Running a non-profit is tough in any economic environment but it’s a nightmare today. Donations are down. Budgets are tight. It’s hard to know where to turn. And, while the financial statements provide clues on managing the cost base, there is no balance sheet for the most important elements a non-profit: its resources, its reputation, its processes and its network.
Here’s how we broke down the intangibles of one non-profit, a regional museum:
The chart below shows the how the organization’s stakeholders rated these critical assets. The scale from 1-5 represents a comparison by the organization’s stakeholders of specific IC elements to those of its peers (1-worst, 2-below average, 3-average, 4-above average, 5-best).
The results for the organization showed that by far and away, its Collection is its greatest strength. But its Business Model is its greatest weakness. Then, there are a number of inter-related challenges around revenue processes (marketing and sales in business lingo), brand and external relationships.
None of these results came as a huge surprise to the Board of the museum. What was different that was the ability to lay this story out in a single view. This view, the measurements behind it and the stakeholder comments supporting the ratings all helped the Board break through the mental log jam they had on how to recreate their business model.
If you spend time with a museum’s financials, you will see the extensive costs of preserving and caring for a Collection. But, to be successful, a Collection must also be seen as Structural Capital—a scalable resource that can be reused in different ways to fuel growth. The key to raising revenues is thinking creatively about ways to generate revenue from this structural capital.
Monetization is not the first word to roll off the lips of most folks in non-profit organizations. Yet, if your mission is to preserve a collection, the best way to fund this strategy in the real world is to think about how the mission and reputation of your organization is aligned with potential funders. This is a much more proactive thought process–about taking control of the non-profit’s destiny rather than considering the organization to be a charity and just waiting for donations.
These results set the museum on a new path that includes:
- Looking to create a long-term model for generating revenue to support the collection.
- Creating innovation teams that seek to build new, collaborative, funded projects that address their key stakeholder groups.
- Focus on key human capital and structural capital weaknesses around development
Non-profit organizations have always understood intuitively the power of intangible capital—relationship capital and human capital are often at the core of the non-profit mission. But, like their counterparts in for-profit businesses, managers in non-profits aren’t as familiar with the concepts around building and leveraging Structural Capital. The answer to financial success of both kinds of organizations almost always leads to the scalable, re-usable elements of Structural Capital.
Thinking about business models in your own organization? Consider starting with an inventory and assessment of your intangible capital. Check out the IC Value Drivers Assessment as a way to get started and get a single-page view of the viability and possibilities of your organization’s business model.
