08/16/2012 10:28 am ET Updated Oct 16, 2012

The Imperfect Storm: Non-profits Need to Start and End With Customers (Series Post 6)

In our initial blog post, we identified five key shifts affecting the environment for non-profits that have co-mingled with the economy to create the potential for continued rough times. The last post covered Shift #4: Non-profits need to use data to both improve their stories and to tell them. In this final post in The Imperfect Storm series, we'll feature the importance of an organization's customers.

Shift #5: Non-profits Need to Start and End with Customers.

As we explore the final shift in The Imperfect Storm, we turn to customers. Peter Drucker once noted that a product (good or service) is almost never defined by the customer in the same terms as it is defined by the people who deliver it. However, we continue to look at non-profit work in terms of the work plans and quality standards that go into a program. We somehow see the participants as the object of the program but not a core part of what it is and should be.

In successful business, there is a clear distinction between two factors: product discovery and product development. Whether for-profit or nonprofit, a group that goes right from problem statement to the specification, design and building of a product misses the boat. The first step is discovering what customers or participants believe they need and can use. That's product discovery, and it is especially important when customers cannot readily articulate the need nor have any idea of easier options.

A business searching for the best electronic health record is no different than a low income family struggling to find software that helps their kids achieve in school. In both cases, discovery is essential because products are successful only when people choose to use them and use them in ways that work. Most social programs are completely dependent on their participants to change their behavior. When and how they are prepared to make this change is critical discovery. Without it, product development is highly likely to rely on assumptions that prove not to be true.

In addition to customer understanding and customer relationships comes customer importance. In fundraising, we have seen a shift from the historical, campaign-centric efforts to a new focus on the donor. In a campaign-centric world, the organization needs a certain number of people to give money, and if one drops out, another is found as a replacement. In the donor-centric approach, when a donor drops out, we have to find out why and how to get them back onboard. The focus is on the individual rather than on overall totals that often don't take into account how many people substitute for others through the years.

We have observed that non-profits tend to spend little time talking with the people who drop out of their programs. As long as the person can be replaced with another, the numbers still work. If the focus is on the participant (just like with donors), an alarm bell should ring when a person stops coming to a program. When someone has occupied a seat, a bed or some other precious real estate for the majority of a program, the opportunity cost the nonprofit pays is very high. Why did the person leave?

We close this initial series of blogs with a question: what predicts whether an organization will take action to achieve in tough times? Because we are both in the data business, it is tempting to say that knowledge predicts progress. Organizations first define and understand what they should do, and then they do it. But this is seldom the case. Information alone is almost never enough to prompt change. The key to taking action is energy -- the positive energy available to persons and organizations. Energy brings needed stamina to handle the weather and keep on sailing. It brings enthusiasm and optimism that are so usefully infectious. And it yields the ability to regenerate and transform what is needed to reach and surpass safe haven.

In future posts, we will go deeper on these themes, offering specific advice on steps to take. We'll begin that journey with a look at what we call Supporter Shift and a discussion about how to engage tomorrow's donor. In the meantime, download the full paper that inspired The Imperfect Storm blog series.

As a recap, here are the other four shifts:
The Imperfect Storm: Nonprofits Need to Engage Their Donors (Series Post 2)
The Imperfect Storm: Define by Results (Series Post 3)
The Imperfect Storm: Nonprofits Need to Ride for Their Brand (Series Post 4)
The Imperfect Storm: Nonprofits Need to Be Data-Driven (Series Post 5)

Which areas do you think nonprofits can most immediately address?