For charities, pivoting and drift can both involve significant changes in direction. The key difference is whether the charity chooses its new direction strategically (pivoting). Or is forced into a change of direction by circumstances (drift).
Strategic pivoting: a deliberate change in direction
Strategic pivoting is an agile but controlled change in direction. It occurs when a charity deliberately decides to change its activities or operating model, having first assessed the strategic implications and crucially, secured the funding needed to support the change.
Typically, the charity will have deliberately built a portfolio of options first. Although it may may not give it that name. The portfolio of options, by definition, gives the charity greater strategic choice, including on how, how fast and when to pivot. Some examples of options held might include: lines of credit, favours owed, large data sets, call options, surplus resource capacity, multi-skilled staff, multi-use buildings and strong unrestricted reserves.
A summary of the process:
- Create a portfolio of options.
- Update the strategy.
- Secure the funding and resources.
- Pivot the charitable activities.
Non strategic drift
Drift occurs when a charity’s direction changes, primarily because circumstances leave it with little choice. The change may be controlled to some extent. Or not. The charity is eventually and inevitably responding to external pressures, rather than deliberately following a strategy supported by a portfolio of options.
There are several ways this can happen.
1. Dependence on a dominant funder
A charity may move from dependence on one dominant funder to dependence on another funder with different priorities or objectives.
The charity has changed direction. But the new direction may be determined largely by the funder’s requirements, rather than the charity’s own strategy.
Analogy: the driver of the car has effectively been replaced by an outsider.
2. Lack of board alignment
A board may recognise that modernisation is necessary. But be unable to agree on what form it should take. Or be unable to agree on which ‘sacred cows’ to stop supporting.
The result can be prolonged indecision, repeated changes of direction, change missteps masquerading as progress, failure to gain traction, or incremental adjustments without a coherent destination.
Analogy: the car keeps turning in circles. While the occupants debate which road to take.
3. Low resilience to unexpected events
A charity with limited financial reserves, narrowly-concentrated income, or operational dependencies may have little capacity to absorb a sudden external shock e.g. a “black swan” event or other major disruption. In these circumstances, the charity may be forced to change its activities. simply to remain viable.
Analogy: a car travelling at speed suddenly encounters an unexpected road obstacle.
4. Traditional income streams become unviable
Some legacy income sources may gradually cease to make economic sense. Examples might include subletting surplus office space. Or operating a network of charity shops where gains from economies of scale aren’t achievable, or (low barriers to entry) competition has created an oversupply in the market. The issue is not necessarily that these activities were previously poor choices. Rather, that their economics have changed.
Analogy: the occupants of the car can no longer contribute enough funding to sustain the journey.
In these circumstances, the charity may have to reduce, replace or abandon traditional income sources. Without having had sufficient time to develop viable alternatives.
The importance of the charity’s ‘portfolio of options’
An investment portfolio contains a range of investments. A portfolio of properties contains a range of properties held. A portfolio of options is exactly that – a portfolio of options, held by the organisation at any point in time.
The distinction between pivoting and drift becomes clearer when viewed through the concept of a portfolio of options. A business-resilient charity deliberately develops options over time – for example:
- diverse and complementary funding sources,
- different income-generating activities,
- strong partnerships and networks,
- transferable organisational capabilities,
- different programme or service models,
- sufficient reserves and financial headroom,
- the ability to scale activities up, down or in different directions.
When a charity has a strong portfolio of options, it can respond to changing circumstances, while retaining meaningful strategic choice. During a strategic pivot, that portfolio of options should remain sufficiently strong to support the transition.
During drift, the portfolio is typically already constrained – or becomes progressively smaller – as external pressures remove one option after another.
The mindset is therefore different:
Pivoting is: “Which direction will we choose?”
Drift is: “When this drift ends, where will we find ourselves?”
The latter can become a case of stakeholders ‘bracing for impact’, rather than actively shaping the future.
How does pivoting relate to charity flexibility?
Charity flexibility can usefully be thought of as having four interconnected elements:
- Adaptability – the organisation’s ability to evolve as its environment changes (evolution rate),
- Agility – the organisation’s ability to change direction or pace, as circumstances change,
- Resilience – the organisation’s capacity to protect itself, remain durable and heal, without losing its strategic viability, and
- Portfolio of options – the range of viable choices available to it.
Pivoting is primarily an expression of agility. But agility does not operate in isolation. To elaborate, a charity can be agile but not resilient. For example, it may be able to change direction quickly. But have very limited financial capacity to withstand the consequences of doing so.
Equally, resilience without agility can result in a charity surviving a period of disruption without being able to adapt its underlying model.
The portfolio of options is therefore particularly important because it can connect agility and resilience.
Where a charity has maintained a strong portfolio of options, it is more likely that agility and resilience will reinforce one another. The charity can absorb disruption, assess alternatives and then deliberately pivot towards a viable future.
Where the portfolio of options has become degraded, the opposite can occur: resilience is weakened, strategic choice reduces, and what appears to be “agility” may actually be a rapid response to circumstances that the charity can no longer control.
Ultimately, the distinction is between changing direction because the charity has chosen to do so versus changing direction because the charity has run out of alternatives.
Simon
Leave a Reply