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3 Tech Startup Principles that Will Transform Your Nonprofit

Do you ever feel like your nonprofit is living in the dark ages when it comes to technology and innovation?

Our team has been building technology for nonprofits for over a decade. And after working with hundreds of nonprofits, we’ve found one thing to be consistently true: nonprofits are bad at change. Most nonprofits resist change at every turn… and then lag 10 years behind the innovation curve. They cling to outdated methods even though most of their constituents are keeping current with the changing world. This isn’t universally true of course. Some nonprofits are incredibly innovative. There’s a new breed of nonprofits who are constantly finding new ways to move their cause forward. So what’s the difference between the lagging nonprofits and those who push the envelope in innovation? And how can nonprofits shift their culture and embrace change?

Why Are Nonprofits Slow to Innovate?

As Nick Kristoff from the NY Times notes, “Any brand of toothpaste is peddled with far more sophistication than the lifesaving work of aid groups.” In other words, Kristoff is saying that free market companies are innovative by default – and charities aren’t. Like it or not, your favorite toothpaste company is driven to make better toothpaste in order to create bigger profit margins for its stakeholders. Companies like Johnson & Johnson (and Virtuous) don’t have the luxury of ignoring innovation. If we aren’t constantly looking to improve our products and please our customers, our revenue will drop, and we’ll be overtaken by the market.

So why don’t nonprofits face the same kind of market pressures that force innovation at traditional companies?

First off, nonprofits’ customers (donors) don’t receive the benefit of the product. Donors don’t have a good way to determine if the nonprofit is effective. In other words, the people the nonprofit are serving (the homeless, foster kids, etc.) don’t give the nonprofit money – and functionally, they have no leverage to force change, which in turn creates “misaligned incentives.” These misaligned incentives allow nonprofits to operate at the status quo without innovation for long periods of time. In fact, once a nonprofit establishes a stable donor base, there is a strong incentive to limit change as much as possible.

In addition to the lack of market pressure, most nonprofits are typically driven by slow-moving boards and rigid annual budgets, which intrinsically limit their agility and innovation. There are often a small handful of founders or key leaders at each charity who are motivated to increase impact, but the system they are trapped in is consistently working against them. These intrinsic institutional limitations, combined with the lack of market pressure, result in a nonprofit industry that lags 20 years behind the innovation curve.

How Do Innovative Nonprofits Break the Status Quo?

Over the past few years, we’ve seen several forward-thinking nonprofits break free from their own institutional inertia by embracing the leading-edge practices of Silicon Valley tech startups. The most agile and innovative companies leverage a “lean” approach to their business practices. Startup practices are built to disrupt institutional inertia and force innovation in short time intervals. These simple practices can be the antidote that breaks through the traditional roadblocks to innovation. In fact, we’ve seen even the most rigid nonprofits turn into innovation juggernauts and dramatically increase their impact when they establish a culture of startup innovation.

3 Keys to Startup Innovation

Startup practices can be grouped into three primary buckets: agility, constituent-centric thinking, and testability. When combined, these three practices are the recipe for fast-paced innovation and increased impact at any nonprofit. We’ll be following up with subsequent posts that flesh out each of these practices, but hopefully this summary begins to stir your imagination for innovation.

Agility

In startup terms, Agility is the ability to change quickly. Most startups use “agile” methodologies to manage product development and marketing initiatives. At the core of Agile is the practice of breaking down projects into short, well-defined, 2-week intervals called “Sprints” with clear deliverables at the end of each interval. This approach to managing projects allows teams to learn and make changes on a very frequent basis based on real time data. It also provides high transparency and team accountability around activities that produce measurable results. Many leading edge nonprofits have now adopted agile practices in order to embed a system that embraces change, experimentation and a results-based approach.

Constituent-Centric Thinking

The most innovative nonprofits are constantly getting feedback from their constituents (donors, partners and the people they are serving). It’s impossible to monitor effectiveness if the team isn’t consistently soliciting feedback from the people served and rethinking services from the beneficiaries’ perspectives. For startups, this is often referred to as human-centered design. Nonprofits who are able to continually listen to their constituents instead of assuming that they know the solution are much for effective. They are also far more willing to change in order to meet the needs of those they serve.

 More about human-centered design can be found here.

Testing

The inability to test and measure results related to the cause is possibly the biggest problem facing today’s nonprofits. Many nonprofits that we’ve seen over the years seem incapable of setting clear, testable goals that map to specific activities in their organization. As a result, organizations waste thousands of hours on activities that don’t directly impact the cause, or the impact they make isn’t measurable. Truly innovative nonprofits are using data to drive decisions. Far too much priority has been placed on “gut” or “heart” feelings at nonprofits. In order to embrace innovation nonprofits must embrace experimentation. Quickly test your ideas, objectively look at the data, and make decisions based on the results.

When combined, these three startup principles can help nonprofits stay innovative and increase their impact as world changes around them. We’d love to hear your stories as you begin to experiment and drive innovation at your organization. Be brave, take the next steps, and drop us a line and let us know how it’s going.

Gabe Cooper
Gabe is the president and founder of Virtuous. He's passionate about technology and empowering nonprofits to succeed.

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