Susan Raymond, PhD is Executive Vice President for Research, Evaluation, and Strategic Planning for Changing Our World, Inc., and the founding director of AFGG’s Innovation Fund. These are her observations on the Final Reports from Round One of the Innovation Fund .
“Where there is an open mind,” American engineer Charles F. Kettering once remarked, “there will always be a frontier.” The Innovation Fund was created from an open mind about what might be possible if global development nonprofits could approach their financial stability be combining markets with their missions. What is remarkable about the first year of activity of the Innovation Fund is the depth of exploration on that frontier that a single year of grants enabled. Some of that exploration was intended, reflecting its clear knowledge about the challenges that its grantees would face. Frankly, some that exploration was not intended, reflecting issues and challenges that not even the grantees themselves knew or understood before work began. This is good. By definition, frontiers are characterized by the unexpected. The first year of the Innovation Fund teaches, once again, that expecting the unexpected is always good practice.
What is being learned through this first year is important to the pursuit of social enterprise throughout the nonprofit sector. The learning represents a critical asset for all of global development. Exploration of five dimensions of the frontier stands out in these final grant reports.
First, skills matter. The valuable skills that every nonprofit learns in cultivating, soliciting, and stewarding philanthropic donors are not the same skills that are needed to understand markets and then create services for to meet those needs. And the skills needed to then manage the implementation of social business models are not the same as the skills needed to manage a donor-driven process. Social enterprise and social market skills can be learned, but nonprofits seeking to diversify revenues need to consciously recruit or build those skills, not assume that they will emerge as an organically from the process of diversification itself.
Second, the government matters. In nearly every instance, the adaptation of nonprofit mission to social enterprise strategy cut across the bow of government policy. In most instances, even where the nonprofit had decades of experience in the country, the interface with government nonprofit policy was unexpected. The Innovation Fund has come to appreciate that a deeper examination of the adaptability of opportunity to policy structures is an important element for implementation schedules.
Third, tensions can arise. Even when social revenue opportunities are organizationally distinct from traditional poverty service provision, public images can become confused, internal staff discomfort can emerge, and priorities can be difficult to establish. Very real distinctions need very clear messaging so that the organizational mission remains paramount.
Fourth, trust is essential. The Innovation Fund consciously chose Round I grantees with deep roots in their communities and long experience in service provision. We learned how important that characteristic was. It was the reservoir of trust that enabled grantees to overcome hurdles and outlast implementation delays and unexpected challenges.
Fifth, financial return from Innovation Fund grants will take time, and it may come not in the form of leverage as well as in the form of revenue. In few cases did revenue flow in the space of a single year. In all cases, that revenue is clearly on the horizon. But the presence of an Innovation Fund grant to generate that social revenue represented a stamp of approval that could be leveraged for the solicitation of complementary funds and hence strengthen the entire effort. Flow of funds in 12 months is not the only measure of financial success.
In addition to advancing the work of its nonprofit partners, what the Innovation Fund is really creating is the beginnings of a map to the new frontier of revenue-generating, mission-supporting financial diversification of nonprofits working in critical areas of global development. The Innovation Fund is an explorer on the frontiers of knowledge. It is drawing a map of pathways forward that, we hope, will speed the journey of an increasing number of organizations to a future of service expansion and successful problem solving for some of the world’s most complex challenges.
Susan Raymond Ph.D.