This is part 2 of our series of articles that explore how NFPs could consider adopting new approaches practiced by successful startups. From alternative organisational structures, to strategy development and innovation. It’s not about replicating startups, it’s about learning and adapting to meet the challenges facing NFPs in our rapidly changing world.
First of all we want to acknowledge that we are taking a top-level broad view of the contrast in common strategic practices between NFPs and successful startups. The finer details and nuances of good strategic practice are too broad to be thoughtfully captured in this article
NFPs and Strategy by Template
Many NFPs adopt “Strategy by Template”, otherwise known as “Strategic Planning”. This process consists of stakeholders ‘planning’ huge shopping lists of goals and things to do. After a few days locked in a boardroom the team push everything they have listed into a table of goals and KPI’s and call it a strategy. This mess of things is overwhelmingly complex, so it’s labelled ‘long term’ or ‘5 year plan’ as to avoid creating clear actions that can be taken today. With good intentions, some higher level concepts are added to the goals; such as the vision, the mission and the values. When done well these can offer guiding principles, but when rushed they offer little value.
In this strategic style the bias is towards analysing, planning and long term measurement. In reality it is often guessing and fluff.
Startups and Strategy by Doing
If we look at startups, we can see what might appear as the opposite end of the strategy spectrum. Successful startups view their business idea as a hypothesis that needs to be proven as quickly as possible through actions and measurement. They are aware that the course of their business will change based on what they learn. Instead of hiding from reality, successful startups embrace that the future is impossible to predict. Long term strategic planning is replaced with learning from actions in the field. This is the lean and agile strategic philosophy adopted by so many successful startups. It focuses on action, responding to change and frequent measurement.
Let’s briefly look at a few characteristics of strategic practice that successful Startup’s have implemented and how NFPs could benefit from integrating them.
Flexibility That Allows for Course Corrections
A key difference in mindset is accepting the fact that we cannot predict and plan the future in the boardroom. Silicon Valley startup guru Steve Blank is often at pains to remind startups of this fact by echoing Mike Tyson’s quote ‘Everyone has a plan until they get punched in the mouth’. In this example, Mike Tyson is the future. The future will punch you in the face within 5 years and there is no way to see it coming. Due to limited time and resources, NFPs need to ride these punches better than most. The paradox is, as Dr Jason Fox puts it, to create certainty we must embrace fuzziness.
There is no faster way of predicting the future, other than just going there.
— Igor Nikolic
Successful startups use a science-based approach, baking flexibility into their strategy.
Rather than making big 3-5 year bets based on assumptions and planning, successful startups get clear on the reality of their current state, quickly explore their options for the future, set a course forward (often as a business model canvas) and treat it as a hypothesis and look to test it with small bets and experiments. The outcomes are measured, and insights are used to course correct the strategy. Rinse and repeat.
A powerful tool for forming your organisation’s hypothesis is Strategyzer’s beautifully simple Business Model Canvas. With some tweaks this tool can give NFPs an insightful birds eye view of how their organisation operates and what assumptions are being made about it.
Be stubborn on the vision, but flexible on the details.
— Jeff Bezos
There are many examples of successful startups course correcting into a more successful state based on what they learned through small bets. The collaborative chat platform Slack was originally a game company before realising through experiments that it’s chat function was valuable to organisations. Instagram was originally called Burbn, a check in app that was failing until the founders realised people loved to share photos on the app and rebuilt the app around photography.
While NFPs don’t have the luxury of being able to make such pivotal cross-market course corrections, they can still adopt the underlying principle; build in flexibility by testing whether your hypothesis is working, and be open to course correction to achieve the organisations vision.
A huge negative of the ‘Strategy by Template’ style is the unavoidable complexity that comes with it. There’s a huge disconnect between the ‘strategy’ and what to do today. This often results in incoherent actions and low autonomy for staff.
Vision without action is hallucination.
— Thomas Edison
Successful startups on the other hand understand that it is from action that we learn the most. They accept that strategy is about doing. Doing = running experiments. Measuring experiments is how we learn. Learning is how we grow.
To take action through experiments team members need to ask two simple questions:
- What do we need to learn to test our hypothesis*?
- How will we learn that?
*The hypothesis is ‘the course’ you have set for your strategy
The answer to the second question provides the basis for ‘what to do’ and is naturally aligned to the organisation’s strategic intent.
Spotify offer a fascinating insight into how this plays out in their organisation. They call it the DIBB framework and it played out in the following way a few years ago:
Data > Insight > Beliefs > Bet
Based on their hypothesis/course for their strategy they had assumed their biggest delivery channel was desktop devices. They ran the DIBB framework to test this hypothesis and create actions from the what they learned. You can see the results in the diagram below.
Adopting an action based strategy provides many benefits to NFPs. The key to an action based strategy is having the data to inform the actions, which we will look at next.
Measuring & Data
Successful startups measure things often to make better decisions and most importantly, to know if the strategy is working. Some of the biggest gaps between successful startups and NFPs can be seen in the frequency and level of measurement.Long term planning and infrequent measurement which is often used by NFPs can create the phenomenon of sunk cost fallacy, where we are less likely to change course or stop an initiative because of the time and effort that has already been spent. Strategy direction through action on the other hand relies on frequent measurement as the oxygen for its lungs.
Measurement is difficult because it often requires deep thinking and questioning about how to best design a measure for often ‘intangible’ things. However there are many ways to measure just about anything. Doug Hubbard, the author of the outstanding ‘How To Measure Anything’ states 4 useful measurement assumptions:
- It’s been measured before
- You have far more data than you think
- You need far less data than you think
- Useful, new observations are more accessible than you think
Because of the perceived difficulty of measurement, many NFPs do not measure the outcomes of their strategy often enough. In the diagram below we have made the visual analogy of a NFPs frequency of strategic measurement similar to shooting their team out of a canon at a goal (don’t try this at home). Compare this to a startup team walking through the terrain and adapting as they go by measuring frequently, adapting from what they learn through minor course corrections.
When shooting the canon however, you make a guess on what angle and power to use to get to the goal (strategic planning). The problem is there is no measurement if you hit the goal until your team hits the ground. If you missed, the team need to make the long walk back to the canon, all the while debating on how to adjust the power and angle of the canon for the next shot. In short, the feedback loop is too long and imprecise to provide learning that can be acted on, and the strategic bet is too big.
Measuring more often may seem like a drain on time, but it does actually save time in the long run and get you to your goals faster. This is why startups make difficult things easy by doing them more frequently.
Waiting for perfect is never as smart as making progress.
— Seth Godin
A less recognised second-order consequence of measuring often is a more motivated team internally. In a study by Amabile and Kramer of employee motivation across , the number one motivator for employees was a ‘clear sense of progress’. This study led to the publishing of The Progress Principle which was recognised as the top breakthrough idea by the Harvard Business Review in 2010. The frequent measurement of progress within startups might partly explain the typically high motivation of their teams and their high ability to attract talent.
The key benefits for NFPs who integrate more flexible, measurable and action biased strategies are many, but the biggest of all is the increased ability to adapt and evolve within the uncertain and volatile environments that the future will bring.
The next article in the series will examine how startups consistently deliver innovation and increased value to their customers.
By Luke Schoknecht | Co-founder & Strategy Lead
Original image by Jack Anstey
At Raine & Makin we work with organisations to understand their challenges and turn them into opportunities. We focus on defining the problem, before rushing to the solution. If you have a problem that is stopping you from achieving your organisation mission, get in touch to discuss how we can work together to solve it.