Challenges of an entrepreneurial world: The “start-up-ization” of NGOs
An entrepreneurial vibe
It took a handful of young guys innovating in their garages to transform “start-ups” into a global movement. Nobody thought that business giants and corporations can be challenged globally. Nobody thought that disruption can come from newcomers. And it did.
Old as ages, but becoming a “mass phenomenon” in Silicon Valley, entrepreneurship served as the best cure for dying economies and poor job markets across the world after the crisis of 2008.
The NGOs could not be left untouched by this entrepreneurial fever, as they operate closer to the people, on the field - and “the field” is all about growing businesses in fertile “ecosystems” across the world. If everybody from grassroots to decision-makers, from beneficiaries to donors, are in full process of entrepreneurial re-calibration, NGOs are in the very middle of it.
This creates a set of challenges unique to these organizations:
1. The “identity” challenge
The term “NGO” is outdated. Created in Article 71 of the Charter of the newly formed United Nations in 1945, NGO describes any kind of organization if it is independent from government influence and is not-for-profit. We have in this category anything from trade unions to churches and private universities…and even shady organizations with a variety of objectives. With this comes a large array of attitudes towards “NGOs”, from trust to mockery or mistrust.
In the international cooperation world the word NGO actually is not used anymore, as CSOs (civic society organizations) is the term largely accepted, referring to “all non-market and nonstate organizations outside of the family in which people organize themselves to pursue shared interests in the public domain.” – but write to a business/corporate donor to tell them that you are a CSO and see if it rings any bell...
The term non-for-profit-organizations is also used, instead of NGO – but it is more used as a description than as a category – although in many ways it is more accurate that the term NGO.
If from a legal point of view – e.g. registering and taxation – it makes sense to put all “NGOs” in one category – which is not “business” and not “government”, in reality these organizations are so diverse and are beginning to have so hybrid business models, that it is difficult to give them all ONE name and call it a day.
2. The business model challenge
For several decades, NGOs did non-business as usual. But the project design and delivery approach, thought for 1-3 years periods, is beginning to show it’s limits in a globalized world where the scale of challenges we face is too big and the urgency to solve them is unprecedented.
Entrepreneurial thinking and Innovation are vital when it comes to how an organization plans and delivers it’s work – because if until now everything was about generating and delivering projects, the focus is shifting towards those organizations who are able to scale-up and create systemic change using various resources as efficient as possible.
3. The funding challenge
Because the business model is changing, the funding model is changing also. Scouting for the available funding daily and depending on grants or donations to keep the engine running is just not sustainable anymore, at least for the “start-up” NGOs. Moreover, the philanthropic “market” has reached a certain saturation and this model may still work for established and reputed organizations, but for new entities it is more difficult to gain credibility and create valuable networks.
Therefore, new-comer organizations are forced to think like start-ups in order to get the funding they need, by creating innovative products and services, branding themselves and pitching in an effective manner.
But even if they think and act like start-ups, they are not treated as such. Traditionally, the “investors” in an NGO are not having the same motivations as the investors in a start-up - profits and socio-economic issues being considered two very different stories over the ages.
The pressure of the urgent issues on the global agenda creates a bigger than ever intersection between socio-economic issues and capital. Impact investing needs to become the norm of allocating financial resources and socio-economic work needs to become social innovation – otherwise it would be difficult to find effective solutions.
4. The partnership challenge
NGOs have been working with a variety of actors having a variety of agendas towards them (more or less transparent); everyone knew their role in the system very well… sometimes making it a great watch with a functional mechanism, but indicating the wrong hour.
Governments have a mandate to create policies to solve socio-economic problems. This is a great thing, but the model of unilaterally thinking solutions and inviting the other stakeholders to just execute is still present in many countries, making the NGOs caught in the middle between the need to get in the game for receiving grants and the pressure to speak in the name of the civil society with all the exposure coming from this.
Private sector, especially big companies, have been constantly changing the budget line dedicated to NGOs from “other expenses to make the company look good” to “let’s do something with impact but not very expensive”. This needs to change, especially because the relationship between business and NGO is one with a great potential for impact at this moment.
Civil society, those represented by NGOs, are having trouble in understanding what NGOs are and what they do.
This is a vicious circle that asks for a more Collaborative Era– dictated by urgency: co-creation, co-design, co-delivery should become the new key-words associated with cross-sector Partnerships.
Employing more than 28 million people globally and managing billions in funds, the NGO sector is the 5th economic sector at global level. The challenges affecting them are affecting the millions of beneficiaries and employees.
But these challenges have also a huge potential to lead to good changes. More start-ups in the world brought more dynamism and innovation, also changing fundamentally how investors think and how governments act.
For-profit and not-for-profit organizations can learn from each other; the potential to exchange and collaborate more in depth is backed by a paradigm shift that is here to stay.
NGOs need to think more entrepreneurial in terms of fundraising, budgeting and delivering products and services. Everything from “elevator pitch” to “go-to-market” should be better thought through in order to “save the world” today. They need a longer term thinking to be able to be more innovative, to better serve the beneficiaries and to engage the private sector at a deeper level than before.
Businesses need to re-think the “profit maximization” theory and acknowledge that there is a big cost to it, that until now has been mainly supported by the society and by the Planet. Therefore, “social responsibility” and “sustainability” should move for good from Marketing-related Departments to the very core of the business strategy.
There is hope. New success stories in areas such as blended finance and social innovation are showing that the “kingdoms” of business, government and society can live in harmony while learning from entrepreneurs about efficiency, innovation, motivation and specialization.