1. Learning Lab: Tools to Support Business Model Innovation
SHARING KNOWLEDGE. GROWING IMPACT.
Learning Lab: Tools to Support Business Model Innovation
September 14, 2010
Prepared for the Council on Foundations Fall Conference
cfinsights.org

2. the IDEA BEHIND IS SIMPLE
What if EACH community foundation could know what ALL community foundations collectively know?
8/3/2019
© CF Insights 2010

3. The Challenge of Business Model Innovation
AGENDA
The Challenge of Business Model Innovation
Reviewing Your Existing Business Model
Comparative Data
Activity-Based Costing Analysis
Economic Scenario Planning
Planning for the Future
Agenda / one column text slide
8/3/2019
© CF Insights 2010

4. “Fueling Impact”: Taking the Next Steps
Business Model Innovation: Key Challenges
“Fueling Impact”: Taking the Next Steps
KEY QUESTIONS COMMUNITY FOUNDATIONS ARE ASKING ABOUT BUSINESS MODEL INNOVATION
How should community foundations focus internally and externally in order to identify opportunities for business model innovation?
How can we plan for our immediate needs and sustainable growth?
What process steps can we take and what practical tools are available to support strategic thinking and problem solving within your own foundation?
Section break / title slide
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© CF Insights 2010

5. The Challenge of Business Model Innovation
AGENDA
The Challenge of Business Model Innovation
Reviewing Your Existing Business Model
Comparative Data
Activity-Based Costing Analysis
Economic Scenario Planning
Planning for the Future
Agenda / one column text slide
8/3/2019
© CF Insights 2010

6. What Should We Do to Understand Our Existing Business Model?
Reviewing Your Existing Business Model
What Should We Do to Understand Our Existing Business Model?
Process Steps
Understand What’s Unique about Your CF
Frame a Discussion
Analyze Product Economics
“Stress Test” Business Model
Connect with Constituents
Get specific about your assets, revenues, and unique capabilities
Quantify business model metrics relative to peers
Explore examples and stories in “Fueling Impact”
Discuss current positioning and concepts of differentiation and sustainability
Define current products and services
Analyze costs and revenues to understand implicit allocation of resources and alignment with priorities
Gauge the sensitivity of your business model to changes beyond your control (e.g., investment performance, donor giving)
Identify areas to mitigate risk
Understand how constituents’ perceive the CF’s greatest value – and the fit with their current and future needs
Tools Available
Comparative Data and Reports
“Fueling Impact”
Activity-Based Costing Analysis
Economic Scenario Planning

7. Reviewing Your Existing Business Model
Comparative Data
CF INSIGHTS OFFERS ACCESS TO INFORMATION ON OVER 500 COMMUNITY FOUNDATIONS, WITH 60 ON-DEMAND REPORTS CUSTOMIZED TO REFLECT AN INDIVIDUAL COMMUNITY FOUNDATION’S UNIQUE PEER SET
WHAT IS UNIQUE ABOUT YOUR COMMUNITY FOUNDATION RELATIVE TO YOUR PEERS?
HOW DOES YOUR BUSINESS MODEL COMPARE?
Asset composition
Cost structure
Growth and giving patterns
Staffing ratios and functions
Revenue mix
Age and development path
Community served
One color and two color, two column graphic/chart; text above and below
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© CF Insights 2010

8. Reviewing Your Existing Business Model
Example: Comparing Asset Composition
ASSET MIX IS AN IMPORTANT FACTOR TO CONSIDER
Multi-color one column graphic/chart with highlight and legend; text above and below
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© CF Insights 2010

9. Reviewing Your Existing Business Model
FUND ASSETS
STAFFING
ANNUAL GROWTH RATE VS. PEERS
( )
TOTAL ASSET SIZE ($M)
2009 ASSET ALLOCATION
ASSETS PER AUDIT PER FTE, 2009
Other: 3%
Deferred Gifts: 2%
Columbus: 18%
Cleveland: 6%
Atlanta: 5%
Chicago: -6%
San Francisco: -11%
Boston: -25%
6/30 FYEs
9/30 FYE
12/31 FYEs
$1.04 B
$1.02 B
Support Org: 2%
$904.5 B
Geographic: 0%
Unrestricted: 28%
Scholarship: 1%
FOI: 19%
Designated: 7%
Agency: <1%
Those foundations with 12/31 FYEs show recovery from the economic crisis
DAF: 38%
Differences in assets per FTE is often reflective of different operating models and product focus
-7% CAGR from
GIFTS
GRANTS
SUSTAINABILITY
TOTAL GIFTS ($M)
TOTAL GRANTS ($M)
OPERATING EXPENSES AS A % OF ASSETS
SFF
Peer average
Dashboard
AVERAGE GIFT SIZE VS. PEERS
AVERAGE GRANT SIZE VS. PEERS
AVERAGE FUND SIZE VS. PEERS
SFF
SFF
SFF
Peer average
Peer average
Peer average
GIFTS PER CAPITA VS. PEERS
GRANTS AS A % OF ASSETS VS. PEERS
OPERATING EXPENSES AS A % OF ASSETS
Boston: $23
Columbus: $29
Chicago: $9
Cleveland: $36
Atlanta: $23
San Francisco: $24
Boston: 14%
Columbus: 7%
Chicago: 7%
Cleveland: 5%
Atlanta: 21%
San Francisco: 9%
Boston: 1.5%
Columbus: 0.6%
Chicago: 1.1%
Cleveland: 0.7%
Atlanta: 1.1%
San Francisco: 1.1%
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© CF Insights 2010

10. Reviewing Your Existing Business Model
Activity-Based Costing Analysis
CONDUCT A DETAILED REVIEW OF YOUR CURRENT PRODUCTS, COSTS, AND REVENUES
WHERE ARE YOUR RESOURCES GOING? ARE YOU SUBSIDIZING STRATEGIC INVESTMENTS OR AREAS YOU SHOULD BE BREAKING EVEN?
ARE THERE OPPORTUNITIES TO INCREASE REVENUES TO BETTER ALIGN WITH THE VALUE OF PRODUCTS AND SERVICES?
Match economics to mission
Prioritize the right products and services
Adjust fee schedules and create incentives for donors that support priorities
Evaluate revenue sources
Gauge community leadership investment
One color and two color, two column graphic/chart; text above and below
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© CF Insights 2010

11. Reviewing Your Existing Business Model
Example: Community Leadership Revenues and Costs COMMUNITY LEADERSHIP IS AN IMPORTANT COMPONENT OF CF INVESTMENTS – AND EACH CF HAS A VERY DIFFERENT REVENUE MODEL
Total Community Leadership Costs and Revenues
COMMUNITY LEADERSHIP COSTS AS % OF TOTAL ADMINISTRATIVE COSTS
42%
23%
30%
32%
15%
25%
10%
21%
18%
13%
16%
Source: Foundation data and CF Insights . 4

12. Reviewing Your Existing Business Model
Economic Scenario Planning
TEST YOUR CURRENT BUSINESS MODEL’S VIABILITY UNDER VARIOUS ECONOMIC CONDITIONS
WHAT ARE THE WEAK POINTS IN YOUR BUSINESS MODEL?
WHERE DO YOU NEED MORE STABILITY AND WHERE CAN YOU TAKE MORE RISK?
Relationship between investment performance and revenues
Declining interest income
Relative levels of giving and grantmaking
Low level of flexibility – inability to tap operating funds
Spending policy shifts deficit to later years
Revenues unconnected to investment performance
More diversified revenue sources
Take a more active role to influence donor giving and grantmaking levels
Revisit policies or build funds that add operating flexibility, particularly to support programmatic and leadership work
One color and two color, two column graphic/chart; text above and below
BASED ON THE RESULTS OF YOUR SCENARIO PLANNING, YOU WILL BE ABLE TO MAKE MORE INFORMED DECISIONS ABOUT THE CHANGES NEEDED IN YOUR BUSINESS MODEL
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© CF Insights 2010

13.      Reviewing Your Existing Business Model
A Base “Expected” Scenario Is a Starting Point to Make Assumptions and Forecast Results
Example “Expected Scenario”
Assumes modest market recovery starting in 2010, with no changes to spending policies. The staff will continue to pursue other sources of revenue, while we maintain our operating budget at current levels.
Category
Assumption
Rationale
Market Performance
4% return in 2010, followed by four years of 7% return
Economists are expecting markets to recover in 2010; the average annual S&P return since 1950 is 9.2%
Donor Behavior
New gifts as % of assets is 3% in 2010, 4% in 2011, and 5% thereafter
These % are lower than in past periods due to donor sensitivity to volatile markets and lagged response to improving market conditions
Spending Policy
No changes (i.e. 3 year rolling avg, fees remain 1.3% of assets and grants paid out remain at about 5% of assets)
We do not think it prudent to increase fees; we have seen the 5% level of grantmaking hold steady over the past 12 months
Other Revenues
Fee for service and general operating grants grow at 10% after 2011
Smaller organizations will continue to look to us for back office support; our community efforts during the crisis will pay off in the form of operating support
Operating Expenses
Annual growth of 3%
Growth reflects inflation and small pay increases; since preserving operating capacity is a key priority for the organization no further reductions are assumed     

14. Reviewing Your Existing Business Model
The Expected Scenario Section Allows You to Share Assumptions and Forecast Results
Assuming operating expenses grow by 3% annually (to account for inflation and modest pay increases), operating at a deficit in 2012 and 2013
Are there long- or short-term changes we should be making to the business model?
Personnel
Non-Personnel
Graph placeholders for you to fill in data from the expected scenario on:
Assets, Gifts, Grants (slide 7)
Revenues, Operating Expenses, Surplus / Subsidy (slide 8)
Months of Cash, Fee Revenue % of Operating Expenses, Grants % of Assets (slide 9)
Note: To replace the placeholder data with your data, just double click on each graph and paste in the numbers from your model; you might have to change the scale of the axes
SHOW THE DOUBLE CLICKING!!!

15.      Reviewing Your Existing Business Model
Creating Multiple Scenarios Tests How Results Change When You Modify Assumptions
OPTIMISTIC
PESSIMISTIC
In this scenario, markets end the year up 6% and our DAF holders shore up their asset levels with new gifts in 2010 and 2011
In this scenario, markets end the year up only 3%, with future growth at 4% or 5% at best; DAFs curb gifts in each of the next five years as economic uncertainty persists
Key Differences to Expected Scenario
Key Differences to Expected Scenario 
Market Performance
6% return in 2010 instead of 4%
3% return in 2010 instead of 4%; 4% return in 2011 and 5% return in instead of 7%
Donor Behavior
New gifts to DAFs at 5% of assts per year starting already in 2010 instead of 2012
New gifts to DAFs as % of assets 1% lower in each of the forecast years
Spending Policy
None
Other Revenues
Operating Expenses    

16. The Challenge of Business Model Innovation
AGENDA
The Challenge of Business Model Innovation
Reviewing Your Existing Business Model
Comparative Data
Activity-Based Costing Analysis
Economic Scenario Planning
Planning for the Future
Agenda / one column text slide
8/3/2019
© CF Insights 2010

17. What Should We Do to Plan for the Future?
Planning for the Future
What Should We Do to Plan for the Future?
Process Steps
Identify New Revenue Sources
Determine Ideas to Test
Model Implications and Scenarios
Make Decisions
Develop Communi-cations
Screen ideas for fit with criteria: generate current income, support future growth, and fit constituents’ needs, the community context, and your unique strengths
Identify factors to change going forward
Define a set of new revenue ideas to test
Explore operating efficiencies
Consider the viability of potential changes and economic impact under various scenarios
Define the right choices that strike a balance between your mission-driven priorities and budget realities
Engage your constituents in the changes you need to make to support your collective philanthropic goals
Tools Available
Case Studies and Peer Learning
Economic Scenario Planning

18. Planning for the Future
What Should We Do to Plan for the Future?
What questions do you have about existing resources?
What else do you need to know or be able to do?
What if EACH community foundation could know what ALL community foundations collectively know?
8/3/2019
© CF Insights 2010