Developing the best business models to face the future
Posted on October 10, 2016
Seb Elsworth is the Chief Executive of Access - The Foundation for Social Investment.
Richard Harries’s paper for Clore Social Leadership, Facing the Future, highlights the main challenges for sector leaders over the coming decades. Fiscal constraint, geo-political shocks and technological advances are changing the nature of social need, as communities tackle inequality and people live longer. At the same time state resources continue to shrink and the mantra doing more with less is stretched to breaking point.
When faced with these pressures many charity leaders will naturally ask: how are we going to find someone to pay for what we do in the future? However, to be able to respond effectively our sector needs to think more profoundly about business models, and not simply where replacement funding is coming from.
Many charities have had a hand to mouth existence. The job of raising money has not always been closely connected to the delivery of value. This disconnect between who pays and who benefits matters because when those who have been paying stop doing so, they are not the ones who immediately lose out.
Much has been made of the potential for social investment to help charities adapt to the changing financial reality. However, the hype about social investment has sometimes missed the point and the adaptation required is more fundamental than is often understood. Loans are not a substitutes for income which has been lost. Rather they are a tool that can help some charities earn more revenue in the future. In a model where you are trading, the link between who pays and who benefits is stronger; and this can help build resilience.
Therefore the question for leaders to ask is not ‘where is the money going to come from?’ but more profoundly, ‘what sort of business model is appropriate as we respond to these future challenges?’
One of our roles at Access is to design and fund capacity building programmes which aim to help charities make this sort of transition. We have consulted widely on what support is needed and the clear top two areas are around leadership and governance. (The others are impact management capabilities, finance and business modelling skills, marketing and improving the use of data.)
For executive leaders in the sector the challenge is often one of having the time to step away from the day to day and consider these questions in a supportive and stimulating environment. Similarly having the confidence to try something new, especially in an organisation with a long history of doing things the same way, can be daunting. Peer learning is one way these challenges can be addressed and is a key design principle for our programmes.
Engaging charity trustees in these questions is the next task. As Richard points out, there are nearly a million charity trustees in the UK, with an average age of 57. They come into their roles often passionate about the cause, but not necessarily with the skills and experience to recast the way a complex organisation operates. Furthermore, trustees are increasingly operating in a risk adverse environment. Negative headlines, declining public trust and an increasingly pro-active regulator are all factors which might encourage trustees to batten down the hatches. However in our sector risk works in two ways; and the consequences of inactivity can be just as bad as making mistakes.
Trustees need to be encouraged to embrace and manage risk as they help their executive leaders to look to the future and consider what business model is right for their charity. Once the business model is defined, the job of financing it will be much clearer; and there will be a good starting point to answer the answers which investors and funders will have.
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