Why Is There a Lack of Innovation in the Nonprofit World?

If there’s a key marker of where nonprofits stand today in terms of making progress in their fundraising, it’s the figure of 2%. That’s the percentage of disposable income Americans give to nonprofits annually. We’ve been stuck at that number for decades. Why is that? What do NPOs need to do to finally move the needle on that number?

The answer lies with innovation. And the way businesses in every industry – not just nonprofits – innovate is by adapting to what’s happening now. Breaking through the status quo for NPOs starts with a close look at today’s donors, learning what defines them, and then adapting their approach to fundraising based on what they learn about their donors.

The Empowered Consumer

To look at today’s donor means looking at who they are in their day-to-day lives: they are today’s “empowered consumers.” What we find is actually quite familiar to all of us. The changes brought about by innovation are all around us, every day, in all kinds of ways, as consumers. Consumers today live their lives in networks, where they can tune in to things they care about. Whether it’s buying a book, watching a movie, purchasing music, or how they communicate with their network, the powerful interplay of innovation and adaptation is so ubiquitous that today’s consumer considers it commonplace.

Today’s empowered consumer has been thoroughly conditioned by this experience – by the incredible ease with which they can do all kinds of things. They expect the fundraising experience to be as smooth as selecting a movie on Netflix.

And that’s where the “chasm,” as I call it, appears between today’s donors and today’s nonprofits. It’s a case of institutional inertia. Data silos tied to disjointed systems, excessive time spent on donation management, outdated marketing strategies, a lack of testing and experimentation, and resistance to upgrading investment infrastructure – these are all too common among NPOs.  

Innovation and Transformation

It’s not just innovation that is required for nonprofits to cross that chasm, and they can. If we as an industry are going to put innovation to work as a positive, disruptive force for change and truly move the needle on giving, a transformation has to occur inside the organization.

It isn’t just acquiring the latest, shiniest technology. We have to think differently about how we organize ourselves, about our current state of best practices throughout the organization, how we organize workflow, and evaluate our knowledge management systems. In short: how can we reimagine and radically improve the donor experience and, with it, long-term donor engagement?

I don’t mean to suggest any of this is easy. It isn’t, of course. Nonetheless, it is the admission price for any NPO that wants to climb out of the 2% trap and enter a new level of success as an organization.

This level of innovation, in change management for nonprofits, hinges on key principles including:

• They are committed to digital-first transformation. For-profit businesses that make the investment in their consumer experience outperform laggards in that industry by 80%, repeatedly. For nonprofits, that starts with easy-to-use, open, cloud-based systems that integrate payment and analytics. It requires eliminating silos and inefficiencies; some 50% of nonprofits are using multiple fundraising tools that are functionally duplicative.
• Invest in the donor experience. One in five fundraisers believe their donors would describe their giving experience as “frustrating.” Today’s donor expects a familiar and consistent giving experience, fully optimized (or frictionless), with a quick, easy Uber-like experience that is “social-enabled,” leveraging the apps and platforms with which donors spend much of their time these days.
• Prioritize long-term relationships over transactional asks. Donor retention is at its lowest point in 12 years. Succeeding as a nonprofit today isn’t about getting your donor to give more in a single transaction. There’s an opportunity to shift from an episodic mindset to one of continuous engagement and stewardship. Since 2005, for every $100 gained in new revenue, today’s nonprofit churns through $96 in lapsed revenue.
• Embrace fundraising strategies for today’s donors. NPOs need to meet their donors where they are, not where the organization wants them to be. Unfortunately, we’ve built an entire process that fails to connect. The vast majority of people on your email list never, ever donate. The fact is, donors don’t live in databases, they live in networks, whether it’s Instagram or Facebook, or another of the multitude of online channels that exist today.

• Embrace an experimentation mindset. How do you begin to look and operate more like a Netflix or Instagram or Twitter? The only way to innovate is by employing effective, new strategies, and constantly trying new things based on experimenting. Starting with a reasoned hypothesis, try something different, measure the results, recalibrate your approach, then refine best practices.

Becoming an innovative nonprofit requires taking the steps necessary to realize a donor-first mentality. Putting donors first takes meeting them where and when and how they can be found. Once you get that right, you’ll have entered a new realm as a nonprofit organization. The future of giving is primed for a giant step forward. So, the next question is: Where do we go from here?