Innovation in the charity sector
As a field of study, the nonprofit, charity and social enterprise sector has received scant scholarly attention compared to commercial sectors, and research into innovation in charities is even thinner on the ground (Mulgan et al, 2007. Murray et al, 2010). Over the last nine decades nonprofit and philanthropic studies have developed into a coherent body of knowledge around themes particular to the nonprofit sector such as volunteering (Ma & Konrath, 2018). A keyword analysis of articles from ‘Nonprofit and Voluntary Sector Quarterly’ and ‘Voluntas: International Journal of Voluntary and Nonprofit Organizations’, both considered to be well respected nonprofit journals (Seattle University, 2020), between 2017 and 2021 (n = 728) revealed 17.3% of articles had as their main topic fundraising and philanthropic giving, 13.4% were about volunteering, 7.5% focused on finance, and, most notably, only 2.1% (15) were about innovation. Given that fundraising and volunteering are unique and essential aspects of the charity sector it’s perhaps not surprising that they should be popular subjects of study for the research within the nonprofit sector. However, the lack of academic attention on innovation in the nonprofit sector, and in charities in particular, leaves a considerable gap in our understanding of how and why charities approach innovation.
Of the fifteen articles considering innovation, ten refer specially to ‘social innovation’, defined by the OECD as, “the design and implementation of new solutions that imply conceptual, process, product, or organisational change, which ultimately aim to improve the welfare and wellbeing of individuals and communities. Many initiatives undertaken by the social economy and by the civil society have proven to be innovative in dealing with socio-economic and environmental problems, while contributing to economic development.” (OECD, 2021). Chew and Lyon (2012) look at income-generating social enterprise activity as a source for innovation in charities and conclude that this occurs as a “strategic response to the wider social, environmental and economic imperatives” as charities work to solve social problems within funding constraints that can hinder innovation (Ranucci & Lee, 2019). These dual purposes of innovation in the charity sector; to achieve social impact and commercial benefit, often cause tension and are an important consideration in how we develop an understanding of innovation in charities, but also makes measuring the impact of innovation doubly difficult.
Whilst innovation in charities may receive little scholarly attention, innovation in, and the processes used by, commercial sector organisations has been widely studied for many years and there is a great deal of existing research to consider.
Defining innovation processes
It is essential to agree a definition of an ‘innovation process’ before proceeding in reviewing processes in order to prevent any confusion between what is a process, a model, or a framework, and to prevent the use of these terms as interchangeable. In order to agree what is meant by ‘innovation process’ we shall consider some of the explanations put forward by the authors of the processes before amalgamating a single definition for use through the rest of this paper:
- The Humanitarian Innovation Process says the process “acts as a map that will help you to identify where you are on your innovation journey.” (Elrha. 2021).
- The Interaction Design Foundation describes Design Thinking as a “non-linear, iterative process that teams use to understand users, challenge assumptions, redefine problems and create innovative solutions to prototype and test.” (IDF, 2021).
- Rogers (1962) mentions that the innovation process should be “considered only a general guide from which most innovations in reality deviate.”
- “A Stage-Gate process is a conceptual and operational map for moving new product projects from idea to launch and beyond” (Cooper, 2008).
- Garud, Tuertscher & Ven (2013) call the innovation process, “the sequence of events that unfold as ideas emerge, are developed, and are implemented within firms”.
- For Tidd & Bessant (2014) the innovation process is “a gradual process of reducing uncertainty through a series of problem-solving stages”.
- The Design Council’s ‘Double Diamond’, described as a design process rather than an innovation process, offers “a clear, comprehensive and visual description of the design process” as part of an innovation framework (2021).
In summing up these various descriptions we can say that innovation processes are usually visually represented as structured sequential stages or phases, with connections and relationship between the stages, in order to be used as a guide or map for innovation and new product development activities, but not intended as a set of specific instructions, and not to include all the necessary elements that may make up an ‘innovation framework’ such as metrics, strategy, people, profit models, channels, etc. (Keeley et al, 2013).
Innovation processes may be implemented at different levels, e.g. firms, multi-party networks, and communities (Garud, Tuertscher & Ven, 2013) but for the purposes of this paper we are only concerned with innovation processes within the firm.
Cooper (2008) points out that where the Stage-Gate process can fail is when it is looked upon as a process that all projects should go through from start to finish, rather than making use of the Gate aspects to end projects that haven’t demonstrated sufficient success in the current stage. It is only through ending the less promising innovation projects can the more promising ones be afforded more focus and resources to increase their likelihood of success. Other processes assume that the entire process would be used in order to facilitate innovation implying that innovations fail where the process wasn’t adhered to faithfully.
Comparing innovation processes
In order to understand how innovation processes are used in charities we need to establish a thorough understanding of innovation processes. Table 1 and the following section seeks to do this by comparing six innovation processes, three from academic work and three practical applications. Those with similar activities within each stage of the processes are grouped together and the groupings identified by the main purpose that is served by that stage of the innovation process. For example, activities that undertake research and idea generation are grouped into ‘Discovery’, and activities that focus on the building of the innovation or new product are grouped in ‘Development’. There are seven such groups. Consideration is given as to where in the innovation process different authors place their focus, where they leave gaps, and whether there are any commonalities across all processes.
Table 1: Innovation processes
|Humanitarian Innovation Guide(Elrha)||RecognitionRecognition of a specific problem or opportunity. Identify a problem or opportunity to respond to, collect and assess readily available knowledge on the issue and context, diagnose root causes and properly frame the challenge.||SearchSearch for existing solutions to the problem. Look for solutions that might already exist in the context, in the wider humanitarian sector and in other sectors or industries.||AdaptationAdapt a solution from elsewhere that requires significant rethinking of certain elements. Identify the changes that are required to adapt an existing solution to a new context.|
InventionInvention of a solution through the generation of new ideas. Work with users and primary beneficiaries (whether crisis-affected populations or humanitarian workers) to design a solution and develop a prototype.
|PilotTest a potential solution to learn whether and how it works in a complex real-world environment. Consists of three workstreams: implementing your innovation, developing learning and evidence, and providing support and logistics.|
|Design Thinking(Design Council)||EmpathizeGain an empathic understanding of the problem you are trying to solve.||DefineAnalyse observations and synthesise them to define the core problems.||IdeateIdentify new solutions to the problem and look for alternative ways of viewing the problem.||PrototypeUse prototypes to experiment and identify the best possible solution.||TestMake alterations and refinements to rule out problem solutions and derive as deep an understanding of the product and its users.|
|Innovation Development Process(Rogers)||Recognizing a Problem or NeedBegin with recognition of a problem or need, which stimulates research and development activities designed to create an innovation to solve the problem/need.||Basic and Applied ResearchOriginal investigations for the advancement of scientific knowledge and scientific investigations that are intended to solve practical problems. Scientific knowledge is put into practice in order to design an innovation that will solve a perceived need or problem.||DevelopmentPutting a new idea in a form that is expected to meet the needs of an audience of potential adopters.||CommercializationProduction, manufacturing, packaging, marketing, and distribution of a product that embodies an innovation.||Diffusion and AdoptionRegulation of the adoption of the innovation and evaluation under controlled circumstances.|
ConsequencesAssessment of whether the original problem/need is or is not solved by the innovation, and of new problems/needs may be caused.
|Initial screeningInitial go/no go decision where it was first decided to allocate funds to the proposed new product idea.||Preliminary market assessmentInitial, preliminary, but nonscientific, market assessment. And appraisal of the technical merits and difficulties of the project.||Business/financial analysisA financial or business analysis leading to a go/no go decision prior to product development||Product developmentDesign and development of the product, resulting in, e.g., a prototype or sample product.||Customer tests of ProductTesting the product under real life conditions, trial sales, trial production run.|
Precommercialization business analysisFinancial or business analysis, following product development but prior to full-scale launch.
|Production start-upStart-up of full-scale orcommercial production. |
Market launchFull-scale and/or commercial launch.
|BS ISO 56002 (2019)(British Standards Institution)||Identify opportunitiesIdentify and define opportunities for the organization and its context based on the innovation intent, scope of the initiative, and learnings from previous innovation initiatives. Acquire insights and knowledge about stated and unstated needs and expectations, and about relevant trends and challenges. Analyse the value that can be realized. Prioritize the opportunities.||Create conceptsGenerate new ideas, potential solutions, or combinations of existing ones, from internal and external sources. Investigate, document, and evaluate ideas and potential solutions. Select the preferred ideas and potential solutions based on established criteria.Validate conceptsValidate early with an initial version of the concept to address the most critical uncertainties, hypotheses, or assumptions to reduce uncertainty.||Develop solutionsDevelop the concept into a working solution, including the value realization model and address risks associated with deployment.||Deploy solutionsMake the solution available to users, customers, partners, and other interested parties, promote and support the solution, monitor adoption rates and feedback, monitor the realization or redistribution of value.|
|Simplified four-stage model(Tidd & Bessant)||Concept generationIdentify opportunities for new products and services||Project assessment and selectionScreen and choose projects that satisfy certain criteria||Product developmentTranslate the selected concepts into a physical product||Product commercialisationTest, launch and market the new product|
The Direction grouping includes stages in innovation processes that align the innovation or new product with the organisation’s innovation strategy, frame the problem space, and provide context to guide the scope of the innovation. Four of the six processes included direction setting activities.
Rogers begins the innovation process with ‘Recognizing a Problem or Need’ (1983) which is used to trigger following stages. Rogers is clear that direction setting activities are essential for successful innovation. “A thorough understanding of customers’ needs and wants, the competitive situation, and the nature of the market is an essential component of new product success.” (Rogers, 1983). He also reiterates that successful innovation projects have had three times as many person days and twice as much money devoted to preliminary market assessments than projects that failed (Rogers, 1983).
In Cooper’s Stage-Gate process the direction setting activities are called ‘preliminary activities’ and include a ”quickie“ study to determine market size, market potential, and possible market acceptance (Cooper, 2001) among other activities to determine the viability of the opportunity. “In most firms, however, project evaluations are either weak, deficient, or non-existent. Our NewProd studies find that initial screening is one of the most poorly handled activities of the entire new product process” (Cooper, 2001). Cooper sums up the importance of direction setting activities as ‘Do your homework’. “Homework is critical to winning”, he says (2001).
The Humanitarian Innovation Guide and BSI process include identifying and recognising a specific problem or opportunity as essential direction setting activities.
Activities within the processes that fall into the Discovery grouping include research to acquire insights and knowledge and idea generation. These stages focus on understanding problems and opportunities. All six of the processes included discovery activities, suggesting that this is an important aspect of innovation processes.
Rogers’ regards the discovery activities from a scientific knowledge point of view as being rooted in basic and applied research (1983). Both Cooper (2001) and Tidd & Bessant (2014) take a more market focused approach to discovery. Design Thinking discovery activities focus on users and customers in order to understand problems and opportunities. The BSI process includes learning from previous innovations within the discovery phase. Although all six processes conduct discovery activities they do so in very different ways.
Definition grouped activities include analysis of the discovery work and idea selection to arrive at a well-defined understanding of the problem or opportunity that the innovation will tackle. Four of the six processes include definition activities that seek to select from the discovery phase of the process and provide focus for the design stage.
All four of the processes that contain definition activities (Design Thinking, Stage-Gate, BSI and Tidd & Bessant’s simplified four-stage model) share commonalities in those activities being focused on screening and selecting ideas to proceed through the innovation process.
Design stages in innovation processes mark the beginning of solution activities and include reviewing existing solutions, identifying new solutions and how to test them using prototypes. Four of the processes included design activities, and the two that did not (Rogers and Tidd & Bessant) were from more academic origins suggesting the role of design in innovation or new product is downplayed in research.
The Humanitarian Innovation Guide and BSI processes both contain reviewing and adapting existing solutions within the design stage, whereas Design Thinking and Cooper’s Stage-Gate focus their design activities on creating new solutions. The BSI process is the only one to call out the need to validate the solutions identified in the design phase before moving onto development.
Development activities focus on taking concepts defined and designed in earlier stages into realisation. All six of the processes have development activities but range from the creation of a working prototype to full production ready product.
Across the innovation processes we see differing specificity as to what should be built at the development phase. Rogers (1983) proposes the broadest definition of development activities, referring to them as “putting a new idea in a form that is expected to meet the needs of an audience”.
The BSI and Tidd & Bessant’s processes are more practical stating that development activities should result in a “working solution” that leads to “value realization” (2019), and “translate the selected concepts into a physical product” (2018), respectively.
At the other end of the spectrum, the Humanitarian Innovation Guide, Design Thinking and Cooper are more specific about the development stage resulting in a prototype that can be used to identify and validate solutions.
Delivery related activities are those defined in innovation processes as resulting in the realisation of the innovation to be usable by end-users and customers. All six processes have delivery related activities with two clear focuses arising; real-world testing and validation, and the commercialisation of the innovation. The Humanitarian Innovation Guide and Design Thinking are concerned with testing, Cooper and Tidd & Bessant include both testing and commercialisation, and BSI and Rogers focus on commercialisation.
The Humanitarian Innovation Guide and Design Thinking processes appear to adopt an ‘Innovation as learning’ stance and as such regard the delivery phase as producing an innovation that can be tested and validated in the real world.
Rogers’ and the BSI processes take a far more commercial approach and consider that delivery activities involve taking an innovation or new product to market. Rogers also briefly mentions the idea of ‘packaging’ interrelated innovations into a single ‘technology cluster’ (1983) for delivery thus optimising the go-to-market commercialisation as a number of innovations are launched under a single sales and market plan.
Cooper’s innovation process includes two stages within the delivery group, that which, “tests the product under real life conditions”, and the “financial or business analysis following product development but prior to full-scale launch” (2010) and so bridges the gap between getting an innovation market-ready and taking it to market. Tidd & Bessant’s ‘Simplified four-stage model’ also blurs ‘test, launch and market the new product’ (2018) into a single stage of the innovation process.
Measuring the success of an innovation at the delivery stage is affected by what is included within the innovation processes. For example, those that focus purely on the commercialisation are likely to have financial and market measures whereas those that focus on testing are likely to be measured by their potential for increasing organisational learning (Tidd & Bessant, 2018).
Diffusion refers to phases in innovation processes that describe the scaling of the solution or how the new innovation is consumed into business-as-usual activities. Only two of the innovation processes include diffusion activities. Rogers refers to how the adoption of innovations can be regulated as they are adopted (1983) and Cooper talks of “Full-scale and/or commercial launch” (2001).
Rogers (1983) refers to diffusion as “the most crucial decision in the entire innovation development process”. He regards this stage from the scientific & health innovation perspective and considers the tension between the trapped value of an unrealised innovation and the measures that can be put in place to control the adoption of an innovation. This gatekeeping mentality is counter to the commercialisation imperative that we see in Cooper who regards the Pre-commercialization Business Analysis and Post Implementation Review part of the Stage-Gate process as where the new product innovation has been demonstrated as a success for the company (2001).
Within humanitarian innovation, stopping at the delivery stage of an innovation is often regarded as success (Obrecht, 2016. Chang, 2019). An innovative project may get delivered, have some impact for its intended beneficiaries and meet the success criteria of its funding contract, but when the funding comes to an end the innovation is often withdrawn (Chang, 2019). The phrase, ‘the missing middle’ is used within humanitarian innovation to refer to “the gap between developing a product or process that offers an improvement over prior practice and achieving wider uptake of that product or process within the sector” (Obrecht, 2016). The reasons for the existence of such a challenge are multiple and complex, but create “a need to understand and address the neglected elements of the innovation lifecycle that lie between conclusion of a pilot program and the ultimate wide scale operation and optimization of an established program.” (McClure & Gray, 2014). Given that the innovation processes that humanitarian charities are likely to be aware of and use Humanitarian Innovation Process and Design Thinking in particular, perhaps it’s reasonable to conclude that, along with other factors such as funding, innovation processes that do not have a diffusion stage have contributed to this problem.
Each of the processes examined has different strengths and weaknesses in providing the means for understanding an innovation process as structured sequential stages with clearly defined relationships between the stages that can be used to guide innovation and new product development activities.
Innovation processes in charities
Having looked at the research on innovation in charities and the literature on innovation processes, we can now bring the two together to consider how innovation processes are implemented in charities.
Why should charities innovate?
“The most pressing issues of our times – such as climate change, the worldwide epidemic of chronic disease, and widening inequality.” remain unsolved (Murray et al, 2010). Radical new approaches are needed to “combine the ingenuity and initiative from the public sector, private companies and third sector to find new solutions to pressing economic and social problems” (Harris & Albury, 2009). There is no shortage of opinion about the role charities should play in using innovation to tackle social problems but these fail to address the barriers that charities face.
Throughout 2020, the pandemic launched a three-pronged attack on charities. As demand for many charity’s services increased, funding became more difficult to secure, and service delivery was disrupted or prevented by “imposed constraints”. (Hyndman, 2020), In response, many charities turned to digital technology in an attempt to tackle these challenges. The Charity Digital Skills Report 2021 showed that “83% of charities changed their services in response to demand during the pandemic (Amar & Ramsey, 2021). Clearly the COVID-19 pandemic has had a significant impact on charities although they faced an increasingly competitive landscape (Ein-Gar & Levontin, 2012. O’Hara, 2015) many years before the pandemic and have adopted innovative approaches to tackling fundraising (Wilkinson, 2013).
How do charities implement innovation processes?
Innovation suffers from variation in how people understand the term (Tidd & Bessant, 2018). This ambiguity offers benefits and disbenefits to charities when implementing innovation processes. When innovation can mean many things and be implemented in many ways to suit the particular context, charities have the scope to develop innovation processes that fit their needs and constraints. However, lacking any clear definition within their context also presents a barrier to charities in understanding how to implement innovation processes reliably. If a charity tries something new, are they being innovative? Does innovation require the use of robust and well-defined processes in order to be efficient and effective?
Murray et al describe the innovation process as “from the initial generation and trialling of ideas, to their establishment on a sustainable basis” (2008), but there continues to be a lack of clear guidance in the academic and popular literature for charities on how to implement innovation processes effectively.
How do charities judge the success of their innovations?
In response to the COVID-19 pandemic “two thirds of charities have innovated to deliver services remotely” (Whitehead, 2021). If so many charities are innovating, why do so many social problems continue? Is there a difference in understanding about what it means to innovate? Are the majority of innovations incremental rather radical, merely adaptations on existing paradigmatic solutions as Antadze and Westley (2010) claim? Are the innovations failing to deliver the expected results? Do charities need different models of innovation (Zivkovic, 2018. Hautamäki & Oksanen, 2016) in order to increase the likelihood of success?
Answering all of these questions is beyond the scope of this study but it will attempt to develop insight into whether charities judge the success of innovation through social impact or commercial return, or both. Mulgan et al (2007) have suggested that social innovations could be judged to be successful where they have achieved “effective demand and capacities to grow”. Antadze and Westley (2010) critique Mulgan et al’s use of market mechanisms for judging the success of social innovation as relying too heavily on the assumption that success should be defined by growth. As such, it’s clear that no standardised measure exists for measuring the success of innovation in charities.
What this literature review has taught us
Having reviewed literature on charities to establish an understanding of how little focus there is on innovation in the charity sector, defined innovation processes that are used to drive innovation and new product development, compared six well-known innovation processes, and considered some of the factors affecting charities, we can state that the need for charities to innovate is even greater now and in the near future, but so are the challenges in doing so. And from this three questions have arisen: What motivates charities to innovate when facing wicked problems, how do they implement innovation processes without a clear definition for innovation and well-defined guidance, and how do they judge the success of innovation when faced with the tension of social impact and commercial benefit?