Playing To Win

Playing to Win for Social Sector Organizations

Social Sector Organizations need to Play to Win too, but Differently

Many people ask me whether, and if so how, Playing to Win applies to government departments/agencies, social welfare organizations, arts/culture organizations, charitable foundations, educational institutions, and/or other non-government organizations — what I will call Social Sector Organizations. So, I decided to tackle in my 10th Playing to Win/Practitioner Insights (PTW/PI) piece, Playing to Win for Social Sector Organizations (SSO). (Links for the rest of the PTW/PI series can be found here.)

The short answer is that it does. In fact, I use it religiously in that world, for example in the turnaround of the Rotman School, and for the SSO boards on which I have served, including the Skoll Foundation, the Hospital for Sick Children (Sick Kids), and Tennis Canada. You can find a description of the successful Tennis Canada strategy here.

As I always say, the heart of the strategy is a matched Where-to-Play/How-to-Win (WTP/HTW) choice. This applies equally for SSOs but there are important nuances for both HTW and WTP in the SSO context.

HTW Nuances for Social Sector Organizations

I start with HTW because that is the area in which people express the most concern about the PTW framework. Isn’t winning inappropriate? Sick Kids shouldn’t be trying to beat other pediatric hospitals. Skoll Foundation shouldn’t be trying to beat other charitable foundations. That is correct. That is why for SSOs, we need to refine the concept of HTW.

The fundamental structure of most SSOs is that of a two-sided market. Google provides a good example of a two-sided market. The Google searcher receives the benefit of the service but doesn’t pay anything (well, except surrendering all privacy). Payment is made by an advertiser for the service of providing access to the searcher. In the classic form of a two-sided market, there is the subsidy side (in this case the searchers) and the money side (the advertisers) and a firm in the middle (Google) serving the two sides of the market. Another example is credit cards where the subsidy side is the credit card holder, and the money side is the merchant.

Most SSOs are structured (implicitly) as two-sided markets. The recipients of the service are different (entirely or in part) than the funders of the service. The Skoll Foundation grantees provide good examples. The One Acre Fund provides smallholder farmers in sub-Saharan Africa with tools, training, and financing so that farmers can enhance the productivity of their small farms enough to escape poverty. The recipients of the service (the subsidy side) are the farmers, while the funders of the operation (the money side) are charitable foundations, including the Skoll Foundation. The same kind of structure holds for the Educate Girls Foundation, which works on reforming the Indian school system to provide equal educational opportunities for girls. Indian girls (and in due course the Indian economy) are the beneficiaries and charitable foundations are the funders. For Sick Kids, the child and family benefit, and the government plus philanthropists pay.

What is the mechanism of the HTW? Let’s use the Google example for the for-profit world. Google does enough for the searchers on the subsidy side that they engage in an activity that is of value to the advertisers on the money side. Google achieves a competitive advantage by providing value to the money side that is in excess of the cost of providing service to the subsidy side by a greater margin than for any direct competitors for the money side’s spending. As in the case of strategy generally, that can accrue by way of providing more value than competitors to the money side at the same cost to serve the subsidy side, or by providing equal value to the money side at a lower cost to serve the subsidy side.

What does it mean to win in an SSO? It means doing something for the subsidy side that is of value far in excess of the cost paid by the money side. One Acre Fund creates value for Sub Saharan smallholder farmers that is far in excess of the funds provided by the Skoll Foundation and others. If you do that, those funders will choose to fund One Acre over doing something else with their resources. And they will be inclined to give One Acre more funding so that it can create more value. That is winning. Just as in for-profits, it requires a clever way to create value: a business model that provides lots of value for more modest costs. Former Skoll Foundation CEO Sally Osberg and I wrote a book about how that is done in the social entrepreneurship space.

For SSOs, the HTW isn’t focused on beating competitors. It is focused on the creation of value for the targeted recipients that is both appreciated by funders and far in excess of costs in its magnitude. An SSO will know that it is winning if its funders are keen to give it more resources so that it can provide more such value to more such recipients.

WTP Nuances for Social Sector Organizations

WTP choices are very important for SSOs, just as with for profit organization, because WTP and HTW must be a carefully matched pair. No HTW is great for every WTP and no WTP is perfect for every HTW.

A challenge for every for-profit organization is scope creep — doing more things because you can, not because it strengthens your HTW. In my experience, scope creep is even more endemic and problematic in SSOs. Generally speaking, SSOs are staffed with good hearted people who genuinely want to help the target audience. So, when they see an opportunity either to help the target audience in more ways or to help a wider group, they tend to let their WTP broaden.

I remember vividly a Skoll Foundation board discussion on this front. Our WTP/HTW was to fund social entrepreneurs who were tackling an unpleasant equilibrium and had figured out a clever way to transform that equilibrium into a more positive one — like One Acre. Better techniques helped smallholders increase yields to move from precarious poverty to stable self-sufficiency — a decidedly better equilibrium. In one of my last board meetings, a grant proposal came up that in no way even attempted to transform an equilibrium. When I challenged whether it fit in our WTP, a particularly outspoken board member declared as the rationale: they save lives! So, by the way, do emergency room nurses and doctors, ambulance drivers, lifeguards, suicide counselors, etc. Such a massively broadened WTP would ensure no distinctive HTW — but the argument carried the day.

That is scope creep in action — doing things because you can, not because your strategy says you should. But why not ‘save lives?’ Well, if having a WTP that is ‘saving lives’ doesn’t result in spending the funder’s resources in a way that produces huge leverage, you won’t get more funding, you will get less — and then be able to help the world in fewer ways.

A key to success at Sick Kids was figuring out where we could uniquely add value and where we should partner with organizations that could add value better than us — if we provided a small but important ingredient. The latter turned out to be the case in pediatric rehabilitation services. It took a concerted effort to rein in scope creep. But we did it and both Sick Kids and our rehab partner had a superior WTP/HTW’s as a result.

Winning Aspiration, Capabilities & Management Systems

As with for-profit organizations, SSOs need to ensure that they flesh out the entire choice cascade. The WTP/HTW needs to be paired with a Winning Aspiration that is motivational to the key stakeholders — the recipients, the funders and the SSO itself. It also needs to have the reality check from Capabilities and Management Systems. Only if the WTP/HTW can be translated into a distinctive set of Capabilities that the SSO is able to build and Management Systems that maintain those distinctive Capabilities over time will the PTW strategy be real, not just a binder for display on a shelf.

Practitioner Insights

If you are a manager or a board member for an SSO, you can productively use PTW for developing your strategy. When thinking about HTW, think of the SSO as operating in a two-sided market in which your task is to deliver value far in excess of costs to a recipient base that motivates capital providers to fund your work. Cleverness and creativity are required to come up with an operating model that provides that gap between value and cost.

Make sure your WTP enhances the power of the HTW as a great matched pair. And watch for the ever-present danger of scope creep. Your sustainability as an SSO is based on your ability to create value that is unambiguously greater than cost and if you broaden your WTP into areas that weaken your HTW, it will jeopardize your sustainability. If broadening your WTP can actually strengthen your HTW, then do it, but only under that condition.

And don’t forget the Capabilities and Management Systems. They need to play their role in ensuring that you win where you have chosen to play — and that will enable you to achieve your Winning Aspiration.

Professor Roger Martin is a writer, strategy advisor and in 2017 was named the #1 management thinker in world. He is also former Dean of the Rotman School.