The good, the bad and the ugly

what the pace of change in digital means for charities

It has become increasingly challenging, over the last 10 years, for many small to medium sized charities to continue to deliver high quality services. Many organisations are struggling to stretch squeezed budgets to be able to provide more evidence of their effectiveness and impact, whilst also supporting more beneficiaries. It’s a brave new world where disruption and innovation have become the watch words of larger charities, and smaller frontline bodies are having to radically redesign both their core operations and delivery models to meet these modern-day challenges.

Pre-crash we looked at ways to enable small to medium sized charities to improve their overall standards in transparency, to improve their governance processes, to better monitor their impact, and to generate and diversify their income to support them to modernise. Yet despite this historic support in skills and capacity development change remains painfully slow. Zoe Amar’s analysis of the Lloyds UK Business Digital Index 2017 rightly highlights the sector has, if anything, become more polarised in recent years. Smaller charities are struggling to meet the competing demands on their time to deliver and to modernise whilst having to do so with substantially less resource.

The explosion of digital investment in both public and private sectors has prompted a step change in the use and application of digital. As a result there is a wider expectation that technology should be used to deliver services and support, amongst both the wider public, and institutional bodies. There is now an increasing implicit expectation that charitable support should be digital by default. This however takes time and money, it frequently necessitates substantial up-front capital investments in infrastructure, culture, and skills in order to be able to make such integrated online services possible. As a result, this presents some very real challenges to a sector that is expected to keep its working overhead costs to a minimum.

Large charities have for the last ten years been modernising their processes with these trends in mind and have commensurately been able to capitalise on concepts that have enabled them to invest in the innovation of new digital services and fundraising offerings. Their overall market share has as a result notably increased over the last five years and many have been astute in creating good partnerships with the private sector enabling them to capitalise on the specialist knowledge and capability these organisations can bring. Large charities, without question, have their own set of digital transformation challenges, often needing to find ways to engage teams of dispersed staff, who are often working in operational silos, and are coping with legacy systems. It is however easier for them to build a case for change to test and build internal capabilities in the use of technology.

It is not new news to say smaller charities are lagging in digital capability but with the current pace of change it is clear this issue needs to be tackled. The work Shift_ and their sector colleagues have undertaken is good news, and it is a timely study to look at more progressive methods of funding and support. The research findings identify some of the practical and logistical challenges charities face in investing in digital, and ways they as institutions can do something to help. It is good news, but with 100,000 charities playing catch up there is clearly lots more that needs to be done.

Innovation Unboxed has been established to try and unpick some of the underlying drivers limiting sector progress in investing in digital capability, and to try and understand what objectively can be done. Having spent the last year speaking to leaders from the largest to the smallest charities there are a number of themes or issues which most people feel are impeding the investment of wider sector development in technology.

1. Funding – It may be obvious but it is incredibly difficult for any organisation to modernise without a consistent level of funding. Particularly when it comes to developing digital services this is a challenge.

2. Unrestricted funding – Understandably donors and funders frequently want a guarantee their monies are only going towards direct delivery of services for beneficiaries, (more so now than ever). Whilst from a funders point of view is eminently understandable, this funding model can cripple smaller charities in particular, meaning they often cannot afford their basic overheads (office etc.), or invest in infrastructure, or for that matter afford their core staff. It is extremely challenging for them to prove the need for up front investments in digital capabilities.

3. New market entrants – There has been a proliferation of new entrants contracting for work in local communities from social enterprises, to government spin-outs, to start-ups, and corporate contracted services. All of these agencies are often competing for the same pool of funds and work as charities. The disruption of the market is good, but there are conflicting drivers in this market place, and some certainly do not put long term support, change and beneficiary needs at the core of their method of delivery. Creative cross-sector collaborations are increasingly emerging but few have broken through to date to be truly sustainable regardless of digital capability.

4. Capacity – There has been much talk about charity capacity in recent years and it has become a particularly challenging narrative that is fuelling a wider public distrust in the sector. Capacity is a messy issue and many problems remain particular to sectors or different sizes of charity:

This list is not exhaustive but it highlights where the most pressing issues lie:

• Cost versus quality – Whilst charities are remarkably resilient many have had budget cuts year on year since 2009 – meaning that many are struggling on the cusp of viability. Many organisations have been heavily pressed to reduce their costs – particularly for local government contracts - in order to be seen as competitive. This has a knock-on effect on the quality they can provide. Non-essential or high risk spend like digital, as a result gets pushed off the radar.
• Reduction in service provision – Many essential organisations, programmes and services have closed down as a result of financial pressures. This has resulted in a significant additional burden on those that remain and any capacity to innovate or strategically develop is correspondingly stymied.
• Governance – It can be incredibly difficult for small highly localised organisations to find charity trustees (who are of course ultimately volunteers), with the right skills and capability to take on board roles particularly when it comes to digital.
• Staffing – Staff are often overstretched with enormously over inflated case-loads. Whilst smaller organisations often do attract capable individuals they cannot provide competitive salaries for specialist roles meaning they do not always have access to the breadth and depth of new skills and expertise they increasingly need.
• Scale – Commissioners are increasingly expecting providers to operate at scale in consortia – which requires different skills and capabilities and more savvy skills sets to commercialise operations, and to look for alternative partnership models and opportunities for social investment.
• Effectiveness – It is of course a great success if charities are becoming more adept in tracking their impact, but it has little meaningful purpose, beyond reporting accountability, if it does not translate into the way they evolve and develop their services. Many organisations are still some way from consciously ensuring they have research driven insights driving service development and innovating what they do accordingly.
• Innovation – It is increasingly critical for charities to consciously plan how they innovate and develop their services. The ways in which people engage with one another are increasingly fragmented. So it is becoming increasingly challenging to make sure service design is accessible and appropriate whilst being true to the core of what they do.

With these issues in mind Innovation Unboxed wants to look at practical and effective ways to support small to medium sized charities and other bodies working in this space to meet these challenges. We are sector agnostic and have a particular interest in building digital capabilities. We work with partners and colleagues across sectors to this end.

Over the next few months we will be highlighting sector issues, success stories, and insights as we speak to leaders from across sectors and disciplines. We will be asking them to provide their thoughts on ways in which we can all work together to make a commitment to solve targeted problems and to practically tackle these challenges to enable a step change in digital.