This summer, the Stanford Social Innovation Review released an article entitled “In Search of the Hybrid Ideal” by Julie Battilana, Matthew Lee, John Walker, and Cheryl Dorsey. In the article, the authors identify four challenges for nonprofits that seek to combine aspects of a classic charitable organization with features of a commercial enterprise.  While limitations to legal structure and financial markets create roadblocks, the more interesting issues and opportunities lie in the realm of strategy.

– Blurred lines create more options and commonalities – The boundaries between the traditional sectors – nonprofit, private and government – have been blurring for years now.  As the authors note, the current recession created an opportunity for individuals to address a wider variety of social issues through hybrid models.  As a macro-disruptor, the recession accelerated the prevalence of these new approaches.  The formation of a new “common space” between the social and commercial sectors is gaining wider acceptance as more social entrepreneurs deploy creative solutions to long-held challenges – and more companies look to make a difference as well as a profit.  As L3C’s, B-Corporations, and social enterprises gain traction in the marketplace we’ll find we have more in common than ever before.

– No more false dichotomies – Most nonprofits need a profit motive, too.  It’s time to quit bashing that concept.  If you don’t earn a profit then you won’t be able to give raises, keep up with rising health insurance premiums, invest in better technology, or proactively design the next era of programs to meet your mission.  That’s what we in the private sector need to do, too.  If we don’t earn a profit to reinvest in operations, or repay debt, then we stall out. We also need to deliver on mission.

– Welcome to the era of value capture and creation – Hybrid organizations create and capture social and economic value.  Doing so requires a well-designed business model – one that aligns itentionally with strategy.  A long-held truism in the private sector, the nonprofit sector is now realizing that value-creation is key to business model design and strategy development.  We couldn’t agree more.  The concept is interwoven into our definition of the nonprofit business model.

– Listen to the folks in HR, it is always about talent – Every organization, regardless of sector, needs to attract and retain the right talent.   Staff and board members need to advance a dual bottom line.  Truth be told, I wonder how much of a lingering challenge this is for nonprofits today.  The recession created a learning crucible wherein nonprofit boards and staffs found that without strong financial underpinnings even the most compelling mission would go unfulfilled.

– Hello, associative thinking! – Strategic leaders are skating to where the puck is going to be – spotting the trajectory – and then guiding their organizations to that destination.  The ability to make connections and cognitive leaps is called associative thinking.  Those of you looking to “hybridize” your nonprofit will need to stay steadfast in your messaging around the need to change and the benefits to be realized for your community and organization.  If hybrid start-ups are building their cultures from the ground up and hiring fresh talent, then what is an established nonprofit to do?  Get ready to manage change.

– New or newly applied? – I can’t help but think of nonprofits that have historically combined mission and commerce.  The field of arts and culture is filled with examples.  The challenges faced by the Colorado Symphony have been headline making reminders of the need to strike the right balance.  Others that rely on ticket sales or other commercial income sources have long had to address these same issues, and more so today as they seek additional income streams.  Let’s not miss the opportunity to learn from our colleagues who have been down this road before.

How is your orgnaization taking advantage of this era of dualities?