What Not-For-Profits Can Learn From Startups: Part 3
This is part 3 of our series of articles that explore how NFPs could consider adopting new approaches practiced by successful startups. Previously we’ve explored management approaches, alternative organisational structures and strategy development. Now we turn our attention to innovation. It’s important to again recognise we’re not suggesting replicating startups. It provides an opportunity to consider how we can learn and adapt to meet the challenges facing NFPs in our rapidly changing world.
Innovation
“Innovate or die.”
“My role here is Director of Innovation. I make ideas happen.”
“Our innovative approach is a game changer set to disrupt the market and deliver a competitive advantage.”
I think we can all agree that the word innovation is often overused, misrepresented and misunderstood. As Scott Berkun puts it, “Einstein, Ford, Leonardo da Vinci, Picasso, Jobs and Edison rarely said the word and neither should you.”
However, we believe innovation is delivering significant positive change. It’s an outcome, not a product or idea. True innovation isn’t necessarily “game changing” or “disruptive.” It solves a problem or overcomes a challenge. It delivers a positive result that provides value to your people.
And innovation without execution is simply an idea.
Where Can Innovation Occur?
Innovation can occur whenever a problem, challenge or barrier exists to creating significant positive change. There is often a misconception that innovation is directly linked to technology. Technology is a vehicle for delivering change, but it isn’t innovation in and of itself.
There are many areas within which innovation can occur. Alternate business models, different management styles, tailored organisational structures, and approaches to productivity are just a few. Others include the way organisations approach problem solving, service delivery and product development.
How do Successful Startups Innovate?
Many startups, by the very nature of the world we live in, are technology based. However Netflix, Spotify, Uber, Airbnb, Headspace, and many others, look to innovate far beyond the end product. To create a positive change for customers, they recognise that the way they work, the environments they work in and the process of delivering their products, is as important as the final product itself.
A willingness to embrace uncertainty, experimentation, and minor setbacks (or even failure) is key to enabling innovation within startups. To minimise failure, they employ new ways of thinking: agile for technology development, lean for management, and design thinking for problem solving.
Let’s take a quick look at how a couple of startups innovate.
Spotify
Spotify has become one of the most well known music streaming startups in the past 10 years. It now has over 30 million paying subscribers and about $3 billion in revenue. It’s substantial workforce (more than 2,000 employees) are organised into agile teams (a.k.a. squads) which are self-organising, cross-functional, and seated together. Spotify has succeeded in maintaining an agile principles without sacrificing accountability. It enables innovation while keeping the benefits of repeatability, and it creates alignment without excessive oversight.
This is very different to the more traditional silo based department approach. Teams answer to a department head, who answers to a cross department director, who in turn answers to the CEO (and in the case of NFPs, the CEO then answers to the board.)
Spotify has a culture that encourages experimentation with an emphasis on test-and-learn approaches and contained experiments. This is important to note. Experimentation is not reckless. It is based on minimal investment on ideas to enable testing and feedback, before fully committing.
Netflix
Netflix was founded in Scotts Valley, California in 1997. It began as a DVD-by-mail service. In 2000 Netflix was turned down for investment by the $6 billion category leader Blockbuster. A decade later Blockbuster went bankrupt and Netflix now has 100 million plus subscribers.
Netflix co-founder, Marc Randolph, believes you can’t have innovation without ideas. A lot of them. Those ideas often come from understanding the pains that customers have, and thinking of ways to remove them. There are no bad ideas, until they’ve been tested and proven to not work.
He also states that embracing risk and persisting at all costs are the foundation for innovation. The most interesting is his belief that you must be constantly “disrupting yourself.” Always looking for different ways your organisation can do things. Constantly question, is this the only way we can do this? For this to happen, exploring change needs to be baked into your organisations DNA. Processes must be in place that encourage and support your workforce to think and operate this way.
Headspace
Headspace is a mindfulness company that provides guided and unguided meditations to users through its website and app. With a reported 500,000 subscribers and 12 million downloads as of February 2017, the app is consistently among the top-rated health-and-fitness offerings in the Apple App Store.
Founders Andy Puddicombe, a former Buddhist monk, and Rich Pierson believe meditation is the key to a happier, healthier life. They founded Headspace with the goal of making mindfulness a mainstream concept.
When approaching a new challenge, the team at Headspace use design sprints to explore the problem and come up with more innovative solutions. An example of this process was utilised when considering a new audience — kids. They first defined the challenge: How do we design an experience for children that captures the value we provide adult users? Second, is that goal viable?
Using the design sprint process over a three day period, the outcome was a team set up for success, they were able to work more efficiently, go deeper and figure out exactly what it was they were going to create. Three months later the team had an MVP (minimum viable product) and completed a successful product launch. Constant improvements and iterations based on customer feedback have seen the new feature receive positive responses from parents.
So What Does This Mean for NFP’s?
Many NFPs are focused on building internal capacity to innovate. Examples of this in the sector are the rise of NFP backed social enterprises, employing new funding platforms, and utilising alternative ways to approach organisational change.
Violet Roumeliotis, CEO of Settlement Services International states that “Innovation is very important as well as not being risk averse.” She recognises that NFPs need to act more like social businesses, to ensure that surpluses are created to re-invest in programs that add value to the community. This is a great opportunity to generate income that can be used to try new approaches and take risks. As we have stated, significant positive change requires embracing ambiguity and risking setbacks.
To innovate, NFPs could consider challenging all aspects of the organisation, not just how to embrace technology. Does the traditional organisational structure support teams to find new ways to deliver significant and positive change for stakeholders? Are we questioning pre-existing fundraising and corporate partnership processes and initiatives? Can we employ new ways of collectively overcoming challenges, such as design thinking, sprint methodologies and agile? Is there an opportunity to test new ideas, before committing large scale resources? Should we ensure strategy development builds in capacity and action steps for innovation?
NFP Barriers to Innovation
NFPs are beholden to a different code than startups, and rightly so. They exist to solve difficult problems in our society that business and government do not. They are funded by organisations, governments and members of the public. With this comes a heavy responsibility and the need for transparency. Compliance and governance ensures that NFPs are held accountable.
While it is necessary, when heavily weighted it can be a major barrier to innovation; compliance versus risk; governance versus ambiguity. Startups realise at their core that to innovate requires a willingness to embrace uncertainty, experimentation, and messy inconsistencies.
Boards, CEOs and senior management need to find a way to balance these tensions to ensure organisations continue to evolve and change. One way could be to ensure that boards have members whose skill sets are in innovation, technology and design. People that employ new methodologies and approaches to solve problems and overcome challenges. This can create both balance and healthy debate between being risk averse and open to new ideas.
The Main Point
There are many benefits for NFPs in adopting approaches to innovation utilised by startups. It can help increase efficiency, engage and retain staff, deliver new services and alternate revenue streams. Most importantly, it ensures NFPs have longevity and sustainability to continue the vital role they play in the lives of the most vulnerable in our society.
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By Rusty Benson | Co-founder & Research Lead
At Raine & Makin we work with organisations to understand their challenges and turn them into opportunities. We focus on defining the problem, before rushing to the solution. If you have a problem that is stopping you from achieving your organisation mission, get in touch to discuss how we can work together to solve it.
Originally published at raineandmakin.com on January 31, 2018.
