Lean Startups and the Nonprofit World

At Personal Democracy Forum last week, I saw a very interesting panel titled “The Lean Startup Model for Politics” (check out Jackie Mahandra’s cool visual notes here).  I was a little amused that the whole panel was premised on an article I’d read in last month’s Wired magazine, “Upstart Eric Ries Has the Stage and the Crowd Is Going Wild.”  Then I was intrigued.  Then I was concerned.

Eric Ries is the latest Silicon Valley Guru.  His new book, The Lean Startup, is a hit with both venture capitalists and startup managers.  It teaches the differences between “vanity metrics” and “actionable metrics,” preaches about “minimum viable products” that allow a company to test market demands early, argues for “iterative” productive development and for “pivoting” when a product isn’t working out.

There’s a lot to like in these concepts.  I’ve written previously about the difficulty of measuring success in online campaigning.  Most of the easily accessible metrics (facebook “likes,” twitter followers, petition signatures) provide only a weak signal of whether or not you’re achieving your campaign goals.  Advocacy campaigns are about applying pressure to specific targets in order to convince them to do something that they would not otherwise do.  Tactics that garner a lot of facebook “likes” are not always the same tactics that provide leverage on your targeted decision-maker.  That sounds an awful lot like Ries’s distinction between “vanity” and “actionable” metrics.

Likewise, the recent success of Change.org came after several previous failures.  Ben Rattray (Change.org’s founder and CEO) was on the panel and discussed their years of experience with iterating, failing, and pivoting.  I think it’s fair to say that, if you view Change.org as an important part of the advocacy landscape, then The Lean Startup is worth thinking around.  It clearly has influenced their strategic thinking, and helped guide important decisions.

The question, however, is just how far we can extend the comparison.  Nonprofit advocacy has some important differences from for-profit companies.  Bringing disruptive new tech into the mix doesn’t erase the difference.  Most importantly there’s a simplicity to business management that is not present for political advocates.  The simple goal of businesses is to maximize profits.  This goal is central to all elements of the lean startup model.  Actionable metrics are the ones that actually tell you whether the product will sell.  Vanity metrics don’t tell you that.  Minimum viable products let you test the market before sinking a ton of resources, thus improving profitability.  Iteration and pivoting are both driven by the profit motive.

The nonprofit world has no such prime directive.  The goal of RebuildTheDream.com  (whose Executive Director, Natalie Foster, was also on the panel) is to build a “movement for a sustainable economy, more jobs, accountability for Wall Street, fair share taxes for corporations—and an America that delivers on its promise of opportunity for all.”  How should we measure that?  What counts as an actionable metric?  When do you know that it is time to pivot?  There are, to be sure, answers to these questions.  But they are not simple answers.  They are the subject of deep debates among practitioners and social movement scholars alike.  And lacking a simple, measurable bottom line, the foundations of the whole Lean Startup model become a good deal shakier.

This became particularly clear in one of Natalie’s answers during the Q&A session.  Responding to a question about vanity metrics, Natalie noted that one of the biggest challenges was funder expectations.  If foundations and major donors demand large petition drives and follower-counts, then organizations will be stuck pursuing those goals even if they know they’re nothing but vanity metrics.  Advocacy groups are donor-driven in a way that startups aren’t, because it is much simpler for a startup to convince funders of their profit model than it is for an advocacy group to convince philanthropists of a social change model.

Indeed, this is even more the case today.  One of the major points I make in The MoveOn Effect is that the Internet’s disruptive impact on nonprofit fundraising has made advocacy groups far more donor-driven than before.  Organizations that used to rely on a stable base of direct mail fundraising now turn to a mix of targeted internet fundraising and large donor fundraising.  Both of these sources tend to be program-specific — it’s much easier to raise money for a specific action than for field organizers or trainings.  Some of the most important organizational infrastructure in the advocacy community simply isn’t very attractive to donors.  And, lacking the simplicity of a for-profit bottom line, it’s pretty hard to move donors in the right direction.

Listening to that panel, I couldn’t help but sense a new bubble forming among advocacy professionals.  “It’s so simple, success lies in following the lessons of silicon valley!”  I see some value, but also plenty of risk down that path.  So I suppose my take-away from the panel is twofold: (1) advocacy professionals should read The Lean Startup, there are some useful concepts in it. (2) they should read it with a skeptical eye.  Applications to political advocacy are going to be messy and inexact.

3 thoughts on “Lean Startups and the Nonprofit World

  1. Thoughtful post, Dave. I agree that attempts to apply trendy biz-world concepts to nonprofit advocacy — even good ones — often add less value than many believe they do. And that meaningful, valid measures of success in nonprofit advocacy are hard to come up with.

  2. I’ll push back a little bit, because I think your overall point is great.

    For all the negative attention paid to the shareholder value incentive – which has done a lot to destroy the world, don’t get me wrong – businesses are often run for more than just profitability. This is especially true for privately-held companies, obviously – and it’s even more true for startups, which you’re covering here. Entrepreneurs are often motivated much more by a desire to make an impact than to get a ton of revenue. And “profitability” doesn’t always equal “profitability”, depending on who you ask; Amazon was famously unprofitable for, what, nearly a decade? Time horizon is absolutely essential. The point is that I think you’re over-essentializing business a little bit here.

    I also think you’re dramatically underestimating the amount of control that can be exerted by VCs, which might be a better analog for donors (especially foundations, obviously) than you credit. Or maybe not: The kicker is, VCs’ incentive is to extract value for themselves – which one hopes they’ll seek to do by building a viable long-term enterprise, but that doesn’t always happen. Unlike VCs, foundations at least ostensibly share the same values as the organizations they fund, and they may not have an entirely self-interested profit motive like VCs. So if the analogy of funders in startups and nonprofits ends up breaking down, it will sometimes do so because some startups are *more* donor-driven than most nonprofits. Again, there’s a big range here which I think you should be careful not to dismiss.

    Otherwise, totally agree. And one of my pet peeves in academia has always been the practice of draw analogies with another phenomenon/sector based on one charismatic text, without a thorough understanding of all that phenomenon’s/sector’s complexities – so keep up the reality check, good man. 😉

  3. Really nice points, Patrick. The second one in particular raises an additional item for me. You’re right about VC’s. A lot of the power that books like The Lean Startup have comes through this pathway — VC’s read it, VC’s believe it, thus VC’s start to speak in these buzzwords and modify their expectations.

    Progressive donors, by contrast, don’t appear to all read the same thing or speak in the same buzzwords. There are a few notable exceptions — Rob Stein’s “conservative message money machine” slideshow was the impetus for the Democracy Alliance, and George Lakoff had a nice run of being the most-read thinker among progressive donors — but there’s only a few. And that creates a disconnect between the latest thinking among strategists/managers/organizers and the latest thinking among donors.

    If progressive donors all end up reading The Lean Startup and being to ask for actionable metrics over vanity metrics, that would be a huge deal. Anything that moves the donors in such a direction would be a huge benefit to the left. If it leads them to start seriously funding infrastructure, I will strongly consider getting an Eric Ries tattoo. But if the donors don’t move en masse, then I worry we start creating a whole new wave of problems.

    Great hearing from you, as always.

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