So, what exactly fuels the challenges to innovation in the nonprofit space?

1. Risk Aversion

The first is risk aversion. Nonprofit organizations are incredibly risk averse, and probably for good reason. With risk comes the potential for failure, and the mindset in many nonprofit organizations is that we simply cannot fail. We’re not like technology companies in Silicon Valley that have a seemingly unlimited supply of capital. Those companies have enough resources and margin to remain resilient against any failure. In fact, in Silicon Valley, failure is often celebrated as a virtue.

“Fail forward.”

“Fail upwards.”

“Move fast and break things.”

How many people in your organizations share those sentiments? Instead, our organizations seek to do the one thing that’s going to work every time. But it can’t. And it doesn’t. So, risk aversion is the first challenge to innovation that we must overcome.

2. Stewardship Distortion

Risk aversion is further exacerbated by another challenge to innovation, stewardship distortion. Many organizations (rightly) feel a significant burden of stewarding the gifts and donations offered up from their donors. But many have used stewardship to entrench the status quo by claiming that we can't risk squandering our donors' gifts by attempting an innovation that could possibly fail.

Innovation needs a Trojan Horse, and I believe that horse is optimization…

What this mindset tends to discount is the fact that anyone who has any experience in business (which most donors, especially significant donors have), knows that risk is essential to any successful endeavor. In fact, many of your major donors have the capacity to give significant contributions to your organization because at one point or another they had taken significant risk. For many, the risk is the sweetener of success. And for big donors, they actually expect it.

This can be likened to the parable of the talents. The owner entrusted to each of his servants a share of his property that was equivalent to their abilities with the expectation of a return. When he returned and took account of his investments, he rewarded the servants that were “faithful” by producing an increased return on his investment with even more to manage. But the one that buried his talent in the ground, he punished by taking away what he had and gave it to the one that had many.

This parable is so very instructive to us that work in fundraising and development. We are being trusted with resources and donations to produce a “Return on Mission” to our donors. When we play it safe, we are not being “faithful servants” and thus risk losing the support of those whom have entrusted their resources to us in the first place.

3. The Struggle to Attract and Retain Talent

In addition to risk aversion and stewardship distortion, nonprofit organizations struggle to attract and retain talent. There’s a variety of reasons for this. Dan Pallotta makes some good points in his book, Uncharitable (Tufts, 2010). One idea he presents is that there’s a wage ceiling in the nonprofit space. If people earn over a certain salary, then it means they aren’t committed to the ministry. This type of mindset forces talented people to decide between doing meaningful work or making money. But these don’t have to be mutually exclusive! Pallotta argues that because we limit ourselves like this in the nonprofit space, we’re limiting our capacity to fulfill our ministry’s calling. We need to value the work that we do and ensure that we pay our employees according to their value, for as Paul writes in 1 Tim. 5:18, “The worker deserves his wages.”

There are many more challenges we could discuss, but I’d like to focus now on the opportunity to overcome some of these challenges.

You may remember the story of Odysseus. He was the general of the Greek army and was in a long war with the Trojans. He had a strategic plan to defeat his enemy and that plan was based on the data available to him. He knew that a horse was the emblem of his enemy’s nation. It symbolized strength and vitality, and the Trojans worshiped at the feet of the goddess Athena (whose symbol was the horse).

So, Odysseus came up with a genius plan. He built a giant statue in the likeness of a horse and left it outside the gates of Troy. He knew the Trojans couldn’t resist the temptation to pull the giant horse inside their city walls and claim it as a trophy of their victory over the fleeing Greeks. As the rest of the Greek army pretended to sail away, an elite team of Special Forces lay in wait inside the belly of the Trojan horse. When the Trojans pulled it inside the city, under the cover of nightfall the Greeks snuck out of the horse and opened the city gates for the rest of the army who entered, destroyed the city, and ended the war.

Optimization

Innovation needs a Trojan Horse, and I believe that horse is optimization – the process of incremental performance improvement through rapid testing and experimentation. In a culture that is risk averse, distorts stewardship by holding on too tightly to resources, and struggles to attract and keep talent – optimization can be our lifeline. Here’s why:

1. Optimization mitigates risk through controlled experiments. It reduces the potential downside of failure. It’s about taking small risks by making incremental changes, and then measuring the difference in performance of those changes. Testing produces results and teaches us what works and what changes we need to make to achieve our desired outcomes.
2. Optimization produces key learnings. It evolves our understanding of our value proposition and it can produce insights that lead to potential new paradigms. When we compile these insights, often it can lead to tremendous innovations in our space.
3. Optimization builds credibility. It demonstrates the power of perpetual performance improvement by managing risk while simultaneously increasing productivity. This gives us more credibility and wins us more capacity and resources to continue our work.
4. Optimization attracts co-conspirators. There are people within your organization that share your disdain for the status quo and desperately want to move the organization forward. When you continue to demonstrate success, you’ll attract people who share your vision for progress and innovation.
5. Optimization smokes out detractors. Optimization identifies people that are a threat to innovation. These are people who cling to the status quo within your organization and are holding you back. Testing, experimentation, and optimization can be a disruptive force and cause uneasiness in the organization which will call out the naysayers. Once they realize that the status quo is dead they’ll either leave of their own accord, or you can share them with the industry.

Optimization is not a silver bullet, but it may be one way to sneak innovation in through the back door of your organization. Sometimes it starts small—with just one single experiment. And oftentimes experiments fail. But regardless of the outcome, every experiment leads to learnings. And it’s the learnings that are most important to innovation. As you begin to compile learning on top of learning, you begin to see your world a bit differently. You see opportunities instead of challenges. You see new ways to solve age old problems. And once that happens, there’s no limit to your ability to innovate.

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Tim Kachuriak is the Chief Innovation & Optimization Officer for NextAfter, a fundraising research lab and consultancy. He is on the Board of Directors for Open Doors USA and the Human Coalition and is an Advisory Board member for the SMU Digital Accelerator and the Blackbaud Institute for Philanthropic Impact. You can learn more about NextAfter’s work and access the results of over 1,200 digital fundraising experiments at NextAfter.com