Whereas a for-profit’s competitive advantage typically leads to higher sales and increased revenue, that’s not necessarily the case with non-profits. A non-profit could provide the best services around and still struggle for survival. Therefore a great non-profit must develop a competitive advantage in two separate areas: the day to day operations required to perform its mission and in securing the financial resources required to keep the doors open and grow. Though the former is equally as important, this article is focused primarily on the latter.
As for-profit and non-profit organizations need an adequate cash stream to survive and grow, a sustainable competitive advantage is necessary to out compete other organizations to secure precious, and increasingly limited, financial resources. Importantly, that competitive advantage becomes the cornerstone of a successful strategic plan.
With for-profits, a company needs to convince a customer to buy its product (or service) and not someone else’s. The competitive advantage required to drive that choice can come from a number of factors: a better product, either in quality or breadth of offering; a less expensive product, resulting from operational expertise; a more convenient product available through better distribution; or a more enticing product, promoted by exemplary marketing.
Similarly, a non-profit must convince someone to contribute to its cause, often in preference to contributing to another organization’s cause. Simply doing good work isn’t enough. A successful non-profit must develop and maintain a competitive advantage vis-à-vis other non-profits to secure the resources necessary to carry out its mission.
Complicating matters, non-profits operate in a complex environment. Competition for dollars comes from both local and national organizations in a wide variety of categories (the arts, health and human services, education, religion, animal rights, land conservation, the environment, ducks, trout, etcetera, etcetera). Funding sources vary as well, and include government agencies, foundations, corporations, individual donors, and even other non-profits. And each of those has a unique set of criteria they use to determine to whom they give money.
Accordingly, good non-profits develop expertise with one of those sources, creating a competitive advantage that meets and exceeds their unique criteria. For example, tremendous grant writing capabilities or extensive connections within multiple layers of government can position one organization ahead of another. Superior operational efficiency can be very appealing to certain funding sources as they look for more bang for their philanthropic buck. Exclusive, rewarding, and enriching engagement opportunities can entice major donors, while a heart wrenching marketing campaign can greatly expand a membership base. Picking the appropriate target source and excelling at meeting their requirements is essential for survival and success.
These economic times have shown us, however, that the best non-profits have diversified their fundraising efforts by developing a secondary funding source as well. Though the organization may not have a significant competitive advantage with the second source, they are good enough to compete effectively.
Perhaps having a two-tier fundraising strategy is a competitive advantage unto itself.