Creating new markets is always better than entering established ones…
One of the areas I most often get involved in with non-profit clients, is looking at ways to rapidly grow their on-mission traded income. It’s an area that has two huge potential benefits – increasing reach and impact, and bringing in unrestricted income for the rest of the charity to use. It sounds like a no-brainer, and often it is, but the conversations are rarely straightforward.
The best opportunities tend to fall into one of two categories – either finding new ways to grow the core service business, which usually involves developing new skills in things like sales, or a presence in new geographies; or it’s finding new markets to enter where we think there’s a gap in provision.
But then we have the conversation about competition.
One of the interesting aspects of what I’ll call “the charity mindset”, is that we do things on a shoestring and if we can cover our costs, we’re good to go. That leads to the pervasive expectation that, if we are going to compete with someone else, it will probably be on price, and it might be worth winning some business at marginal prices, or even at a slight loss, if it fits with the mission and gets us a foothold in a market.
These are dangerous assumptions and I’ve lost count of the number of times I’ve had to correct them, so let me be clear: you will never make your money back if you start out by winning business at a loss; and you won’t make any material difference to your mission or beneficiaries, if all you’re doing is winning the opportunity to do exactly the same as the other fella was doing.
The second of those points is critical. The reason charities, and businesses for that matter, end up competing on price is because none of them is offering anything that the others can’t. None are adding real, distinct value to the market; providing anything new or unique that people can’t get elsewhere. It is not the business of charities to make up the numbers in a competitive marketplace – if other people can do things just as well as you, let them, because there are a range of things only charities can do, and competing on price isn’t one of them.
Almost a century ago, when innovative charity start-ups like Scope and the National Autistic Society first set out to change the world for their beneficiaries, they didn’t do it by competing. They did it by setting up services and institutions that hadn’t previously existed, to meet needs that nobody had met before. Both proved that those needs could be met, those social gaps addressed, and good money could be made from doing it. They didn’t enter their respective markets; they created them. And now those markets are worth millions, if not billions of pounds, and serve thousands, if not millions of people in need.
They didn’t enter existing markets just to compete on price, they started by creating new markets that would ripple out far wider than they could ever reach themselves.
I recently had a final update with the outgoing CEO of a client organisation, asking her how things were going, and if the early positive signs we’d seen at the end of our project together had gone on to bear healthy fruit. It turns out they’ve just had a record year for commercial income and she will be leaving the organisation in better shape than it’s ever been.
“Probably the only challenge that I’m leaving for my successor to sort out,” She said, “Is that we’re becoming so successful in those commercial areas, that other people are noticing and setting up similar enterprises. It seems like there could be some stiff competition coming our way.”
“But actually,” she continued, “Now I think about it, that’s probably a good thing, because the more people who are doing it, the more impact it will have.” And what she said was absolutely true. In reality, the biggest challenge her successor should be thinking about, is which new markets to create next.