Nonprofits & NGOs

Defining Your Competitive Advantage

All social change organizations have one, but yours may not be what you think it is.

It’s unfortunate that social change organizations tend not to think about competitive advantage as it relates to social impact and growth; far too many nonprofit organizations view competition as something reserved for the for-profit world. Many think their competitive advantage is simply a rephrasing of their mission statement (i.e. our advantage is that we serve those in need). But the fact is that all organizations are competing for something—whether it’s market share, or more attention from clients or donors.

The Nature Conservancy (TNC), for example, competes for land; when a new parcel of land is up for sale, TNC tries to outbid competitors (private developers or other conservation groups) on land for conservation. Teach for America (TFA) competes for new teachers—its recruiting sector aims to entice graduating college seniors away from lucrative job offers on Wall Street toward public service. Even “last resort” organizations compete for clients. The competitor for a homeless shelter, for example, is a park bench, or a night on the street—viable alternatives for those who don’t want to (or who aren’t physically able to) wait in line. Homeless shelters must “outperform” the competitor by offering a better alternative for homeless people, offering superior amenities, convenience, and location. At first glance, these examples are contrary to what we might think. After all, clients will take advantage of social services regardless of whether the organization knows what its competitive advantage is, right?

New programs are started all the time without a good understanding of competitive advantage, and as a result, many fail to meet their desired outcomes. Baby University (Baby U), based in Cambridge, MA, is a great example of a new organization that took steps to find its competitive advantage and is now successfully meeting its goals. Baby U offers free parenting skills workshops modeled on the success of Geoffrey Canada’s Baby College (part of the Harlem Children’s Zone). Through weekly workshops, playgroups, and home visits, Baby U helps parents strengthen their parenting skills. Its competitors include church groups, social workers, and other social services. The organization didn’t have a cost advantage—other parent skills services in the area were free too. But Baby U had three things its competitors did not: 1) a proven model to increase parenting skills, based on the success of Harlem Children’s Zone; 2) weekly incentives for the parents in the form of gift cards to grocery stores and a raffle cash prize; and 3) a sense of community that stays with Baby U families after they graduate from the program. The Baby U alumni families still receive quarterly home visits and are welcome to attend a variety of Baby U events. Baby U staff is comprised of Cambridge residents; thus, it is a program in which neighbors are learning from neighbors and collaborating in ways that are not often found in urban social services. Once the Baby U staff shared these three advantages with potential clients, its classes filled up.

Once you start thinking in terms of competitive advantage, the next step is to identify what, exactly, your advantage is. As a social change organization, it’s easy to think your advantage is as simple as what you do, but the definition of competitive advantage is the attribute (or combination of attributes) that allows you to outperform your competitors. Your competitive advantage is what will allow you to achieve your mission. You can either compete by differentiating your organization from your competitors (differentiation advantage) or by delivering lower-cost products (cost advantage). Most nonprofits, our own financial services organization Capital Good Fund (CGF) included, deliver different benefits than the marketplace provides, creating a differentiation advantage. Some of these benefits also happen to be lower cost (for example, our loans are less expensive than loans from payday lenders), but that may not be your main competitive advantage. So how do you determine what your competitive advantage is? We recommend setting up a strategy session with your staff, board, and major constituents. The Foundation Center provides a handy toolkit to help determine your unique competitive advantage, whether it’s cost leadership, differentiation, innovation, operational effectiveness, or customer-orientation.

We did this exact exercise ourselves and came up with three qualities that compose our organization’s competitive advantage. For business, our competitors include credit card companies, payday lenders, and rent-to-own stores. For funding, we compete against other nonprofits. We also compete in a kind of marketplace for ideas—lots of people have thoughts on how to tackle poverty, and we want our approach to be heard and for it to influence policy and funding decisions.

Unlike other financial service nonprofits in our area, we partner with anchor institutions such as local universities, the state treasurer’s office, a local school district, Americorps VISTA (Volunteers in Service to America), and local employers to improve our productivity, quality of employees, and client satisfaction. We also strive to incorporate beautiful, human-centered design into all of our operations, products, and services. The concept of using financial services as a poverty-fighting tool isn't necessarily obvious or easy to grasp, but through well-designed videos and promotional materials, we can help people buy into our work. (Good design often comes from good inspiration, and for a source of user-friendly yet beautiful design, we’ve looked to Charity Water’s website.)  Finally, we do data mining—the process of looking for patterns and meaning in large data sets—which gives us an innovation advantage. With data mining, we can not only increase our loan repayment rates, but also triage our efforts so that our clients will only receive the services they need to truly benefit. These relationships and tactics allow us to become more deeply embedded in our communities, raise more funds for our operations, and better serve our clients.

Thinking competitively has transformed our organization. We are smarter about what products and services we do and do not offer; we are clearer about how we tell the story of our work; and our clients are more satisfied with what they get from us. We bet this approach can transform your organization too.

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  • BY Chris LeBeau

    ON January 25, 2013 06:37 AM

    I was having this discussion just yesterday with a Silicon Valley social enterprise.  We are beginning to work through a list of their “competitors” but they are quite resistant to using this term. 

    In the end, I laid out the case similar to your method.  If funding dollars are allocated elsewhere or a potential client chooses another service instead of yours, they are competing with you. 

    Thanks for the article.

  • BY Andrea Morisette Grazzini

    ON January 25, 2013 09:15 AM

    Great piece, and apropos a ‘do-good’ civic change start-up I’m just launching called WetheP.

    We just completed writing our Private Placement Memorandum, Exec Summary and Business Plan, intentionally choosing to mimic a ‘for-benefit’ corporate model to insure our focus as competitors in the marketplace. Needless to say, we intend to make money for shareholders, but while also maintaining critical focus on achieving the outcomes our stakeholders need.

    Neither focus can overwhelm our direction, but if push comes to shove, stakeholders are where our vision is most invested. But, as we analyzed competitors, we not only learned what we’re up against, more surprisingly we learned what we’re not up against. As you note, few companies in our space seem to position themselves as competing for much of anything. Certainly they do, but, without a clear understanding of what and where their niche most effectively is and how they maximize it. In the end, this lack of awareness means people aren’t being served as Stakeholders in solutions like our company can provide.

    Perhaps because I come for both civic engagement and business backgrounds, I’m sensitive to understanding this all. Civic engagement is inherently fluid, with different players moving in and out the space, and with concentrations of energy driven by cultural events. Only a few key organizations sustain the niche—most from academic or policy realms. The good news and bad news is they don’t always perceive each other as competitors. Collaboration and inter-organization cooperation can significantly bolster respective efforts for mutual gains in outcomes. But this can also leave important sectors underserved, due to simple lack of insight from a more big-picture view. Thus, opportunities to serve specific niches are lost. While the inverse happens, too: high visibility sectors can become saturated and/or largely served by Alpha organizations/interest groups, leaving smaller or more specialized organization’s perhaps innovative, more expedient or more holistic efforts marginalized—if not completely lost in the shuffle. Which is a waste of solutions and a loss for those in need of them.

    In any case, I much agree with you. Competitive awareness, strategies and benchmarks should be a key part of any social enterprise effort. If nothing else to insure that all in need solutions get proportional attention. And, of course, to insure that we reach our highest potentials and mission.

    Andrea Morisette Grazzini
    CEO, WetheP
    Founder, DynamicShift

  • BY Lynda Gerty

    ON January 27, 2013 11:26 AM

    What a great article!  We really appreciate this perspective - and your use of the term “competitive advantage” in relation to social change organizations.

    At Vantage Point, we believe the competitive advantage of all not-for-profits is our ability to hire talented people and pay them with meaning (rather than with money.)  It’s a unique opportunity – and one most people working in the sector take for granted.  On the whole, we have not yet realized almost an infinite number of highly talented people are available to work with us, if we can only realize how to engage them well.  Imagine what that could make possible!

    Let’s face it, the majority of social change organizations will never have all the money they desire. And to operate within this space of assumed scarcity, rather than abundance, means they are continually planning with limitations. In our experience, when not-for-profits stop planning based only on money – and how much they do not have – the situation changes dramatically. They can begin to create the Abundant Not-for-Profit. 

    The Abundant Not-for-Profit: the title of our upcoming book. It’s not an oxymoron. Really.

  • BY Howard Brodwin

    ON January 28, 2013 11:45 AM

    Nonprofits who can define their competitive advantage then have a great communications platform to build from—whether delivered through social media, donor communications, PSA’s, etc., they should craft a clearly defined message of what they provide that sets them apart from others in the space.

    Great to see more marketing and business thinking being applied to the nonprofit space. Thank you Mollie, Andy and SSIR!

  • Competitive analysis is must for every single business owner and for a big concern. Because it helps to maintain good profit record, costumer sanctification and lot more. Especially it helps to do good decision making.

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