Nonprofit organizations have to stretch a dollar harder than for-profit ones do. In this article, readers will learn how to be most efficient in selecting to whom they provide nonprofit benefits by looking at an example of a food distribution charity.
From space many places on Earth look pretty flat. From the ground more obstacles become apparent: Granite mountains loom in places where chasms divide neighboring areas. Both perspectives tell you something you need to know. The space view shows you the most direct route as the proverbial crow flies, while the close-up view shows you obstacles that are well worth avoiding where that's possible. In this article, the broadest perspective, like that from space, is emphasized. That perspective encompasses expanding your business model (the who, what, when, why, where, how, and how much of your offerings) in volume-improving ways for your nonprofit organization.
In considering how to expand your business model's delivery of offerings and benefits, you should be guided by what will be easily understandable and desirable by your stakeholders (those who are affected by what you offer) . . . and where the adjustments will provide more effectiveness for nonprofit organizations. Business model innovation is something that many organizations find to be difficult. In this article, I've broken out the elements and added an example to make innovative business model thinking and analysis easier to do. This article's material will, however, be clearest to those who have already read about continuing business model innovation.
Expand What You Do Now
Unless you are providing a very small percentage of the needs of each customer or beneficiary, growing by 21-fold requires adding beneficiaries. Because so many organizations can expand to provide 21 times the number of beneficiaries, that's a great place to begin. You should start by considering who you will serve as these added beneficiaries and where those benefits will be delivered to make the expansion more practical.
Who Is Served and Where
Let's begin considering volume-expanding business models by looking at "who" is served. The lesson is to keep it simple. Change as little as possible while becoming more efficient and effective as an organization for your customers and beneficiaries. The simplest way to do this is to put more volume of the same kind through an existing organizational structure without adding fixed costs or increasing the ratio of variable costs to benefits delivered.
In a nonprofit organization there's a savings incentive to provide more of the same offerings to the same recipients. Let's consider an organization that ships donated food by truck to distribution centers serving needy families. Most such distribution centers provide a small portion of a family's total weekly needs -- perhaps as little as one meal a week. The families may be visiting 10 to 30 different distribution centers weekly to fulfill all their needs. The trucks carrying the goods to a given distribution center are often owned and operated by that center, may be in use for only a few hours a week, and could be operated much more often.
Let's assume that more volunteers can be found to load the food, and drive and unload the trucks. Both the nonprofit organization and the needy families will benefit economically if 21 meals weekly are delivered and distributed at one time to a distribution center.
See Example 1 for a quantification of this point.
Example 1: Adding Trip Volume for an Underutilized Truck to Increase Food Available to Needy Families for Each Pick Up
When a truck isn't driven very much, its capital costs (depreciation of its value from the purchase price) exceed the operating costs. Put that truck into use more often and you are able to divide the capital costs over more miles. As a result, your cost per trip of the same distance will become much smaller.
Truck Beginning Point -- 1 Truck Trip per Week: Annual truck capital costs $52,000 for 5,200 miles per year
Capital cost per trip $1,000
20 Times Truck Volume Increase -- 21 Truck Trips per Week: Annual truck capital costs $109,200 for 109,200 miles per year
Capital cost per trip $100
Note: Annual capital cost is higher because service life is reduced by driving more miles a year.
Recipients' vehicle operating costs, by comparison, vary directly with use. Driving 21 times as much results in spending 21 times as much. If they can reduce their driving, however, their operating costs per week go down.
Automobile Operating Costs Beginning Point for Recipients -- 21 Pickups per Week
Weekly gas, oil, and maintenance $21.00
Cost per pickup $1.00
Automobile Operating Cost -- 1 Trip per Week
Weekly gas, oil, and maintenance $1.00
Cost per pickup $1.00
Copyright 2007 Donald W. Mitchell, All Rights Reserved
Navigating the Waters of Business Success: The Strategic Launch of Business Objects
In the competitive world of business, the trajectory of success is often determined by the initial strategic decisions made by a company. The story of Business Objects, a pioneer in business intelligence software, exemplifies the importance of a well-planned entry into the industry. By choosing the right location, assembling a diverse team, and innovating their business model, Business Objects set a precedent for rapid and sustainable growth.
Genetifcally Engineer Wonderful Business Models That Deliver More Stakeholder Benefits
Using genetic engineering, scientists can take qualities of a weed for hardiness and transfer those strengths into a food crop. In the same way, you can genetically engineer your business model by adding on all of the attractive qualities of complementary business models. If you combine enough business models, you'll have an amazing advantage that will deliver myriads of benefits to large numbers of people.
Don't Just Play Around -- Your Industry Is Full of Excellent Opportunities Everyone Has Overlooked
Companies want to grow faster and always imagine that areas they haven't explored are full of better opportunities than where they are. The truth is usually the opposite. This article explores the missing opportunities at toymaker Hasbro.
