Asset Building - USHCC Foundation

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Asset Building - USHCC Foundation
INNOVATIO
Asset Building
Through Credit Pilot
Building a sustainable business model
LUZ I. GOMEZ and JOYCE KLEIN
Acknowledgements
The Asset Building through Credit (ABC) Pilot Program was developed through a partnership
between FIELD at the Aspen Institute and the generous support of the Citi Foundation.
Citi Foundation
Pamela P. Flaherty, President & CEO
Brandee McHale, Chief Operating Officer
Daria Sheehan, Senior Program Officer, U.S. Financial Capability & Asset Building
About the Citi Foundation
The Citi Foundation works to promote economic progress in communities around the world
and focuses on initiatives that expand financial inclusion. We collaborate with best-inclass partners to create measurable economic improvements that strengthen low-income
families and communities. Through a “More than Philanthropy” approach, Citi’s business
resources and human capital enhance our philanthropic investments and impact. For more
information, visit www.citifoundation.com.
FIELD
Joyce Klein, Director
Luz I. Gomez, Consultant
FIELD at the Aspen Institute works to advance the U.S. microenterprise field through
knowledge and innovation. In its work, FIELD engages deeply with leaders in the
microenterprise industry and provides them and their organizations with tools — including
research and data, grants, peer learning, and leadership development programs —
that support their efforts to innovate, scale and improve their performance. FIELD also
disseminates knowledge from its work with leaders broadly, through publications, webinars
and presentations.
The work and learning from the ABC project would not have been possible without the
work and openness of the pilot partners. FIELD would like to thank Justine PETERSEN, and
in particular Sheri Flanigan-Vazquez and Kristin Schell, for their partnership in this effort.
We’d also like to acknowledge the generosity and openness of the project teams from
the pilot sites: the Mission Economic Development Agency, Pacific Asian Consortium for
Employment, Latino Economic Development Center, Champlain Valley Office of Economic
Opportunity, Central Vermont Community Action and Local Development Corporation of
East New York.
2014 by FIELD at the Aspen Institute
Published in the United States of America
© 2014 by the Aspen Institute
All rights reserved
Asset Building
Through Credit Pilot
Building a Sustainable business model
LUZ I. GOMEZ and JOYCE KLEIN
Introduction
Nonprofits and business models
“It is difficult to talk about business models without sounding like a candidate for
Wonk of the Year, but street-smart managers know that the concept is at the heart of
successful management. Strong business models bring programmatic and financial
success, while weak ones bring irrelevance and even ruin.
The classic nonprofit has to create a successful mix of three elements: resources,
program design, and impact. All of these components have to be successful and
fully aligned or the model won’t work. Any given nonprofit can be said to have a
single business model for the entire entity, or it can have several models for different
programs and services.”
Thomas McLaughlin in The Nonprofit Times1
Nonprofits that participate in pilot initiatives often face the challenge of sustaining a
successful program or project once the pilot phase has ended. Recognizing this challenge,
as we neared the end of the Asset Building through Credit (ABC) pilot, FIELD worked with
two of the participating sites — the Mission Economic Development Agency (MEDA) and
Pacific Asian Consortium in Employment (PACE) — to explore development of a business
model that would enable them to continue to offer a secured credit card teamed with credit
coaching. We focused on the business model because, in an increasingly competitive funding
environment in which funders are asking tough questions
about the value of investments, nonprofits that can
articulate a clear rationale for a line of business can find a
competitive advantage.
The Asset Building through Credit
About the Pilot
The key questions explored in developing the business
model were:
n Is it possible to sustain the delivery of a secured
card teamed with coaching?
n How can the experiences from the pilot inform the
business model for the product?
n What is the business case for delivering the product
in partnership with a financial institution?
This paper summarizes the approach and tools used
in the process of developing the business model, and
the key conclusions from these explorations. Although
the document focuses on the delivery of credit-building
services, the process it outlines can benefit any nonprofit
seeking to take a strategic approach to analyzing
the value of its services and the best investment of
scarce resources.
1
Pilot Program — a collaborative
program facilitated by FIELD
at the Aspen Institute with six
microenterprise organizations,
a financial institution and the
Citi Foundation — was designed
to assess whether a secured
credit card teamed with financial
coaching could create positive
credit-building behaviors and be
a useful tool for assisting clients
to progress toward their business
development goals. For more on
lessons and outcomes gleaned
from the pilot, visit: www.fieldus.
org/project/securecard.html.
Thomas McLaughlin, “Your Nonprofit Business Model: Is is really that healthy?”, The Nonprofit Times (December 19, 2011).
P A G E 2 A sse t B u ildi n g t h r o u g h C r e d i t P i l o t
The tools
Put simply, a business model describes the
rationale of how an organization creates,
delivers and captures value. FIELD employed
two tools as it worked with the pilot sites
to study these questions of sustainability:
the Business Model Canvas2 and the Lean
Canvas.3 Both tools allow organizations to
analyze the business model for either a single
line of business, or the overall organization.
Getting Started
1. Review Lean Canvas instructional
videos and materials.
2. Form an internal team.
3. Define the issue to explore.
4. Create milestones to chart
your progress.
The Business Model Canvas helps teams
to jointly describe, think through, or amend
their business models. The original Business
Model Canvas (pictured on the next page) has nine boxes that together represent the
core elements of a business model. Each box has several questions to get users thinking
about that aspect of the model. If a large poster-sized version of the model is used, a team
can write, draw or use Post-It® notes in the boxes, and add lines to show how different
elements of the model connect to each other.
The authors of the Business Model Canvas recommend that users start with the
customer box at the right of the canvas — with the rationale being that any line of
business should begin with a focus on the customer. The analysis process then works
through the rest of the model. The final area of focus is financial viability. Business
models often are reduced to considerations of costs and revenues. As this framework
illustrates, the financial structure undergirds everything else in the business model — it
has to work in order for the rest of the model to succeed. However, the Business Model
Canvas (on the next page) is designed for organizations to focus first on defining deep
customer problems and accompanying solutions, in order to build a strong foundation for
the entire line of business.
The second version of the canvas, and the primary one that FIELD used in working with the
pilot programs, is the Lean Canvas. This version of the canvas (pictured on page 5), amended
by an entrepreneur, makes a clear distinction between the product/service being offered
and the market for that good. FIELD found this distinction to be very helpful in honing in
2
lexander Osterwalder and Yves Pigneur, Business Model Generation (self-published, 2009). To access a copy of the canvas
A
see http://businessmodelgeneration.com/canvas/bmc
3
See http://leanstack.com/, for more information on the Lean Canvas.
A sse t B u ildi n g t h r o u g h C r e d i t P i l o t P A G E 3
P A G E 4 A sse t B u ildi n g t h r o u g h C r e d i t P i l o t
examples
Personal assistance
Dedicated Personal Assistance
Self-Service
Automated Services
Communities
Co-creation
The makers of Business Model Generation and Strategyzer
DesigneD by: Business Model Foundry AG
This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit:
http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
sample characteristics
Fixed Costs (salaries, rents, utilities)
Variable costs
Economies of scale
Economies of scope
types
Asset sale
Usage fee
Subscription Fees
Lending/Renting/Leasing
Licensing
Brokerage fees
Advertising
fixeD pricing
List Price
Product feature dependent
Customer segment
dependent
Volume dependent
Dynamic pricing
Negotiation (bargaining)
Yield Management
Real-time-Market
For what value are our customers really willing to pay?
For what do they currently pay?
How are they currently paying?
How would they prefer to pay?
How much does each Revenue Stream contribute to overall revenues?
is your business more
Cost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing)
Value Driven (focused on value creation, premium value proposition)
Revenue Streams
Cost Structure
channel phases
1. Awareness
How do we raise awareness about our company’s products and services?
2. Evaluation
How do we help customers evaluate our organization’s Value Proposition?
3. Purchase
How do we allow customers to purchase specific products and services?
4. Delivery
How do we deliver a Value Proposition to customers?
5. After sales
How do we provide post-purchase customer support?
What are the most important costs inherent in our business model?
Which Key Resources are most expensive?
Which Key Activities are most expensive?
types of resources
Physical
Intellectual (brand patents, copyrights, data)
Human
Financial
Through which Channels do our Customer Segments
want to be reached?
How are we reaching them now?
How are our Channels integrated?
Which ones work best?
Which ones are most cost-efficient?
How are we integrating them with customer routines?
characteristics
Newness
Performance
Customization
“Getting the Job Done”
Design
Brand/Status
Price
Cost Reduction
Risk Reduction
Accessibility
Convenience/Usability
Mass Market
Niche Market
Segmented
Diversified
Multi-sided Platform
strategyzer.com
For whom are we creating value?
Who are our most important customers?
What type of relationship does each of our
Customer Segments expect us to establish
and maintain with them?
Which ones have we established?
How are they integrated with the rest of our
business model?
How costly are they?
Channels
catergories
Production
Problem Solving
Platform/Network
motivations for partnerships
Optimization and economy
Reduction of risk and uncertainty
Acquisition of particular resources and activities
Customer Segments
Customer Relationships
Version:
What value do we deliver to the customer?
Which one of our customer’s problems are we
helping to solve?
What bundles of products and services are we
offering to each Customer Segment?
Which customer needs are we satisfying?
Date:
Value Propositions
Designed by:
What Key Resources do our Value Propositions require?
Our Distribution Channels? Customer Relationships?
Revenue Streams?
What Key Activities do our Value Propositions require?
Our Distribution Channels?
Customer Relationships?
Revenue streams?
Designed for:
Key Resources
Key Activities
Key Partners
Who are our Key Partners?
Who are our key suppliers?
Which Key Resources are we acquairing from partners?
Which Key Activities do partners perform?
The Business Model Canvas
on the customer and the value
The Lean Canvas
proposition (offer), as well as the
market channels, for a secured credit
card. The Lean Canvas adds a box for
problem definition — the problem
the organization is trying to solve
for the customer. The underlying
thinking is that, when a problem is
clearly stated, it is easier to design a
possible solution, which has its own
box in the canvas, as well. The Lean
Canvas also pushes users to identify
a few critical metrics they can use to
quickly evaluate and measure success
(with the hope that the organization
will evaluate and use that information often). The final addition to the Lean Canvas is a box
titled “unfair advantage.” This portion of the Canvas reminds organizations to define their
competitive advantages early on, and to continue to develop and articulate that advantage.
Exploring critical areas of the business model
The organizations used these resources to examine several important questions
related to the sustainability of offering a secured card combined with credit coaching:
n What value did the program offer to its clients, and to donors? Can that value be
articulated clearly?
n What were the messages and positioning of the product that resonated
most with clients?
n Who are the “right” clients to target within their market?
n Given the experience with the product during the pilot phase, what could the
organization reasonably project in terms of volume and scale in the future?
n What were the true total costs of and the potential revenue streams from
this product?
Both business model canvases are designed to help organizations build a strong case
for their programming, and to highlight areas that need further work and refinement. In
using these tools to analyze their business models for delivering a secured credit card,
both MEDA and PACE had more than one year’s worth of data collected as part of the pilot
evaluation, as well as the organizational experience gained during the pilot phase.
A sse t B u ildi n g t h r o u g h C r e d i t P i l o t P A G E 5
The “offer”/value proposition
Why it matters
“A lot of people could benefit from credit, but who really stands out as our strongest
customers? The canvas helps us tell a story. It’s fleshed out and comprehensive. It’s
simple. It’s important to know what and why we’re doing things in a certain way and for
whom. We can really gain a lot of momentum for this about ways to improve, specify,
and become clearer. Ultimately, it’s a safer experience for our customers.”
Program manager
The first exercise in the Canvas involved pinpointing the ideal client for these credit-building
services. Most microenterprise development organizations (MDO) serve an array of client
segments, and this is true of both PACE and MEDA. One key element of the pilot involved
figuring out how to frame the value of the secured card and credit coaching, assessing which
messages clients responded to, and observing which clients were best suited for the program.
Honing in on the client segment: The ABC
pilot served two broad sets of customers:
Group 1
Group 2
those who were new to credit, and those
who had an existing low score, lacked active
trade lines, and were trying to rebuild their
Looking
No-hit/
to re-build
credit profiles. The exercise in this section
zero score
credit
of the Canvas involved working with the
organizations to articulate their most
Thin file,
No recent,
important customers. These were the early
fewer than
active lines
3 lines
adopters of the secured card, who proved to
be their strongest customers. The challenge
here was to hone in on a customer segment
that was sufficiently specific to allow the
organization to create effective marketing
messages, but not so narrow that it overly limited the market for the product.
Both MEDA and PACE had a strong focus on immigrant entrepreneurs. These clients fit
well with the organizations’ overall missions and target markets. Immigrant entrepreneurs
also showed strong uptake and performance on the card during the pilot phase. MEDA
defined its “ideal” client as “San Francisco low-to-moderate income (LMI) immigrant
entrepreneurs.” PACE defined its idea clients as “immigrant business owners for whom
credit has been an obstacle for access to capital or financial products/services.”
Defining problems and positioning of the services/product: Once the organizations had
identified their focus on immigrant populations (Latino and Asian immigrants), they were
urged to identify between one and three problems or “pain points” facing those customers.
The organizations were also encouraged to identify what their “early adopters” were
already doing to address those problems. In doing so, the hope was that organizations
would frame solutions, and unique and compelling value propositions that addressed the
pain points they had identified. A unique value proposition seeks to distinguish a product
or organization in the marketplace by encapsulating the value it delivers to its customers
P A G E 6 A sse t B u ildi n g t h r o u g h C r e d i t P i l o t
into a single, clear and compelling message that can turn someone into an interested
prospect.4 The problems identified for these immigrant entrepreneurs included: language
and cultural barriers, the absence of clear information regarding credit building, and a lack
of trust in traditional financial institutions.
The experiences of MEDA and PACE in marketing the card during the pilot phase yielded
important insights into the value proposition of the product for their target markets. First,
they saw that their target markets responded more strongly to the product when it was
marketed as part of a process for building credit, rather than as a financial product. In
other words, customers responded to messages about improving their credit, rather than
those that focused on accessing a credit card. Second, the personalized coaching played a
central role in the value proposition. Many of the target market customers were intimidated
by, or had a lack of trust in, financial institutions. The role of a counselor or coach who
could be a source of trusted information and support, and could assess each client’s
specific credit history or challenges, was clearly a key part of the value proposition.
Below are the unique value propositions developed by MEDA and PACE:
MEDA
Problem Definition
Lack of information and
trust in U.S. financial
institutions
Language and cultural
barriers to accessing and
understanding credit in
San Francisco.
Solutions
Unique Value Proposition
Generate and distribute
consistent, targeted, and
accessible bilingual and
culturally relevant information
to San Francisco consumers
and partners.
Safe, accessible products
that establish and/or build
credit for San Francisco
uild trust through
B
methodical, outcomesbased personalized
financial coaching.
LMI Latino immigrant
Offer cost-effective
appropriate credit-building
products
coaching.
Solutions
Unique Value Proposition
entrepreneurs coupled
with personalized financial
PACE
Problem Definition
Language and cultural
barriers and access to
resources.
Lacking credit-building
and credit-management
knowledge.
4
We offer a comprehensive
Providing credit-building
training together with
credit-building tools (i.e.,
secured credit card),
credit counseling and
relationship building.
credit-building gateway with
personalized and culturally
relevant coaching to reach
financial goals at low or
no cost.
See http://leanstack.com/, for more details on the Lean Canvas.
A sse t B u ildi n g t h r o u g h C r e d i t P i l o t P A G E 7
Making the case to supporters/investors
Laying out a clear and compelling value
“MDOs often know how to create
proposition for a product or service is
critical to capturing clientele. However,
and deliver value to their customers
most nonprofits also have a second set
or clients, but it’s the capturing of
of “clients” in the donors and investors
value by the institution that’s often
who partially or fully subsidize the cost of
the hard piece.”
the services they provide. These donors
– Elaine Edgcomb, FIELD
and investors are seeking their own
value propositions, which may differ from
those of the direct users of the product.
In fact, the value proposition may vary among donors, depending on their interests and
perspectives.
Thus, another aspect of FIELD’s work with MEDA and PACE focused on exploring sources of
revenue to support delivery of the secured card and coaching, and the value propositions
and messages needed to position this line of business to resonate with various funders.
The table below identifies the revenue streams discussed with both organizations and the
types of value that could be of interest to each stream.
Revenue Streams
Types of Value
Client fees
Increases to/establishment of credit scores
Foundations
Increases in credit scores and financial capability
Financial institutions
Community Reinvestment Act (CRA) credit
Expanded client relationships with “new” unbanked/
underbanked customer base
City governments
Interest in innovative asset-building strategies; bringing
together private/nonprofit actors to address underserved
populations
Local corporate partners
Support for/services to local low-income families
Once each organization identified the value that the product could provide to different
funders, the next step was to work with its development team to translate that value
into specific marketing and fundraising strategies and messages that would connect to
each revenue source. This process included describing the competitive advantage that
the organization offered in this particular space. The Lean Canvas uses the term “unfair
advantage,” which it defines as the attributes that cannot be copied easily by other
organizations. MEDA articulated this well within its canvas:
“MEDA provides a bilingual, streamlined client experience. It has product knowledge
paired with cultural competency. Its partnership with a local financial institution
allows the client multiple payment points, and the personalized coaching and
follow-up is supported with text messaging and online banking supports.”
P A G E 8 A sse t B u ildi n g t h r o u g h C r e d i t P i l o t
Start-up and ongoing costs of the pilot
On understanding costs
“This process of working through the numbers and cost structure as part of the Lean
Canvas … links us to the efficiency that our clients want; our donors want,
and ultimately, that we want.”
Program manager
One of the key elements of any business model is the financial model that specifies both
costs and revenues. The evaluation model for the pilot included a process of collecting
detailed cost information for both the start-up phase (the program-development phase
before the secured card was actively marketed and delivered), and on a quarterly basis during
the first year of card delivery. The evaluation process also collected monthly time sheet data.
The start-up costs of the organizations that
Although information about revenues
participated in the pilot varied depending
(in the form of donations, grants, and
on their existing infrastructure (primarily
5
staff) for providing credit-building services. earned income) is usually fairly solid,
In terms of ongoing costs during the first
organizational knowledge about
year of card delivery, the highest expenses costs tends to be weak.6
across all of the five pilot sites were those
related to staff and benefits, because the
coaching model was integral to marketing and delivering the product. The total programdelivery costs incurred by the sites during the pilot year (excluding start-up costs) ranged
from $23,462 to $48,061.
Understanding the full costs of running a program like this requires that an organization
take into account both the direct costs (e.g., staffing hours, marketing) and the indirect costs
(such as overhead). While nonprofits tend to document revenues effectively, many nonprofit
accounting systems do not allow organizations to track and allocate costs effectively at the
program or product level. MEDA and PACE used the financial and time sheet data collected
as part of the pilot evaluation to conduct a cost-accounting exercise (sample shown on
the following page) that analyzed program performance, costs, and revenues during the
course of the pilot. That baseline analysis, along with learnings about staff deployment and
efficiencies gained during the pilot, informed their projected costs going forward.
One indicator of efficiency is the cost per
client served.7 The cost analysis conducted
by MEDA and PACE revealed that the key cost
drivers for the program were staff hours and
overall client volume. Specifically, the fewer
clients served and the greater the number
of hours spent coaching or marketing, the
“What was shocking was calculating
the costs … It forces you to think
about how much time you are
spending with clients.”
– Program manager
5
For more detail, see Asset Building through Credit Pilot: Initial findings, 20-21.
6
Susan J. Colby and Abigail M. Rubin, “Costs are Cool,” The Bridgespan Group (December 2003), 2.
7
ost per Client measure represents the average cost of serving a client in the fiscal year. It is calculated by dividing the total
C
cost of the program by the number of clients served during the year. See http://microtracker.org/resources/microtracker/pdf/
MT-Glossary.pdf.
A sse t B u ildi n g t h r o u g h C r e d i t P i l o t P A G E 9
higher the cost per client. Those two factors (hours spent marketing and coaching) are also
the levers that a program can pull as it works to reach and serve clients most efficiently.
The cost accounting exercise revealed the following insights for both programs as they
considered the long-term sustainability of the product:
n Identifying and focusing on the most effective marketing channels yields greater
scale and lower costs. Both MEDA and PACE refined their marketing channels to
increase the volume of clients later in the pilot. For example, although PACE used
general marketing strategies at the onset of its program, it found that most of the
clients who were well suited to the card came in via its credit workshops, and through
specific community partners. MEDA found that standardizing all of its marketing
materials to describe its array of asset-building products and services (including the
secured card) helped maintain a steady pipeline of clients for the card. MEDA also
drew compatible clients primarily from its existing business development training.
Understandably, the cost per client varied over the course of the pilot; both MEDA
and PACE’s costs per client went down during the last two quarters because of
adjustments to their marketing channels and strategies.
n Tailoring the level of training to the customer’s needs can also provide efficiencies.
Coaching hours were another main driver of cost during the pilot. FIELD’s outcomes
analysis showed that more hours of training did not have a significant effect on credit
scores or credit behavior during the period measured.8 The finding suggested that
organizations might want to consider the number of hours dedicated to education
carefully, as they seek to balance the client outcome from the program with the
organizational need for efficiency and sustainability. Moreover, the study showed that
programs might benefit from allocating their time more efficiently by client segment.
For instance, it appears that clients with low existing scores may need more intensive
guidance and reinforcement regarding use of the card than clients with no scores.
As MEDA and PACE worked through future projections for these services, the coaching
teams thought critically about the level of training time per client that they felt would
produce both strong results and efficiencies. During the course of the pilot, sites had
already begun to experiment with reducing the cost of delivering the card by, for instance,
using classroom sessions to address basic credit concepts before clients met with
counselors one-on-one.9 MEDA planned to achieve greater efficiencies by incorporating
lower-touch client check-ins using text messages to emphasize coaching messages
regarding on-time payments. Its coaching staff also sharpened its message and
standardized the process for delivery, which also had implications for cost savings.
To illustrate the use of this cost-accounting exercise: During the first 12 months of the
pilot, MEDA served 48 clients. The organization averaged 25 hours of staff time per
client during that period. These hours included those spent on marketing, coaching and
training; managing the program; and providing evaluation data. Given MEDA’s staffing
cost structure (direct costs) and indirect costs, its costs averaged $874 per approved
client. As MEDA projected forward based on its analysis of past costs and lessons
learned, it anticipated it could dramatically reduce the number of marketing hours by
8
For more detail, see Asset Building through Credit Pilot: Client Gains in Credit Scores and Financial Capability.
9
For more detail, see Asset Building through Credit Pilot: Initial findings.
P A G E 1 0 A sse t B u ildi n g t h r o u g h C r e d i t P i l o t
focusing on its most successful channels, and decrease its coaching time to 7.5 total
hours per approved client.
Hours per
Approved Client
Projected
Costs & Hours
Hours spent coaching, training, monitoring clients
13
7.5
Hours spent marketing /recruiting
10
0.5
2
2.5
    25
   10.5
Hours spent administration/evaluation
Total Hours Spent
Avg. hourly rate (including fringe)
No. of approved clients
Total cost per client
Cost per Client (including overhead
and other operational costs)
$33
48
200
$825
$346
$874
$426
How many people need to be touched to get volume desired?
How long does it take to get them through the process?
Where are the cost challenges?
Where can one decrease costs to be more reasonable?
As MEDA thought through the costs and benefits of its coaching model, seeing the results
from the cost exercise was an “aha” moment for its team. Given that the organization is
continuing to offer a secured card teamed with coaching, it was particularly concerned
with developing a lean, high-impact model for this line of work that could be sustainable
in the long term. The team thought that it could cut its cost per approved client in half, to
an estimated $426. This analysis seems to bearing fruit, as MEDA’s carefully reengineered
credit-building program has grown substantially over the first half of 2014.10
Evaluation/metrics
The final piece of the Canvas involved determining the set mix of metrics that would allow the
organization to track and analyze the program’s success in meeting its goals on a relatively
frequent basis. Key metrics can identify areas that need work — so they can be addressed
early. In working to identify key metrics, FIELD and the two grantees laid out several
categories of metrics related to the credit-building programming, as well as more general
categories also relevant to the organizations’ other microenterprise work. These included:
n Simple outputs: These could be the number of applications processed or coaching
sessions provided, for example. Output metrics are useful in helping programs to
see the overall volume of a program. While they are typically the simplest metrics to
10
or a brief synopsis on MEDA’s newly launched credit-building program, see http://www.cfsinnovation.com/content/
F
engaging-clients-right-time-and-place.
A sse t B u ildi n g t h r o u g h C r e d i t P i l o t P A G E 1 1
collect, other categories of metrics (such as those outlined below) are important to
deepen assessment of a program.
n Client outcomes: The ABC pilot involved collection of data on a substantial number of
client outcomes metrics. Although organizations may not want or have the resources
to collect this level of data on an ongoing basis, identifying and collecting data on a
few key outcomes metrics can be highly valuable for internal management purposes,
as well as for fundraising. The most valuable client outcomes for this program would
likely be client credit scores over time, on-time payment on the secured card, and the
rates at which clients graduated to an unsecured credit card or other forms of credit.
n Efficiency/cycle time: Measurements related to cycle time can be a highly useful
means to assess efficiency. Cycle time relates to the time it takes to get clients
through the process of accessing a financial product. In this type of credit-building,
a program would monitor how long it takes to get from first identifying a lead to a
complete application. FIELD also urged programs to think about how strategies/
tactics such as the use of technology might play a role in increasing efficiency and
improving client outcomes. The use of technology, such as MEDA’s planned use of text
messaging, could, for example, have an impact on metrics such as on-time payments
(an important metric of client outcomes) or the cost of client follow-up (an important
measure of efficiency).
n Inputs and outputs: Metrics that examine a program’s inputs relative to its outputs
are also highly valuable in assessing and refining its business model over time. The
cost per approved client metric evaluated in the cost-accounting exercise above is
one example of this type of metric. Customer satisfaction is another input/output
metric. Organizations can collect data on customer satisfaction by conducting
surveys at key moments in the process (such as after a coaching session, or
six months after the customer has applied for and received the secured card).
Conversion rates (measured from the time a lead is first generated to the time of the
first coaching session is provided, or a card application is submitted) can be used to
assess and monitor the effectiveness of particular marketing strategies.
Identifying the key numbers that show how you are doing in real time.
Efficiency
Cycle Time
Outcomes
No. Apps
Credit
scores
No.
Coaching
Sessions
On-time
payments
Technology
Outputs
Graduation
P A G E 1 2 A sse t B u ildi n g t h r o u g h C r e d i t P i l o t
Input/Output
Lead to
Coaching/
App
Cost per
approved
client
Length of
Session
Customer
satisfaction
Follow-up
Sessions
Conversion
rates
Conclusion: Where do I start?
We encourage organizations to try the process of analyzing the business model for one
of their products or programs, using the tips and tools provided at the beginning of this
publication. The beauty of these business model canvases is they enable an organization
to synthesize the deliberation around a business model in one place. FIELD has seen
programs use these simple tools to explain the rationale for a new or existing business
model to stakeholders (staff and/or board members) and potential investors. Articulating
what can often be complex business models can also enable a nonprofit to effectively
deploy and manage teams, raise funds, and strengthen its work. The analysis process can
reveal strengths in a business model and point out potential weaknesses, both of which
can illuminate the path toward sustainability.
For More Information
For more information on the Asset Building through Credit Pilot Program and
Building a Sustainable Business Model tools visit:
http://fieldus.org/Projects/SecureCard.html
http://leanstack.com
http://businessmodelgeneration.com
PRODUCTION CREDITS:
Designer
Olmsted Associates, Flint, Michigan
A sse t B u ildi n g t h r o u g h C r e d i t P i l o t P A G E 1 3
One Dupont Circle, NW, Suite 700
Washington, DC 20036
1
3
4
6. Key
Partners
7. Key
Activities
8. Key
Resources
9. Cost Structure
1. Value
Proposition
4. Customer
Relationships
2. Customer
Segments
3. Channels
5. Revenue Streams
6. Key
Partners
7. Key
Activities
8. Key
Resources
9. Cost Structure
1. Value
Proposition
4. Customer
Relationships
2. Customer
Segments
3. Channels
5. Revenue Streams
6. Key
Partners
7. Key
Activities
8. Key
Resources
9. Cost Structure
1. Value
Proposition
4. Customer
Relationships
2. Customer
Segments
3. Channels
5. Revenue Streams
The Business Model Canvas
Designed for
Designed by
Versio
n
The Business Model Canvas
Type in text
The Business Model Canvas
Designed for:
On:
Designed by:
Day
Iteration:
Key Partners
Key Activities
Value Propositions
Customer Relationships
Customer Segments
Who are our Key Partners?
Who are our key suppliers?
Which Key Resources are we acquiring from partners?
Which Key Activities do partners perform?
What Key Activities do our Value Propositions require?
Our Distribution Channels?
Customer Relationships?
Revenue streams?
What value do we deliver to the customer?
Which one of our customer’s problems are we helping to solve?
What bundles of products and services are we offering to each Customer Segment?
Which customer needs are we satisfying?
For whom are we creating value?
Who are our most important customers?
motivations for partnerships:
Optimization and economy
Reduction of risk and uncertainty
Acquisition of particular resources and activities
categories
Production
Problem Solving
Platform/Network
characteristics
Newness
Performance
Customization
“Getting the Job Done”
Design
Brand/Status
Price
Cost Reduction
Risk Reduction
Accessibility
Convenience/Usability
What type of relationship does each of our Customer
Segments expect us to establish and maintain with them?
Which ones have we established?
How are they integrated with the rest of our business model?
How costly are they?
examples
Personal assistance
Dedicated Personal Assistance
Self-Service
Automated Services
Communities
Co-creation
Key Resources
Channels
What Key Resources do our Value Propositions require?
Our Distribution Channels? Customer Relationships?
Revenue Streams?
Through which Channels do our Customer Segments
want to be reached?
How are we reaching them now?
How are our Channels integrated?
Which ones work best?
Which ones are most cost-efficient?
How are we integrating them with customer routines?
types of resources
Physical
Intellectual (brand patents, copyrights, data)
Human
Financial
Mass Market
Niche Market
Segmented
Diversified
Multi-sided Platform
channel phases:
1. Awareness
How do we raise awareness about our company’s products and services?
2. Evaluation
How do we help customers evaluate our organization’s Value Proposition?
3. Purchase
How do we allow customers to purchase specific products and services?
4. Delivery
How do we deliver a Value Proposition to customers?
5. After sales
How do we provide post-purchase customer support?
Cost Structure
Revenue Streams
What are the most important costs inherent in our business model?
Which Key Resources are most expensive?
Which Key Activities are most expensive?
For what value are our customers really willing to pay?
For what do they currently pay?
How are they currently paying?
How would they prefer to pay?
How much does each Revenue Stream contribute to overall revenues?
is your business more:
Cost Driven (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing)
Value Driven ( focused on value creation, premium value proposition)
sample characteristics:
Fixed Costs (salaries, rents, utilities)
Variable costs
Economies of scale
Economies of scope
www.businessmodelgeneration.com
types:
Asset sale
Usage fee
Subscription Fees
Lending/Renting/Leasing
Licensing
Brokerage fees
Advertising
fixed pricing
List Price
Product feature dependent
Customer segment dependent
Volume dependent
dynamic pricing
Negotiation( bargaining)
Yield Management
Real-time-Market
This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License.
To view a copy of this license, visit http://creativecommons.org/licenses/by-sa/3.0/
or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
Month
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Year
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Rapid business model prototyping for nonprofits
thecanvaskit
TA B L E O F
CONTENTS
A R A P I D I N T R O : R E A D T H E S E S E C T I O N S B E F O R E Y O U G E T S TA R T E D
Dedicated to the pioneering nonprofit that wants to thrive, rather
than just survive
The three rising and
irreversible trends.....................6
What’s making this inevitable for all nonprofits? Here are the three
themes that make your business model top priority
Start with your business
model..............................................9
Visualize how resources flow throughout your nonprofit
The nonprofit business
model canvas.............................10
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Let’s set the tone, intent,
and expectations.......................5
Why redesign one for nonprofits?
A framework to take you
through exploration................12
Putting a name on a process that we all do naturally
Testing assumptions with
design research.........................15
What does it really take to deeply understand people?
TA B L E O F
CONTENTS
A R A P I D I N T R O : R E A D T H E S E S E C T I O N S B E F O R E Y O U G E T S TA R T E D ( C O N T )
Why visualize your data?.........16
90+8998 100+
100 100
Go beyond simple swot charts and venn diagrams
Visualizing a steady shift into a hybrid cloud IT infrastructure
Stages simulated: Clarification Ideation
Template: nBMC...........................17
Version 2.0
KEY PARTNERS
Scenario: Moving into
Cloud IT...................................20
Contextual
Interview.................................30
Watching participants in a work-based context allows you to
look for unspoken clues
KEY
ACTIVITIES
KEY RESOURCES
SOCIAL VALUE
PROPOSITION
RELATIONS
CHANNELS
CO-CREATORS
socialinnovationcollaborationleadershipexcellenceadaptabilitycreativitywickedproblem
designreiterateexperimentationdivergexconvergeadaptabilitycreativityinnovationsdesig
thinkingrapidprototypingsocialinnovationstrategicplanningobservationsystemsthinki
greframinginnovateleadershipprototypingdesigndoingempathynonprofitinnovationsocia
changestrategicplanningwickedproblemsleanthinkingdesignchangemakingfuturesthinkin
designreiteratesensemakingstrategicplanningadaptabilitycreativityinnovationstrat
gicthinkingsocialinnovationcollaborationleadershipproblemsolvinghowmightweprototypi
DECODING THE BUZZ
5% canvas, 95% individual skill set
The social sector is caught in the
crossfire of some the biggest ideas
of our time: Human-centered design,
design thinking, Lean Startup, et al.
But something was missing. Changemakers
still scrambled over the ambiguity. The
conversations out there spoke of the “why,” but
little of actionable know-how aside from “tips &
tricks.”
How might one take all that advice and bring
it down to earth for a small team to practice in
manageable steps?
The Canvas Kit invites you to start with the
heart of your organization: The business model.
Rather than a disconnected encyclopedia of
“tips & tricks,” what’s conveyed here is a way
to chain the bare essentials together towards
creating the canvas from start to finish.
Chaining these skills towards the creation of a
paper prototype — a strategic physical artifact
— makes it more likely that the skills applied will
become tacit knowledge.
Finally, I introduce process. It’s not for stifling
with a rigid formula, but to connect these skills
and unify team direction. Get comfortable with
the basics first, then get a feel for what you can
modify later.
tacit knowledge
Knowledge built up over time through
experience.
10+2023139
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Let’s set the tone, intent,
and expectations
Dedicated to the pioneering nonprofit that wants to thrive, rather than
just survive.
The Canvas Kit is for nonprofit
leaders, staff, and their stakeholders
who want to rapidly prototype a new
business model, or solve conflicts in
their current one.
The approach guides you through a fluid stepby-step process to create one paper canvas. It
blends Lean Startup principles, concepts from
human-centered design, and applied creativity
— all keys to achieving breakthroughs and
overcoming problems in any business model.
Creating this “blueprint” is your main goal,
but to achieve it, the kit also teaches how to
collaborate together with speed so that you can
create an accurate one — meaning, a canvas
that isn’t riddled with old data or assumptions.
This prototype can then be used to inform new
revenue strategies.
One last thing: You’ll see that this is biased
towards simplicity and action. Why? Because
meaningful insights are gained through
immersion in the field to better understand
what’s real and what isn’t real about your
nonprofit. Just enough guidance is presented
so that you can get out there and start verifying
things on your own. In Lean Startup talk, this
venturing out into the real world is called
“getting out of the building.”
prototype
[proh-tuh-tahyp]
A prototype is a tangible mock-up
like a sketch, drawing, or physical
model that represents the future state
of something. It provokes people for
feedback and inspires ideas on what
that something might be like in the
future.
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The three rising and
irreversible trends
What’s making this inevitable for all nonprofits? Here are the three
themes that make your business model top priority.
TREND
1
TIGHTENING RESOURCES
The Nonprofit Finance Fund’s State of the
Sector Survey for 2013 says that low financial
resources is a persistent problem. Here are
some notable stats from the survey:
×× 42% of survey respondents report that
they do not have the right mix of financial
resources to thrive and be effective in the
next 3 years.
×× 1 in 4 nonprofits has 30 days or less cash onhand.
×× Over the next twelve months, 39% plan to
change the main ways they raise and spend
money.
×× 23% will seek funding other than grants or
contracts, such as loans or investments.
Visit the link to this survey to get a fuller picture.
What other insights can you draw?
the end of using the “overhead ratio” as a sole
indicator of a charity’s overall performance.
The economic climate is worsening. Donor funds
are getting strained and nonprofits are being
provoked to complement traditional sources of
funding with new revenue streams.
Nonprofits are also being prompted to withdraw
from self-limiting attitudes that hold them
back. This includes the “charity mindset,” the
starvation cycle that many nonprofits are forced
to accept, and accepting donor money with
strings attached which make nonprofits deviate
from their original vision.
Also, Guidestar, Charity Navigator, and the BBB
Wise Giving Alliance kickstarted an awareness
campaign in the summer of 2013 to advocate
Nonprofits are problem solving
enterprises at the core. They need the
resources and infrastructure to achieve
their mission.
the canvas kit for nonprofits
TREND
2
7
RISING COMPLEXITY
Change and complexity mean
different things to people, but just what
exactly are we all up against? Let’s
unpack the buzzwords together and
define what change really looks like for
the lean-thinking, design-oriented,
21st century nonprofit:
• Globalization
• New government policies
One assumption to discard is the belief that
we’re unaffected. Our mission frontiers have
shifted indefinitely and they’ll continue do so at
a rate that we cannot control. The underlying
events of these paradigms make up a vast
ocean of complexity which all nonprofits must
inevitably navigate.
Think about how many organizations find
later on that their mission and objectives have
become misaligned. How long and how well did
they play catch-up?
The kit helps you make sense of hidden
opportunities now, rather than later when a
crisis suddenly hits.
• Big data
• Shifting marketplaces
• Evolving technologies
Here’s a quick example
• Evolving communications
One organization has stuck with direct mail for a long time. But in the age of
• Changing attitudes and preferences from
donors, clients, and constituents
responsive website design and social media, multiple channels like Facebook,
Sometimes, nonprofits forget how these
paradigms affect the total scope of their
mission.
Twitter, and email can be leveraged together. Even their website isn’t quite
designed for the times. How might they use social media to expand advocacy or
increase donations? How might one find out what its audiences think or prefer?
How might they reshuffle resources in their organization to make way for these
changes?
the canvas kit for nonprofits
TREND
3
8
LEAN STARTUP, LEAN NONPROFIT
A different kind of capacity-building is needed.
Right now, there’s rising interest by nonprofits
into the lean startup movement.
Why? Because nonprofits share similar
challenges with startups:
✓✓ Constrained resources: Time, money, and
energy
✓✓ The need to experiment, test, and measure
outcomes, and eventually reiterate on a
product or service.
✓✓ The need for agility, creativity, and flexibility
in operations
✓✓ Operating under conditions of extreme
uncertainty (relates to Trend 2)
With that said, you also have to acknowledge
this one thing alone:
In a world of rapid change and constant flux,
one of the greatest risks anyone can take is to
design anything based on “common sense” and
other untested assumptions.
You don’t have to be a tech startup to adapt
lean startup concepts and attitudes. A startup is
any human enterprise that provides value.
Programs and services in the social sector can
endure long cycle times before results can even
be evaluated. And in between that time, a lot
can change. That’s why testing assumptions first
is a crucial part of the kit. It helps us see which
of our efforts create true value and which ones
might actually be wasteful.
The meaning of value and waste isn’t all that
different for nonprofits, either. Value is the
benefit created through programs, services, and
other activities. Waste, on the other hand, is
anything else that consumes time, energy, and
money, yet doesn’t create any benefit.
We can use a similar lens and ask:
“What in our business model creates real value,
and what might be wasteful?”
Value
The benefits created through your
programs, services, and other
activities.
Waste
Whatever else consumes time, energy,
and money, yet creates no benefit.
ASSUMPTIONS
estd. yesterday
One of the greatest risks anyone can take is to design
anything based on “common sense” and other untested
assumptions.
20+30454019
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Start with your business
model
VISUALIZE HOW RESOURCES FLOW THROUGHOUT YOUR NONPROFIT
Nonprofits need two things to adapt: The right infrastructure to
maximize outcomes, and the right business model to sustain it.
Before you can decide what to change, you have to know what you look like
first. The original Business Model Canvas is a one-page visual tool that
demonstrates the 9 key elements of any enterprise. Dr. Alex Osterwalder
first developed this idea for his dissertation at the University of Lausanne,
Switzerland, and then later refined the canvas in his best-selling book Business
Model Generation. The canvas has been praised in both business and the social
sector as the fastest way to convey any organization’s “business” logic so that
clear strategic decisions can be made.
So why redesign the canvas for nonprofit organizations?
9
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The nonprofit business
model canvas
WHY REDESIGN ONE FOR NONPROFITS?
Well, there are two major reasons. First, the Nonprofit Business
Model Canvas was redesigned to better match the logic and context of
nonprofit operations.
Since the original canvas was released under the Creative Commons ShareAlike license, anyone could revise the canvas according to different contexts as
long as original credit was retained and the same license was used. I like using
A ship in port is safe, but that’s not
the analogy of a ship sailing through an ocean. Your canvas is like a blueprint
what ships are built for.
showing your ship’s anatomy. You’ll have to cast off one day, but is your vessel
designed to navigate and sail through unpredictable waters?
the canvas kit for nonprofits
11
Second reason?
Many of the business model challenges are unique to nonprofit
operations:
1. Making sense of challenges unique to the
nonprofit sector: Mission creep, mission
drift, misaligned social value proposition,
unfocused resources, lack of overall strategy,
underfunded, etc.
2. For the nonprofit, the “customers” may be
the clients or the beneficiaries that receive
services.
3. You also have to consider the fact that you
have a social value proposition in which
donors expect a “social return.”
4. Diverse stakeholders: Volunteers,
beneficiaries, investors, philanthropists – all
which can be further segmented.
5. Dynamic stakeholders relationships. For
example, a donor might not just be a donor,
but also be a beneficiary of services.
6. Diverse outcomes: You also need volunteers,
membership sign-ups, behavior change,
mission-related outcomes etc.
7. Multiple Social Propositions: one for
beneficiaries, one for donors.
8. Emerging trends that prompt nonprofits
to revisit their canvas blueprint more often
than usual: Marketplace trends, cross-sector
collaborations, political developments, web
and technology advances, etc.
9. Rapid immersion, rapid prototyping and
continual reiteration where necessary
10.Emphasis on qualitative design research to
test assumptions.
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A framework to take you
through exploration
PUTTING A NAME ON A PROCESS THAT WE ALL DO NATURALLY
While many people have done their own nonprofit canvas redesigns,
the Canvas Kit focuses on crucial questions that nonprofits needed to
answer:
Do you know your true and full costs?
Do you have the operational
And if not, how might you improve,
foundations and revenue models to
change, and build momentum right
adapt to the future?
now?
the canvas kit for nonprofits
13
The problem? These questions couldn’t be
answered by the nonprofit board alone. They
couldn’t just download the canvas, discuss it
amongst themselves, then write out what they
felt to be the answers, the solutions, and then
just leave it at that. Not without going out into
the world, investigating it, and validating it.
They also couldn’t exclude the participation of
other staff, volunteers, and stakeholders who
might hold meaningful insights which might lead
to breakthrough ideas.
CPS is an open process that goes way back.
Many contemporary design and innovation
firms have modified it to fit the context of the
industries they specialize in.
Finally, there’s the danger of hyper-focusing on
the tool. It wasn’t just the canvas that mattered,
but what and how the data was collected.
You’ll also see the same necessary collaboration
skills:
Would the canvas really be an accurate
depiction of where the nonprofit stood? Or just
based on old data and personal feelings?
I’ve presented a structured but fluid step-bystep process to counteract those dangers
and keep team discussions productive. It’s a
modified version of what is essentially called
the Osborne-Parnes Creative Problem Solving
Process. I’ve added it here to help unify and
focus your team’s efforts.
1. Diverging: Generating a vast quantity of
ideas or new questions.
2. Converging: Wisely evaluating for the best
ideas.
3. Deferral of judgment: Avoiding the
premature judgment of ideas.
Strategic Conversations: The Canvas
Kit’s process is about structuring
everyone’s creativity together for
maximum productivity.
“Hah! That’s NEVER going to work!
“But we already tried that!
Here’s an
“Come on, you’re really suggesting THAT?
idea!
What’s unproductive? Judging ideas
too early. It’s like accelerating and
braking at the same time. Deferral
of judgment is a skill that separates
the two, and it can mean the difference
between finding truly breakthrough
ideas, or forging on with the same old,
same old.
the canvas kit for nonprofits
14
Think out of the box!
One last thing: This is a proactive process. It’s true that thinking differently
requires thinking creatively, but it also requires us to do it continually. And real
creativity isn’t just about having one great idea, but about implementing (or
innovation
!
More oration
b
colla
More
innovation!
Yes, more
strategy!
Yes, more
leadersh
ip for
innovatio
n!
More
creativity!
reiterating) on ideas that have both novelty and social impact: That can be
through a new service you’ve created, or a better business model that helps your
organization evolve.
Radio Noise: Everyone seems to be
So before getting to your great ideas on what to change or create in your
talking about creativity and social
business model, you have to know where you stand in your current one, first. You
innovation these days. That’s fine, but
must create your first snapshot of the big picture.
most advice and articles are clobbered
with ambiguity and clichés. What’s
• Well, what kind of data do we need?
really missing from the conversation
• Where are our limited resources really going?
is defining explicitly what these
• What’s really providing value, and what’s actually wasteful?
underlying skills are, and how to
• How do we know what to design and how to make it?
develop them.
Read on.
75+79609080
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Testing assumptions with
design research
WHAT DOES IT REALLY TAKE TO DEEPLY UNDERSTAND PEOPLE?
The goal is to deeply understand people, their motivations, and
aspirations. The standoff between market research vs. design research.
Market research is used to predict
the behavior of large groups. It can be
used to predict mass responses and
what large groups of people might do.
But this data won’t tell you what your clients’ or
constituents’ real motivations are. It also won’t
explain why your services or programs aren’t
achieving the desired results. Finally, it won’t tell
you what service to make, or how to make it.
That’s what design research is for: To seek the
hidden details and deeply understand unmet
needs. You’ll see here a high emphasis on
ethnography and design research, but don’t
worry about the terminology so much – The
point here is to deeply understand people, their
motivations and aspirations. And then to use
our own humanity, empathy, and understanding
to quickly inspire the design of your business
model.
The Canvas Kit has a growing repository of
these tools you could use to dig deep for the
information you need.
Design research looks for peculiar
and unique data to discover unmet
needs, trigger new insights, and inspire
new ideas.
SOCIAL VALUE
PROPOSITION
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Why visualize
your data?
GO BEYOND SIMPLE SWOT CHARTS AND VENN DIAGRAMS
A part of rapid collaboration comes from how well we communicate
and connect the dots.
Let’s recap: Before deciding what
to change or create, we must first
understand what’s creating value and
what’s just waste.
We know that the original canvas template has
been redesigned to better suit the nonprofit
context.
We know that the Canvas Kit’s modified CPS
process will structure everyone’s thinking for
maximum productivity around the canvas.
We know that design research is used to find
unique and peculiar data to inspire the design of
our business model. It’s good for seeking unmet
needs and testing assumptions.
✓✓ Build a shared exploration and understanding
among teammates
Now once we’ve collected all this data, how do
we make sense of what the data tells us? Well,
many methods in the kit will help you make
sense of all of the information.
✓✓ Build a shared sense of idea ownership
THE BENEFITS OF SENSEMAKING THRU
✓✓ Trigger flashes of insight and special aha!
moments
VISUALIZATION?
✓✓ Memoing on post-its allows you to instantly
manipulate and move data around on the
canvas
✓✓ Scan and engage the data better:
Capture patterns, hidden insights, hidden
assumptions, and discrepancies
✓✓ Helps counteract one-sided, one-dimensional
conclusions
NONPROFIT BUSINESS MODEL CANVAS
VERSION 2.0
OPERATIONS LEVEL
ENGAGEMENT LEVEL
KEY PARTNERS
KEY ACTIVITIES
SVP (social value propositions)
RELATIONS
CO-CREATORS
Who are our key partners and suppliers?
Which key activities do our social value
What programs and services do we deliver?
What kind of relationships do co-
Who are our stakeholders? For whom
Which Key Resources are we acquiring
propositions require? What activities are
What problems or challenges are we trying
creators want from us? What bonds do
are we creating value? Who helps
from partners? Which Key Activities do
needed to sustain operations? Examples:
to solve? What value do will we deliver
we establish and maintain with them?
us create Outcomes or our Value
to co-creators? What’s in it for our co-
Examples:
Propositions? Examples:
partners perform? Example
partnerships:
1. marketing
6. training
2. campaigns
7. networking
3. events
8. research
creators?
CATEGORY 1
CATEGORY 2
1. investors
1. clients
2. philanthropists
2. constituencies
4. self-service
3. high donors
3. recipients
KEY RESOURCES
CHANNELS
CATEGORY 3
CATEGORY 4
6. Buyer-supplier relationships to assure
Which Key Resources do our Value
How do we reach co-creators? How do
1. volunteers
1. customers
reliable supplies.
Propositions require? What other
they want to be reached re: the delivery
2. participants
2. members
key resources are needed at the
of our Value Propositions? How do
engagement level? The operations
we provide ongoing communications,
level? Examples:
support, and awareness? Examples:
1. Strategic alliances between noncompetitors
2. Coopetition: strategic partnerships
between competitors,
4. production
9. service delivery
5. development
1. community
5. direct action
2. co-creation
6. automated
3. accountability
services
4. low donors
3. Joint ventures to create new “x”
4. Cause Marketing alliances
5. Advocacy alliances
1. physical,
3. human
1. brick + mortar
4. purchase
2. intellectual
4. financial
2. online
touchpoints
3. collaborative
partnerships
4. advocacy
3. mobile
COST STRUCTURE
OUTCOME STREAMS
What does it really cost to run our nonprofit operations? What costs are inherent in our business model?
What value is the co-creator truly willing to return or contribute? What routines and processes do they
Which Key Resources and Activities are the most expensive? What does it cost to run and maintain the
prefer? Mission related milestones?
Operations Level?
Examples:
1. FINANCIAL OUTCOMES: donations, grants, sales proceeds, x revenue, membership sign-ups, one-
1. OpEx, overhead, and administrative costs.
time transactions, recurring transactions
2. fixed costs, variable costs, economies of scale / scope.
2. NON-FINANCIAL OUTCOMES: behavior change, x social impact, mission-related milestones and
outcomes, membership sign-ups
The “Nonprofit Business Model Canvas” is adapted from businessmodelgeneration.com and is licensed under Creative Commons Attribution-Share Alike 3.0 Unported License.
SOME LAST WORDS BEFORE YOU ENGAGE
NOW THAT YOU KNOW
THE KIT WILL BE IN CONSTANT REITERATION
There’s no doubt the nonprofit sector is slowly adapting itself to new ways of
thinking. The pace is slow, but it’s getting there. But I think individually, you can
get a head start and stay ahead. With that said, the kit will strengthen and update
over time. But the goal will always remains the same:
Complete a canvas from start to finish, and help nonprofits create new options for
themselves.
AND FINALLY
BE DELIBERATE AND COMMIT
Prototypes inform what to change.
But the final act — implementation
— comes from you. Be deliberate and
commit to the process at least once,
and see what you dig up.
When it does come time to execute change —
like remodeling your business model — then you
must act on it.
Remember: We don’t resist change itself, but the
path towards it, the initial discomfort coming
from doing things differently for the first time.
All paths to self-discovery are like this. After all,
we always face something new in our routine
lives which force us to think differently or
creatively than before, whether that’s a riveting
email, a shakeup in our relationships, or just in
our daily activities. And no matter the outcome,
we always overcome it: Either a job well done, or
a hard lesson learned.
We might assume it’s the lack of resources that
holds us back from doing anything. But now it’s
time to test that first assumption. It’s time to
find out where you stand and see what options
you can create.
Crossroads:
What are the costs of change versus the costs
of things staying the same?
Scenario // Moving Into Cloud IT
20
This scenario demonstrates:
1.
Clarification
2. Ideation
moving into cloud it
Dolphin Research Organization (DRO) is a Hawaiian nonprofit dedicated to the study, rescue, and
research of Spinner dolphins. They perform educational outreach with schools, on-site workshops and
classes, marine research, and environmental project development.
The DRO has improved their Social value
propositions and thus expanded their different
financial outcome streams. Aside from
memberships, private foundation grants, a
gift shop, and generous corporate donations,
they’ve also built small on-site attractions and
interactive programs that engage the public.
This has supported their facilities since they
operate in both a natural setting and high tourist
area.
Research and teaching is always an important
part of their work. They’ve also expanded
the educational aspect of their mission by
implementing internship programs and college
accredited courses.
A GLIMPSE INTO THE CHALLENGES
The nonprofit is growing fast. As their member
base, business processes, and public attention
flourish, this also means that their IT backbone
needs to be redesigned to support their growth.
DRO has long depended on traditional
outsourced IT: Website hosting, file storage and
backup, email, break-fix issues, etc. Their house
file is tracked on an Excel spreadsheet.
They still operate a legacy IT infrastructure.
Email and website hosting is outsourced, too.
Memberships and donations are growing, but
scalability is becoming a nightmare.
Scenario // Moving Into Cloud IT
21
clarification
DRO wanted to move parts of their IT infrastructure to the cloud, but the ripple effects need to be
visualized. It’s best to get the full picture to see where they should focus their energy. Clarifying situations
is the heart of framing complex challenges.
In canvas-speak, the current IT infrastructure
is a Key Resource. It helps staff carry out their
Key Activities like donor management, print
newsletters, and other marketing.
Key Partners are strategic partnerships with
people and institutions. They provide Key
Resources or do those Key Activities in which
they can’t do in-house. Here, it’s the local print
shop and the outsourced IT company who
handles their email, websites, and hardware.
Cost Structure deals with the stuff that has
substantial costs in maintaining the operational
side of things. In this case, it’s salaries, office
leases, facility upkeep, and the fees associated
with that local IT services company.
Plotting what they know
Validating and seeking new facts
Team members plotted their canvases
individually before merging theirs on a bigger
one on the whiteboard. This became the canvas
for testing what they thought they knew about
their business model. (Fig 1)
Each team member gets a copy of (Fig 1).
They use it as a reference before exploring
and verifying what they know. The group also
developed some great prompter questions about
what data and facts they needed to seek out.
Here’s a couple of them:
•
•
•
1ST CANVAS: Assumption Canvas
•
Who, or what, needs priority?
Why are we, or others, really seeking this kind
of transition? And how much work would it
take to migrate their data?
What would the true costs be in the longterm?
Any staffing or training issues?
Scenario // Moving Into Cloud IT
22
FIG 1: 1ST CANVAS
key partners
state
foundation
tourism
x
local
print
shop
key activities
IT
services
company
regional
attractions corporation
x
association
enviro
dev
field
research
admin
animal
care
svp
facility
upkeep
public
teaching
(social value proposition)
internships
work
shops
dolphin
research
college
public
accredited interaction
courses
dolphin
care
key resources
IT
infras.
research
facilities
co-creators
relations
direct
participation
attractions
direct
action
programs
outreach
community
college
students
family
vacationers
school
students
school
teachers
donations
grants
channels
research
equipment
website
in-person
phone
house
file
cost structure
offices
salaries
outcome streams
IT labor
facility
upkeep
IT
services
gift shop
retreats
programs
college
courses
memberships
1ST CANVAS: PLOTTING WHAT WE KNOW SO FAR
Scenario // Moving Into Cloud IT
23
FIG 2: 2ND CANVAS
key partners
state
foundation
tourism
x
local
print
shop
key activities
IT
services
company
regional
attractions corporation
x
association
enviro
dev
news
letters
field
research
admin
public
teaching
donor
mgmt
svp
facility
upkeep
animal
care
(social value proposition)
internships
work
shops
dolphin
research
college
public
accredited interaction
courses
dolphin
care
key resources
IT
infras.
research
facilities
co-creators
relations
direct
participation
attractions
direct
action
programs
outreach
community
college
students
family
vacationers
school
students
school
teachers
donations
grants
channels
research
equipment
website
in-person
phone
house
file
cost structure
offices
salaries
UNCHANGED
outcome streams
IT labor
facility
upkeep
NEW ADDITION
IT
services
gift shop
retreats
programs
college
courses
memberships
2ND CANVAS: AFTER TESTING ASSUMPTIONS, ONLY A FEW EDITS WERE NEEDED
Scenario // Moving Into Cloud IT
•
•
•
•
How might moving into the cloud affect
overhead costs?
Administrative costs?
How does it affect our staff’s Key Activities?
What’s the impact on Stakeholders or CoCreators?
This also helped formulate the right kinds of
questions before they gathered information
through internal interviews.
Many of the productivity and workflow concerns
came from staff members who were already
discontent, so the team already had good
starting points so that they can further clarify
the issues.
The team had made it a priority to be both
timely and thorough. Each member was given
autonomy in collecting staff feedback before the
deadline.
Making sense of the data
The team gathered as much data as they could
before their agreed-upon deadline. Everyone
had new Aha! Insights jotted on their reference
canvas.
They met up together again and used a simple
sensemaking tool — the affinity map — to
group insights onto sticky notes and discover
important and hidden themes about their data.
(not shown)
+
=
Using the canvas + new exploratory data to create an
affinity map.
24
Here’s what they now know: Only a few edits
were needed on top of their 1st canvas. They
realized maintaining the house file ate up so
much time and energy that it might as well be
called a key activity. Another key activity, and
the biggest part of their marketing, were print
newsletters. (Fig 2) is the 2nd canvas which
is the closest depiction of their true business
model at the present moment.
They realize only one staff person manages
the Excel house file. Whenever someone else
needed access, a copy of it would be sent
through email, and it was hard to track revisions
and human errors. If they ever hired new staff,
multiple people might need access to it. Sending
large sensitive data like this was not just a
productivity issue, but a security issue, too.
Some staff members wanted to start an official
blog and send email newsletters, but most
website concerns — whether a tech glitch, new
addition, or minor change — always needed to
be coordinated through their outsourced local
IT services which consumed a lot of time and
personal energy.
Staff members even struggled to navigate their
own website. Contact information was scattered
and out-of-date. It wasn’t optimized for mobile,
and the layout was counter-intuitive. First-time
visitors failed at finding the information they
needed. They discovered some real instances
where people randomly called any listed
phone number they found just to ask specific
questions. Websites are mission critical since
most of the activities in their Social Value
Proposition block relied on prospects visiting
the website to find specific information.
Finally, the local IT services company doesn’t
do website design per se — but for a monthly
fee — still hosts their website using a basic, nonresponsive website template.
AFFINITY MAP
a sensemaking tool
Used to group large amounts of data
into logical themes.
Benefits: Facilitate clear communication, maximize
meeting productivity, and foster team alignment.
Scenario // Moving Into Cloud IT
HMW?
HMW?
HMW?
HMW?
HMW?
HMW?
HMW?
HMW?
HMW?
HMW?
+
+
=
Plotting the top three challenges: Using the canvas, affinity map,
and prompter questions, they made a long list of challenges using
simple and direct sentences. There were so many to choose and they
knew they couldn’t focus on all of them. So they agreed to narrow
the long list down to their top three most pressing challenges. They
wrote their concerns in the format of “How Might We?” (HMW)
HMW?
LISTS
an ideation “tool”
Don’t underestimate lists! Sometimes
you just don’t need a “tool” or method
to generate ideas. Ideas may flow so
fast that just writing them out is the
best way to capture everything before
you forget it all.
1. How might we create a website
that better accommodates our
“business” processes?
2. How might we add blogs and
email newsletters to our existing
marketing workflow?
3. How might we better
manage donors, volunteers, and
constituent databases?
Scenario // Moving Into Cloud IT
ideation
With the situation clarified, it was time to create a paper prototype of what might be added or improved in
the business model.
The team allowed two weeks
to let these new challenge
statements sink in. Everyone was
encouraged to generate and
incubate new ideas in their own
time.
It was understood that sometimes our best
ideas also arrive when we’re away from the
drawing board.
There are plenty of ways to approach this part
before the group reconvenes in two weeks.
Some opted to focus on the blocks in question
and just write a long list of ways to solve the
HMW challenge statements.
One can also take a copy of their nonprofit’s 2nd
canvas and jot their new ideas as long as they
focused on solving the challenge statements.
The only caveat would be to remember that any
addition, change, or removal will also impact
surrounding blocks.
Scenario // Moving Into Cloud IT
27
FIG 3: nTH CANVAS
key partners
foundation
x
IT
services
company
local
print
shop
key activities
enviro
dev
field
research
blogging
facility
maintenance
animal
care
&
training
donor
mgmt
state
tourism
agency
techsoup
print
newsletters
corp
x
svp
admin
email
newletters
public
teaching
(social value proposition)
internships
public
interaction
dolphin
research
&
care
workshops
hybrid
cloud IT
research
equipment
research
facilities
offices
UNCHANGED
outreach
attractions
community
direct
participation
programs
college
students
family
vacationers
school
students
school
teachers
channels
staff
house
file
cost structure
salaries
direct
action
college
accredited
courses
key resources
regional
attractions
association
co-creators
relations
website
social
media
phone
in-person
outcome streams
cloud
licenses
&
subs
IT labor
&
maintenance
IMPROVE
facility
upkeep
NEW ADDITION
gift shop
retreats
grants
programs
college
courses
memberships
donations
nTH CANVAS: A COMPLETED PROTOTYPE.
Scenario // Moving Into Cloud IT
Example 1st prototype
Remember the still pond analogy: The ripples
come from blue and green stickies.
Here’s their first paper prototype (fig 3) if we
took into account their top three HMWs. Let’s
roleplay one person’s thinking for each block.
28
The DRO may hire a professional firm to redo
the website as part of its marketing strategy.
The staff’s blogging and editorial workflow may
improve. And with a new website, they’ll have a
chance to do e-newsletters so that co-creators
and various audiences can easily stay up-to-date
and connected.
With a possible CRM (constituent relationship
management system) looming, much of its
donor management processes can be placed on
Unchanged: Foundation “x,” state tourism agency, auto-pilot. It may be easier to change, update,
regional attractions association, corporation “x”
and organize information. It may be easier to
Improved: IT services company, local print shop
segment the user base according to how much
New: TechSoup
they pledge, donate, or communicate with the
nonprofit.
Techsoup becomes an important partner in
providing most donated software and discounted KEY RESOURCES
cloud subscriptions.
Unchanged: Research equipment, research
DRO reduces time and money spent for local
facilities
IT services. They come in only when hardware
Improved: House File
“breaks.” They no longer provide email and
New: Hybrid IT
website services. Instead, DRO may begin
developing a migration strategy into either
Key resources can mean human, physical,
Google Apps or Office 365. This eases up the
financial, or intellectual. They help execute key
Cost Structure in the long-term.
activities. Here we see both human and physical
resources improved. A hybrid IT infrastructure
may alleviate some painful productivity issues
KEY ACTIVITIES
that staff struggled with. Cloud solutions could
improve project management, file storage, and
Unchanged: Environment development projects,
document collaboration. Also, with a cloud CRM,
field research, facility maintenance, animal care & the house file can be better organized.
training
Improved: donor management, print newsletters, A professional firm specializing in nonprofit
administrative, public teaching
website design might be brought in. They would
New: e-newsletters, blogs
have the know-how to integrate the nonprofit’s
website with CRM systems with their internal
Staff training on new cloud apps wouldn’t be too business processes (donations, automated
much of a problem because staff had already
membership renewals, etc).
tried them out on the side. Most cloud apps are
designed to be intuitive and easy to use.
KEY PARTNERS
COST STRUCTURE
Unchanged: Salaries, facility upkeep
Improved: Offices, IT labor & maintenance
New: Cloud licenses & subs
If the nonprofit decides to migrate to Google
Apps or Office365, then local IT services like
email and website hosting may be cut. That same
IT services company may just provide breakfix services. If Techsoup happens to be a Key
Partner, the nonprofit may qualify for discounted
cloud licenses and subscriptions.
SOCIAL VALUE PROPOSITIONS
Unchanged: internships, dolphin research & care,
public interactions
Improved: workshops
New: college accredited courses
DRO’s social value proposition is embedded in
their mission: “the study, rescue, and research of
Spinner dolphins.”
But what makes them different from the
other research organizations? They’re the only
organization in their locale that offers internships,
college accredited courses, workshops, and
public interactions with dolphins. So they’re not
just any research organization. They encourage
invite the public to be a part of the organization’s
daily activities. And they’ve been doing this well
for many years.
They do plenty of educational outreach. Is it
possible that their website and cloud application
portfolio can assist in better organizing and
communicating to the public about their social
value propositions?
Scenario // Moving Into Cloud IT
DRO also offers college accredited courses.
What are their current teaching processes like?
One interesting possibility here is employing
a Learning Management System (LMS) like
Instructure’s Canvas to make teaching more
accessible and enjoyable for both instructors
and students. Keep in mind that this idea
now strays from the original three challenge
statements to focus on. It’s important that the
idea is put on the backburner for another time.
RELATIONS
Unchanged: Direct action, attractions, programs
Improved: Direct public participation, outreach &
marcom, community
New: None
Relations delve into the ways we develop bonds
and relationships with our co-creators.
DRO has various attractions, programs, and
workshops that engage co-creators. This leads
the way to pleasant experiences but memorable
relationships with its community. With cloud
computing and a website redesign, there’s a
good chance that communications and outreach
will improve.
CHANNELS
Unchanged: Phone, in-person
Improved: Website
New: Social media
Social media is a different issue altogether, but
with the way cloud applications integrate with
social networks, one could consider it a future
idea especially if the benefits are compelling
enough. This might also prompt them to start
thinking about how social media might weave
into the rest of its marketing strategy.
29
CRMs and cloud solutions can integrate with
the new website and the rest of its business
processes. The website is more than an online
presence, but also a central communication hub.
CO-CREATORS
Unchanged: Direct action, attractions, programs
Improved: Direct public participation, outreach &
marcom, community
New: None
The DRO was smart enough to segment their
audiences into main categories of co-creators
who typically visit their facilities: College
students, public school students, teachers, and
family vacationers.
As mentioned before, email newsletters and
blogging might let staff better communicate
and interact with their co-creators.
OUTCOME STREAMS
Unchanged: Gift shop, retreats, grants
Improved: Programs, college courses,
memberships, donations
New: None
How do people sign up for programs? College
accredited courses? How do they manage their
donations and memberships? The business
processes of these outcome streams may
improve along with other key activities.
WHAT WAS ACCOMPLISHED?
This is the kind of strategic
conversation that should be
happening with the nonprofit
business model canvas.
The Clarification stage reminded them that
migrating some IT to the cloud is not just a
productivity matter, but also a business decision.
They needed to ask what the real costs of
change may be. Any ripple effects have both
benefits and drawbacks which weren’t realized
before.
This helped them become better informed and
better prepared for the ideation stage of the
process.
Bank >>
Exploratory Tools
30
contextual interviews
Observing participants in a work-based context lets you find new
and critical insights which might’ve been impossible from traditional
interviews.
YOU NEED
RECOMMENDED FOR BLOCKS: Social Value Proposition, Stakeholders
Use contextual interviews to
probe the existing design of your
programs and services
Contextual interviews outshine traditional Q&A
in two ways:
• They allow you to observe and probe as
someone uses your product or service within
their social and physical environment.
• They reveal why they do certain things as
they do it. Sometimes we forget the small but
insightful details of our experiences, details
which could be overlooked in traditional
interviews.
Contextual interviews are also work-based.
You watch and engage the participant as they
perform the work. This triggers valuable details
which can yield new insights or validate other
qualitative data collected elsewhere. Observing
list of questions
tape recorder
camera
paper
supportive team
members
participants in a work-based context lets you
quickly probe and posit a new question which
might’ve been unavailable from a traditional
interview.
Environmental & Experiential Triggers
With traditional interviews, your verbal
vocabulary is the only cue, or trigger, for the
participant to recall their experiences. Social
or physical environment of the interview is
irrelevant.
In contextual interviews, the social and physical
environments matter because it also informs
you of their influences related to the usage of a
product or service.
Teacher and Student Roles
The interviewer takes on an inquiring “student”
role and the participant takes on an active
“teacher” role. As the participant performs and
explains the work being done, the interviewer
observes, takes notes, and probes further.
pen/pencil
PRECAUTIONS
• Use informed consent forms, if necessary.
• Preferably no more than 2 or 3 should be in
your interview group so that the participant
doesn’t feel overwhelmed.
Bank >>
Exploratory Tools
HOW TO DO IT
Step 1: ESTABLISH THE RELATIONSHIP
Make the participant comfortable. Clarify
the intent of the interview. Explain that the
participant will take on an active “teacher” role
while you will take on a “student” role. If you are
recording audio or video, ensure you get the
participant’s permission.
Your list of questions is merely a starting point:
It’ll help you focus on the kinds of insight you’re
seeking, but know that the interview’s flow will
take unexpected turns.
31
TIPS
• Active Observation: Heed non-verbal
cues and body language; ask open-ended
questions.
• After a sizeable amount of interviews, do
affinity maps to sum up and synthesize all of
your interview data.
• Suspend any judgments and beliefs as a
student. The “teacher” knows more about
the experience than you, so expect that you’ll
learn something new.
Step 2: ENGAGE
As the task is being executed, engage and
inquire. Allow the participant to guide you as
they perform the work. Be ready to improvise or
posit new questions on-the-fly. Observe closely.
Write quickly. Contextual interviews have a
certain flow: The next question may not arise
until the participant does something new or
interesting. If something is unclear, or something
new or insightful occurs, ASK the participant to
elaborate.
Step 3: REVIEW and WRAP-UP
Ensure that future meetings and follow-ups
can occur in the future. Review the audio, film,
and other notes you’ve captured together with
teammates and gather the key takeaways.
“
if i asked my customers what
they wanted they would say a
faster horse.
— henry ford
AVOID
×× Hypothetical questions: “What would you do
if...”, Or any other questions that participants
can’t clearly answer.

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