This week, IDEO announced they will be spinning out IDEO.org as a standalone nonprofit organization this fall under the leadership of Joceyln Wyatt and Patrice Martin.
IDEO, arguably the world's leading innovation consultancy, is most widely known for its breakthroughs in product, service, space, and interactive design. It is hard to find a company heralded as innovative—or that aspires to innovate—that hasn't worked with IDEO.
IDEO CEO Tim Brown hired Wyatt several years ago to build out their social innovation domain. She was charged with creating a profitable (or at least, budget-neutral) practice using human-centered design to address societal needs.
Foundations with appetites for innovation, like the Rockefeller Foundation, hired IDEO for projects that explored the application of design thinking to social issues. They also pushed IDEO to democratize design thinking to make it accessible to a much larger range of social entrepreneurs around the world who could not afford IDEO's rates.
The desire to spin out the practice as a nonprofit was apparently driven by several objectives, but a primary one was the ability to continue to collect funding from foundations. Due to federal regulations, foundations have limitations on how they can fund commercial enterprises and still classify it as a charitable purpose.
IDEO is not the first blue-chip professional services firm to spin off a nonprofit arm. In 2000, Bain & Company incubated The Bridgespan Group with deep financial and human capital start-up support and continues to provide funding and access to technology resources at below-market rates.
Over the last 10 years, Bridgespan has evolved and grown tremendously, even through two recessions. Today it is an independent, $35 million-a-year organization with 180 employees across three offices. The firm is widely respected and engaged by the top foundations and nonprofits in the nation. Meanwhile, Bain & Company continues to provide millions of dollars of pro bono resources to the community in other capacities.
Bridgespan's success was stimulated in large part by frustration in foundation board rooms across the country that wanted to see their potential and the potential of their grantees better realized. Foundations have poured billions of dollars into the nonprofit sector, and yet we still face many of the social, economic, and environmental issues we did decades ago. For boards populated with corporate executives, a shot of world-class management consulting might be just what we need to spur progress. Spending a couple of hundred thousand dollars on Bridgespan was not a hard sell.
Bridgespan can't claim to have single-handedly resolved these challenges, but it certainly has helped bring a level of unprecedented rigor to the sector. While not all their work has been transformative—or even been actionable—the thought leadership gleaned from serving nonprofits and foundations has set the agenda for nonprofit management. Their insights have changed many conversations and helped steer resources to investments with greater impact.
IDEO.org enters the scene with a similar value proposition. Foundations remain frustrated by a lack of progress, and design thinking, the core of IDEO.org's approach, presents another tool familiar to corporate executives that claims to solve problems by uncovering the latent needs, desires, and attitudes of customers.
Is the challenge in the nonprofit sector perhaps that we don't understand these latent needs and therefore aren't designing solutions to really meet them? No wonder we feel stuck. IDEO.org will offer foundations an opportunity to expose their grantees to the real needs of the community.
It is a compelling arrangement. I was sold when I hired a former IDEO executive, Laura Weiss, to run Taproot's programs and have been pleasantly surprised by the transformation in our organization. We are approaching problems differently and having a lot more fun doing it.
The reality is that nonprofits are often far more connected to their clients than companies are to their customers, and I would argue that the nonprofit sector is at least as innovative as their commercial brethren.
The nonprofit community needs a voice that can celebrate our triumphs in addition to tools that can help us use latent talents to become more and more adept at providing powerful social innovations. This is where IDEO.org can make a major impact. It will be important for them to learn from Bridgespan that the primary source of their value is not in the consulting work but in collecting broader insights about the sector and being a strong proponent for the nonprofit point of view.