May 4, 2016

Technology as a Strategic Asset

For the past year, we’ve been thinking a lot about how new technology is transforming organizations.

To date, the primary use of technology has been to increase the efficiency and productivity of their existing work. While productivity will always be important, technology is now also transforming how we work and how we engage with our constituents. Technology is now more than a supporting toolset. It has become a strategic asset that can help nonprofits accomplish their goals and fulfill their missions.

We have identified four models of the ways we apply technology that directly or indirectly result in transformation.

Enabling—Technology makes it possible for organizations to pursue strategies that would otherwise be too labor-intensive or not cost-effective. Examples of enabling technology include micro-strategies, such as micro-lending and micro-volunteering; and personal fundraising.

Substitution—Technology replaces existing non-digital approaches. Examples of this model include email webinars and video conferencing.

Disruption— Within this model, technology introduces new models that fundamentally change the dynamics of communication, content, relationships, and commerce. Crowdfunding; apps that displace email and phone communications; and the sharing economy, which displaces traditional providers are all based on a disruptive model.

Data Byproducts—This model, typified by the data generated as a byproduct of technology, represents an asset beyond its original purpose. Examples include Google search term analysis used to predict flu outbreaks; collective fitness band data used to target health initiatives and measure outcomes; and cell tower and GPS connections data generating real-time traffic congestion maps.

All of these models are in play, to one degree or another, in most nonprofits, and will, over time, have significant impacts on how nonprofits raise funds, design and implement programs, engage with donors and other constituents, and measure impact and success.

Intelligence

Intelligence and customization is a core asset for nonprofits, and part-and-parcel to the use of technology as a strategic asset. Intelligence is the engine that drives advanced applications like marketing automation. When organizations have a deeper understanding of their constituents, they’re able to engage them in more meaningful ways through personalization, targeted communication and content, and more direct involvement in organization initiatives. That in turn builds stronger relationships, leading to greater success in fundraising and other programs.

The building blocks of intelligence are data and analytics. Of particular importance are data on donor behavior, such as knowing which emails an individual donor reads and responds to, what website content she views, and whether she participates in advocacy and other programs. Many nonprofits already use data overlays such as political indicators and use of social media to enrich donor profiles. The emerging Internet of Things offers the potential to greatly expand our knowledge of donors and constituents, as well as to help refine and measure the outcomes of programs.

Data-driven systems such as marketing automation use donor demographics and behavior data to tailor content and messaging to help the organization engage donors. The next wave of analysis—predictive analytics—will go further, looking forward to predict behavior and understand the dynamics of the environments in which the nonprofit operates. This will enable organizations to refine program strategies to better achieve desired outcomes as well as engage donors in more meaningful ways.

A mark of successful organizations will be their commitment to rich data and analytics.

Third Party Applications

Nonprofits use a range of capabilities to engage with donors and constituents and to provide information and services. While donor management systems (DMS) may offer some of these capabilities, many nonprofits are turning to third party applications to augment those capabilities. Findings from the latest Lehman Reports™ Donor Management Study clearly show many nonprofits contracting with third party providers. In fact, with the exception of fundraising capabilities, these nonprofits are at least as likely to use a third party application for each of the other capabilities covered in the study as they are to use the capabilities resident within their DMS. Nearly 60% of nonprofits contract for email marketing capabilities; just 20% rely solely on the email capabilities found within their DMS. This extensive use of third party applications presents a challenge, since behavioral data reside largely within those applications.

For most nonprofits, the DMS is the primary database of donor information and is the hub for third party applications. These applications require donor information resident within the DMS, such as demographics and contact information. In turn, the donor record needs to update to reflect activity that takes place within the external application. For example, a third party email system accesses segmentation and email addresses in the DMS, then writes back information about the individual donor when they open the email and click on embedded links. The capability of the DMS to support full integration with third party applications is therefore a critical purchase decision factor. Based on our findings from our studies in the association market, most organizations probably have not integrated these applications with their DMS. In some cases, the DMS does not fully support these types of integration, or would require expensive customization services to do so. In others, the organization simply has not made the investment to develop the integrations.

Graph of the use of third party applications

Strategy Mindset

Our research also shows that a strategy mindset within organizations correlates with greater success. A greater focus on strategy and outcomes enable organizations to take full advantage of the expanded role of technology, and to remain flexible to embrace new approaches as they emerge. More than 60% of nonprofits that have a formal and written engagement strategy also experienced a year-over-year growth in fundraising. In contrast, only one-quarter of those who have no plans to develop an engagement strategy plan experienced increases.

Graph demonstrating the relationship between an engagement strategy and changes in fundraising

Today’s donor management systems are much more than simply a means to store donor information and provide basic fundraising and communications capabilities. They are the organization’s hub for specialized applications and the focal point for intelligence about donors and constituents.

To fulfill this role, your DMS needs to work well with other applications and support bi-directional data flows, interface with advanced analytics systems for needs beyond standard reporting capabilities, and be flexible enough to accommodate new models and applications as they emerge in the months and years ahead.

The Lehman Reports™ 2015-16 Donor Management Systems Use and Satisfaction Study is in its third year and is undertaken in collaboration with NTEN. The study gathered information from nearly 1,300 US-based nonprofits on questions such as: What are the most commonly used donor management systems? How often do nonprofits upgrade or change their DMS? How satisfied are they with their choices? You can download a summary of study findings in this free downloadable report

Tom Lehman
Tom Lehman is president and founder of Lehman Associates, LLC, a strategy and research firm located in Alexandria, VA. Lehman works with nonprofits on technology strategy and with technology providers on market and competitive intelligence. The Lehman Reports™ 2015-16 Donor Management Systems Use and Satisfaction Study is in its third year and is undertaken in collaboration with NTEN. The study gathered information from nearly 1,300 US-based nonprofits on questions. The Lehman Reports series also includes the annual study of Association Management Software (AMS) Use and Satisfaction, and the Association Technology study of use of third-party applications beyond the AMS. More information available at www.LehmanReports.com