Business models in not-for-profit

Recently I worked on strategic planning with a women’s fund in South Africa that supports local grassroots women.  We took an approach that looks at not-for-profit organizations as a social enterprises that offer value to both grassroots women and to donors, people, businesses or institutions committed to support women.   The business model we mapped  includes value propositions to grassroots women that generate social benefits and value propositions to donors that generate revenues for the organization.  For an organization to be sustainable those two types of propositions need to be compatible and balanced. And not only the propositions have to be compatible, also the values that drive the relations with the two groups of “customers”.  How often do you see in not-for-profits that the fundraisers are completely out of sync with the people in the field and vice versa? The model highlights the connections.

The methodology is exiting to work with.  For the ‘enterprise’ to work, we need to make sure that we know on an on-going basis what grassroot women (and donors)  need and what works.  In this model being participatory, client-oriented and responsive is not an add-on feature, limited to a stakeholder event or something similar;  being responsive is build into the venture right from the start.

The standard approach in planning development coöperation is the LogFrame.  This is a detailed action plan incorporating goals, results, outputs and inputs, based on an analysis of the problems, root causes and possible solutions.  You can do it in a participatory way, but there is nothing in the methodology that requires that.  Also, the approach is quite rigid and tends to start from what is wrong, what is missing. In my experience, LogFrames works well for quite straightforward, discrete projects. LogFrame and organizational change on the other hand do not really mix very well.

Contrary to the LogFrame, this approach of mapping a business model directly builds on what the organization has done well in the past. The point of departure are the services  – intended or not – that beneficiaries and donors responded well to. You draw on that positive core to come up with your value propositions.  This makes change inspiring for the team and the organization’s stakeholders. And that is something change processes in organizations can never do without: inspiration and motivation.

To map the business model we used an approach developed by Alexander Osterwalder c.s. For more information go to the businessmodel alchemist , thank you Josien Kapma for introducing me 😉

The women’s fund whose business model we mapped is WHEAT.  WHEAT is a venture of a great group of women in South Africa supporting grassroots women who work to improve their livelihoods and to build their communities. WHEAT has shown to be very effective in reaching out and supporting these women. The fund supports women by making grants to invest in (leadership) skills and by providing tailored advise.  A few years ago  a small grant enabled a group of women in a township to start producing their own soap – instead of simply retailing soap they bought wholesale at considerably higher costs.  WHEAT also encourages women to get together to discuss local problems at so-called “convenings”.   WHEAT is non-partisan.   Check out the website for more information.

Weak signals and coincidents

“Niets nieuws onder de zon”, is the title of a book I am re-reading.  Roughly translated the full title reads: “Nothing New under the Sun and Other Coincidences, aka Strategy from Chaos”. The book was published in 1987/2003 in Dutch only. It connects concepts on chaos and strategy at a practical level and I have drawn on these ideas of when supporting organizations in their strategic planning because I find them to be inspiring.

The authors are Jaap Peters and Rob Wetzels.  Peters is a Dutch management consultant.   Other books published by Peters have similar catchy titles like – again in translation – “Intensive People Farming” on human resource management, and “At Which Reorganization Do You Work?” on change management.  He also edits a journal on organizational development entitled “Slow Management”.  Peters draws on his experience with organizations in the Netherlands, but I feel his ideas can be very well applied elsewhere.

There is no future you can predict, and standard planning models usually only help us to copy, possibly improve on the past.  Here and now, there is a dominant current and there are weak, undercurrents.  For the future, these weak signals are significant but within our organizations they remain usually unheard. These weak signals usually do not fit in our Results Oriented Strategic Plans and LogFrames and tend to be ignored.  Too bad, according to Peters, because the future is emerging from that undercurrent.  These weak signals represent what is coming.

Peters feels that most standard strategic planning and management models underestimate the creativity and power of self-organization.  We have to treat organizations as chaotic systems.  The McDonalds or “factory farm” approach to management implies splitting-up everything, standardizing processes, making everything and everyone perfectly manageable and measurable.  McDonaldized systems dampen external signals, they are closed, only change under pressure and are based on one single “truth”.  Organizations that function as chaotic systems on the other hand absorb and process signals, are open, change organically through commitment and allow for contrasting ideas and multiple interpretations.

Peters observes that managers and planners in what he calls the McDonaldized organization ask quite different questions from those that treat organizations like chaotic systems or chaordic organisms.  If you want to discern strategy from chaos, you need to hear and see the weak signals, as a group you have allow for different perspectives, both dominant and weak.  Hearing and observing the weak signals requires a special effort.  You can only do it if you are able – and willing – to lose some of your mental formatting, you also have to allow for “seemingly stupid” questions and answers. Allowing for different perspectives is essential. To illustrate surprising perspectives Peters quotes in his book a story about a Texan and an Israeli farmers discussing how big their farms are. Boasting about the size of his ranch, the Texan explains he can drive his car a whole day without getting to the limits of his property.  “I had such a car once” the Israeli commiserated.

Like the oyster making pearls out of irritating grains of sand, in an organization problems and dilemma’s can be used as inspiration to change our perspective.  This is where I feel that Peter’s “Strategy from Chaos” complements Appreciative Inquiry.   Appreciative Inquiry rejects the McDonaldized approach to planning that tells you to identify the problem, conduct a rootcause analysis, brainstorm for solutions and develop action plan.  Appreciative Inquiry works differently.  It departs from the idea that organizations are a solution to be embraced. For planning you appreciate what is (discover), imagine what might be (dream), co-construct  what should be (design) and co-create what will be (destiny). AI teaches us we are to embrace what works in our organizations.  But I feel Peters has a point when he urges us to face our problems and dilemma’s and draw on their creative force.

Peters approach to strategic planning can help the imagining what might be.  Acknowledging weak signals and exploring the dilemma’s Peters advices to draw a cross to map the chaos within and surrounding our organization.  Its axes represent old and new thinking and old- and new behaviors. The four quadrants of the cross capture reflections on the present that have significance for the future. Drawing on the present we develop four different stories about our future.  I like his approach. More particularly I think it reinforces creative and inspired “dreaming” in Appreciative Inquiry.    I also like the idea to capture the future through stories. The cross looks like this. The most left “wave” is the dominant current; the other wave is the future, the undercurrent, present here and now through its weak signals.

On chaos and complexity in relation to international coöperation and development you will find interesting stuff at the portal from Wageningen University on their Complexity – Innovation Dialogues or the blog from Ben Ramalingam,  all in English. For more on Appreciative Inquiry check-out the Appreciative Inquiry Commons.