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The Power of a Theory of Change

Last week I spoke at the Women’s Collective Giving Network (WCGN) national conference about the power of a theory of change. The WCGN is an affiliation of women’s philanthropic groups across the country. The members pool their money and give grants to nonprofit organizations. It is critically important that they, along with every nonprofit organization, understand and embrace the power of a theory of change.

With increasing competition for social change dollars it is absolutely crucial that nonprofit organizations develop their own theory of change. A theory of change is basically an argument for why a nonprofit organization exists. It describes how an organization uses community resources (money, volunteers, clients) to perform a set of activities which result in changes to the clients’ lives (outcomes) and changes to broader communities, institutions, or systems (impact).

Essentially a theory of change describes how a nonprofit creates social change.

So a very basic theory of change for a literacy program would look like this:


It used to be enough for a nonprofit to talk about what they produced (or outputs), such as meals served in a soup kitchen, hours spent reading to a child, beds provided in a homeless shelter, but that just doesn’t cut it anymore. In a world where there are fewer and fewer dollars and more and more nonprofits fighting for those dollars, philanthropists, government funders and others are increasingly asking the question “To What End?” So what if you created outputs, did anything really change because of your work? Did the lives of those in your program change and did our community change?

That’s where a theory of change comes in. If you can articulate what change you hope your organization is creating, then with that fundamental building block in place you can:

  • Chart a strategic direction
  • Prove your results
  • Secure more support for your organization

And ultimately achieve the holy grail of the nonprofit sector: sustainable community change.

A theory of change is the fundamental building block that makes all of this happen, like this:

A theory of change is so fundamental because you cannot chart a strategic direction if you don’t know what you are trying to change. And you can’t prove that you’ve changed something unless you have articulated what it is that you want to change. And you certainly can’t get funders, volunteers, and key decision makers to support you if you can’t tell them what you are trying to change and whether you are actually doing it. So the only way to truly create long-term social change is to start with a theory of change. Which is why I encourage every nonprofit organization to go through the exercise.

If you need help crafting your own theory of change, check out our Creating a Theory of Change step-by-step guide, or if you need customized help to chart a strategic direction, check out our Strategic Planning consulting services.

Photo Credit: Kristymp


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Do You Understand Your Nonprofit’s Place in the Market?

Until recently, market research, or understanding the marketplace in which a nonprofit operates, had no place in the nonprofit sector. Once the sole purview of entrepreneurs and corporate brands, market research is quickly (and rightly) becoming a skill set that nonprofits must embrace. Because in an increasingly competitive landscape, if you don’t understand the needs of your clients, who else is addressing those needs, what your funders are looking for, who else they are funding, where policy makers and decision makers are moving, you are sunk. But for many nonprofit leaders market research seems nebulous, inaccessible and expensive. It doesn’t have to be.

Here’s how you can start to wrap your head around market research.

The first step is, with board and staff, to map the marketplace in which your nonprofit operates. A nonprofit is best positioned where their core competencies (those organizational assets they have that cannot be easily taken or replicated) intersect with a community need, apart from where their competitors or collaborators are strongest. Which looks like this:


The idea is that if a nonprofit organization can figure out what part of the solution to a social problem they offer and how that relates to the piece their competitors or collaborators have to offer, then the nonprofit can (for a start):

  • Better articulate to funders what their nonprofit is uniquely positioned to accomplish
  • Forge partnerships with organizations who supplement weaknesses the organization has
  • Stop wasting resources on “doing it all” and focus on the 1-2 things they do exceptionally well
  • Reduce competition for funding
  • Chart a sustainable future direction

But it is not enough to simply ask board and staff where they think your nonprofit fits in this map. Once they’ve taken a stab at it, you need to get out into the marketplace and see if that assessment holds true. This is where market research comes in. You need to understand current and future trends in your competitors/collaborators and the community need you are trying to address. So you need to find the answers to questions like:

  • Is the need within your client population expanding or contracting? In what areas? Why? What does the future hold?
  • How else are your clients getting these needs addressed or not addressed?
  • What is the future strategy of your competitors and collaborators?
  • What are the core competencies of your competitors and collaborators?
  • Are there new competitors/collaborators entering the space?
  • How do key decision makers (policy makers, funders, etc) feel about your competitors/collaborators? What do they think your role in addressing the problem is?

So how do you go about finding these answers? You can call current funders, friends or other connections and ask them to give you a lay of the land. But you also need to pull some data. And there are lots of free resources out there. Here is a beginning list of things to try:

  • Check out these free market research tools
  • Ask your local reference librarian for help
  • Use the many free databases available at public and university libraries
  • Use SurveyMonkey (or other free/cheap survey tools) to ask clients, funders, volunteers what they think
  • Ask a market research class at a local college or university to practice their new skills for free on your organization

There really is no excuse for nonprofits not to explore the market in which they operate. The information is out there, you just need to go out and get it. And if you don’t, you will be moving forward in the dark.

Photo Credit:

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How Do You Convince Donors to Give?

Convincing a donor to give to your nonprofit is a tricky business, and it’s getting harder all the time. Now more than ever nonprofits are struggling for funding amid growing competition and decreasing available dollars. It has become harder and harder to stand out and recruit donors. These days, donors, especially major ones, are less likely to give because an organization “does good work” and more likely to give because an organization provides a solution to a social problem the donor cares about.

Which is why every nonprofit needs a compelling Case for Support. Our newest Social Velocity Step-by-Step Guide, helps you create your nonprofit’s Case for Support.

This new environment requires those nonprofits that want to continue to attract and grow philanthropic support create a compelling argument for why a donor should give to them. Driven by a thoughtful combination of data and emotion, a good Case for Support can help you communicate and connect with your target donors much more effectively.

Our Case for Support Guide is organized into the 8 sections of a Case for Support:

1. The Community Need
2. Our Solution
3. Why Us
4. Our Impact
5. Financial Model
6. Strategic Direction
7. Resources Required
8. Social Return on Investment

In each section of the guide there is a series of questions. Your answers to these questions become the basis of your final Case for Support. But your Case for Support cannot be written in just a day, by one or two people. You will need to get feedback and insight from staff and board. And you’ll need to gather data to make your Case for Support stronger. This work will take time, so it may be a few weeks or months before you have a final Case for Support that is compelling, convincing and agreed upon by the organization as a whole.

A good Case for Support is an increasingly critical part of any fundraising campaign. You must be clear about why someone should give to your organization. Because if you don’t know, how will they?

Download Now

Photo Credit: puzzledmonkey

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What Social Value Do Nonprofits Really Create?

This post originally appeared on the Social Entrepreneurship blog earlier this year.

There is a concept that good entrepreneurs know only too well, but nonprofits could stand to explore. A “value proposition” is the unique value a product or service provides a consumer. Without a value proposition a business has no place in the market. For a nonprofit, a social value proposition is just as critical to success, but often ignored. In an increasingly competitive marketplace, due in part to the growth of for-profit social entrepreneurs, nonprofits must analyze, articulate, and deliver on a social value proposition.

In the past, nonprofits could exist without a value proposition. Donors wouldn’t argue that a library, homeless shelter, food pantry or school provided a necessary service. But as we move further down the road of social innovation, the assumption that money will automatically follow good works is no longer valid.

The issue is complicated by the fact that nonprofits have two sets of consumers: those who benefit from the product or service (clients) and those who buy the service (funders, investors, philanthropists). There is increasing competition for both sets of consumers.

In order to attract the consumers who buy services (and who, by the way, increasingly want a social return on their purchase) nonprofits must articulate the value that the consumer (donor, investor, philanthropist, sponsor, whatever you want to call them) receives by writing a check.

In the nonprofit sector the closest thing to a value proposition has been a case for support. But when this is created (which isn’t often) it tends to focus on the organization and its needs rather than on the potential social return on investment for the funder. A good value proposition articulates how an organization is uniquely positioned to create significant social impact that is much greater than the costs associated. It involves an organization analyzing, understanding and delivering on three very important things:

  1. Capability: What is the organization uniquely positioned to provide to the community (the marketplace). Why is this organization better positioned than other organizations (nonprofits, for-profits, government) to deliver it?

  2. Social Impact: What change is the organization creating in the community, region, world? Why is this significant? Why should/will consumers (funders) care?

  3. Cost: How do the costs of the service being delivered compare to that social impact? Is there a social profit being achieved, i.e. are the costs involved in delivering the service significantly less than the benefits? Will a funder (who is paying these costs) receive a significant social return on their investment in the organization?

A value proposition is less about a well-articulated statement and more about an organization’s ability to think through these questions and really understand the marketplace in which they operate. More and more the nonprofit that can effectively execute on a social value proposition will find the financial stability that ultimately leads them to create lasting social change.

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Friday, February 25th, 2011 Nonprofits, outcomes, Planning, Strategy 1 Comment


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