Too few nonprofits are leveraging their strategic edge, writes Kevin Barenblat for Harvard Business Review.
Everybody knows nonprofits benefit from tax exemptions, but having to pay less tax is not the only advantage they have when it comes to strategy.
In order to make the most of their nonprofit status, these businesses must learn how to turn their apparent weaknesses into strengths, an approach Kevin Barenblat refers to as “nonprofit judo”.
Barenblat has spent time observing nonprofits and has identified “patterns in the strategic choices successful leaders make”.
Here are four lessons leaders of nonprofits should learn:
1) Focus on an underserved market segment. Success is defined differently for nonprofit and for-profit businesses.
Successful for-profit businesses develop a product, segment customers based on profit potential, and then focus their energies on the market segment their analysis suggests will be most profitable.
Successful nonprofits identify an underserved market segment and focus on developing a product to serve its specific needs.
TalkingPoints, a nonprofit that connects parents and teachers, illustrates this difference. There are numerous for-profit platforms created for the same purpose, but TalkingPoints is able to focus on low-income families of colour. If it were a for-profit, investors would pressure it to focus on the most profitable market segment instead.
2) Share for the greater good. Unlike for-profit businesses, who are focused on staying ahead of the competition and obsessed with privacy, nonprofits are willing to share resources for the greater good, which encourages others to do the same.
For example, Crisis Text Line, a nonprofit providing youth crisis-intervention via SMS throughout the US, is able to remain free thanks to volunteer counsellors and partnerships with AT&T, Sprint, T-Mobile and Verizon, which don’t charge for messages sent to the hotline. These companies also omit texts to the crisis line from bills, protecting young people from abusive family members.
Crisis Text Line has also created crisistrends.org, aggregating millions of anonymous text messages into the largest open-source database of youth crisis behaviour in the US.
3) Partner with other nonprofits. When it comes to marketing, the most successful nonprofits are able to take advantage of opportunities not available to for-profit businesses.
For example, Khan Academy, a nonprofit educational organisation, was able to partner with the College Board, the non-profit administrator of the SAT test in the US, to create SAT Practice, a free tool for preparing for the SAT test. SAT Practice is used by more than half of students taking the SAT test, and Khan Academy has access to students it could never reach on its own.
4) Don’t fear fundraising. “Nonprofits often view fundraising with dread, wanting instead to focus on fulfilling their mission,” writes Barenblat.
But if nonprofits treat fundraising in the same way for-profit businesses treat sales – considering the benefits of their service to funders as well as the market segment they serve – they can have the best of both worlds.
Careervillage.org is a nonprofit providing free, crowdsourced career advice for low-income students. Realising that companies benefited from well-informed youths with relevant experience, founder Jared Chung was able to entice corporate partners and sponsors such as Barclays, ESPN, Dell, LinkedIn and PwC.
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“Social entrepreneurs can wield unexpected power if they design strategies that exploit the unique advantage of nonprofit status,” concludes Barenblat.