16 November 2017
Thea is Head of Front End Innovation here at the Good Lab. Here's an recent article Thea wrote for Charity Finance Group's Finance Focus magazine on the importance of innovation and risk-taking in the charity sector and how our work at the Good Lab helps mitigates against risk...
In a traditionally risk-averse sector, we can adopt agile working practices and a portfolio approach to innovation to mitigate against perceived failure. But the biggest risk is allowing too much caution to be the enemy of long-term sustainability and progress.
We could be forgiven for thinking safety lies in doing things the way they’ve always been done, especially where donors’ money is concerned – yet for charities, the ability to evolve is more important than ever. Fortunately, there are ways to increase efficacy and decrease risk as part of innovation or product, service and brand development.
Innovation and best practice
Collaboration is one of the most powerful ways to decrease risk. The diversification gained by convening more parties around a table to own a challenge means the risk and reward are shared, but it also means that there are more inputs. Data and knowledge is key, so the more of it, from different perspectives, the better – especially when it comes to innovation and doing anything new. At the Good Lab, our strength comes from the collaboration of our diverse charity partners. Insight – whether that comes from market intelligence; organisational understanding; or a deep understanding of the attitudes and behaviours of supporters and customers – is core to making good decisions. Done well, it informs the why, what, when and how of everything that happens within a successful organisation, ensuring a laser focus on doing the right things, for the most effective reasons. Foresight and inspiration from beyond the sector are the other bedfellows alongside insight. Prototyping, or making things real and getting that prototype into people's hands as quickly as possible, is a great way to de-risk the development of products, services and experiences. One secret of this is to not be too concerned about perfection – getting something ‘good enough’ out for an early real-market test is key. You will learn huge amounts by doing this, and can perfect the details of execution after you know that your audience engages with and buys into the core of what you’re offering. Good prototype testing allows for plenty of quality feedback that instantly informs improvements and developments – getting you further, faster, on the back of real data. To prototype is to prove.
"Although taking risks that deal with the uncertainties on the horizon may feel uncomfortable, the far bigger risk is doing nothing at all."
Alongside these core principles there are many further tactics which can be used to de-risk innovation and development projects, including delivering frequently; having stringent value measurements; and staged investments. These need dedicated structures; governance, and processes that are specially designed for purpose. Likewise, teams need the skills, space, time and resources to operate differently if being asked to think differently or do something outside the organisational norm.
Investing in today and investing in tomorrow
Different time horizons require different attitudes to risk. When considering the future in the longer term, we need to look beyond the mitigations we’ve already mentioned above – although they still ring true.
Trustees should be engaged and educated to ensure they don’t view risk in an over simplistic way. The rewards to be gained from a short-term project for today are not equal to those from a project for the longterm future. When allocating budget and resource for long term innovation (as well as evaluating the success of it) we need to remember that this comparison is not equal. There needs to be the budget and skilled resource to gather insight, create solutions and test a variety of outcomes for a ‘tomorrow’ every bit as thoroughly as for a ‘today’. Investing in the short, medium and long term needs to be thought about as a portfolio.
Taking a portfolio approach to innovation and risk means that trustees have to feel more comfortable with failure in a certain context. Working to address the future is hard. It is uncertain. Not as many projects, activities or enquiries will result in a tangible launch or positive outcome. Put simply, more things will ‘fail’. But if we have been ambitious enough, those projects that endure – those that ‘win’ – should be responsible for a much greater upside. The stakes are high, but there has to be space within the innovation portfolio for this high risk, high reward approach, alongside short term and incremental growth endeavours.
Likewise, on the other side of the coin it is of paramount importance to paint a picture for trustees of what might happen if we don’t invest appropriately in the future; if we just drift rather than taking a proactive stance. Consumer-film giants like Fujifilm and Kodak were branded ‘lazy and irresponsible’ for not investing in the future and adapting quickly in the late 1990s and early 2000s when it came to the onslaught of digital media. Famously for Kodak, the risk of concerning themselves only with the today, and not tomorrow, was nigh on fatal.
We won’t stay safe by sitting tight. The sector must invest in its long-term future, both to grow and to defend against imminent disruption. And although taking risks that deal with the uncertainties on the horizon may feel uncomfortable, the far bigger risk is doing nothing at all.
This article originally featured in the September 2017 issue of the Charity Finance Group's Finance Focus magazine.
Finance Focus is the monthly magazine for Charity Finance Group members and subscribers, providing up to date information and guidance on issues and news of relevance to charity finance professionals.