Nonprofit Sustainable Competitive Advantage

In both the for profit and nonprofit business environment, the keys to sustainable competitive advantage are a firm’s resources, including assets, organizational core competencies, knowledge, and processes. Professor Michael Porter (Harvard) theorizes that in order for these resources to create a competitive advantage they must have four characteristics:

The resources must be valuable. The value of an organizational resource is the degree to which it contributes to efficiency and effectiveness.

The resources must be rare. If many organizations have the same valuable resources, they can replicate your advantage.

The resources must be imperfectly imitable.  They must be impossible to duplicate. This may be due to sheer difficulty, actual impossibility, or because it would be cost prohibitive.

The resources must be nonsubstitutable.  This means that your resources cannot be replaced, and the use of other resources would not produce the same value.

It isn’t easy for a nonprofit to create a sustainable competitive advantage. Society expects nonprofits to avoid competition of any sort. Our history speaks of collaboration, scarce resources and community, a combination that is the antithesis of competition. However in this economic climate charitable, educational, artistic and other types of not-for-profit organizations are struggling with declining fee and grant revenue, decreasing charitable contributions, increased operational and program costs, and increased struggle for limited new funding. In order to remain viable, nonprofits must compete. But competition doesn’t have to be aggressive, as is sometimes seen in the for profit environment. A nonprofit can compete by demonstrating value to its clients/customers in ways that distinguish it from other, similar organizations.

But if we are all performing meaningful and collaborative service in the spirit of our missions, how does one organization set itself apart from the pack?

No matter what your mission is or the types of programming you offer, I suggest there are five steps that can help a nonprofit gain a sustainable competitive advantage: 1. Hire competent employees and developing them into superstars. 2. Use organizational knowledge and skilled analysis to accurately determine what stakeholders want or need. 3. Meet emerging needs by creating innovative systems and programs. 4. Develop organizational competencies in areas that increase efficiencies. 5. Identify target outcomes and meet them to prove you are effective.

Nonprofits must compete to remain viable. It does not diminish our mission to create rare, imperfectly imitable, nonsubstitutable and valuable resources.  In fact it creates value by demonstrating our worth to the community. This form of competition is not a necessary evil; it is simply necessary.


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