idea if someone was prepared to put themselves completely on the line for it?
- Feedback and reward: celebrating failure as much as success, praising effort and creativity, is the flywheel that keeps the innovation cycle running. Who does this in your charity and how visible is it to the rest of the organisation?
Final Thought: A strategic approach to innovation doesn’t need to be expensive, but it does need to be energetic and embedded into the heart of the organisation. What can you do over the next few months to accelerate the pace of strategic innovation in your organisation?