Are you taking advantage?Karen Beavor | Georgia Nonprofit NOW, Winter 2014
Warren Buffett made an average of $37 million every day in 2013.
That headline jumped out at me recently as I was considering my own end-of-the-year giving. I had recently read a biography of Buffett, and I think his approach to investments translates well to how we, as nonprofit professionals, should think about being good investment choices for donors. Buffett’s simple formula for investing:
“Our investments continue to be few in number and simple in concept: The truly big investment idea can usually be explained in a short paragraph. We like a business with enduring competitive advantages that is run by able and owner-oriented people. When these attributes exist, and when we can make purchases at sensible prices, it is hard to go wrong.”
This is great wisdom to think about in reverse. How does your nonprofit stand up to Buffett’s formula? Does your organization provide enduring competitive advantages? Is it run by people who are capable and who “own the mission”?
You are not alone if you have ever wondered what a competitive advantage really is and what you do with it. Let’s start with what it is not. Your competitive advantage is not a checklist of strengths. Good reputation in the community; skilled staff; well-respected leader; knowledgeable about the issues; strong donor list; client focus: most relatively successful nonprofit organizations share those strengths. Your competitive advantage is what your organization does better than anyone else.
Your competitive advantage is not a checklist of strengths. It’s what your organization does better than anyone else.
The “enduring” aspect refers to your ability to continue doing those things over a long period of time. For example, one could argue that the unique competitive advantage at McDonald’s is operational excellence, enabling them to deliver a cheap, consistent experience, quickly and in large volumes, anywhere their customers happen to be. Other organizations get their leading edge from specialized talent pools that drive innovation and development—think Johnson & Johnson or Google. Nonprofits can develop advantages in operations or innovation as well, but we can also focus on dimensions like strategic partnering skills and public influence.
The new breed of donor is investing Buffett-style, seeking organizations with true and lasting core competencies. The dream, for us and for our donors, is exactly as Buffett describes it: “When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
Want forever donors? Cultivate a competitive advantage and use it to create sustainable results. As always, GCN’s mission is to help you succeed. Please call on us in this new year to be your partner in navigating your leadership, management, and governance challenges.
Karen Beavor is President and CEO at the Georgia Center for Nonprofits.