In the corporate sector, business strategy is typically about seeking and maintaining competitive advantage to capture market share and satisfy a critical mass of customer demand. Customer demand typically remains limited, because customers link product and service value to price affordability.
For a customer shopping for tonight’s dinner in a supermarket, they’ll consider value (taste, freshness, nutrition, convenience) amongst rival products, relative to the price charged. For the customer, just because some products are ‘on special’ (discounted from the regular price), they won’t instantly buy a vast amount of that product, because; they lack funds, lack storage facilities and may value freshness as well. Current demand is therefore constrained.
In the charity sector, charity beneficiaries typically aren’t paying, or are only part-paying for the services provided by the charity. An example of the later is care home care provided to a beneficiary by a care home charity. Charity strategy is therefore about matching up charity funder ambition to the cost of providing charitable services, better than a rival charity can do so. It’s also no good being more cost efficient that a rival, unless the funder is aware of this. In the background, beneficiary demand is unconstrained.
Astute funders expect the charity to remain sustainable (invest and maintain necessary infrastructure and talent) and to clearly define the scope of operations, even if that means referring some charitable beneficiaries elsewhere. Charity strategy is therefore about seeking and maintaining competitive advantage through beneficiary need focus, deciding what level of quality to offer and deciding what not to do. From the charity’s perspective, where their funders aren’t being realistic (about the ‘price of funding’), educating them on what’s realistic for a given funder £ is important.
If the funders hear the same message from multiple independent charities about what ‘bang they’ll get for their buck’, that helps also. Given sufficient funds available, funders will then fund the charities where the value to the funder exceeds the price of funding. It follows that charity fundraisers can improve their effectiveness (funder acquisition and retention) if they search out and develop relationships with those funders where the gap between perceived charity value and the price of funding is the highest.
1. Risk management
Strategic risk management in a charity is about systematically reviewing the level of business resilience, whether to daily fluctuations (event attendees or bed occupancy levels say) or ‘black swan’ events. McKinsey studies have found organisations that invest in business resilience before disruptive events are typically the first to show a strong recovery afterwards.
2. Improving Impact
Charities face a strategic choice between (1) improving the charitable impact to a small number of beneficiaries or (2) improving the charitable impact by providing less comprehensive services, but to a wider range of beneficiaries. The problem with the first option is that the costs to provide bespoke services rise disproportionately against the extra impact achieved. It’s easier to scale up the number of beneficiaries with a fairly standard service provision and introduce additional services to a subset of those beneficiaries after the charity has captured economies of scale in delivery and back- office functions.
3. Broadening the funding base
By simply altering the Vision and Mission/Purpose of the charity in subtle ways, it can attract different funding partners, new volunteers and enable new income streams. However strategic thinking is desirable before the Vision/Mission alterations occur.
Diversifying the funder sources is also a risk mitigation measure.
4. Lead to bigger commercial trading net profits.
Thinking strategically about potential commercial sectors and your relative advantage to succeed in those sectors, perhaps with commercial board expertise, a strong business case and some seed capital, can result in significant commercial profits to help subsidise charitable activities on an ongoing basis. One way to look at this is that even if your charity is less efficient than a rival charity in delivering charitable activities to beneficiaries, if there is a strong subsidy coming from commercial sources, the result is comparable.
5. Increase your charity influence in strategic alliances and with natural allies.
Strategic alliances work best when both parties think strategically before they form the alliance. Natural allies are organisations who stand to gain from your charity success, but don’t currently support your charity with funding or benefits in kind. Your fundraising pitch to natural allies will be aided by evidence of strategic thinking by your charity.
Simon