Ed Rekosh

 
21 November, 2017

Rethinking CSO Business Models

MEXICO CITY, MEXICO - NOVEMBER 03: during the third day of Global Perspectives 2017 conferences of the International Civil Society Center in the NH Hotel on November 03, 2017 in Mexico City, Mexico. (Photo by Manuel Velasquez/Getty Images)

Towards the end of the Global Perspectives conference earlier this month in Mexico City, one of the participants asked the leaders of some of the world’s largest international CSOs to imagine their offices around the world empty and dark. Another participant emphasised this key take-away: “Grants are for losers.”

The title of the conference, “New Resources for New Programmes,” barely does justice to the ambition of an agenda intended to urge well-established CSO leaders out of their comfort zones and into a radical re-conceptualisation of how they do their work.

No one needs to remind international CSOs that they face pressure from both ends. Donor countries that once spawned or nourished them are now looking for more direct connections to locally-based groups serving local needs. And aid-receiving countries are adopting highly restrictive policies they justify by questioning the legitimacy of foreign funding to civil society groups.

But the key question posed by the conference was: What can CSOs do about it? Implicit in the agenda was that CSOs need to change their operating models and challenge other fundamental assumptions about how they do and fund their work if they are to continue to further their missions.  As David Booth of the Overseas Development Institute laid out on Day One: to remain effective, ICSOs will need to become more politically smart, adaptive and locally led.

It’s hard to build a new ship when it’s in the middle of the ocean. Always resourceful and resilient, ICSOs are rising to the challenge nonetheless. Indeed, the conference provided a dizzying array of ways in which CSOs are starting to think outside the box: creating volunteer-based structures, replacing donation-driven programs with crowdfunding platforms for local groups, employing human-centered design techniques to develop and test programming ideas, experimenting with social enterprise, exploring new forms of collaboration with business and government and new strategies for mobilising the public to make change, and many more innovations.

The result was more than a little overwhelming, for at least two reasons: the sheer breadth of opportunities and their rapidly evolving nature at this particular moment in time. But the discussions served as an important reminder that along with large-scale trends threatening the very existence of CSOs, there are equally strong positive trends that CSOs can harness, including:

  • Technological change. Social media and other communications technology is partly responsible for the pressure on the intermediation function of ICSOs in a world where donors have direct, virtual access to locally-based implementers, but it opens up new possibilities as well. Technology allows ICSOs to become more efficient and expand their reach though it can require significant restructuring to take full advantage of the opportunity.

 

  • Social entrepreneurship and impact investment. Moving from a grant-based model to an investment model offers the promise of access to a quickly expanding pool of untapped capital and new opportunities for sustainable change.

 

  • Business with purpose. Engaging with business in constructive ways is becoming more possible as a result of developing normative frameworks like the UN Guiding Principles on Business and Human Rights, consumer and investor pressure on companies to disclose information about the impact of their behavior against ESG (Environmental, Social and Governance) standards, and the development of hybrid socially responsible commercial structures such as benefit corporations.

 

  • Millennial generation values. Millennials expect information to be decentralised, and they want to integrate their personal professional and financial objectives into more meaningful lives. As a result, we can expect generational change to drive these other trends forward.

In sorting through all the challenges and opportunities, it may be that a shift in perspectives is in order. People in the non-profit world tend to think that the term “business model” necessarily implies the commercialisation of their work.

MEXICO CITY, MEXICO - NOVEMBER 03: during the third day of Global Perspectives 2017 conferences of the International Civil Society Center in the NH Hotel on November 03, 2017 in Mexico City, Mexico. (Photo by Manuel Velasquez/Getty Images)MEXICO CITY, MEXICO – NOVEMBER 03: Third day of Global Perspectives 2017 conferences of the International Civil Society Center in the NH Hotel on November 03, 2017 in Mexico City, Mexico. (Photo by Manuel Velasquez/Getty Images)

But that’s not really the case. As soon as an associational endeavor takes the form of a grant-funded legal entity, it has already adopted a business model. In the business-speak of widely adopted tools like the Business Model Canvas, such CSOs develop their assets and activities based on a value proposition to a group of beneficiaries, financed by strategic partnerships with grant-making donors.

To muster the necessary creativity to respond successfully to a dramatically changing landscape of threats and opportunities, it may be helpful for CSOs to surface and assess their business models in order to challenge assumptions embedded in the grant-seeking model. Closely examining the relationships among value propositions, revenue streams, cost structures, assets, activities, strategic partnerships and other elements of a business model can lead to insights that potentially transform the way they operate.

That kind of experimentation feels risky. But avoiding the question of business models may be riskier still.

 


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