"Our business model has major flaws."
"Our business model has major flaws. We need to redesign it so that we are financially sustainable over the long term." This is one of the most prominent conversations we are having with clients across a range of NFP sectors – NDIS, International Development, Employment Services and Social Enterprises. Many NFPs were struggling financially prior to COVID-19 impacts, and this event has further highlighted the vulnerability of the most prevalent business models across these sectors. To compound this situation, we find that many organisations are preoccupied with pressing operational issues so don’t have the time to review, think, explore and plan for an alternative future. They are also aware that doing nothing is not an option. We are often asked if we have a solution for this problem, which we do. We have developed our “Investing for Impact” methodology which takes clients through a four stage process from ideation through to commercialisation. Ultimately, the aim of this methodology is to confirm if an investment in a new business model will generate positive financial and social outcomes. We also find that many clients know they need to do this but will struggle to find time to allocate to the process. To help with this, we breakdown the project into a series of smaller steps that allows the management team to focus on a specific topic or part of the solution, to build alignment around the implications and decisions surrounding this topic, and to use this as a key milestone to confirm they would like to proceed to the next step. An example of where we applied this approach is with an International Development agency that was looking to launch a consulting service targeted at the private and public sector clients. Our first step was to rapidly understand their current situation, looking at capabilities, operating constraints, performance and outcomes. The key output was a series of problem statements that ladder to a higher order problem. With agreement from management of the problem we needed to solve, we moved into a visioning stage of where we imagined what was possible. We used a range of external case studies to identify what other organisations had done and developed purpose and ambition of what this new service could look like and achieve. The following step became more quantitative where we identified market sizing across a range of categories, confirmed the nature of demand and formulated a core product suite that could be taken to market at specific price points. Now it was time to test this in the market place and we conducted a number of customer interviews to validate the proposition and gain market permission to play in this space. In this situation, the feedback was this service is a natural extension of the organisation’s original mission and to some degree we were asked why had it taken the client so long to think of this! The next step involved bottom-up thinking to construct and cost-out an operating model to support the first three years post-launch along with identifying the key risks associated with the venture. This step heavily involved the Finance function and is where the greatest level of scrutiny was applied to the model. We appreciated that without the support of the CFO, this is nothing but an idea. We now had to pull all of our thoughts into a launch plan. We outlined what needed to happen to make this a reality. The ultimate challenge was to confirm who was going to deliver against the workstreams, as we now revisited one of the original barriers to starting this project, which is the capacity of key management and personnel that were going to carry this forward.
The last step we took was the preparation of a business case which was presented to the Board for approval. There were some very good challenges which we anticipated, mainly around mission drift and risk exposure, however, the ultimate decision was to support the investment and to start deploying the launch plan. Unfortunately, COVID-19 stopped all launch preparation activities, however we have recently connected with the client and were happy to hear that they will soon reignite these activities. If you have been having similar discussions within your organisation and would like to move this process forward, we would be happy to walk you through our experience and learnings from doing this type of work with a range of clients.
- James Christie