THE ASPENINSTITUTE In Pursuit of Scale and Sustainability for Non-Profit Organizations Kirsten Moy

THE ASPENINSTITUTE What is Scale? More capital More customers More effectiveness “Economies of scale” usually refers to the development of mass markets and progressive cost reduction through increased business volume. Can the industry groups assembled achieve this kind of scale?

THE ASPENINSTITUTE Why Pursue Scale? To reach more people To provide access to services to as many low income people and communities as possible on a permanent and sustainable basis To tap into economies of scale To become more sustainable To have greater impact in low income communities

THE ASPENINSTITUTE Case Comparisons Undertaken Banknorth Group 7-11 (Vcom Expansion) ACE Cash Express Allied Capital and BLX VISA Credit Card Self-Help (Fannie Mae SF Mortgage Program) ACCION The Reinvestment Fund Dell Computer Unified Western Grocers

THE ASPENINSTITUTE Innovation -- and Scale -- Occur at Three Levels: Product Innovation Organizational Innovation Industry Innovation

THE ASPENINSTITUTE Product Innovation Organizational Innovation Industry Innovation Design for scale (e.g., standardization, simplification & refinements) Infrastructure Technology Capital Partnering Management New organizational structures Regulatory policy Strategic positioning Industry intermediaries Industry infrastructure New sources of capital impact New Pathways to Scale for Community Development Finance actions Graphic Representation Courtesy of Langdon Morris, InnovationLabs, April 2004

THE ASPENINSTITUTE CUSTOMERS INDUSTRY MEMBERS INDUSTRY MEMBERS TRADE ASSOCIATION INDUSTRY INTERMEDIARY TRADE ASSOCIATION INDUSTRY INTERMEDIARY INVESTORS & FUNDERS POLICY MAKERS & REGULATORS POLICY MAKERS & REGULATORS Basic Model of Key Players Industry leaders play a powerful role in setting standards and creating standardization in the industry.

THE ASPENINSTITUTE Industry Structure 1 CUSTOMERS INDUSTRY MEMBERS INDUSTRY MEMBERS TRADE ASSOCIATION INDUSTRY INTERMEDIARY TRADE ASSOCIATION INDUSTRY INTERMEDIARY INVESTORS & FUNDERS POLICY MAKERS & REGULATORS POLICY MAKERS & REGULATORS Industry Structure 1: The Corporation -Customer Dynamic In most industries, direct interaction between the customer and the industry member is a primary factor.

THE ASPENINSTITUTE ii Industry Structure 2 CUSTOMERS INDUSTRY MEMBERS INDUSTRY MEMBERS TRADE ASSOCIATION INDUSTRY INTERMEDIARY TRADE ASSOCIATION INDUSTRY INTERMEDIARY INVESTORS & FUNDERS POLICY MAKERS & REGULATORS POLICY MAKERS & REGULATORS Industry Structure 2: The Small Players Dynamic: Industry Associations/Intermediaries Help the Many Small Members Compete with the Few Large Members

THE ASPENINSTITUTE Industry Structure 3 CUSTOMERS INDUSTRY MEMBERS INDUSTRY MEMBERS TRADE ASSOCIATION INDUSTRY INTERMEDIARY TRADE ASSOCIATION INDUSTRY INTERMEDIARY Investors/Funders/ 3 rd Party Payers Investors/Funders/ 3 rd Party Payers POLICY MAKERS & REGULATORS POLICY MAKERS & REGULATORS Industry Structure 3: Subsidy Dependent: Behavior of Industry Members Driven More by Funders/3 rd Party Payers & Policymakers/Regulators than Customers

THE ASPENINSTITUTE Implications of the Industry Analysis and Linked-Scale Model: Different activities are required at different levels; Scale at the product level contributes to scale at the organizational level; But working at the product and organizational levels gets you only so far – to reach scale in a fragmented sector comprised of many small local organizations, we must ultimately work at the industry level – the level least attended to in grantmaking; Subsidy and 3 rd party payments have a disruptive effect on relationships with customers; Collaborative business models: e.g., cooperatives, networks and alliances may provide a viable structure for working at the industry level

THE ASPENINSTITUTE Collaborative Business Models Could Help Organizations: Retain local control and ownership Lower cost of operations Access larger pools of capital Reduce effort devoted to fundraising Access better management talent and specialized expertise Increase ability to reach more people

THE ASPENINSTITUTE Collaborative Business Models Could Help Organizations: Produce higher quality programs Provide more diversified and comprehensive programming Access more up to date technology and infrastructure Promote long term sustainability Ultimately, create greater impact

THE ASPENINSTITUTE Three Examples of Powerful Collaborative Models: Unified Western Grocers Housing Partnership Network CCA Global Partners

THE ASPENINSTITUTE Wholesale grocery co-op; distributor to independent grocers….. …..Largest in Western United States Graphic presentation provided courtesy of Unified Western Grocers, Inc.

THE ASPENINSTITUTE The Network Peer alliance of 87 high performing nonprofits; network is a 501c (3) 600,000 affordable homes created 2 million low - income families served Foster innovation & entrepreneurship Create & operate social enterprises for wholesale access to capital markets Peer Exchange – Network meeting Graphic presentation provided courtesy of Housing Partnership Network

THE ASPENINSTITUTE Creating the Magic Zone Owners CCA Empathetic Owner & Staff Professional & Knowledgeable Passion for Business Professional Training World-Class Marketing Lower Operational Costs Maximization of Profits Best Service Straight- shooters Innovative Respects and likes their customers Honest Confident Real People Smart Business People Know Product Staff Works Like a Team National Programs Real Estate Services Store Design Buying Member Services Training Research National Accounts Information Technology Human Resources & Hiring Product & Merchandising Marketing & Advertising Growth of Business Increase Customers & Profit Magic Zone CCA Global Partners Graphic presentation provided courtesy of CCA Global Partners

THE ASPENINSTITUTE Attributes that Work and Don’t Work Relation to Members Non-Responsive Members Own Doesn’t WorkWorks Initiators Ownership Management Membership Entity Type Revenue Stream Driving Rationale Value Proposition Large Groups Third Party Amateur Anyone Trade Association Donations Weak Nice to Have A Few Leaders Very Responsive Must Have Strong Earnings Operating Entity By Design Professional Representative AnyoneCEO or Principal

THE ASPENINSTITUTE Organizational Models Nonprofits Cooperative Corporations Combinations Membership Organizations Network of Affiliates Peer Alliances Co-Ops Credit Unions Multiple Locations Franchise Licenses Criteria for Membership OwnershipGovernance / Control Degree of Professional Management Where Does the $$ Go

THE ASPENINSTITUTE Thank you!