Yes, Not for Profits Have Customers Too

By September 15, 2014April 12th, 2017Business Models

With decreasing government funding and increasing competition for philanthropic funds, Not For Profits are having to rethink their business model. This can be an uncomfortable journey, as “business models” have been traditionally associated with the private sector. In this blog, I explore one of the business model building blocks, namely the “Customer Segments” and how this should be examined from a Not for Profit perspective.

Stakeholder value exchange

When examining an Not for Profit service provider’s business model, one of the most important things we consider are the key ‘stakeholders’ or ‘co-creators’ to understand their value demand. This has been exacerbated by the shift to case based funding. The term co-creator, first articulated by CK Prahalad and Venkatram Ramaswamy, acts as a generic description for the different groups who receive value from the organisation but also help to create value. With Not for Profits income is not traditionally derived from customers and as such services are traditionally provided in a manner in which clients are seen purely as beneficiaries. In contrast, the co-creator concept involves seeing people who use Not for Profit programs or services in a ‘customer-like’ relationship with the organisation, not in the traditional sense of receiving a good or service for monetary transaction but rather for an exchange of information or knowledge.

Benefits to developing stakeholder relationships

Recognising that your end-users are a potential source of knowledge and innovation can enable you to deliver better products and services that are more aligned to client needs. Failure to orientate the organisation around achieving a two-way relationship with clients can result in an inability to cope with excess demand, keep services relevant and be sustainable.

Developing this approach not only benefits the organisation but also fills a need and ensures customers feel valued, which attracts donors, volunteers or other revenue and resource generating groups, enabling the survival of these services.

Stay tuned for future blogs on the other areas of the business model and what these mean in the social sector context. Also see our whitepaper on sustainable funding models:

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