Nonprofit Innovation: How Nonprofits Can Begin to Innovate

‍Podcast episode transcript ↓

Josh:

It's no secret nonprofits often struggle with innovation.

So why is innovation so difficult, and how do nonprofit leaders begin to cultivate an internal culture that pursues innovation with success?

I'm Josh with Anedot and welcome to Nonprofit Pulse, where we explore trends, insights, and resources, and help nonprofits accomplish their mission.

On this episode, we're joined by Nathan Hill on the topic of nonprofit innovation and how nonprofits can begin to innovate.

Nathan is the Vice President of the NextAfter Institute at NextAfter, where he helps nonprofits innovate to grow their fundraising and impact.

Hey Nathan, thanks for joining us.

Nathan:

What's going on, Josh? Good to see you.

Josh:

Man, I'm so pumped about today. And we're gonna talk about innovation and nonprofits and, you know, what does that look like?

Why have nonprofits struggled in the past? How can they begin to innovate? And even if you've started, how do you get unstuck?

So, Nathan, just bringing a ton of wisdom from his organization, NextAfter.

So, what exactly is innovation?

Josh:

So, Nathan, just talk to us first, you know, why have nonprofits historically struggled to innovate?

Nathan:

Yeah, it's a good question. Honestly, the first thing that kind of comes to mind is I guess a bit from my own background.

So I've been at NextAfter for about seven years, it'll be seven years in May.

Before that, I was at an organization and I just, I worked kind of on the digital marketing team. We serve the whole organization, doing emails and web content and all that sort of stuff, including fundraising and beyond.

But I just remember a conversation and maybe it was somewhat of an argument about like, what is innovation, even in the first place?

And in that conversation we're talking about two different approaches.

One being like, there's innovation for innovation's sake, and like, what's actually truly net new and net new in the marketplace, versus maybe a more specific application.

What's just new to us? How do we take those next steps forward to try new things that are actually gonna move the needle and be impactful?

And so I think that's almost where we gotta start, is defining that term. 'Cause innovation to me and in my brain has become just such this like, murky buzzword that maybe doesn't have any meaning anymore.

And I say that actually. So I'm wearing a jacket that says NIO Summit, which is our own conference called the Nonprofit Innovation and Optimization Summit.

We've literally named an event after the word, but it just, I feel like the word comes with a lot of baggage and very little clarity about what it really means.

So I think that's even like a starting place if you're talking about why should people pursue innovation is what are we actually aiming for? Are we aiming just to do cool new, interesting things?

Because there's value in that, but I think maybe more importantly for us in our space as we're, you know, serving the nonprofits, we're fundraisers and marketers trying to fuel causes and things like that is defining like, where are we actually trying to go?

Are we trying to do something just interesting and new, or we're actually trying to make meaningful performance and improvement by focusing on what are we not doing today that maybe we should be? Or how do we push the envelope in an area where maybe we're sitting at the status quo, but we think it can be better.

So that's at least how I think about the term innovation. Does that make sense?

Why nonprofits struggle with innovation

Josh:

Yeah, that's great. That's super helpful. Yeah, so why is that so hard, especially in the nonprofit space?

Nathan:

That's a good question. I mean, there's probably a lot of reasons.

The first thing that comes to mind is a lack of resources.

I think putting myself in the shoes and trying to go back in time when I worked specifically in a nonprofit, like it's really easy to get into this kind of scarcity mentality where we never have enough resources to do anything, do we kind of throw our hands up and say, "well, we can't do that, 'cause we're just a nonprofit and our budgets are limited."

One thing that I have maybe come to learn over the past few years is like, everybody's in that boat, whether you're in nonprofit world or profit world or somewhere else, like everyone's resource strapped to some degree.

One of our core values at NextAfter, and we were just reviewing these yesterday, we had our quarterly, like all staff get together and one of the things that we do is we review core values.

What really drives us in our culture and who we are. One of those is MacGyver-like resourcefulness where we know that, you know, even within our own company and with the organizations that we serve, like resources are always going to be limited.

There's always going to be a cap somewhere.

So how do you make the most of what you have and how do you take all the pieces of something and put them together with Tim, who's our founder, dives deep into like the MacGyver analogy, but how to use like bubblegum and paperclips and duct tape and stuff to put all the pieces together in order to get the solution that you need.

And even though like bubblegum and duct tape doesn't sound all that innovative, how you put the pieces together and actually move things forward for you.

I think that in itself is innovation, but we can get trapped in this sort of scarcity mindset where we're not even thinking about, maybe I have all the tools, but they don't exist inside of my purview at the moment and I've gotta go actually find the things I can put together actually lead to real solutions.

So the scarcity mindset is probably one of the things that can hold us back when we say, "we just don't have the resources for it."

So that's something we probably just have to retrain our brains about to figure out, okay, how do I not operate from a point of scarcity, but a point of knowing maybe we have the tools already and I just need to figure out.

Josh:

Yeah, focusing more on outcomes rather than, you know, inputs.

Well, we need three other staff or we need this amount of money or we need this expertise.

When really if you could start with outcomes, you can kind of create a different path there to gain that.

Nathan:‍

Totally. And yeah, especially that comment about always needing more staff for something, that's another lesson I've just come to learn in the past few years also, like, it's really easy to say, "man, that would be a cool thing to do. We gotta hire somebody to do it."

Like, you can't hire somebody if you haven't proven that something is actually gonna work.

And that kind of ties into maybe the other significant factor, which is like nonprofits typically, and I don't mean to like point a finger, 'cause I'm gonna point the finger back to myself.

I, as a person tend to be pretty risk averse and many nonprofits tend to be very risk averse. And so in order to actually pursue something new like it's hard to say, yeah, let's go hire a full-time person to go try this new thing when it's totally unproven.

And so we have to go find a way to make the most of the resources that we have in order to test something, pilot something, try something to get some data back to say, is this actually a direction we can be going?

Then we can justify the investment in additional resources if you know that it's actually going to pay for itself or allow us to be more efficient on the program side of things or bring in more revenues on the fundraising side of things.

So it is that combination of overcoming that scarcity mindset, but tied directly in with how do we take some incremental next steps to step next steps to mitigate risk and challenge ourselves to be more innovative, I guess.

Josh:

Yeah, yeah. That's awesome.

Why should nonprofits innovate?

Josh:

So before we talk about next steps, let's just talk about why.

Why should nonprofits innovate? Why should they be looking kind of across their organization constantly about whether to make changes, whether to do new things?

Nathan:

Yeah, the why is probably the most critical question. And I think it's easier actually to make the argument for why you should innovate in the nonprofit space more than any other space.

Like, okay, it's cool in the for-profit space to innovate so you can like drive more shareholder value and then maybe increase the value of your business and make more money.

Like, okay, cool. That doesn't motivate me at all.

In the nonprofit space, the outcomes that we're looking for are of so much greater significance than that, when you're impacting humanity in a significant way, not just trying to drive, you know, new revenues for the sake of it.

So just fundamentally from that standpoint -

Innovation is probably more critical in the nonprofit space than any other space because the potential outcome of meaningful innovation is that we get to impact more human beings and people.

Maybe it's environment and things like that, real causes that are meaningful.

So yeah, just fundamentally I think innovation is critical in our space and most critical in our space. But even beyond that, I mean there are so many implications as to the why.

I mean my lens is typically through a nonprofit fundraising and marketing standpoint, 'cause that's the business that we work in, but it goes well beyond that.

I mean, if you can generate more, if you can find innovative ways to take the resources that you have now and get more supporters and more advocates and more donations and more revenues that trickle down impact of those things as more people actually being impacted by your cause.

So I think the question of why is a really easy question.

What does nonprofit innovation look like in 2023?

Josh:

Yeah, yeah. So, you know, looking at 2023, I can't believe we're here in this year.

You know, it just blows my mind to think we're living in 2023, but we are indeed.

So what does that look like for nonprofits to innovate in 2023? You know, what are you seeing?

Y'all help so many organizations, you know, do so many different things, mainly fundraise and marketing, but what does it look like? What are you seeing out there?

Nathan:

Yeah, so just to comment on the 2023 side of it, not only are we in 2023, we're like halfway through the first quarter of 2023.

Josh:

That's right.

Nathan:

Like two or three weeks at this point from when we're recording this, which that's wild to me.

This is an interesting year, something we've been chatting about just internally, you know, many of the organizations we work with saw some very similar trends from like 2021 to 2022.

Jeff Giddens who runs our client services team, which is a team like in the weeds day-to-day working with organizations trying to figure out how do we grow a digital fundraising program, many of the organizations that we work with are seeing a common trend.

'Cause over the past five years, by and large online revenues are moving up and to the right, well I should be this way, up and to the right.

For those that are just listening, I'm using my hands to try to point in the right direction while looking at myself mirrored on a screen. So that's my stumble there.

But most organizations that see online revenues going up into the right, moving in a positive direction. And then there was this big jump in 2021, so height of the pandemic.

Sure, lots of people were, you know, out of work and things like that, furloughed, loss of income, but those that weren't saw a need and and filled a need. And this is very a typical trend when you see things like natural disasters that occur.

You've got people that just flock to go help people that are in need and are generous with their dollars. But then what typically happens when you have this disaster relief kind of donations is that retention is actually really hard for those kinds of donors.

So you see a lot of donations right away and then, you know, the news of the issue, current event kind of falls out of the media and then it's no longer at the forefront, and then those people don't give again to the same organization.

Retention is hard. And I think we're seeing something very similar where there's this huge block of people who are giving in 2021, because there's this huge global need now, that it permeates a variety of different causes and is really across our sector.

So big increases in 2021. And then 2022 was this year of kind of coming back down to earth a bit. The long term macro trend is still kind of up into the right, but 2021 to 2022 was kind of coming back to, regressing to the mean, if you will.

And so as we're looking at 2023, I think that problem, like in isolation, it's easy to be really worried, just 'cause we tend to just straight line project stuff. We say, "well, '20 to '21 was really good, so 22 is gonna be even better." And then it wasn't, then we get concerned.

But I think what the macro trend is telling us is that we still just have this problem that we've had in our space forever, which is donor retention.

When we have this influx of brand new donors, what on earth do we do then to try to retain them?

And this is where I think innovation comes into play is we've been saying the same stuff in our space for so long about how to improve donor retention and acquire better donors and missional minded donors and things like that.

If you even, I just gave a talk on this a couple of weeks ago and had showed a Google search and what comes up when you just search for donor retention strategies. And all the top ideas that come up is just stuff that's, "invest in technology" or "invest in new technology" or "send thank you notes" and just basic stuff that's not really blown anybody's mind.

It's not really all that innovative. It's the same old strategies that have yet to fulfill on the promise of fixing our donor retention problems.

And so that's kind of where my brain is at today, thinking about why innovation now is that the stuff that we have said works or maybe used to work doesn't work in the same way or isn't gonna get us to the next ceiling of where we want here or where we're gonna go.

So if we wanna actually improve results in a meaningful way and if we're actually sick and tired of sitting at the status quo of like 23% new donor retention rates and 40 something percent overall retention rates, if we wanna see that bump even a little bit, we've gotta try something new and actually be willing to test anything and everything.

Letting go of what we've held is, "this is the way that we do it" and trying something different because what we're doing now isn't gonna get us to where we wanna go.

How does a nonprofit begin to adopt an internal culture of innovation?

Josh:

That's so good. Yeah, just thinking about, you know, how organizations become organizations who innovate.

It's really about culture. It's really about having that internal culture that we are a nonprofit who pursues new things, who does not accept status quo, who wants to do more so that we can accomplish our mission and go even beyond what we can imagine.

So how does a nonprofit begin to kind of adopt that internal culture of innovation?

Nathan:

It's really hard. It's really hard, especially for a larger organization. It's really, it takes a long time to steer the ship or to turn the ship.

For smaller organizations especially, you're just kind of starting out in the past couple of years, things like that, growing rapidly, like it's maybe easier to make pivots and to kind of innovate.

So Tim Kachuriak who's our founder, one thing that I've heard him say often and he's presented on often is that like the Trojan horse of innovation is testing and optimization.

Maybe that's convenient for us to say, 'cause that's kind of the core of our business is we're focused on testing and optimization and how do we find those incremental improvements toward that lead to growth, but the reality of what we've seen is that, you know, starting small with incremental testing to just challenge something that's small, like the copy on a page, is this the right messaging?

Putting that to the test to challenge your assumptions there, admit that we don't actually know and put it to the test can create this sort of like, maybe it's even like an addictive mindset where you see a lift from one of those things or you get a learning and you say, "ooh, maybe I can get another one."

How do I get the next green arrow up? How do I find the next new learning about my donors? And it kind of snowballs and it builds momentum as you start to test and test and test. And ultimately what testing does like that is it attracts other people who are interested in making data-driven decisions.

And then it can start to permeate your culture and then actually lead to a culture of innovation and a culture that's using data to make decisions holistically.

Or you're not just challenging, you know, is this the right copy, the right design, the right messaging for this page or for this email for this ad, but then starting to even work into how we fulfill services and programs. Is this the right way and the best way to go impact this person or to go impact this cause?

Maybe it's not, maybe we need to try something radically different to make the most of the returns that we get through fundraising and things like that.

So that's where I tend to lean on is that idea that, you know, small changes can actually start to make a significant impact on how people think and on culture at large.

Josh:

So it sounds like, you know, nonprofits who have or who don't have a culture of curiosity and a culture that enables a freedom of challenging assumptions, they're gonna really struggle to innovate.

Nathan:

A hundred percent, a hundred percent.

I don't know how you can innovate if you don't have that, like, that curiosity of what might be better, what might actually be more effective if you don't have that at sort of the core of your thinking in your mindset, I don't know how you find a meaningful path forward, especially in a day and age where like literally on a day-to-day basis, like the digital landscape is changing.

So if you work in digital marketing, you work in digital fundraising, we'll just even throw like advertising out there, like what works in digital advertising, even just like Facebook ads, it changes month to month.

It's radically changed in the past year and a half since like Apple and Facebook going to war and you've got, I think iOS 14.5 rolled out some changes to tracking across apps and browsers and all that sort of stuff, so Facebook's not as effective at knowing who you are anymore, which radically changes our approach to advertising.

There's stuff like that is changing every single day. And so we have to be curious to learn what actually works, 'cause if we get stuck in our ways for even a couple of months, well now we're behind, we're like dinosaurs.

And so we've gotta have that insatiable curiosity where we're always looking for what's next, what's the next best thing to find and optimize.

Nonprofits must challenge their status quo to start innovating

Josh:

So thinking about nonprofits who have, you know, maybe they have a good culture of curiosity, maybe they have a freedom to challenge assumptions, there's a lot of trust within the organization, but they're just simply struggling to innovate, you know, what would you say to them?

What's a simple exercise or a path or something to get them unstuck?

Nathan:

Yeah, I think one of the easiest things to do, and this is through the lens of fundraising and through the lens of like digital marketing, again, that's kind of our space, so that's where my head goes.

One of the first things that we're gonna do when we're talking to an organization about how can you grow, just go make a donation to yourself and see what the process looks like.

Josh:‍

I love that.

Nathan:

It sounds overly simple and maybe it is overly simple, maybe it's better to go have like a trusted friend or someone who's gonna give you honest feedback to go make a donation to your organization and tell you what the process looks like.

But if you're just doing it yourself, like challenge your assumptions. If you are in the mindset of someone who is intent on making a donation to you, like what does the process look like? What does it feel like?

We run these, what we call like a mystery donor audit for a few organizations. It's baked into kind of our core roadmap as well where we just go through this process, we become a donor and we wanna see what's the pathway.

If I land in your homepage, what does it take to actually go make a $20 donation? And it's really interesting the things that you find, 'cause as the fundraiser, as the marketer, especially like the web content manager, you know all the pathways to get from point A to point Z and actually go make the transaction. It seems easy.

Someone who doesn't have all the context that you have might actually find a lot of roadblocks.

You come to the homepage, where do I actually go? Is it clear where I actually click? Okay, I click the give button, but it didn't take me to the donation page. It took me to like another ways to give page where I have to click again on another give button, same call to action, I'm hoping for a different outcome and now I get to the donation form, but it's actually a checkout cart experience. And now I've gotta go like add a donation to my cart, which feels weird, and then there's like a few next steps after that to go log in and blah, blah, blah, blah, blah.

And you like, when you do this, you realize how much pain there potentially can be in something as simple as a donation. And so just making that kind of a, taking that step to go give yourself a donation might actually be pretty eye-opening.

And what it does is it's just gonna challenge you to think about how can I make this even just one step better or one step more efficient or effective? Then go put that to the test.

And this is where I think the rubber meets the road is with testing and optimization. If you can go actually implement some level of change, even at that small level of let's tweak the language on this button to make it clear where someone goes to give, or let's tweak the headline and the copy on this page to try to help someone understand why they should give and be more effective at converting people on this page.

You start to get some data that can start to change people's minds internally and get more people to buy in and say, "oh, if you can do that to lead to a 15% increase in giving, well, can we do something over here with these donors, with recurring donors, with major donors, with mid-level donors that might actually lead to even more significant outcome?"

Because we thought that this worked, but clearly it didn't. So maybe we need to challenge the status quo in a few other places as well.

Josh:

I love that. And it makes me think about how oftentimes we think that our website and our customers or supporters, we tend to think as we live in a vacuum, however, you know, as nonprofit leaders, your donors, your supporters are also donating and supporting other organizations and they're going through their technology, they're going through their journey, their own journeys over there on their website.

And it doesn't take long before you realize, whoa, our path is completely different than similar orgs that we serve with and we're not serving our people the best we can by having one less click, by having one less page by having, you know, forms that aren't preloaded. And so doing that just makes so much sense.

Nathan:

Totally. And I think it's easy as well to get fixated on tools and software are gonna solve all my problems, but even within, you know, you might take two organizations that use the same tech stack.

Implementations might be radically different. And so we can't just rely specific, like tools empower a strategy and you need to have the right technology in place to empower the strategy, but the tool itself can't take over and figure out for you exactly how you should craft the pathway to make it most effective for a donor or anyone else interacting with you.

And so we have to apply this mindset of how do we continually test to find the next best thing and the next way to this better, knowing that you've got the right technology behind the scenes to empower the strategy, but we can't just rely on, "well, I've got I think the best tool, but that's not working, so I'm throwing my hands up."

We've gotta take more ownership of it and figure out what's an incremental change to make improvement.

Closing thoughts

Josh:

Yes, yes. So this will be easy for you, Nathan. You speak quite often and you know your work so deeply, but let's just imagine for a moment that we're on stage in front of 500 nonprofit leaders and they are hungry to begin innovation. They're eager.

What's your word to them? What's your encouragement to them?

Nathan:

Well, it's not gonna be a surprise. It's always be testing.

It's a core value that we hold dear. And you know, one thing I've been saying for the past couple of weeks, just chatting with people kind of internally, the past couple years, I do a lot of speaking and things like that and you know, just in my back pocket I could pull out probably five or six different talks on really tactical stuff where we've used testing and optimization to figure out new strategies for donor acquisition and better advertising and better emails and all that stuff.

And I'm just kind of at this point in this year so far, it's like I'm kind of tired of talking about the tactical stuff, because what I don't want someone to hear is just like, "oh, that's the next best practice that I need to go plug into my fundraising program or into my marketing program."

Because in the context of innovation, how do we figure out how to do the next best thing that's going to lead to better results?

It has nothing to do with a specific tactic and it has everything to do with the mindset.

And the mindset that is gonna be focused on innovation is this insatiable curiosity about what works to actually get more people to take that next step, and it all comes back to we've gotta be courageous enough to challenge the status quo and we've gotta be willing to test anything and everything, because some of the things that we hold to be most sacred that you never touched might actually be the thing that needs to be improved the most and could lead to actually transformational results.

Josh:

Man, that is great. That's great. Nathan, thanks for joining us. I hope we can talk soon again, maybe towards the end of the year.

I hope everyone will check out NextAfter and your great work there. Any other resources you would recommend?

Nathan:

Yeah, I mean there's several. I mean, if you guys go to Nextafter.com, we try to open source and publish for free basically everything that we're learning about what works to grow giving.

So you can go to Nextafter.com and find a whole library of resources.

One thing I'd encourage you to check out too is again, the NIO Summit, NIO Summit, Niosummit.com. It's coming up in September of this year in Dallas, but it's basically two days of learning where we're trying to bring people from outside of our sector to bring in some of these more innovative ideas that are working in the for-profit sector that we think might actually have a meaningful impact for us as nonprofit fundraisers, marketers, et cetera, to fuel some of this innovation that we're talking about.

So you can check that out at Niosummit.com and actually see me in person. I'd love to meet you in person too!

Josh:

Awesome. Awesome. Nathan, thanks for joining us.

Nathan:

For sure. Thanks so much, Josh.

Josh:

Hey, thanks for checking out this episode!

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