Non-profit value strategy with the Delta Model

Non-profit organisations compete for attention, funds and support. For lasting success, especially in fundraising, they must work out unique selling points that make a clear difference.

The competition is by no means only with established organisations with a similar mission. Political and social campaigns, corporate social responsibility initiatives and corporate initiatives increasingly occupy the traditional fields of activity of NPOs. This makes the question of what one's own particular contribution is a strategic task.

Arnoldo C. Hax, a long-standing professor at the Massachusetts Institute of Technology (MIT), presented the Delta Model as an approach for commercial enterprises. It is intended to prevent services from becoming interchangeable mass goods (commoditisation) and to enable close customer loyalty, customer bonding.

The focus is on understanding what really matters to individual customers. On this basis, attractive, customer-specific value propositions are developed and implemented. The model has three strategic positions: best product, total customer solutions and system lock-in. For NPOs, Hax adapts the terms for the eight stages that belong to these positions.

Two stages relate to the best product position. Administrative efficiency describes the need for every organisation to manage resources and assets efficiently. Differentiation requires a clear awareness of one's own services and products, their special features and their originality.

Three stages lead to total customer solutions. Acquiring and developing the customer means understanding customers and stakeholders with their needs and expectations of the organisation. Shared knowledge means recognising one's own core competencies and existing knowledge and passing them on in such a way that added value is created for customers and stakeholders. Breadth of the overall offering aims to identify all needs creatively and meet them from a single source, using the extended organisation.

Three further stages form system lock-in. Distribution channels concern the routes and forms through which an organisation reaches its customers and stakeholders exclusively. System support means exclusive systems and platforms with which customers and stakeholders can carry out their task better. Intellectual value stands for the development and safeguarding of unique ideas, values and solutions that make the organisation unmistakable.

In the Delta Model, NPOs usually start out already in a system lock-in position. It results from a protected environment or even from an existing quasi-monopoly. In such a situation, the organisation has probably not paid the greatest attention to cost and resource efficiency.

The first development step therefore aims to improve the efficiency of service delivery and to build an effective cost infrastructure. In the second step, the organisation develops a clear awareness of its services and their degree of differentiation.

Then it moves towards the total customer solutions strategy. To do this, it carefully identifies all relevant customers and develops an interesting, specific value contribution for each of them. Only after this process, according to Hax, can it strive for a system lock-in, which would then be well earned.

The work begins with three questions: who are the organisation's customers or stakeholders, what different needs, behaviours and value expectations do they have, and which characteristic groups can be formed?

Two points are particularly important. The concept of the customer must not be defined too narrowly. In this understanding, customers are all stakeholders who have an interest in the organisation or a claim on it, that is, far more than the recipients of the actual service.

The segmentation criteria are just as decisive. Depending on which criteria are used, the result tends in a particular direction. Intensive, critical discussion of the distinguishing criteria is therefore an essential part of this step. It ensures that the segmentation reflects more than “the old world”.

The analysis of core competencies goes beyond listing strengths. What is sought are the bundles of capabilities, deeply rooted in the organisation and developed over several years, on which its success essentially rests.

An effective core competence meets three conditions. It leads to a benefit for customers and stakeholders, even if they cannot trace the perceived benefit back to the core capability. It leads to differentiation, that is, it can neither be copied nor bought in the short term; building it usually takes several years. And it is not tied to any particular service or area of responsibility: it can be transferred to other fields and expanded.

With this picture, the requirements of the individual groups can be compared with the organisation's own core competencies. This comparison is an essential basis for the value proposition for each target group and thus for strategic positioning.

For each customer or stakeholder group identified, a value proposition is defined that is based on its specific needs, expectations and requirements. It answers the question of what the individual service packages for the target groups look like.

In addition to the actual services and products, the value proposition includes the design of the relationship between stakeholder and organisation, all time spans in providing and using the service, questions of quality and satisfaction, accompanying services and questions of image.

A value proposition is therefore always a unique combination of different value criteria that, from the perspective of customers and stakeholders, influence the perceived added value and consequently satisfaction. This step requires precise knowledge of one's own services, their attractiveness and their differentiation potential.

Getting started can be worked on in three one-day workshops with the organisation's key players. The first is preceded by an organisational check covering self-understanding and purpose, organisational development, strategy, structure and current challenges. In the workshop, segmentation criteria based on needs and behaviours are developed. The concept of customers and stakeholders is clarified, and the stakeholders are characterised on the basis of the criteria and grouped into clusters.

The second workshop is devoted to core competencies. Participants work out the successes of recent years and their causes, bundle capabilities into core competencies and review them, including by means of a failure analysis.

In the third workshop, a common structure for describing the value proposition is agreed first. Then the value proposition is made concrete for the identified clusters, taking the core competencies into account. Finally, the individual and organisational development needs required for implementation are derived.

With this approach, an organisation's established frameworks of observation and evaluation can change fundamentally, so that new opportunities come into view. Segmentation provides insights into fundamental needs and forms the basis for unique service packages built on existing core competencies.

Organisations that develop a new view of their target groups recognise where they are competitive and where they are not. This often leads to intensive discussions about the extent to which core competencies, structures, lived culture and human resources meet current and future requirements.

A suitable architecture for the strategy process, in which the important key players are involved, increases the capacity for strategic thinking and action and fosters willingness to support necessary changes. The question of strategic differentiation shifts attention from day-to-day operational work to the organisation's questions about the future.