This is part three of a series of five blogs to guide nonprofit leaders on what it takes to thrive in their digital transformation journey (read Part 1, Part 2). 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).
Evidence abounds that in the digital economy, merely employing technology to tweak past practices that have led us to current success no longer cuts it.
The seduction of hiding silos with a thin shell of technology is tempting. Promises of efficiency and effectiveness are heavily marketed to us and solutions appear, at first, to work at reasonable costs. Unfortunately, as many nonprofits have already experienced this early on. Over time, this tech-first approach revealed itself to be very costly and eventually, ineffective. For example, one large nonprofit spent about USD $100 million to automate its well-proven practices, only to find out a few years later that this tech solution could not adapt to a rapidly changing context, was no longer fit for purpose, and had to be ripped out and replaced. To be clear, they did not make a project mistake, the digital economy just changed their world faster than anyone anticipated. With The Center for the Digital Nonprofit, they are now starting an accelerated digital effort, at a lower cost, starting by reimagining the way they work (e.g., skills, processes, models) and putting technology after people and processes.
Nonprofits need to reinvent their organizations, their cultures, their processes, their competencies, and sometimes, their purpose in the value chain of delivering good. These are not easy pathways to find on one’s own. That is why The Center offers a blueprint of four proven pathways for digital transformation that we have observed NetHope members taking. These four models, discovered through the research of The Center for the Digital Nonprofit, also find validation in the for-profit work of MIT’s Peter Weill and Stephanie Woerner published in their book, What’s your digital business model? As these journeys work equally for nonprofit and for-profits, they provide a rare link where both sectors can collaborate and learn from each other with a minimum amount of translation.
Recall that The Center for the Digital Nonprofit evaluated NetHope members through the Digital Nonprofit Ability along the vertical axis of beneficiary focus and the horizontal axis of operationally focused. Jeanne Ross of MIT, who presented at the 2016 NetHope Summit in Atlanta, calls these axes digitalization (the customer/beneficiary axis) and digitization (the operational axis). It is through the tension created by these two forces that organizations can find their way to transform.
There are four pathways a nonprofit can take to go from the Tech-Enabled quadrant, where most nonprofits are today, onward to the Digital quadrant.
- The Vortex
- The Lift
- The Corner
- The Steps
We’ll address the Vortex pathway first because, while it does not lead to success, it is quite common in our observation. For many good reasons, such as restricted funds, a fragile organization, just-work-harder leadership style, or believing they are too unique, some organizations engage tentatively in the digital path. After some efforts, they usually end up back where they started instead of accelerating forward. This could be because they did not successfully resolve the deep and hard questions facing them such as:
- How is our revenue distributed today and how would we want it to be in 2030?
- Do we have a great understanding our partners and our partners’ partners?
- Why are people coming to us and would they continue if there was a more effective alternative?
- How satisfied are the people we serve?
- What profound organizational change will it take for us to digitally transform?
Or they failed to develop the capabilities necessary for change. On this last point of change-failure, John Roberts, CEO of myProteus, presented at the 2018 NetHope Summit in Dublin about the three types of change complexity and the three types of people capable of successfully ushering them. He strongly warns that mismatches in people/change complexity result in costly failures.
To be clear, there is no shame in doing good and staying put. Not every nonprofit can achieve exponential impact. Nonprofits caught in the Vortex might be better served to wait, let others take over, and follow on later by copying proven reference models.
The Lift path is achieved by moving first through the operational axis. Organizations often proceed this way by modularizing their operations and digitizing them. By asking if the organization processes are better than someone else’s, best of breed solutions can be integrated and long-term costs avoided through shared services. This approach holds perhaps the greatest values for nonprofits but at the same time seems to be the hardest to emotionally achieve.
Today, many organizations believe that the bespoke aspects of their processes hold some special value. They imagine that the organization’s future success would not be possible without them. Yet, in a workshop conducted by The Center for the Digital Nonprofit and Humentum, consensus emerged among COOs that we may associate more value to these customizations than they yield in reality. Participants noted that regulated processes, such as financial and human resources would benefit more from sector standardization than organizational customization (or worse, chapter-level customization). As with any change, to gain full benefit requires overcoming the natural resistance to move off from one’s habits and to create reference models for the sector that will usher new operational ecosystems.
It should be noted that from the perspective of beneficiaries, taking the Lift path is invisible, despite investments, as little change is achieved at first on the beneficiary axis.
The Corner path is achieved by focusing first on beneficiaries and communities. Often categorized as ICT4D, this path has the advantage to create a lot of engagement with communities served. For example, by understanding key life events of people, more intimate and lasting engagements can be achieved. At the same time, by collecting more information on beneficiaries or donors, the voice of these people can be amplified inside the nonprofit. This is the path often followed by community-led nonprofits. It quickly achieves a common understanding of where the organization is at today, and where it needs to go. The challenge of the Corner path is in scaling up. Growing can be very costly as operational capabilities may not be there. This can be observed in small local nonprofits who often have proven solutions that fail to go broader.
The challenge of scaling impact has been well documented in the sector to depend on solid operations. For example, the Bridgespan group paper “Scaling Impact”, published in the Stanford Social Innovation Review, recommends many operational initiatives (e.g., convert bricks to clicks, build networks, develop talent, strengthen the sector). With a constant feed of beneficiary feedback, the Corner path can be addictive and the organization can quickly lose sight of the costs to serve till they hit it. That path may thus be better suited for missions where time is of much greater importance than costs, such as disaster relief or epidemic disease management.
The Steps path, while ideal to balance beneficiary-facing and operational tensions, is the most difficult to achieve. This is because it constantly requires readjustments and thus demands that leaders have an utmost discipline in monitoring. It also requires an extremely agile, data-driven organization capable of rapid test-and-learn adjustments. Operational methodologies such as Lean, Agile, Kanban, or Scrum, for example, need to be well established and common practice before the Steps path can be contemplated. Less responsive organizations may suffer change whiplash through the rapid gear switches between beneficiary and operational dimensions that the Steps path demands.
Of the 15 Imagine, Design, Execute, Assess (IDEA) social accelerator programs of NetHope members conducted by The Center, 60 percent are advancing on the Lift pathway and 40 percent on the Corner pathway.
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 Four in the series: 4 business models and 8 key capabilities
Part Five in the series: 4 moments of truth