79 Strategic Questions
Competition is as much a fact of life for nonprofits just as it is for corporations. Nonprofits, their boards, and their donors need to understand who else is serving a community and how these social enterprises plan to grow.
This strategy tool is more than a list of questions. Consider it an approach to assess your competition, identify funding risks, and examine your future direction.
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Today's Market
What keeps you up at night?
Social entrepreneurs are no different than business entrepreneurs. The nonprofit and its issues accompany you home each evening. One concern can spill over into another. “What keeps you up at night” is a catchall set of questions.
Each of the questions immediately below should prompt you to ask deeper, more fundamental questions that you will find in succeeding categories in this document. A government policy change announced in today’s media reports can affect donations. If that is a worry, check out the Political Factors section or the future scenario questions towards the end of the document. A rival with a new offering can change the way you think about how you promote or how you deliver services. Examine the Technological Factors or the Rival’s Impact sections below.
- Market activity: What recent market activity tends to keep you up at night?
- Declining service: Is the need for your service declining? Why?
- Game changer: Has a rival launched a game-changing service? Have you lost your competitive edge relative to other nonprofits? What exactly has changed?
- Commitment: Is a donor about to end its commitment to your organization and why might that be the case? Has another nonprofit won the funding and replaced your organization?
- Regulatory change: Have regulations changed in a way that threatens your services, or have the needs changed on the part of your customers? Can you quantify this change in any way?
- Need for service: Is the overall need for your services increasing, or decreasing? If so, why?
- Expansion: Is your service area local, or has it expanded into other regions, nationally or internationally? Have rivals begun to serve this expanding market and what is the impact on your organization?
Political factors
From healthcare to Net Neutrality, you need to track and appreciate local and national legislative changes. Regulations can take years or decades to change, which is why when change does occur, many organizations are caught off guard. The following questions address the kind of government activity you must track.
- Government grants: Do you expect government to offer more or fewer grants to nonprofits in your area?
- Elections: Will upcoming elections carry legislation that could change the nature or demand for your services?
- Tax code: For donors, will tax code changes alter your ability to increase donations? What do you believe that impact will be?
- Party in power: How will the majority party’s platform affect your organization’s agenda?
- Social welfare: Do you think government’s approach to social welfare and support programs grow or shrink in coming years? What is the timing for these changes?
Economic conditions
These are large questions that may not affect tomorrow’s operations at a nonprofit but could have an impact on how you message your audience come the next fundraising campaign.
- Economic conditions: Do you expect the economy to grow or stagnate in the immediate future?
- Donation levels: Will a funder’s donations increase based on favorable economic conditions? Will they flatten? Or, funding decrease for other reasons, such as a change in tax deductions or incentives?
- Unemployment rate: Will the unemployment rate and availability of labor affect how your organization can hire or expand?
Social conditions
With our hyper-connected society, social trends and norms can appear to change overnight. Whether you are crafting a communications strategy or a launching a new service, you need to consider answers to the following questions.
- Population change: Has the general population’s age and growth rate fueled or dampened demand for your organization’s services?
- Social mobility: Has your population’s social mobility changed in recent years? If so, how has this upward or downward shift changed the way you deliver services?
- Taboos: Have social taboos or social barriers changed the demand for your services in any way?
- Religious beliefs: Similarly, have religious beliefs and lifestyles altered the makeup of your population and its needs?
Technological factors
Tech trends, such as the move into cloud computing, has radically changed the way people work and how they work together. Organizations that can successfully harness these new tech-driven dynamics can achieve a competitive advantage. That is why the questions below are so important.
- New technologies: What new technologies, or access to these technologies, can affect your services?
- Rapid growth: How has a technology allowed social innovators to grow much more rapidly and effectively? How has technology given nonprofits the ability to more easily experiment with new concepts?
- Virtual organizations: How has technology allowed organizations to become more virtual, thus reducing overheads?
General opportunities and threats
Cost of operations and collaboration underpin some of the major threats and opportunities within the nonprofit sector. The rate of change for both of these factors are moving very rapidly and can leave the slow-moving nonprofit an also-ran if it fails to grapple with them.
- Mergers: Have you seen a rise in collaborations or mergers among nonprofits in your sector? What could this do to your competitive position? Will collaborators be able to lower their costs or deliver better, broader services to a larger geographic area?
- Growth with collaboration: Are there partners or potential collaborators that could help grow or extend your offering?
- Trend-setting markets: Have social service activities outside your region provided you with ideas for enhancing or improving your nonprofit? Are there trend-setting markets that can “teach” you how to increase the impact you have with your consumers?
- Cost of operations: Has the cost to deliver services risen to the point where you find it difficult to achieve your goals for your customers? Have your overhead costs made you a less desirable charity?
Competitive Analysis
Upstarts and new rivals
The number of new nonprofits entering the market each year is dizzying.[1] These new entrants can bring lower cost models or an entirely new business model to the market, making their services more efficient and perhaps more desirable to funders. Who are they and where did they come from? You need to keep track of this startup rush.
- Low-cost entrants: Have new social entrepreneurs entered your sector with lower overheads and an ability to scale that you do not have?
- Different offering: Do new entrants into your area offer something new and different that allows your customers easier access to services, or a wider variety of services for similar funding levels?
- Earned income success: Has the new rival developed an earned income model that allows it to be self-supporting or even provide funds for expansion?
- Funding independence: Has this entity taken advantage of government funding that allowing it to remain somewhat independent of private foundations, thereby giving it long-term staying power?
- Rich uncle: Does the new entrant come with the financial backing of a much larger nonprofit, giving it staying power?
- Technological prowess: Does the social innovator also bring with it technological prowess that dramatically increases efficiency and lowers overhead costs, as well as deliver other services not available to you?
- [1] According to The Urban Institute 2015 report, the number of 501(c)(3) public charities rose from 798.988 in 2003 to 954,476 in 2013, nearly a 20-percent increase. https://www.urban.org/research/publication/nonprofit-sector-brief-2015-public-charities-giving-and-volunteering . During a similar period (2006-2014), the number of new businesses created dropped from 614,024 to 452,835. http://money.cnn.com/2016/09/08/news/economy/us-startups-near-40-year-low/index.html
Customers or User Groups
Some nonprofit sectors, such as public education, attract many social entrepreneurs. You need to consider how crowded your market has become.
- Customer gatekeepers: Do you and your rivals service many individuals or few but large customer organizations? Large customers, such as inner city public school systems, may insert gatekeepers between the nonprofits and the true user or beneficiary of the service. In the case of a public school system, the ultimate customer is the student. How do you or your rivals gain access to students in such cases?[2] Are certain rivals able to win more grant money or gain more access to customers than does your group?
- [2] For example, as of January 2018, there were over 100 nonprofits offering services to the Boston Public School system (BPS) with BPS acting as a clearing house to vet these organizations. (www.guidestar.org)
Current rivals – general issues
You can think about new entrants or customers when you consider the competitive environment but most of the time when you think “competitive”, you mean competitor. Too often we can become lazy when watching competition. Indeed, rivals may not drastically change their behavior, but they can make incremental changes or cut deals that could make them far more of a threat than you anticipated. Consider the questions below when planning to “win market share” from your competition.
- Commodity offering: Are you one of a few organizations providing your service or are you one of many? Do donors possibly view your service as a commodity offering? [3]
- Differentiated offering: How differentiated is your offering, compared to other nonprofits in your market or in your region? Do your rivals offer more value to their beneficiaries by making it easier to receive services, or delivering more effective outreach? How do rivals describe what they do better than anyone else? How do your rivals set themselves apart from other social service groups? Are they faster or easier to use? Do they represent lower risk?
- Collaboration competitive advantage: Have you noticed more collaboration among nonprofits serving your market? Has this collaboration given rivals a cost advantage or an ability to serve a larger region?
- Collaboration disadvantage: Are there disadvantages to collaborating, including diluting brand image, loss of jobs, or potential damage to your reputation?
- [3] Guidestar lists over 20,000 animal rescue organizations nationwide with over 2,300 in California alone under the NTEE code, D20. (www.guidestar.org)
Rival goals
Sometimes rivals express their goals openly, other times not. For those rivals who do not publicly telegraph their plans, they nonetheless make them known in a variety of ways expressed below.
- Rival goals: What are the rival’s stated and unstated goals regarding customers, growing its services, scaling, and so on?
- Belief system: Does the rival organization have an organization culture, set of rules, or marketing constraints defined by a religion, a belief system, or by a constitution?
- Board control: How much does the board control or influence operations? What are the positions of these board members? Are they conservative or proactive and aggressive in the way they approach risk or growth opportunities? Do you have evidence of decisions make by board members in this organization or in their role as executive or board member in a corporation or other nonprofit?
- Contracts: Are there contractual arrangements with a government agency or another group that may limit a rival’s reach and impact?
- Unexplored market: Does the rival’s set of goals take it into a new and unexplored market, perhaps parallel but not in conflict with your services?
Management background and risk attitude
An executive’s approach to risk is something often witnessed, but not heard. As Associate Supreme Court Justice, Potter Stewart, said about his difficultly in describing pornography, he wrote that “I know it when I see it.”[4] Yet you can find evidence of an organization’s risk tolerance, as the questions below indicate.
- Management skills: What skills or background do the nonprofit’s founders bring with them? For example, have they used technology to solve distribution and service problems in their past or current affiliations? How could that influence the type of service and how the nonprofit offers it?
- Financial risks: What financial or organizational risks are the nonprofit’s founders or executives willing to accept or tolerate?
- Executive risk tolerance: In the past, how have these executives acknowledged risks and how far have they been willing to stress the organization’s resources and capabilities?
- Selling risk: How have management been able to convince foundations that investment in their organization are worth the donations?
- [4] https://en.wikiquote.org/wiki/Potter_Stewart
Funder attitude to risk
Funders open their hearts and wallets for causes that appear true and just. That said, large donors have begun to tighten their approach to managing risk. Metrics, impact of service have become ingredients in their donation recipe book. Check out the issues below.
- Funder attitude: Do the funders you target have widely different attitudes with respect to risky or long-shot investments?
- Portfolio history: Do you know the funder’s portfolio of nonprofits and grants issued? Can you label the grants by risk level? What percentage of these grants fit your organization’s risk profile?
- Failure tolerance: Does the funder you are examining tolerate a certain number of failures in its portfolio?
- Acting local: Does your funder prefer local or regional grants where it can exert more influence and a watchful eye on how the funding is spent?
Branding goals
Name recognition can attract funding. How does your organization measure up when considering the questions below?
- Value proposition: Do donors and consumers attribute high value to the nonprofit’s name and its services? What goals does the nonprofit hope to achieve with its image? Do donors recognize and reward this high value and good reputation with continued and long-term funding support?
Rival’s assumptions
“They were primed to find flaws, and this is exactly what they found,” wrote Daniel Kahneman, the Nobel Prize-winning psychologist.[5] We tend to fool ourselves, especially when studying the competition. Our biases can defeat even the most data-rich report. You need to recognize the false assumptions you may make about a rival to appreciate that organization’s capabilities and potential threat to you.
- Self-perception: How does the nonprofit see itself in the market it serves? Does it view itself as a thought leader or high-quality provider? If so, how does it express this leadership quality?
- Key services: If the rival’s service has become the benchmark for others to imitate or build upon, what are those key services or infrastructure that has allowed it to be a nonprofit leader?
- Growth expectations: Does the rival believe the demand for services it provides will grow or not, and why? What is the underlying proof driving that belief?
- Founder’s experience: Is the nonprofit’s view of the market based on the founder’s past experiences in other organizations? What biases come with that perspective?
- Competitor response: How does the nonprofit respond to other social entrepreneurs entering their area? Have they welcomed them or closed their doors, fearing loss of funding because of competition?
- Strength and weaknesses: How does the nonprofit view its rivals strengths and weaknesses? Which of these strengths does the nonprofit most fear?
- Risk-taking self-image: Does the rival see itself as a low-risk or as a high-risk taking nonprofit?
- [5] Thinking, Fast and Slow, Daniel Kahneman, FSR, 2011
Infrastructure
One organization may be more capable than another, with unparalleled resources and capital to allow it to execute on its strategy. You need to explore a rival’s infrastructure and determine if it can gain a competitive advantage because of its capabilities.
- Funding level: Does the nonprofit have the funding in place to fulfill its long-term strategy, or is it living hand-to-mouth?
- Marketing skills: Has the organization demonstrated the required marketing and social media skills needed to grow its services?
- Staff training: How well trained is its staff and service providers? If the organization wished to expand or scale into other regions, could it do so with the capabilities and expertise of its existing staff?
- Proprietary technology: Does the organization own proprietary technology which it can use to build infrastructure or deliver its services?
- True overhead: What is the nonprofit’s true overhead? Has the nonprofit under-reported its overhead costs or reallocated costs to meet a foundation’s standards?
- Earned income success: Has the nonprofit pursued an earned income strategy and has this strategy contributed capital to its operations, or has it only given the organization more public exposure? Or, has its earned income approach done neither, serving only as a distraction, as well as draining staff time?
Rival’s impact
An increasing number of nonprofits measure impact; their donors are demanding they do. You need to appreciate how your rivals view their impact.
- Success factors: How does the nonprofit measure its impact on the market? What are its success factors?
- Data tracked: What data does the nonprofit tend to track?
- Storyline: Which impact measures does the nonprofit use to tell its story and motivate donors to support its cause? Since it began using this storyline, have funders increased donations? Has the story attracted public attention, increased news coverage?
Ability to scale
Many a social innovator would like to scale a nonprofit, dreaming of serving customers around the world through its network of offices. Can your rival scale? What factors must be in place for it to do so?
- Commitment to scaling: Are the founders committed to scaling?
- Hiring strategy: Have the founders themselves hired managers to expand the operation allowed these managers the leeway to do so?
- Feedback process: Does the nonprofit have the feedback management tools in place to allow for scaling and quality control?
- Ability to replicate: Has the organization made its products or services relatively easy to copy or replicate at its other locations?
- Scaling by partnership: Has the nonprofit scaled by arranging partnerships with for-profit as well as government agencies?
Tomorrow's Landscape
Management commitment
More for-profit corporations talk about scenarios than live the experience. It takes commitment. Ask yourself these two simple but honest questions below to see if your nonprofit is up to the task.- Commitment to the long term: Has your organization’s founders or executives truly committed to a long-term outlook, or does it live from funding cycle to funding cycle?
- Time investment: Is the organization willing to spend a half year or more considering the ten- or fifteen-year outlook that scenarios demand, or is that not realistic?
The critical issue
Remember “What keeps you up at night”? That is a short-term concern and most executives know exactly what that is. The 10- or 20- year worry is more elusive. Consider the questions below with your staff or your board. Most likely, the first answers each of you scratch on a piece of paper will not match. The critical issue deserves discussion.- Single issue: Has the board or management identified the single future issue it needs to address? What is that singular issue? It must be one whose dramatic shift could represent an existential threat to the organization or a potential new growth opportunity?
Drivers and uncertainties
Thinking about the future starts with driving forces. This is a fun exercise, great for a brain storming session with your management or board.- Driving forces: Have you identified drivers, not trends? Trends represent a historical view of what has happened, not what will happen. Drivers, the building blocks of future scenarios, describe the basic forces that create change. Drivers also describe conditions that are highly uncertain. Drivers typically fall into one of four categories: political, economic, technological, or social. For example, in the story of streaming media, the Internet is one driver, one force that explains the dramatic growth of Netflix and the implosion of Blockbuster. Typically, you would construct a future scenario based on a combination of drivers.
- Define each driver: Have you defined a statement for each driver? As in the above example with Netflix, you might have defined this driver: “The degree to which the Internet will become a major information and data platform accessible worldwide.” Other drivers in this scenario might include the cost of acquiring home entertainment (economic), or the need for people to enjoy themselves in large groups (social).
Build scenarios
The scenarios you build, based on the concepts suggested below, will likely take you to worlds you would not have imagined – both bright and optimistic worlds, as well as dark and negative worlds. This is the final step in examining the future. It is an important one. Think about the discipline it takes to craft these stories, as you review the questions below.- Permutations: Have you mixed and matched the driving forces, such that you will create many combinations? For instance, if you selected four drivers and each driver has two polls, you will derive 16 permutations or combinations of these four drivers, each with two polls. Using the above example, the cost-to-acquire-entertainment driver would have two polls, a “high-cost” and a “low-cost” poll. The other drivers each will have their own polls or extremes.
- Future boundaries: Not all 16 permutations of the future will be usable. Have you asked yourself the following? Out of the 16 story combinations, which ones are plausible, challenging, as well as differentiated from the others? Most likely you will accept no more than a half-dozen. By selecting a half-dozen distinct stories, you have in effect developed boundaries for most of the possible futures for your market. You now can plan your strategy to anticipate any one of these eventualities.