HR for innovation

The Human Resources department in most companies is about performance reviews, recruitment, and disciplinaries. HR Management grew up as a function for companies to secure commitment from workers in a time where the job was considered the prize.

This won’t be enough in the future.

In an organisation where knowledge work is the norm, skills are now the prize. This shifts the bargaining power from the organisation to the individual. If an organisation wants to support innovation, HR needs to play a different role. In an organisation where autonomous individuals are committed to their work, HR can become about supporting human intellectual assets and integrating the learned knowledge into the organisation to become the competitive advantage.

Or, to take it a step further into the future, HR in an innovative organisation that is based on anarchist principles rather than capitalist ones would be about achieving ‘cooperative advantage’ rather than competitive advantage through the decentralisation of power, decision-making and wealth. This cooperative advantage would apply just as much between the organisation and other organisations as it would between individuals within the organisation as an innovative organisation has more permeable barriers between it and other entities (including society at large).

What makes the business models of innovators in the 21st century competitive?

Introduction

Innovative 21st century business models contain many aspects that differentiate them from business models that are more closely associated with the pre-internet era.

Innovative organisations are able to utilise disruptive technologies and approach business strategy from a different perspective to traditional companies and use this to digitise their business and develop a business model that enables them better respond to the increasing pace of change in industries, and so create competitive advantage.

The ability to develop and utilise intangible assets such as knowledge, organisational routines, and intellectual property to achieve competitive advantage separates innovative businesses from physical asset focused organisations but is not without its risk, and so absorbing change and dealing with uncertainty become essential in maintaining competitive advantage.

Organisations with innovative business models are able to leverage the advantages of network externalities to achieve cost efficiency, customer lock-in, complementary value and first-mover advantage to hold a competitive advantage over companies that fail to utilise network effects in their business.

Purpose and societal impact can be sources of competitive advantage for organisations that contribute positively to environmental, societal, or human issues,

All of these elements impact modern business models and contribute to an organisation’s ability to achieve and maintain competitive advantage in the 21st century.

Digitisation, technology and strategy

The 21st century has seen a huge increase in disruptive technologies such as the internet, social media, artificial intelligence, blockchain, robots, and IoT entering almost every market including the music industry, banking and finance, engineering and manufacturing, and recruitment and HR. Organisations that make use of these disruptive technologies can gain a competitive advantage over competitors who are slower to appreciate the benefits and undertake the digitisation of their business. Whilst slower-to-adapt, traditional companies rely on functionality to beat competitors, modern companies beat competitors with speed and customization (Christensen, 2001).

The increasing speed of change in the digitisation (Kurzweil, 2004) of business places pressure on innovative organisations to be continually evolving in order to keep pace with the change and remain competitive. As Porter noted when describing how a competitive advantage is achieved through cost leadership and differentiation, “The ability to be both low cost and differentiated is a function of being the only firm with the new innovation” (Porter, 1980: 3). This suggests that competitive advantage viewed in this way is easily lost to companies that use the next newly available disruptive technology to differentiate themselves. However, those companies that approach innovation as a continual creative destruction (Schumpeter, 1934) of their own practices, products and services, and even business model can successfully utilise digital technologies in strategies that ensure they maintain a competitive advantage.

This pressure to continually reinvent any and all aspect of a business has driven a shift in how organisations approach innovation from closed innovation in which businesses generated their own ideas and develop them internally, to open innovation 1.0 in which companies combine internal and external ideas to accelerate their innovation process (Chesbrough 2003) and onto open innovation 2.0 in which ideas are developed within an ecosystem of industry, universities, government and communities (Curley and Salmelin 2013).

“BMW Group faces many innovation challenges for which it doesn’t always have immediate in-house solutions, so we choose to search globally for the technology that we need, particularly among the innovators who are running startup companies. That is why the BMW Group has, in conjunction with StartupFest Europe 2017, challenged startups from across Europe, working in all fields related to mobility products or services, to submit their pioneering technology, product or service ideas for a competition that offers a chance to become part of a pool that buy billions of dollars’ worth of products and services every year.” (Gimmy, 2017). Companies, such as BMW, adopt an innovation 2.0 approach in order to develop a broader range of ideas more quickly and without the resource constraints of needing to employee experts in all areas of development, and the company that does this better than their competitors can achieve competitive advantage.

Intangible assets and absorbing change

Whilst Porter asserted that competitive advantage comes from providing value to customers at a higher value than it costs to provide, Barney’s view was that competitive advantage is achieved by “implementing a value creating strategy different from the strategies of its competitors.” (Talaja, 2012). This advantage can be achieved when a company possesses and exploits valuable, rare, inimitable, and non-substitutable resources and capabilities (Barney, 1991).

For modern innovative organisations using business models that rely on intangible assets such as software, organisational routines and specialist knowledge, using this resources-based view allows for an understanding that excelling at creating and managing intangible assets is essential for establishing and maintaining competitive advantage. As new models of open innovation emerge that rely on developing eco-systems from partnerships across industry boundaries rather than exclusively within a business (Curley and Salmelin 2013), knowledge becomes more important and the challenge of retaining that knowledge needs to become an essential part of an innovative organisation’s strategy. Nonanka’s Dynamic Theory Of Organisational Knowledge Creation describes how in learning organisations knowledge moves from tacit to explicit in a continual dialogue where new knowledge is developed by individuals and transferred to organizations (Nonaka, 1994). This knowledge transfer is an essential part of companies ensuring they maintain the competitive advantage gained from creating and retaining intellectual property.

Teece and Pisano argue that “the competitive advantage of firms stems from dynamic capabilities rooted in high performance routines operating inside the firm, embedded in the firm’s processes, and conditioned by its history” (Teece & Pisano, 2003). However, there are risks to businesses in relying solely on their organisational routines and unique intellectual property to achieve competitive advantage. Over time, organisational routines can become settled and need to be refreshed in order to ensure they are indeed high performing given the constant change in today’s markets, and specialist knowledge and intellectual property can become locked in the minds of founders and employees which creates a risk to the business if those people leave the company.

More recently, Teece, Peteraf and Heaton have explored ideas around “fostering the organizational agility necessary to address deep uncertainty, such as that generated by innovation”. They point out the differences between managing risk in a traditional way and dealing with the deep uncertainty that is a characteristic of “interdependent economies experiencing rapid technological change and financial disruption” (Teece, Peteraf & Heaton, 2016). In order to maintain its competitive advantage an organisation needs to ensure it’s dynamic capabilities provide it with the means to absorb and respond to change quickly and use its response to change to improve its dynamic capabilities.

Network externalities and cost efficiency

For organisations following Porter’s Cost Leadership strategy (Porter, 1985) and so concerned with reducing transaction costs in order to lead on price within the market, digitisation enables cost savings (Lucking-Reiley & Spulber, 2001). For internet-era ‘digital-first’ organisations with digital-only products and services, transaction costs can be shrunk to near zero. Innovative organisations can utilise network effects to increase their customer base and so achieve scale faster and more cost-effectively than businesses with lesser digital business models.

Network effects can be expressed as the value that a product provides the customer, and so the business, increases as the number of users grows (Katz and Shapiro, 1985). Two examples of utilising network effects are interaction, where a product is only useful if a number of other people are also using the product, and compatibility, where customers purchase and use software that is compatible with other software that they are those they interact with are using (Katz and Shapiro, 1985). A study by NFX of digital companies that went on to become worth more than a $1 billion, estimated that network effects have accounted for approximately 70% of the value creation in tech.

These elements creates a lock-in effect where the cost (financial, but mostly in loss of value from interacting with and being compatible with others) of stopping use of the product is greater than the cost of continuing to use it (Farrell & Klemperer, 2007). Organisations that successfully leverage lock-in and so increase the switching costs for customers have the potential to dominate a market and make it very difficult for new entrants to gain market share, which becomes a key strategic advantage in maintaining competitiveness.

Utilising Internet technologies and network effects allows companies to increase the value offered to their customers by providing bundles of complementary products and services (Amit and Zott, 2001). These complementarities “are present whenever having a bundle of goods together provides more value than the total value of having each of the goods separately”, and those bundles may be made up from products and services owned by the business or by businesses offering services from other organisations that complement their own product (Amit and Zott, 2001). Whereas businesses that don’t leverage network effects may offer bundles in the form of ‘two for one’ or other such offers, companies with innovative business models are able to offer complementariness in a way that becomes a distinct competitive advantage. When customers recognise increased benefits they are likely to get from purchasing from a business that offers products or services with bundled complementariness in contrast to purchasing from business that don’t, the increased adoption can contribute to the innovative business increasing market share and maintaining competitive advantage.

Having already looked at three elements of Amit and Zott’s sources of value creation in e-business, Novelty is the fourth aspect that drives value. The “introduction of new products or services, new methods of production, distribution, or marketing” and ways of doing business enables innovative businesses to gain first-mover advantage (Amit and Zott, 2001). Where newness and first-mover advantage drives value for a business it can be leveraged to be a competitive advantage in conjunction with the other sources of value creation.

Purpose and societal impact

Although the role of business in society changes over time, society is expected to provide an environment that business can operate in whilst businesses provide products and services for the members of society in exchange for economic returns (Cannon, 1994). 21st century innovative businesses can build upon this relationship by providing an environment and work that is purposeful (Sgori, 2014) in order to help creative knowledge workers feel that they are contributing to a positive impact on the world.

Etsy, the ecommerce marketplace company selling handmade and vintage items, is an example of how a business can balance profit and purpose. Etsy holds a B-Corp certification, showing it meets the highest standards of social and environmental performance. It also runs a free entrepreneurship courses to underemployed and unemployed residents in collaboration with the US government (Hakimi, 2015).

Having purpose also has a positive effect on employee morale. A report by the Society for Human Resource Management revealed that companies with strong sustainability programs had 55% better morale, 43% more efficient businesses processes, 43% stronger public image, and 38% better employee loyalty (SHRM, 2018). These reports all contribute to the idea that a business that has a positive societal impact can achieve attract and retain employees that have greater commitment and contribution to the company.

An article on the Moving Worlds blog lists nine innovative companies with a social purpose and includes lessons from them such as “customers seek out brands that align with their morals” from Patagonia, Salesforce’s donating of “1% of revenue, products, and employee time towards charitable work”, and Social Capital’s use of “data techniques to evaluate investments that contribute to social good by covering sectors including education and healthcare” (Barbu, 2018) as purpose-driven business models that demonstrate commercially success. These and a multitude of other examples show how having a purpose is more than just good public relations, it can be a source of differentiated competitive advantage for any kind of business.

Conclusion

Many varied things are involved in making the business models of innovators in the 21st century competitive. There are many theories that contribute a partial understanding to these various aspects of innovation and business but clearly there is no single dominant model or intellectual framework that provides an accurate lens for understanding what it takes to be a successful, innovative businesses in the 21st century. Disruptive technologies and the digitisation of every kind of business and industry have widened the gap between those innovative organisations that are able to respond to the increasing pace of change and those that are being left behind. Organisations that are able to utilise technology also need to be able to successfully manage their capabilities, intellectual property and other intangible assets such as employee knowledge in ways that create advantages over competitors. Having a clear approach to value creation through efficiency, complementarities, lock‐in, and novelty offers companies yet another aspect of successful innovation, and having a positive impact on society, offer yet more things for a business to consider as it invents its innovative business for competitive success in the 21st century.

References

Christensen, C. (2002). The Past and Future of Competitive Advantage. MIT Sloan Management Review.

Kurzweil R. (2004). The Law of Accelerating Returns. In: Teuscher C. (eds) Alan Turing: Life and Legacy of a Great Thinker. Springer, Berlin, Heidelberg.

Porter, Michael E. (1985). Competitive Advantage – Creating and Sustaining Superior Performance. The Free Press, A Division of Macmillan, Inc.

Schumpeter, Joseph. (1934) The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle. Harvard Economic Studies.

Chesbrough, Henry William. (2003). Open Innovation: The New Imperative for Creating and Profiting from Technology. Harvard Business Press.

Curley, Martin & Salmelin, Bror. (2017). Open Innovation 2.0: The New Mode of Digital Innovation for Prosperity and Sustainability. Springer, 5 Oct.

Gimmy, Gregor. (2017) Who will win the BMW Startup Challenge? startupfesteurope.com

Talaja, Anita. (2012). Testing VRIN framework: Resource value and rareness as sources of competitive advantage and above average performance. Management (Croatia). 17. 51-64.

Barney, Jay. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management. 17: 99.

Nonaka, Ikujiro. (1994). A Dynamic Theory of Organizational Knowledge Creation. Organization Science, Vol5 No1 February.

David Teece. Gary Pisano. The Dynamic Capabilities of Firms. Handbook on Knowledge Management pp 195-213. Springer, Berlin, Heidelberg. 2003.

Teece, David. Peteraf, Margaret A. Heaton, Sohvi. (2016). Dynamic Capabilities and Organizational Agility: Risk, Uncertainty and Entrepreneurial Management in the Innovation Economy. California Management Review.

Lucking-Reiley, David & Spulber, Daniel F. (2001). Business-to-Business Electronic Commerce. Journal of Economic Perspectives—Volume 15, Number 1—Winter 2001—Pages 55–68.

Katz, Michael L and Shapiro, Carl. (1985). Network Externalities, Competition, and Compatibility. The American Economic Review Vol. 75, No. 3 (Jun. 1985), pp. 424-440.

NFX, (2017). 70% of Value in Tech is Driven by Network Effects. Medium.com

Farrell, Joseph & Klemperer, Paul. Coordination and Lock-In: Competition with Switching Costs and Network Effects. Handbook of Industrial Organization. Volume 3, 2007, Pages 1967-2072

Amit, Raphael & Zott, Christoph. (2001). Value creation in e-business. Strategic Management Journal, 22: 493–520 (2001). The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania, U.S.A.

Cannon, Tom. (1994). Corporate Responsibility. A textbook on Business Ethics, Governance, Environment: Roles & Responsibilities. Pitman Publishing.

Sgroi, Anthony Jr. (2014). The Innovative Lean Machine: Synchronizing People, Branding, and Strategy to Win in the Marketplace. CRC Press.

Hakimi, Sherry, (2015). Why Purpose-Driven Companies Are Often More Successful. fastcompany.com

Zukin, Cliff & Szeltner, Mark. (2012). What Workers Want. Net Impact Talent Report. John J. Heldrich Center for Workforce Development Rutgers, The State University of New Jersey.

BSR and Aurosoorya. (2018). Advancing sustainability: HR’s role. A research report by the Society for Human Resource Management.

Barbu, Petra. (2018). Doing Well by Doing Good: What We Can Learn From 2018’s Most Innovative Companies. Movingworlds.org.

5 digital trends charities should definitely not avoid in 2019

This JustGiving blog post includes five “trends” (it’s questionable whether these five things are actually trends; a trend is the direction a thing moves or changes not the thing itself, but moving on…) that charities should avoid in 2019. I’m not sure blanket statements about what charities should avoid is very helpful so I wanted to reconsider them.

I agree that charities probably do need more focus, but given that the charity industry is going through massive changes and challenges, not least of which is concerned with how to be more innovative, perhaps the ‘head in the sand’ approach of avoiding things just because they haven’t necessarily reached the plateau of productivity on the hype curve may be counterproductive. There are models for considering new things (such as McKinsey’s three horizons) that can foster discussion rather than shutting down the conversation and prepare charities with a healthy pipeline of innovative ways to achieve their objectives.

Viral campaigns

A bit like buying a lottery ticket instead of learning how to earn money from an actual job every day

That senior management in charities prioritise short term fundraising initiatives in the hope of making a quick buck suggests a misunderstanding either on the part of management or marketers, but I struggle to accept that all the very smart people that I know who run and market charities fall into such an obvious trap.

Virality has a scientific definition. It is an achievable thing with sufficient planning and resources. The ability to understand and utilise vitality in trends should be one of the tools in a fundraisers bag, not at the expense of longer term planning, but as a means of leveraging current events and temporary things that pop up in the consciousness of people.

#Firstfiver was a great example of a viral campaign that could of benefited far more charities than it did if more of them had already considered how to solve the logistical challenges of getting paper five pound notes in people’s pockets into a physical donation tins. A charity that has prepared ahead of time to respond to raising trends, not just by sending a few tweets with a hashtag, but by offering solutions for members of the public to support a charity they might not usually consider could leverage a trend into a significant financial contribution.

So if 99.99% of charities choose not to consider the potential for viral trends in their marketing and fundraising planning for 2019, then that leaves more space for the .01% who do decide to commit to building the capacity to responding quickly to events in a fast changing world in a way that amplifies the trend and achieves their objectives, be they awareness raising, income generation, or mass action.

Digital transformation

Transformation’ implies magical, overnight change

If digital transformation is being communicated as an overnight solution to all a charity’s ills then it is the communication that is at fault, not digital transformation. Just as the industrial revolution took hundreds of years to play out, so will the digital transformation of our society. It already and will continue to touch every part of our lives, from our health care records to traffic management to paying for a coffee. Digital transformation involves transforming technologies, cultures, mindsets, behaviours and thinking. It cannot be thought of as a quick fix.

Charities that don’t adopt the mindset and adapt to this changing world will find themselves irrelevent in the eyes of their staff, volunteers and supporters. Can anyone imagine engaging with a charity only through face-to-face contact because they don’t have a website or use email? No, of course not, because every charity has a website and uses email, so their digital transformation has already begun. To ignore ongoing transformation in 2019 and not embed digital into their strategy, not improve the reach, efficiency, and cost-reduction benefits of online fundraising, not support their staff and volunteers to improve their digital skills, will leave a charity even further behind. Charities should be accelerating their digital transformation in 2019 and beyond.

Bitcoin

There are just three problems with Bitcoin

There are just three solutions with Bitcoin (and other cryptocurrencies of which bitcoin is one of many).

Mining bitcoins does take a lot of energy. Generating renewable energy from wind power had the same inefficiency issue when it was introduced. It cost more to produce the power than it was worth, but pioneers and early adopters used and developed the technology into a viable alternative and soon it will be more cost-efficient to use renewable energy sources than mine for fossil fuels. The more organisations looking at opportunities to leverage the benefits of cryptocurrencies, the more funding will be driven into development, and the more efficient and viable they will become.

Bitcoins are a currency used on the dark web, but far more criminals use cash. Does this mean charities shouldn’t accept cash? Of course not. Criminals using something does not mean a charity shouldn’t use it. There is no logical argument here for charities to not spend time understanding how cryptocurrencies might affect them or be utilised by them.

Third – and this is a big one – people who donate to charities just don’t use it… yet. No one used contactless cards to donate to charities.. until they did. But charities exploring options around cryptocurrencies should involve more than just taking donations, they should be looking at how cryptocurrencies will change their investment portfolio, how it may change banking practice and consequently their finance governance.

Charities might not be committing significant resources to building the systems and skills to take bitcoin donations in 2019, but cryptocurrencies should definitely be in their horizon three initiatives with people in Digital, Technology and Finance thinking about how to handle bitcoin and cryptocurrency in the near future.

Blockchain

Treat blockchain like I’m a Celebrity – Get Me Out of Here! By all means, watch it and follow it, but don’t spend precious work time on it

In the early 70’s when the relational data model was invented lots of people thought it was useless. Why would you want to establish a relationship between two pieces of data? Nowadays relational databases power every charity’s CRM system.

Blockchains are decentralized, distributed, sometimes-public digital ledgers that are used to record transactions across many computers, which although not the answer to every data storage problem, do have some specific uses which can apply to and benefit charities. Where a charity is working with multiple organisations who all contribute data, and all parties want unshakeable assurance that the data is reliable, and those partnerships require that no single organisation is the owner and controller of the transactional record, then blockchain might be a solution.

Blockchain will increase in prevalence over the coming years and become the de facto solution where data needs to be decentralised and distributed across a network to ensure trust in the recorded transactions. So if charities aren’t giving serious thought to use cases for blockchain and would rather continue in the mindset of centralising data under their control and watch reality TV shows instead, then they will find themselves investing in the wrong solutions in the very near future.

Agile

But don’t spend precious time importing agile wholesale when it’s a square peg for a round hole.

Referring to the original manifesto for agile software development as the only source of thinking about Agile is very limited, as is only referring to Scrum when speaking about Agile. Being agile means (among other things depending on whose thinking you’re referencing) getting closer to customers, working in small batches, having short feedback loops, and responding to change. Navy SEAL teams use Scrum to improve ownership among team members. Marketers apply agile thinking when they involve customers by testing ideas ahead of launching a campaign. There are lots of examples of how Agile can be applied to more than just software development.

Charities should most definitely not be avoiding working towards achieving greater agility, “moving with quickness, ease and grace“, as Joshua Kerievsky puts it. Agility is a key competitive advantage that has been realised in almost every other industry. If charities don’t become far more agile than they currently are they run the very real risk of being left behind, not only as an organisation but as an industry. They will quickly be overtaken as more agile startups and businesses move into their markets. There is nothing that charities do that could not be usurped by a business, leaving the charity behind and irrelevant in the eyes of its supporters. Having agility is essential for charities to keep pace with the changing modern world and people’s changing expectations.

 

 

There are lots of other innovative developments in thinking and technology in addition to these five that I also think charities should also be considering in 2019, things like machine learning, 3D printing, co-creation, autonomous teams, digital twins, the quantified and augmented self, AR & VR, voice & virtual assistants., etc., etc. A charity that has all of its focus on the mainstream technologies and thinking of the past is being left further and further behind. Charities need to be exploring all the new ideas they can using a robust innovation model that allows them to extract value at the right point in time.

Thinking differently about innovation

I went to an interesting talk with Twitter and Good Innovation about how to think differently about innovation. They mentioned some really good ideas such as creating “yes-and” environments where no one is allowed to shut down ideas by saying “no” or “but” but instead has to build on ideas.

I think understanding ‘innovation’ as a thing within an organisation can be started by looking for parallels, e.g. learning. Learning is something that is valued by an organisation, so they set up Learning & Development Team who arrange formal training opportunities such as funding college courses, webinars, mentoring, job-shadowing, etc. All of these are important because different people need different opportunities in order to learn. But what this also does is communicate to people that learning is valued by the organisation, which then encourages them to learn by reading a book, listening to a podcast, or talking to a colleague. Learning only happens at work when people can see that the organisation values learning and provides some opportunities, but it’s the communicating that it is valued that is the important part. And that doesn’t happen because a few emails are sent to people, it happens when people can see that an organisation walks the walk rather than just talking the talk.

Innovation can be thought of in a similar way. There needs to be a formal programme for innovation that has dedicated people, budget, strategic mandate, etc., and it needs to deliver innovations, but equally important is that as part of embedding innovative thinking and practices across the organisation it doesn’t isolate itself from the rest of the organisation so much that people think only the innovations team can be innovative. So a part of their work should be encouraging, finding and supporting innovation across the organisation.

Innovation can and should happen in all parts of and at all levels of an organisation, but just like learning, it requires formal programmes and informal opportunities and practices, all of which are valued by the organisation and so valued by people.

Philanthropy Vs. Capitalism: rambling towards understanding giving to charity

Ahead of a fundraising innovation workshop next week, I’ve been thinking again about the differences between philanthropic and capitalistic thinking for charities.

For the purposes of this rambling stream of thoughts about how charities can understanding ‘giving’ in a different way, here’s some definitions:

Philanthropy: private initiatives, for the public good.
Capitalism: private initiatives, for the private good.
(For completeness, Government is public initiatives for public good)

From a Charity (big ‘C’: organisation with charitable aims, rather than small ‘c’: being charitable) perspective, philanthropy is a one-way value exchange, meaning supporters pass value, mostly through financial donations to the charity but don’t receive any value in return. And capitalism is a two-way value exchange, meaning customers pass the value of their cash to an organisation or other person in return for receiving the value of goods or services.

Capitalism, as the dominate economic model in western society, has lots of history and theoretical models behind it to help us understand it and apply some of that thinking to charity fundraising, but first where did philanthropy come from?

Where does making charitable donations come from?

Financial donations to charitable organisations was fashionable among the middle classes in the 19th century, and through the twentieth century, with the shift in social classes and social mobility, making donations became something other classes did too.

This means that the making of charitable donations has always been very closely connected to social class.

The BBC class survey showed the class make up across the UK as:

  • 6% Elite – the wealthiest and most privileged group in the UK
  • 25% Established middle class – the most gregarious and the second wealthiest of all the class groups.
  • 6% Technical middle class – a small, distinctive and prosperous new class group.
  • 15% New affluent workers – this group is sociable, has lots of cultural interests and is in the middle of all the class groups in terms of wealth.
  • 14% Traditional working class – this class group scores low for economic, social and cultural factors, but they do have some financial security.
  • 19% Emergent service workers – this class group is financially insecure, scoring low for savings and house value, but high for social and cultural factors.
  • 15% Precariat – this is the poorest and most deprived class group.

Understanding social class is important in understanding charitable giving as class is made up of income, education, social networks, and social contacts, and all of these things that affect a persons ability and proclivity to donate.

Donating is a social act.

What makes people donate?

Reasons for donating to charity can fit into three broad categories:

  • Purely altruistic – motivated by supporting the good done by the charity.
  • Impurely altruistic – motivated by the expectation of getting some value from knowing they have contributed to the good for the charity.
  • Not altruistic – motivated by wanting to show friends and family that they are a ‘good’ person.

Charities assume, under the philanthropic model, that all charitable giving is ‘purely altruistic’. Capitalistic thinking might say that pure altruism is a myth and that a donor is always motivated to derive some value, even if it’s just feeling like a good person.

Supply and demand in charitable fundraising


“In microeconomics, supply and demand is an economic model of price determination in a market. It postulates that, holding all else equal, in a competitive market, the unit price for a particular good, or other traded item such as labor or liquid financial assets, will vary until it settles at a point where the quantity demanded (at the current price) will equal the quantity supplied (at the current price), resulting in an economic equilibrium for price and quantity transacted.”

The same thinking could be applied to the supply of fundraising products by charities against the demand from impurely-altruistic and not-altruistic supporters. In this context ‘price’ means the value derived by the customer.

Quantity of fundraising products in the market

If there are fewer causes to donate to (either perceived or actual), the value of those causes increases. The value here can be thought of in terms of greater awareness for supporters and so an increased propensity to donate.

The more ‘asks’ that are put in front of supporters, the lower the value of those asks. A flooded market is no good for charities or supporters as it drives down the value of each fundraising product.

Imagine a world with perfect social equality, no environmental damage, and no disease or life-threatening health conditions. The majority of charities would have no reason to exist. Those that managed to find a reason would operate within a high demand market, pushing up the value of their fundraising offer.

Value of fundraising products in the market

This is where social contracts/act of donating comes in. If making a donation meets the needs of affirming a donors values, triggers empathy and connection, allows to let people know they’re doing a good thing, etc., then it has a higher value in the market than an ‘ask’ that doesn’t deliver these benefits.

Would you rather donate £10 anonymously to provide massages for stressed businessmen in Tokyo or to provide nurses for sick children in your local town and be able to post about it on Facebook? Option A doesn’t meet the social contract of donating and so has low market value, whereas option B has a higher market value as it includes aspects of the social contract.

The right number of asks giving the right value return equals equilibrium and so optimisation for the fundraising offer.

However, it often seems that charities, working under the philanthropic model, do a lot of work in trying to get the ‘ask’ right; creating new campaigns, testing images, optimising donation forms of web pages, etc., but do very little about delivering value to the donor. Made a donation? Here, have a thank you letter. Not a great value exchange, if you think about it from a capitalist point-of-view.

So, charity fundraising as an industry, charities, and those who work in fundraising, need to shift away from the idea of philanthropy as one-way value from donor to charity, to capitalism as a two-way value exchange between donor and charity. Once this kind of thinking is embedded, then they can start asking the question: what do donors really want in return for their donation.

The not-so distant future of digital retail innovations

After a few recent discussions around what the future of retail might look like, here’s some future gazing of my own.

Better data sharing leads to greater personalisation

Over the last few years retailers have been working on getting their customer data out of its channel silos to attempt to create a single view of the customer. In the future they will realise that their data is far more valuable if it’s blended with other retailers shopping behaviour data, location tracking data, market research, etc., etc. Big data becomes Huge Data when all of these massive data sets can be joined together and analysed to reach an understanding of an individual to the extent where their needs, motivations and behaviours can be predicted with a practically applicable degree of accuracy.

How might huge data and hyper-personalisation affect the customer?

Personalisation will grow exponentially with every single little detail of every interaction with a business being tailored to each individual customer. The retailers will know what a customer needs, when they need it, and who they are most likely to buy if from before the customer does, and their marketing will lead customers along the happy path to purchase so smoothly they’ll hardly even notice they clicked the buy button. Shopping will become so deeply embedded into life that the idea of ‘going shopping’ will be like going out to the well to get a bucket of water. We don’t do that anymore, we just turn on the tap when we need water and it’s there.

Personalisation won’t just be for the customer, it will be for the business too. It will become a means of connecting with their customers. It won’t be ‘your order is processing’, it will be ‘Alfred is picking your order right now, would you like to watch a live video?’

Artificial intelligence will revolutionise anything that requires thinking

Customer service, merchandising, logistics, finance, in fact every aspect of business can and will be affected by Artificial Intelligence. For a time, AI will be a competitive advantage for those first-mover companies that figure out how to implement it effectively, but the speed of change means that it won’t be long until even the smallest business is powered by AI as much as it’s powered by electricity.

How might AI affect the customer?

The use of AI to take over many of the unpleasant, dangerous, and boring jobs the humans currently do is driving the argument for universal basic income, which would have a massive impact on spending habits in the future.

But even before we get to live in a society where robots do our work for us AI will have a massive, and for the most part, unseen impact on the life of the shopper. Artificial intelligent customer service systems will deal with every customer contact in real time, even being aware of issues before the customer is and only contacting them to tell them that the issue has been resolved. AI customer service will be able to make commercial sound decisions about things like how much discount to offer an individual customer based on their predicted lifetime value and demonstrate with absolute certainty the value to the business of good customer service. AI, and even more so AI utilising huge amounts of data from lots of sources, will make vastly better decisions about all aspects of business because it will understand the far reaching impact a decision will have in a complex system. It will be able to balance the sales that result from stock availability, the costs of distributing the stock, staff availability, customer behaviour patterns, weather, local events that might affect traffic to a shop, etc., etc., to maximize the cost-effectiveness of the business.

Connecting identity to payment will streamline checkout

Traditionally, retail has always regarded ‘who the customer is’ as completely separate from ‘how the customer pays’. This will change as huge data personalisation and AI progresses and customer expectations become more about having a streamlined end-to-end shopping experience that optimises the payment process.

How might streamlining checkout affect the customer?

Clothing shops position their tills to the sides to encourage browsing behaviour, whilst supermarkets line up their tills at the front of the store to make checking out as efficient as possible, and both still struggle to manage queues of people try to give them money. In stores future checkout innovations might be pin entry devices built into baskets that scan items as the customer puts them into the basket, and then the customer simply enters their payment card pin to checkout, or customers having an app on their phone that allows them to walk out the door of the shop with a bag full of items knowing the app will charge their bank account (think the next evolution of Amazon Go).

Online, taking payment could be done using behavioural logic to make educated guesses about whether you are who you say you are. So if you’re making a purchase using a device registered to you, from a location you’ve been to lots of times before, the item is in your size, and it’s being delivered to your work address then the payment system would use statistical modeling to decide if you are who you say you are and then not need you to enter your payment card details in order to complete your purchase.

The decentralization of manufacturing changes economic and distribution models

The use of low cost 3D printing will drive manufacturing into local hubs that can produce products that previously had to be mass produced in the Far East. This will have a massive effect on local economies, the environment, and on the speed at which retailers can launch new products and resupply.

How might 3D printing affect the customer?

Customers will find themselves facing a massive increase in the number of items available and those products will be increasingly made to measure for each individual. Clothing won’t be made in size small, medium and large, it will be made to the measurements the customer specifies. Any and every design of wallpaper, bedding, and wrapping paper will be available. Every possible colour of car, laptop, and inflatable drinks holder will be available. People will purchase products unique to themselves, and retailers will become even more about inspiration and trend-setting to encourage people to purchase with them.

The internet everywhere leads to a mindset of connectivity

Our device-oriented thinking will be replaced with an acceptance that the internet connects all aspects of our lives together. Rather than thinking of our phones as one type of device for doing a certain kind of thing on the internet, IoT devices for a another use, wearables for doing something different, we’ll live in a world where all of these devices will be instantly and always connected and sharing data so that your fridge knows when your going on a holiday that you booked on your phone and adjusts your grocery shopping list accordingly.

How might a mindset of connectivity affect the customer?

This connective mindset will be empowered by the technological changes that in turns drives a behavioural change with people becoming more integrated with the digital systems in their lives, including the heating of their homes responding to the weather, the sat nav in their cars telling them to reduce their speed to allow traffic jams ahead to clear, and retailers having more data about people’s lives to power their AI and personalisation. The internet everywhere will change people’s lives without them really realising it.

Innovation session at Channel 4

Innovation session at Channel 4

Went to an Innovation Session at Channel 4 to talk about the different ways people consume TV content and how Channel 4 can deliver adverts that are personalised and highly relevant, and how important this is when the average person sees 362 ads a day.