A significant limiting factor nonprofit organizations face when innovating is they are artificially insulated from market forces. I realize that may seem counterintuitive because we have generally only considered the positive aspects associated with our tax exempt status. But insulation from market forces increases our tolerance for underperformance and makes it possible to prolong survival by generating activity without results, especially if you are skilled at communicating the activity in a compelling way. Too often we find the justification to continue an initiative or even an entire organization based on the worthiness of the cause rather than the validity of the results.
The problem is that not all activity produces desired outcomes. Inevitably some of our initiatives will be underwhelming at best, flops at worst. And if you approach innovation with an “all in” mentality you will have invested a lot of human and financial resources in the rollout process, which makes it nearly impossible to admit failure. So we celebrate regardless of the outcome by spinning a creative story about the exciting activities we generated as if they were actually results. Eric Ries describes this as success theatre, where an organization “grows through continuous fund-raising…but does not develop a value-creating product” or service.
In this month’s vlog, Why “All In” can be All Wrong, Steve Moore shares ideas about the lean approach to innovation and entrepreneurship through a process of validated learning using a build-measure-learn feedback loop. Every new idea hinges on several leap-of-faith assumptions that must be identified and tested. The leap-of-faith assumptions are the value hypothesis and the growth hypothesis. The value hypothesis asks the question: is this valuable, do people want it? The growth hypothesis asks the question: is this scalable, can we grow it? To quote Eric Ries, “If we’re building something that nobody wants, it doesn’t much matter if we’re doing it on time and on budget.”