I have in the past and continue to work closely with many nonprofit organizations. Over the years I have come to realize that nonprofit organizations face unique and difficult challenges when it comes to innovation. The innovation challenges faced by nonprofits can be traced to two root sources: a lack of capital and strong traditions.

Lack of Capital

Cash flow is always a problem for nonprofit organizations. How can they divert funds to innovative projects when their basic needs are not met? Nonprofit organizations become accustomed to living “donation to donation.” As a result, when some capital is raised, most non-profits put it aside for a rainy day.

Unfortunately, things get worse for nonprofit organizations. Because they lack capital and do not innovate, they quickly become less effective in a changing world. The result is that fewer donations will come in and the cycle will repeat itself.

A lack of capital is a difficult barrier to nonprofit innovation. One solution is to begin asking this question - What innovative projects can generate consistent income over time? Such a question is difficult for many nonprofit organizations to ask. There is an ethical issue here and I will be the first to warn you about going too far. However, nonprofit organizations should be just that non-profit, not for-profit and not for-loss. It is okay to depend on donations, but it is also okay to cover some of your costs where appropriate. I am not going to go any further into this issue, as I am sure I have already stepped on enough toes.

I should mention that there are foundations that assist innovative nonprofit organizations to overcome the capital barrier. Notably the Bridgeway Foundation. You can also learn more about Mark Peterson of the Bridgeway Foundation on his blog Open Hands.

Strong Traditions

Unfortunately for nonprofit organizations, innovation can be met with strong resistance and even the loss of funding (adding to a lack of capital). The nature of innovation is to change things. Change management can be difficult at the best of times; match that with the traditions that many nonprofit organizations have and you have a bomb to diffuse. There is no easy solution here. Nonprofits must be extremely sensitive to their traditions and how their innovations will impact those traditions.

Nonprofits have it hard. First they need to generate the capital to be innovative, which can be counter intuitive. Second they need to effectively manage the changes of innovation which is made extremely difficult due to their traditional nature.

This entry was posted on Tuesday, October 30th, 2007 at 2:16 am and is filed under Innovation Concepts. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.