Does Your Nonprofit Deserve to Exist?

By Nicolas Takamine, 2009 ProInspire Fellow

Editor’s Note: This is part two in a series of blog posts by Nicolas Takamine (2009 ProInspire Fellow), inspired by ProInspire’s request for engagement in its strategy process in ProInspire Strategy Update 1: Start With Your Result. [Read Part 1 here].

In Part 1 of this series, I characterized strategy as the process of convincing yourself that your organization deserves to exist. I explained that a nonprofit organization’s strategy is rooted in the unique way in which it brings superior value to the world and that a deserving organization must articulate why it creates more value than can be created by other organizations in its place.

This perspective deserves some elaboration. The crux of the issue lies in understanding what it means to bring superior value to the world. For the purposes of strategy, the value that matters is not your “value added,” but rather your “added value.” Allow me to explain.

Organizations take inputs, such as funding, labor, and know-how, and turn them into outputs that are more valuable to society than the raw  inputs individually. This increase in value is called “value added,” and I think it’s safe to say that virtually all organizations produce some degree of it (even if they are still working to measure that value).

For the purposes of setting strategy, however, the most incisive question to ask is not “Do our programs create value?” but rather “Is more value created for society overall because we, specifically, exist?” The idea is that many value-adding organizations can be removed from the picture without significant impact to overall value creation. Funding would be redirected and other organizations would fill the gap easily enough.

Some organizations, however, bring something irreplaceable to the world; even if funding were redirected, total value to society would shrink. The total value created with such an organization in the picture minus the total value without it is called “added value,” and society maximizes value by allocating resources to the organizations that create it. (Note that the collective wisdom of the internet generally conflates the terms “value added” and “added value”—don’t let this confuse you.)

Take the case of James Patterson, author of 76 New York Times bestsellers and one out of every 17 novels purchased in the U.S. since 2006. Patterson has high added value because total book consumption and reading enjoyment is greater than it would otherwise be without him. This is true even in spite of the fact that 80% of his novels since 2002 have been written by other authors under Patterson’s creative vision and editorial oversight. In stark contrast, each co-author generally has little added value because the number of books sold is unlikely to be affected by which unknown author does the writing. In Patterson’s own words, “[The writers] actually pay me. Because they’re learning so much.” Remove Patterson from the picture and overall readership will shrink, even if other authors keep the airport bookstore shelves full. Patterson brings something irreplaceable to the world; the co-authors of his books do not.

The implication of this perspective can be a tough pill to swallow for organizations that struggle to articulate their added value. These organizations may perform good value added work, but if they do not create value that is irreplaceable, society should reallocate resources and these organizations will have a hard time reasoning that they deserve to exist.

Thus, a strategy that makes ProInspire deserving of society’s capital has to articulate the organization’s  added value. It has to answer questions such as What can ProInspire do uniquely well? How do these distinctive capabilities create value for its beneficiaries? What does ProInspire add to the world that is irreplaceable? Could another organization plausibly achieve greater impact?

Continuing with the illustration I introduced in Part 1, ProInspire might reason that it is irreplaceable because it is able to gain uniquely deep insight into the needs of emerging social sector leaders, and that only it can turn this insight into as powerful a growth experience for these leaders as it does. ProInspire’s strategy process should  involve formulating such an argument and having leadership and the board convince themselves that it is true.

If you are developing your organization’s strategy, don’t let an inability to prove the answers to these questions prevent you from asking them. Even the simple act of articulating the logic behind an organization’s added value and rationalizing on paper and to other people why you believe each assumption to be true is a step that few organizations undertake. Only those who do so will have a good answer to the question “Does your organization deserve to exist?”

Resources and further reading:

• If you can forgive the rambling nature of “The Added-Value Theory of Business,” you’ll find further elaboration of the added value concept and a discussion of its origins in game theory.
• For those concerned that all this talk about being better than others sounds too competitive to be appropriate for the social sector, see “Strategy Is Not about the Competition” for more discussion of what it means to “grow the pie” for everyone.

Nicolas Takamine is recent MBA graduate from the Kellogg School of Management and is joining consulting firm Strategy&. He brings more than six years of experience in the private and social sectors to his mission to create social impact using management theory and best practice. Follow him @ntakamine.