From space many places on Earth look pretty flat. From the
ground more obstacles become apparent: Granite mountains
loom in places where chasms divide neighboring areas. Both
perspectives tell you something you need to know. The space
view shows you the most direct route as the proverbial crow
flies, while the close-up view shows you obstacles that are
well worth avoiding where that's possible. In this article,
the broadest perspective, like that from space, is
emphasized. That perspective encompasses expanding your
business model (the who, what, when, why, where, how, and
how much of your offerings) in volume-improving ways for
your nonprofit organization.
In considering how to expand your business model's delivery
of offerings and benefits, you should be guided by what
will be easily understandable and desirable by your
stakeholders (those who are affected by what you offer) . .
. and where the adjustments will provide more effectiveness
for nonprofit organizations. Business model innovation is
something that many organizations struggle with. In this
article, I've broken out the elements and added an example
to make innovative business model thinking and analysis
easier to do. This article's material will, however, be
clearest to those who have already read about continuing
business model innovation.
Expand What You Do Now
Unless you are providing a very small percentage of the
needs of each customer or beneficiary, growing by 21-fold
requires adding beneficiaries. Because so many
organizations can expand to provide 21 times the number of
beneficiaries, that's a great place to begin. You should
start by considering who you will serve as these added
beneficiaries and where those benefits will be delivered to
make the expansion more practical.
Who Is Served and Where
Let's begin considering volume-expanding business models by
looking at "who" is served. The lesson is to keep it
simple. Change as little as possible while becoming more
efficient and effective as an organization for your
customers and beneficiaries. The simplest way to do this is
to put more of the same kind of volume through an existing
organizational structure without adding fixed costs or
increasing the ratio of variable costs to benefits
delivered.
In a nonprofit organization there's a savings incentive to
provide more of the same offerings to the same recipients.
Let's consider an organization that carries donated food by
truck to distribution centers serving needy families. Most
such distribution centers provide a small portion of a
family's total weekly needs -- perhaps as little as one
meal a week. The families may be visiting 10 to 30
different distribution centers weekly to fulfill all their
needs. The trucks carrying the goods to a given
distribution center are often owned and operated by that
center, may be in use for only a few hours a week, and
could be operated much more often.
Let's assume that more volunteers can be found to load the
food, and drive and unload the trucks. Both the nonprofit
organization and the needy families will benefit
economically if 21 meals weekly are delivered and
distributed at one time to a distribution center.
See Example 1 for a quantification of this point.
Example 1: Adding Trip Volume for an Underutilized Truck to
Increase Food Available to Needy Families for Each Pick Up
When a truck isn't driven very much, its capital costs
(depreciation of its value from the purchase price) exceed
the operating costs. Put that truck into use more often and
you are able to divide the capital costs over more miles.
As a result, your cost per trip of the same distance will
become much smaller.
Truck Beginning Point -- 1 Truck Trip per Week: Annual
truck capital costs $52,000 for 5,200 miles per year
Capital cost per trip $1,000
20 Times Truck Volume Increase -- 21 Truck Trips per Week:
Annual truck capital costs $109,200 for 109,200 miles per
year
Capital cost per trip $100
Note: Annual capital cost is higher because service life is
reduced by driving more miles a year.
Recipients' automobile operating costs, by comparison, vary
directly with use. Driving 21 times as much results in
spending 21 times as much. If they can reduce their
driving, however, their operating costs per week go down.
Automobile Operating Costs Beginning Point for Recipients
-- 21 Pickups per Week
Weekly gas, oil, and maintenance $21.00
Cost per pickup $1.00
Automobile Operating Cost -- 1 Trip per Week
Weekly gas, oil, and maintenance $1.00
Cost per pickup $1.00
Copyright 2007 Donald W. Mitchell, All Rights Reserved
----------------------------------------------------
Donald Mitchell is chairman of Mitchell and Company, a
strategy and financial consulting firm in Weston, MA. He is
coauthor of six books including The 2,000 Percent Squared
Solution, The 2,000 Percent Solution, and The 2,000 Percent
Solution Workbook. You can find free tips for accomplishing
20 times more by registering at:
====> http://www.2000percentsolution.com .
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