Beyond fundraising: New business models for social progress
We recently wrote about the death of fundraising and the threat to traditional ideas of charity as people embed ideas of impact and purpose into every aspect of their lives.
As with other long-term trends, this accelerated during the pandemic. Everything has become fluid. Governments have made unprecedented interventions and businesses are getting serious about their social purpose. Charities in the UK have asked for (and mostly not got) additional support.
This raises some big questions. What is the proper role and relationship between the state and charities? Between business and charity? What can these sectors learn from each other? What’s the role for the voluntary sector if more and more “non-charities” are moving into this space? What’s the difference between a charity that earns some of its income and a business with a social purpose? Does it even matter?
Importantly - and practically - should charities stay in their lane when no-one else is?
The pandemic has challenged charities to go back to basics. How do they have an impact? How do they turn time, money and energy into good outcomes?
Looking at your business model is one way of thinking about how you can serve your mission not only today, but for the long-term.
A charity that receives voluntary donations and uses that to support beneficiaries is just one way to have a positive impact on society. It’s the traditional way we tend to think about “charity”. The idea that this is the only or best way to organise for social progress is outdated. (More than that, in many contexts, even the idea of “beneficiaries” needs review. Are you doing something “with” people or “to” them? Did they ask for your support? Who are you accountable to?)
If you want to have maximum impact in service of your vision, the answer is almost certainly not to just continue with your current model of working.
To simplify massively, larger charities tend to be risk-averse organisations set up to deliver projects and programmes. They tend to think annually and operationally. If you want to think about new business models, it demands a different way of thinking about risk, time horizons, investments, and failure.
In practice, many charities already have hybrid business models. Ambitious charities are thinking about how they deliver impact in new ways. The best ones are driven by a clear definition of their purpose, a curiosity for innovation, good governance and solid partnerships. For example:
Encouraging entrepreneurialism for patient impact: In 2019, Cancer Research UK pledged to invest at least $25m in a commercialisation fund, working together with the venture capital firm SV Health. CRUK will use its network of research centres to identify research that can be brought to the market. This approach should mobilise more private capital to beat cancer, connect the research they fund to patient impact and potentially get a future financial return. In the words of CRUK: “We need to encourage more entrepreneurialism if we want to get more medicines to patients to beat cancer.”
Stimulating tech innovation for vulnerable children: To scale their impact and encourage innovation, the Children’s Society partnered with Bethnal Green Ventures to fund tech ideas that help vulnerable young people. Ventures in this programme (which can be for-profit and not-for-profit) receive support and training from both BGV and the Children’s Society, benefiting from their specific expertise.
Getting businesses to pledge their revenue for a better planet: 1% for the Planet is an initiative by the founders of Patagonia. It does not seek to collect direct donations, but is a branded membership model businesses can join. Members pledge 1% of their revenues and are also linked to environmental non-profits to whom they can donate these revenues.
Selling refugee-made products to improve livelihoods: Made51 is a home decor and accessories brand by the UN refugee agency UNHCR. It connects local social enterprises with refugee artisans who can use their skills and traditions to craft products. Made51 then works with strategic partners to commercialise this. Instead of looking at refugees as “helpless beneficiaries” it looks at their untapped potential, while also leveraging the UN mandate of protecting and supporting refugees.
The benefits and the challenges
Drawing on our experiences, there are four ways in which business model innovation can help serve your mission, but there are also four key challenges.
Four benefits
Results: New business models can mean new impact. In the Cancer Research UK example, they hope to move treatments along the pipeline more quickly. The Children’s Society hopes to unlock new innovations. This impact would be much harder to achieve using traditional approaches, but complements the existing work.
Resilience: Diversification builds resilience. New business models provide some protection from adversity and uncertainty - be that a pandemic, long-term trends or new regulations.
Reach: New business models can help reach audiences that might not engage in traditional fundraising. It also holds the potential to increase the range and type of people you serve - and maybe even reframe the idea of beneficiaries.
Renewal: New business models might lead to unexpected partnerships or ideas that would else not have surfaced. With an open mind it can lead to new, exciting avenues to serve your organisation’s mission.
Four challenges
Mission drift: When you’re in the detail of new business models, partnerships and revenue generation, it is important to keep referring back to your ultimate aim. You need to articulate how you will continue to serve your mission.
Culture clash: New business models require a different mindset. People in an established, process-led organisation might struggle to find the agility for work with start-ups, while entrepreneurs might not be used to the rigour and reporting required in more traditional organisations. To break out of this, partnerships are often essential to success. Look for similar values, shared goals and a culture that can bring a different way of thinking about a problem.
Governance nightmares: Not every charity structure is fit for new business models, and each structure has its own benefits and drawbacks. Make sure that your administrative systems, governance structures and charitable objects allow you to do the things you want.
Risk and reward: What’s the size of the prize? How will you judge success? How will you capture lessons? What happens when stuff goes wrong? Is it worth the mission drift, culture clash and governance challenge? In general it’s easy to start things but harder to stop them. How will you balance the risk and reward when things (inevitably) go wrong? Charities are often not well set-up to consider these questions.
The pandemic has given organisations permission to go back to basics. Business model innovation - the way you turn time, energy, voice and money into impact - asks fundamental questions about how you do that.