How can not-for-profit leaders innovate to ensure that they remain relevant, financially viable and true to their purpose? In this article, we explore the case for investing in social sector innovation and practical steps leaders can take to innovate with impact.   

‘Innovation’, which we are now seeing as commonly in not-for-profit strategic plans as ‘financial sustainability’, can be often written off by social sector leaders as merely a buzzword that pleases Boards, and a somewhat tenuous goal. Yet we all know the evidence for investing in innovation is clear. We know that the corporate sector invests a significant proportion of their budget in research and development, but often not-for-profits lack that elusive pot of discretionary funds to invest in this activity.   

From working with hundreds of not-for-profit organisations in recent years on strategy and business model projects in recent years, we are learning that those able to unlock the power of intrapreneurship are not only surviving, but thriving, have greater impact and more engaged staff. Intrapreneurship is when the power of change makers within an existing organisation is harnessed to design new solutions for social impact.    

In Australia, we see a lot of investment in the entrepreneur ecosystem. This happens through funding, working spaces, media attention (we’re all used to seeing and celebrating hip-looking founders who are tackling an issue with a business solution from scratch) and more. We believe the lever of intrapreneurship is being largely overlooked. We believe this needs to change.  

Aside from the obvious benefit of leveraging existing organisational infrastructure, the other advantages of enabling not-for-profits to innovate from within are numerous. These include the fact that those working deeply within the sector have nuanced understandings of social challenges, and they have direct access to those with lived experience of the challenge at hand, who are pivotal participants in the necessary co-design of any social innovation. Furthermore, the deep institutional knowledge of existing not-for-profits informs appropriate safeguards in the innovation process, which mitigates the risk of the potentially ill-informed entrepreneurship approach.  

So what do we need, then, to fuel more innovation from within the not-for-profit sector? Our hypothesis, developed from working with a myriad of organisations, is that there is triumvirate that must come together for a successful innovation process – ideas, capability and capital.  

Ideas 

There are a raft of ideation approaches – be it human-centred design, agile, lean or another method – that fall in and out of favour. Ultimately, the critical success factor we see in generating powerful ideas is to understand what problem needs to be solved and for whom. The key to this is meaningful engagement, involving a range of different stakeholders in processes such as co-design workshops, expert Delphi rounds, and interviews.

Coupled with exploring what is happening across the globe (this can often be done through desktop research), ideas then need to brought together in different scenarios. Tools such as the business model canvas can be handy for this, but the key here is that intrapreneurs are not starting with what we have today, the perspective is focused on what is needed, now and into the future.   

Then it’s about being smart in the way that we test the ideas. For example, crowd-funding campaigns can be a cheap way to market test a product or service. If no one supports the campaign, they’re not likely to purchase it once it’s built, so a lot of investment can be saved using this mechanism. Perhaps slightly less fun, but critical to the testing and implementation of ideas, is financial modelling and action planning.  

Capability 

Of course, once we’ve designed innovations for the future, we then need to return to the present situation. It can be helpful to start with a gap analysis, outlining what is required to deliver the innovative ideas, and comparing these requirements to what we have now. We have found this step is often overlooked, and the new project is often lumped on top of an individual’s existing workload. Aside from capacity constraints, not-for-profits often require skills that the organisation has not needed before, particularly if the innovation has commercial components and the organisation is coming from a history of block funding. Common skills gaps we see include commercialisation capability, business development, marketing and deep understanding of technology. If the right capability is not developed in-house or brought in (and this may be outsourced for a short period or created through partnerships), it is unlikely they innovation will be brought to life.

Capital 

This final piece of the puzzle refers to the investment required to pilot and iterate the innovation. In private sector terms, it’s the seed funding. We often see not-for-profits allocating their entire innovation budget on the ideas phase, as that’s usually where grant funding is skewed. That leaves (near to) nothing for the implementation. Leaders need to be putting forward a case for investment that asks their Boards to dig deeper into reserves to cover the element past the shiny ideas phase. Alternatively, we are seeing some turn to their philanthropic supporters to seek investment for the capability and transition phases, and the bold philanthropists are responding. Philanthropy Australia has long been advocating for greater investment in intermediaries who can help bring expertise to this space. And we’re starting to see interest from impact investors too, through both debt and equity instruments – it’s definitely worth leaders exploring that path if the innovation has the potential for financial return.  

 In addition to the three elements above, there’s also a critical leadership piece around encouraging a culture where it’s OK to fail. One of our organisational values at Spark is ‘love not fear’; this more expansive mindset can help intrapreneurs feel safe to be creative and explore unchartered territory.   

We are really excited by some of the great successes we are seeing in not-for-profit innovation, and believe that by sharing practical approaches and learnings, we can grow this impact together.   

If this article has sparked your thinking and interest, check out our free whitepapers on financial sustainability, cross-sector partnerships and government engagement. Or drop us a line to info@sparkstrategy.com.au to talk all things social impact and social innovation.  

About the Contributor:

Felicity Green is the co-founder and Associate Director of social impact advisory firm, Spark Strategy.  She has a deep expertise in Not for Profit business models, collective impact and is a specialist in social innovation and creating cross-sector partnerships.