Episode 59: Innovation and the Nonprofit Sector

March 31, 2020

by: Sheela Nimishakavi

Nonprofits have a huge potential for impact right now. There is so much technology and could allow us to grow our programs and serve more people. I think we’re also at the stage of growth of our field where we’re finally looking at key metrics and asking ourselves, what do these results show?

While the private, for-profit sector seems poised for innovation, and indeed there is plenty of innovation in the private sector that nonprofits have utilized, at the end of the day they are designed to focus on profit over all else. Even the so-called social entrepreneurship model includes profit as a core piece of its model.

While the government sector could impact the greatest number of people, this sector not only lacks adequate resources to implement innovative, large-scale endeavors, but also struggles to unite people across the political spectrum, and innovation takes a backseat to political moves. 

When we look at the failings of these two sectors, it’s clear that the nonprofit sector is perfectly positioned for innovation. Ideally, all three sectors would collaborate, but in my opinion nonprofits need to lead the charge.

Obstacles to innovation

So if we’re so perfectly positioned for innovation, why isn’t there more in our field? Well, there are definitely a few factors that hamper innovation in the nonprofit field.

First and foremost is the current funding model. So with grants and other funders that utilize the same model, nonprofits are expected to have the answers before you ever test your ideas. Moreover, the current funding model supports a very long feedback loop. When you apply for grants, you’re typically applying for programs that are at least one-year in length. That means by the time you have any data to evaluate and assess the success of your program, you’re already a year in.

To support innovation, funders would need to value short feedback loops. Trying multiple different avenues of program delivery to determine which one is the most effective and using data as you go along to direct your activity. As we know, control lies with whoever has the money to fund the program, so until and unless funders actively support innovation, the nonprofit sector will stagnate. In my opinion, this is the biggest barrier to innovation in our field.

Four Elements of Innovative Problem Solving

The Stanford Social Innovation Review published a really interesting article called The New Practice of Public Problem Solving. In this article the authors laid out four components that help organizations eliminate problems through innovation, not just mitigate them.

I think the authors of this article really hit the nail on the head with these four elements and they more or less correspond with what others in the field indicate are necessary for innovation. More importantly, this isn’t innovation just for innovation’s sake- we’re not trying to win one of those Shark Tank style grant competitions. This is innovation with the goal of truly solving the big problems that we face in society- things like poverty, injustice, homelessness, hunger.


We need information about and from those we are trying to serve in order to help. By focusing on people, we begin to distance ourselves from the belief that people are the problem. When someone lacks housing or access to healthy food options, it is not because that person has some quality that causes their problem. Thus the problem will not be solved by supposedly fixing the person, even if that fix is giving them what they lack.

When we look at a problem in isolation, the solution seems straightforward. For instance, if someone lacks housing, then the solution must be that they need a home. Looking at it through our little vacuum, this makes perfect sense. If someone lacks a home, give them a home and their problem will be solved. If someone is hungry, give them food and their problem will be solved.

However, when you actually include those you are serving in the process of coming up with solutions, it widens the lens of the problem. Homelessness goes from a straightforward problem of lack of housing to a very complex issue with systemic causes. In fact, in some cases providing the straightforward solution is not the most effective intervention.


In kind of a contradictory way, while we need to think really big to solve complex issues, we need to start small and collect frequent feedback.

I mentioned that one of the issues preventing nonprofits from innovating is the fact that we need to run year-long programs in order to apply for funding. We need to lay out every detail of program design from start to finish just to apply for a grant. Furthermore, we need to explain what the results will be before we ever run the program. But how do you know what works and what doesn’t until you’ve gone out and done it?

In an ideal world, nonprofits would be able to run experimental programs in an iterative fashion and share their results with the community. With an iterative process, as soon as the nonprofit recognizes that their intervention is not having the intended result, they can change their methodology and try again. Essentially, this decreases the time for the feedback loop. Rather than waiting until the end of the program year, the program results are constantly evaluated.

Moreover, similar to a scientific paper that publishes a discussion of the methods they attempted and the results, nonprofits could share their results with other organizations as well. This allows for coordinated experimentation across nonprofits which is particularly important when we consider limited resources such as funding and time.

Leverage Data

The way that nonprofits currently use data is as hindsight information.

Jennifer Pahlka, the director of Code for America, aptly describes this situation. She says, “It’s like asking a pilot to fly a transcontinental flight with only after-the-fact, unreliable estimates of her airspeed, heading, and altitude, instead of the panel of instruments with constantly updated data and tested checklists to reduce accidents and errors that modern pilots rely on.”

While nonprofits are getting much better at collecting data, we are still not clear on how to actually use the data to drive decision making and problem solving. But what if we changed our view of data from something that provides hindsight analysis to using data to predict outcomes? I think that would change the type of information we seek and would facilitate innovation.

Design programs that scale up

Nonprofits do a great job of figuring out how to serve their community. For instance, if your service area is your county, you can pretty much figure out what works for your county. But how do you take that information and apply it to the state or to the country, or even globally? That’s much more complicated but that is where the weaknesses of your programs are tested.

I think this is where the opportunity for collaboration comes in. Nonprofits operating at a local level can come up with creative ideas, test them out in a pilot project, collect and analyze the data. These organizations can figure out what worked at the small scale, and then by collaborating with the private and government sectors, these successful pilots can then be applied at a much larger scale.

In Conclusion

Nonprofits have the potential to be creative and implement new ideas to solve problems. If you take all four elements together, nonprofits become these testing grounds for innovation, and once the solution has been determined, these organizations can take the information to the government and to private companies so that there is a wider benefit.

Of these four elements, I think the place that every nonprofit can start is with creating a people-centered philosophy. Get your participants involved with your organization and make sure that their feedback is truly given the weight that it deserves.

Do you agree with these four elements? How do you see your nonprofit implementing them into your work? I’d love to hear your thoughts! Join the conversation by signing up for our free, private Facebook group. Click here to join today!