This is part four of a series of five blogs to guide nonprofit leaders on what it takes to thrive in their digital transformation journey. These ideas leverage research from MIT’s Center for Information Systems Research (CISR) complemented with The Center for the Digital Nonprofit studies of the digital transformation experience of nonprofits gained through our open tools and guidance such as the Digital Nonprofit Ability™ (DNA), the Digital Nonprofit Skills™ (DNS) and the social sector accelerator of Imagine, Design, Execute, Deliver™ (IDEA).
Advancing on the path to digitally transform the nonprofit sector requires deciding on which business model to target. This is because the digital economy makes new types of business models possible. Here again, the beneficiary and operational axes help to define four potential business models: Supplier, Omni-Channel, Modular Producer, and Ecosystem Driver. These are mapped below:
A Supplier nonprofit is one who provides services to partners who then deliver them to end beneficiaries. To carry on our description of business models, let’s consider Vaxorg, a hypothetical NGO that produces vaccines for diseases of low-income countries. It does not deliver its vaccines directly to the communities that need them. Vaxorg instead supplies vaccines to other nonprofits that work directly inside communities and that have their own logistics delivery chain. Vaxorg is an actor in the value chain of good but possesses only partial information about end-beneficiaries (e.g., quantity, places delivered, returns). It is a supplier nonprofit.
One day, Vaxorg finds a donor asking it to expand its services. The donor funds it to vaccinate beneficiaries directly, and to also deliver vaccines to government health systems. Vaxorg decides to change its business model and becomes an Omni-Channel nonprofit. Like before, it delivers its vaccines through other NGOs, but also service beneficiaries directly, and supply to governments. Its service is still limited to vaccines but it gains more and more information on beneficiaries through the multiple channels it delivers into.
The Modular Producer
Conversely, if Vaxorg, was to move on the operational axis instead of expanding through the beneficiary axis, it could augment its services by adding pharmaceuticals and medical supplies from other suppliers to its catalogue. Vaxorg would still offer its vaccines to be delivered by other NGOs but also offer a complementary suite of health and medical products alongside them. By expanding its portfolio and continuing to deliver through other nonprofits, Vaxorg would become a Modular Producer nonprofit. A modular producer is one that integrates multiple service offering, including its own, through its own process, and offers the integration of these to partners.
The Ecosystem Driver
Should Vaxorg both deliver directly to beneficiaries and aggregate medical services from other suppliers, NGOs would become an Ecosystem Driver nonprofit.
Today, most global nonprofits do not purely fit into a single business model. Through history and donor influences, they have spread their activities and, while a single business model can be seen to lead, it would be an oversimplification to assume that all their work fits that model. We find that most large nonprofits map, in average, into two top business models:
- International NGOs that solely work through partners (e.g., through local churches, via government agencies, funding in-country partners) mostly operate with the Omni Channel business model. These organizations typically have a focused mission and multiple delivery channels for it.
- Headquarters of federated organizations whose purpose is principally to raise funds and govern the network fit into the Supplier business model. They often do not have day-to-day interactions with beneficiaries and obtain aggregate information from them through field programs reports (e.g., Monitoring & Evaluation, donor reports). Large foundations and institutional donors that distribute funds to multiple nonprofits and do not have field programs themselves, also fit that business model.
Advancing digital transformation also requires gaining new capabilities. Some of these capabilities have been observed to be essential to success and thus warrant discussion at the top levels of organizations.
As leaders go from asking “what is the path forward?” (pathways), to “how do we do it?” (business models), they then end up asking “what key capabilities are necessary for success?”. They want not only their organization to be fit for purpose in the digital world, but also to be a great place to work and grow.
We hope the following tool provides an easy-to-use diagnostic of the key capabilities needed for a nonprofit to advance forward into digital transformation. The questions listed below are derived from MIT’s research.
Leaders should answer how effective their organization is at:
(Scale from 1, not effective to 6, very effective):
- Gathering great information about beneficiaries “meaningful life moments”? [__]
- Amplifying the voice of whom you serve throughout the organizations? [__]
- Evidence-based decision making? [__]
- Providing an integrated multi-program beneficiary experience? [__]
- Being distinctive and the first place your best beneficiaries go when need arises? [__]
- Being great at partnership and at partners’ partnerships? [__]
- Service enabling core operational transactions (and with open APIs)? [__]
- Treating efficiency, compliance, and digital responsibility as competencies? [__]
Total: Add scores and double out of 96.
The purpose of this blog is not to cover all key capabilities raised by these questions but instead to highlight a few interesting ones that we have observed to challenge nonprofit leaders most.
The first question, about beneficiary information, is critical because people or natural communities do not just exist in the confine of your mission. They have a life of their own, marked by meaningful moments. As nonprofits, we often only see a glimpse of their continuum of being. We may treat a displaced person only once or twice in their long journey. We may see moments of a young person through their childhood, and then no longer see them as adults. Likewise, we may only interact with animals as they cross our conservation paths and then lose track of them as they disappear into the ecosystem.
On average, we tend to see beneficiaries only through the looking glass of our mission. But as a sector, wouldn’t it be amazing to understand how to shape the wellbeing of people from cradle to grave, and the health of the forests and rivers they cross? To thus intimately understand our collective impact on humanity and the planet? To service individuals and their communities with the whole portfolio of services available from all nonprofits and not just to restrict our impact only to our own programs? To understand people throughout their lives and not just through the interactions they have with us? These hopeful visions of the future are why it would benefit all NGOs to have more information on the people we serve, regardless of what we serve them for. Of course, in this endeavor, ethics, privacy, and security will have to be addressed, but should not stop us to try.
The third question, about evidence-based decisions, is one that many NetHope members are seeking to answer now. Never in the history of our membership has data be so much in demand to support decision making at all levels of organizations. It has risen in importance to what field connectivity was a decade ago and we expect great progress to be realized in the next few years. Regardless of mission, The Center is observing a multitude of NetHope members seeing “a single source of truth” for decision making. Quality data that is fresh, integrated, and trusted. Yet, as discovered in the data workshop we conducted last year in the NetHope Summit, the top challenge of the sector is with data collection and hygiene, areas that will demand focus and resolution before being able to move ahead. If there is a key capability that nonprofits could benefit from by collaborating today, it is data for evidence-based decision making.
What if there was a way to offer other nonprofit programs to the communities we serve? Programs that we do not offer but that are needed and complementary. This is what the fourth question, about multi-programs, seeks to tease out.
High-income populations have appreciated the economic model change from a supplier-driven model to a consumer-driven one that puts them in control. We have more product and services available to us and we are in control; we can choose.
This shift has not happened in our sector. Many nonprofits are seen by communities as supplier-driven silos. Consider that in Yumbe, the closest town with services to the Bidi Bidi refugee camps in Northern Uganda, there are an estimated 90 nonprofit offices, each providing different services. There is no aggregate catalogue of them all. Yet it would not be very difficult for all these nonprofits to digitally represent to beneficiaries the whole collection of services offered by all nonprofits in Yumbe—and to let them choose.
This future state, where beneficiaries could self-serve through a marketplace of good provided by nonprofits, communities and individuals, is already being accelerated by one NetHope member.
Part One in the series: What it takes to thrive in the digital transformation journey
Part Two in the series: Digital challenges and opportunities
Part Three in the series: 4 pathways to digital transformation
Part Five in the series: 4 moments of truth