Strategy for Social Organizations Bob Kennedy William Davidson Institute and The University of Michigan

What is Strategy?  Opportunity Identification »Scanning the environment »Identifying opportunities for value creation  Formulation »Organizing a set of activities to deliver efficiently and effectively  Implementation »Creating and managing resources and an organizationto deliver on this vision

Who is Your Customer?  Southwest Airlines  NGO focused on citizenship training for teens The Customer is the one who pays you money!!

Strategy: Opportunity Identification  What does the “market” look like?  Who else operates in this market?  Do segments exist that are not being served (or are being underserved)?  Is someone willing to pay to service these segments?

Opportunity Identification: Southwest Airlines  Most airlines were full service »Travel agents, nice meals, hub & spoke systems, multiple classes of service  Insight: Smaller city pairs were not being well served

 Can your organization create an operating model that creates value »Provides service at lower cost, OR »Creates better value for the customer (i.e. higher willingness to pay) Strategy: Formulation

Formulation: Southwest Airlines Limited Passenger Service Frequent, reliable departures Lean, productive ground and gate crews High Aircraft Utilization Very Low Ticket Prices Short point-to- point routes

 Is your organization aligned for effective implementation? »People »Incentives »Support activities »Organizational Structure »Culture »Leadership and Communications Strategy: Implementation

Implementation: Southwest Airlines  People: Non-union, flexible work rules  Incentives: high pay, team oriented  Supportive activities: one model aircraft, no assigned seats, no meals, etc.  Org Structure: Flat organization, empower line workers  Culture: fun  Leadership: Communication, mission, etc.

What Changes with NGOs?  Customer: those who pay differ from those served  Objective: often social goal, not profits  Competition: comp exists, even though many SE leaders are reluctant to admit it.  Organizational issues: many workers incented by non-financial considerations  Leadership and communications: discussing efficiency and effectiveness is uncomfortable

An Example: Acumen Fund  Opportunity ID: »Wealthy individuals who believe in incentives and mistrust gifts »Many worthy organizations to well off for grants  Formulation: »Act as a venture philanthropy that demands high performance »Invest in metrics and oversight. »Focus on BACO measures (best alternative charitable alternative)

Acumen Fund (2)  Implementation »Hire professional managers, pay market salaries »Academic outreach »Fellows program »Invest in community building among donors –Advisory boards, brainstorm sessions, tours  Result: Now manage $10 mm »Goal is $100 mm by Changes are good.

Strategy in Your Organization  Opportunity ID: What is the opportunity? »Who do you compete with? »Is someone willing to pay for this “service”?  Formulation: »Can you do this more efficiently or effectively than “rivals?” If not, why should you be funded?  Implementation: »Do you have the right: people, incentives, support activities, org structure, culture, and leadship in place to succeed?

Discussion