What is Nonprofit Strategy All About?
By Nicolas Takamine, 2009 ProInspire Fellow
Editor’s Note: This is Part 1 in a series of blog posts by Nicolas Takamine (ProInspire Fellow, ’09), inspired by ProInspire’s request for engagement in its strategy process in ProInspire Strategy Update 1: Start With Your Result.
The term “strategy” is used so liberally that it often does little to guide us in the task at hand: “We need to develop a growth strategy,” “Let’s be strategic about this decision,” “What is our strategy for this meeting?” and I’m no less guilty of this usage than the next person. As a result, when it comes time to set and execute strategy for an organization, it can often be difficult to know what is entailed.
What, then, is “strategy-with-a-capital-s,” the central responsibility of an organization’s senior executives and board of directors?
Photo by Renaud Camus
Fundamentally, strategy is an approach to running an organization thoughtfully and deliberately, and its purpose is to guide the entirety of an organization’s thinking, decisions, and actions. The strategy process involves defining how an organization creates superior value, making coherent tradeoffs, and guiding day-to-day actions. Each of these points seems obvious when you read it; the challenge lies in maintaining the discipline to make the difficult decisions that may be required.
Define how you create superior value
Ask yourself this question—why does my organization exist? For nonprofit organizations, the answer seems easy: “We exist to provide shelter to those experiencing homelessness,” or “We exist to combat climate change.” These responses describe the value the organization creates, and that’s a great start. But strategy calls for more.
Strategy requires you to explain how you create more value in the world than other organizations could create in your place. This starts with identifying what you can do uniquely well—what capabilities your organization possesses that others do not—and, crucially, how these capabilities work together to create superior value for your target beneficiary.
For the sake of illustration, ProInspire might consider one of its differentiating capabilities to be its ability to develop deep insight into the needs of emerging leaders in the social sector. A second differentiating capability might be its ability to design enriching growth experiences for these leaders. ProInspire might reason that, combined, these capabilities provide greater value for a segment of leaders at key transition points in their careers than other organizations offering similar talent development programs.
This train of reasoning is necessary in strategy. If you can’t explain convincingly why you create more value than could be created by other organizations in your place, then you’ll have a difficult time explaining why funders should allocate resources to you—or indeed even why beneficiaries should choose your services over others. In this sense, you might think of strategy as the process of convincing yourself that your organization deserves to exist!
Make coherent tradeoffs
In a world without constraints, all organizations could achieve perfection in every aspect of their work. In the real world, strategy is needed because resource constraints and limits in human ability mean that no organization can be world-class at everything. We must make tradeoffs. Strategy is about making tradeoffs in a way that results in a coherent capabilities system—one in which all of an organization’s activities are uniquely optimized to deliver its superior value.
Such tradeoffs can be difficult. They require you to invest heavily in only the activities most critical to delivering your unique value proposition while subordinating activities that are not. For instance, to maintain the intimacy with fellows that contributes to ProInspire’s superior insight, ProInspire might forgo cost reductions to preserve a high staff-to-fellow ratio and to invest significant CEO time directly in program implementation. In contrast, it might invest the minimum “table stakes” in activities such as marketing, in which any advantage ProInspire could gain compared to other organizations would have little impact on the superiority of the value it creates.
Coherent organizations also make tradeoffs in the portfolio of programs or services they choose to provide. If a program does not align with the distinctive capabilities you possess, it’s likely that it would create greater value under the management of an organization with a stronger capabilities fit.
Imagine that ProInspire is offered a large grant to develop content for online analytical skills training modules for social sector employees—a somewhat plausible request since ProInspire develops training programs and its fellows bring analytical skills to their host organizations. In our example, however, ProInspire’s distinctive capabilities are to gain deep insight into the needs of emerging social sector leaders and to design enriching growth experiences. Online analytical skills trainings are made no more valuable because of what ProInspire can do uniquely well. Society is better off if a different organization offering a better capabilities system fit were to run the program.
Done right, making tradeoffs to achieve coherence requires difficult decisions and often generates resistance. After all, it might require you to turn down funding or shut down programs. You might reduce one department’s budget, causing a reduction in staff, only to significantly expand the resources of another department. It’s hard to make coherent tradeoffs when these may be the consequences, but achieving coherence is central to the strategy process.
Guide day-to-day actions
Ultimately, strategy is about the day-to-day actions of your employees. For strategy to have any real-world effect, employee behavior must reflect your tradeoff decisions and must be guided by an understanding of how the organization creates superior value. For instance, let’s continue with the illustration that ProInspire creates superior value through deep insights into the needs of emerging social sector leaders and its ability to design enriching growth experiences.
What would it look like for ProInspire’s strategy to guide day-to-day actions? ProInspire’s trainers would know that every training module should also serve as “market research,” and would feed insights back to ProInspire’s leadership after every session. ProInspire program staff would focus on needs that the organization understands better than anyone else—for instance, how social sector professionals can accelerate their development in a sector that lacks a focus on talent—and would let other organizations address other needs, including building expertise in specific domains such as education. ProInspire’s marketing staff would ensure brochures, the website, blog posts, etc., are all consistent and specific in communicating the unique value that prospective fellows gain through its programs.
How do you know whether your employees understand the strategy well enough for it to guide their day-to-day actions? Ask them why the organization exists. If they explain how your coherent capabilities create value that only you can achieve, then your organization gets what strategy is all about.
Resources and further reading:
•La Piana Consulting produces the best practical resources for strategy, written specifically for the nonprofit context, that I have found.
•The Bridgespan Group also has great resources, including detailed strategy case studies of their work with nonprofits.
•For a great read that will help you put the sea of strategy frameworks in their historical context, see Walter Kiechel’s The Lords of Strategy. Or, for a quicker read that gives a decent overview: What is Strategy, Again? or “Exhibit 1: A Landscape of Strategy Concepts” in “The Right to Win.”
Nicolas Takamine is an MBA candidate at the Kellogg School of Management and will be joining consulting firm Strategy& upon graduation. He brings more than six years of experience in the private and social sectors to his mission to create social impact using management theory and best practice. Follow him @ntakamine.