Top Menu

Innovation is just too darn risky isn’t it?

iStock_000011778701Medium

Thatcher

I had a story retold to me about the late Margaret Thatcher defending her gaffe prone Trade Secretary, David Young, on ‘Breakfast with Frost’. When Frost pressed the Prime Minister that Young’s position was untenable after his latest slip-up Margaret tut, tutted and dismissed the assertion by assuring both Frost and the audience watching that she couldn’t possibly fire her ‘favourite’ minister because, as she put it, “other ministers bring me problems, David brings me solutions”. From some personal experience I want to address the problem of the risk inherent in being ‘innovative’ for non-profits but please don’t let me go until I behave like Maggie’s ‘favourite’ and offer a possible solution.

I have been working in Business Development in The Wheel for just close to three years now. We are a representative body for the non-profit sector. Described by some as being a type of Small Firms Association, IBEC or ISME for the voluntary sector – we have over 900 member organisations varied in size, scale and scope and have a database that allows us to communicate with over 10,000 more organisations across the sector

It’s a wonderful job!

Like many representative bodies we are at the mid-section of the hourglass with news and information passing through us daily which gives you a fantastic overview of what is happening in our sector. I have a natural inclination for nosiness so this perk of the job suits my disposition.

In my three years I have noticed ‘innovation’ being talked about. A lot! The Celtic Tiger has bolted and this country and/or our non-profits need to ‘innovate’ our way out of our current malaise to enable social impact… etc etc.

Innovation

Innovation is an exciting word! It’s an aspirational word! It’s a word you want to be associated with. It’s not yawn inducing like ‘meticulous’ or ‘precise’ or ‘pernickety’. Words like these are not ones I would hope to have engraved on my tombstone when I eventually shuffle off.

But to be described as an ‘innovator’, now wouldn’t that be something? Innovators are cool! Suave! Tech Savvy! They are On Trend! Fashion Forward, They are now, the future and all that is to come! Us meticulous types are terribly drab. We buy our clothes in what used to be grocery stores because they have the right waist and trouser length size for our slightly lopsided, gangly bodies.

Innovators are maverick types, a little dangerous, a little risky but a blue sky thinker, someone ahead of the curve, people you get a bit of a teenage crush about.

So we all talk about Innovation. We all aspire to it on some level I guess. It comes up at every conference, every forum, every roundtable, every blog… ahem…

But should charities be innovators? To characterize a charity as a maverick, a little dangerous, a little risky, is this acceptable? Is that a charities role? After all whose money will the charity be a maverick with? Is that not our money? Like Father Ted is that money not supposed to be ‘just resting in my account’ before being moved on for the delivery of the frontline services for which it was donated? You wouldn’t find it acceptable for a charity to take your donation and bet it all on black on the 50:50 chance they could double it. 3 out of 4 startups fail so why would you, as a charity, bet on setting up innovative new ventures when the odds are even worse than heading for your nearest roulette table?

So yes, it’s not in a charities DNA to be a risk taker.

Yet being reminded constantly of the need to be ‘innovative’ must create excruciating cognitive dissonance in the minds of sectors leaders, their fundraisers, their boards and anyone who has to wonder how their organisation is going to make payroll by the end of the month.

The rules that a non-profit must play by are that they cannot expose themselves to risk, they cannot afford failure and they must innovative solutions from the current economic climate that helps them deliver to an increased demand in service with dwindling financial resources. It is enough to give anyone an ulcer! Dan Pallotta’s TedTalk in March of this year puts it, more eloquently and succinctly than I could ever hope, that the way we think about charity is dead wrong.

Deal effect

Back in August 2011 I had the good fortune to be approached about a potentially very innovative tech start-up for charities. I was part of a team that got this concept to a fully funded start up and thankfully Deal Effect will launch later this year. Deal Effect has the potential to generate significant income for charities without charities having to ask their cash stricken supporters for a donation in these straitened times. In fact, charities will offer them discounted services and generate revenue from that. How innovative an idea is that in the current climate?

But we knew asking charities to come with us down the road of e-commerce tech start-ups would be a challenge. We are not in that game, neither are other charities. So we studiously did our homework, talked to all the right people, got all the right advice, developed focus groups of our members and learned what would be their requirements. We did this by the book, whiter than white. We ran the financial models. Calculated the absolute minimum number of charities we would need to operate the service profitably and benchmarked that against the number of our members we might expect to sign up this new idea. Checked and double checked the figures and still came out with being able to generate over €500,000 for charities in the first year with only 25 charities signed up from the start. As it stands we already have 33 supporting the venture. This is a success and I can only hope will be a continued success for the slick e-commerce people we have employed to run it. Best of luck to them!

Our expectations are abysmally low

But recently I had pause to reflect on achieving these milestones and had to conclude that our expectations are abysmally low. Of 900 organisation members of The Wheel we had to work out what would be the absolute minimum level of support we could get to make the thing financially viable. This is prudent, I appreciate that, but it is also kind of depressing.

For every charity who takes the leap of faith there are 28 – 29 who are saying, no thanks, not for me.

Some feedback from charities who considered it was that while they were supportive of the idea their boards turned it down. That must be frustrating. There are a few who have brazenly admitted to fence sitting to see if it will succeed and if it fails won’t it be ironic how their inaction contributed to that inevitable outcome? The core root of this cognitive dissonance can be summed up in these words back from one organisation:

“We don’t think it’s an appropriate use of our charity resources to lend funds… That would involve us risking funds by lending to a separate stand-alone commercial venture, unrelated to our programme work… and this is not in keeping with the purpose for which our supporters have given us donations and have supported our events”

This feedback is all the more interesting because these same organisations recently told us in a report (see here) that reduced funding is currently their greatest challenge and the main supports they required was help with managing costs and help with fundraising.

So where do you go?

Do you just ignore this reality and dismiss the 28/29 in 30 charities who won’t share some risk with you? The Fools, we know better eh? They are just so pernickety with their ill-fitting clothes, unlike us innovative types in our tight jeans that are just ‘so now’.

On the contrary I think they are absolutely right! Bang on in fact! They would be answerable to a public that would never tolerate them taking a 50:50 bet, never mind a 3 to 1 shot. They can’t take those risks because the way we think about charity is dead wrong! Hate the game, not the player.

So how do we change the game?

I had lunch recently with the tech start-up advisor who mentored us on Deal Effect. I hadn’t seen him since before Christmas when he finished advising us as has been off mentoring his next start-up rookies. At lunch he told me how Deal Effect was the first Social Enterprise/Charity startup he had ever worked on and just like buying a car that as soon as he drove it out of the lot he was now noticing how charities can use technology to enable social impact all over the place. I don’t quite think it was a conversion on the road to Damascus moment for him but his experience on our modest venture illuminated some things for him.

I was explaining my own recent ruminations of being happy with the milestones we had reached to date with Deal Effect but how could our sector do this type of thing quicker, faster, easier and more frequently in the future? We needed to take out the inherent risk for charities in taking a punt on a startup. That it shouldn’t be a punt, or even seen as a punt in the first place. That it should be recognized that investing in innovative startups was actually prudent for charities! We needed a change in mindset so we needed to change the game.

My road to Damascus moment came when my tech start-up friend explained that he had invited me to lunch to propose this exact concept to me.

The need for a hub

The non-profit sector needs a hub of enterprise startups like the NDRC, or DIT’s Hothouse or the Digital Hub, to name but a few. The sector needs to be collectively investing in the next FundIt, Deal Effect or whatever the next project will be.

It’s a bit of Social Entrepreneurs Ireland and the Arthur Guinness Fund but with an express commercial outcome. An incubator programme designed to give charities access to world class innovation and technology that actively, but in a risk managed way, supports trial phases of new tech ventures that nonprofits can get a financial return from in the future.

There are some 455 registered charities in Ireland who have a turnover of €1.5million or more and a combined turnover between them of €4.7billion according to the INKEX figures. Imagine 455 €1,000 investments each year from this group? 0.9% of their annual turnover invested in innovation. Imagine matching that investment with venture philanthropy funds? And matching it again with angel investor funds? And matching it again with statutory investment through Enterprise Ireland, third level partnerships or EU support through the Social Business Initiative? We are close to a €2million annual fund for innovation here and all for a small €1,000 investment from a group of like-minded charities to get it started. Imagine the possibilities!

Do others believe we could bust open this innovation thing

Are other people interested in this? Do others believe we could bust open this innovation thing, limit and reduce the risk if we worked and invested more collaboratively? Could the non-profit sector develop its own innovation cluster and generate revenue for itself longer term? There are examples of the model currently being established in the UK between Wayra and UnLtd so maybe partnering with our own indigenous tech sector could create the right opportunity and environment to give this a real bash.

Or maybe I am wrong. Maybe innovation is just too darn risky…

********************************
Hugh O’Reilly is Business Development Executive with The Wheel |hugh@wheel.ie | 01 454 8727 | @Hughie_OReillyie.linkedin.com/pub/hugh-o-reilly/9/18b/310/

Small Business Can Newsletter
Small Business Can is run by businesspeople for businesspeople. We share our experiences, successes and failures. Sign up for our insightful (and sometimes funny) newsletter and stay up to speed with all the latest insights.

, , ,

2 Responses to Innovation is just too darn risky isn’t it?

  1. LocalSearchHQ June 13, 2013 at 6:56 am #

    Great suggestions shared! Loved your points on setting up a small business.

    • Shaun June 14, 2013 at 5:00 pm #

      Thanks for the comment I hope the information helps people make right decision for their business.

Leave a Reply