The nonprofit landscape is in an unprecedented state of flux. Because nonprofit organizations may find themselves in radically different institutional or economic contexts in just two or three years, the standard five- to ten-year planning period is often obsolete for some institutions. Others will continue to benefit from it until they have built a sound internal strategic perspective that is widely, if informally, understood.

The Changing Landscape of Nonprofit Organizations

Unsurprisingly, the Internet is partly to blame for exceptionally dynamic sectoral changes. The costless and instant flow of information has redefined the way socio-economic priorities emerge. While nonprofits may successfully build upon the apparent immediacy of the issues they embrace, they need to be prepared for the quickly shifting attention of their Boards, staff, supporters and external observers as well as of the public, and the sometimes volatile and unpredictable impact of such changes.

Another substantial factor is the shifting boundary of the local and universal. The relevant geographic context for nonprofit organizations is greatly expanding. To some extent this has always been important for advocacy groups with global stakeholders as well as for the top tier organizations in education, science and the arts. But today, more and more nonprofit and academic institutions operate in a global context peppered with swift and mostly unpredictable changes in almost every corner.

Over and beyond the changing pace of nonprofit organizations on the ground, philanthropic attitudes and donor agendas are much more in flux, creating a less predictable and more competitive environment for funding for many nonprofit organizations. With the emergence of social entrepreneurship, corporate social responsibility and impact-oriented funding policies, sleepy nonprofits are at risk of losing their appeal, diminishing their impact and thereby under-achieving their mission.

In addition, the 2008 fiscal crisis and subsequent uncertainty in global capital markets have taken their toll on the nonprofit sector. Public funding of virtually all nonprofits has decreased, drastically so in some sectors, and reductions are likely to continue for at least the next several years, if not longer, in view of the continued unsettledness of both the U.S. and global economies. Since the pressures on federal, state and local government budgets overall are unlikely to be reversed in the near future, the business models of many nonprofits will need to be reconceived—in some cases drastically—in order to ensure continued financial stability and organizational relevance.

Many of these changes in the overall nonprofit landscape have been increasingly evident over the past several years. What is new—and significant—is their acceleration and the consequent increase in attention to the role, value and impact of the nonprofit sector by the media and the general public.

New Risks at Colleges and Universities

Given their size, institutional landscape and long-term missions, academic institutions traditionally change less rapidly than other nonprofits. However, with the digital revolution now at the very gates of academe, significant change can be expected in the very near future. Massive Open Online Courses (MOOCs), courses taught by faculty in different countries, and the rapid increase in prestigious research universities and liberal arts colleges joining organizations that provide on-line courses are all examples of how new platforms are crossing over traditional geographic, disciplinary and institutional boundaries. Access is expanding rapidly, with student enrollment numbers to on-line courses in the millions. The existing institutional structure is already struggling to accommodate these substantial changes, and these are obviously only the first waves of disruptive change in the sector.

Just as important, in many respects, higher education has a failed financial architecture that is unsustainable going forward. Institutions face unrelenting budgetary pressures from the combination of recent rapid tuition rate increases substantially above the general rate of inflation; the growing debt burden of students and families; reductions in government funding of research and financial aid; continuing cuts in state appropriations for public institutions; high levels of institutional debt; and stagnant capital markets. At the same time there is increasing competition for the best students, knowledge is exploding in a variety of fields and many graduates are having difficulty in finding jobs.

While there is recognition of the significant value of both undergraduate and graduate education in the evolving knowledge economy of the United States, there is also a growing public questioning of the value of higher education and concern as to whether college is worth the cost.

As these challenges and pressures increase, institutional governance will become even more complex and demanding, requiring gifted leadership, thoughtful attention to communications and clear-headed, meaningful engagement with the full range of institutional constituencies.

Perhaps the most significant challenge to higher education institutions is the unrelenting acceleration of change, with new issues, problems and challenges often arising suddenly both on campus and around the world. While this in many ways is simply a defining characteristic of the contemporary world and its instantaneous inter-connectedness, it places institutions in positions of potential serious vulnerability.

How Can Strategic Planning Effectively Meet Such Vast Challenges?

In the past two decades, nonprofit strategy consulting has largely been defined by commodity approaches that pay less attention to the individuality and specificity of organizations and simply apply a highly standardized approach. Far too often, strategy consulting has been built on reheating the standard “five-year strategic plan,” going through the motions of reviewing the mission and deciding upon four or five major strategic objectives. As a result, too often many strategic plans have ended up on the proverbial shelf. In many quarters, strategic planning has a bad name; the prospect of engaging in strategic planning is seen, by some participants in the planning process, to be somewhere between eating one’s vegetables and going to the dentist.

We believe that every nonprofit organization has its own history, culture, situation and personality. A strong understanding and appreciation of such particularities are key to framing clear strategic directions that will be useful in setting institutional directions. Close attention and thoughtful understanding of these specifics will better ground the planning process and, most importantly engage the participants.

A commoditized model of strategy consulting cannot accommodate the time and skills to actually understand the mission and values of the organization it is advising or the specific challenges the client faces. Further, a commoditized model typically is not informed or coordinated by skillful professionals who are knowledgeable about best practices of other institutions, are aware of larger secular and systemic trends and challenges, and who can help institutions chart bold but thoughtful strategic courses.

Thinking and acting strategically are critical in a world defined by rapid change, unpredictable events and new forms and means of communications. The institutional ship may be sea-worthy, with a superbly skillful skipper at the helm, able and willing crew and adequate supplies. Without a clear chart and an agreed-upon destination, however, it will be subject to the vicissitudes of changing winds and currents, and runs the risk of floundering in the water or unexpectedly arriving at an unexpected—and possibly undesired—location.

The Continued Role of Traditional Strategic Planning

For many institutions, “traditional” strategic planning is still critical in clarifying mission, building consensus around identity, considering the impact of significant external systemic changes and laying out a bold vision for the future—thereby grappling with the fundamentals of institutional positioning and aspirations.

This foundational work is essential for organizations that do not have a tradition or history of strategic planning or strategic thinking, may not have strong healthy cultures, or are confused about who they are and what they’re doing. For these institutions, strategic planning is often a kind of “Trojan horse” that facilitates exploration and examination of complex and sensitive issues in ways not otherwise easily available. It also allows institutions to (re)focus their perspectives, strengthen their organizational cultures, collegially establish priorities, clarify identity, and marshal institutional energies.

In such institutions, widespread engagement of constituencies throughout the planning process is particularly important, so as to ensure effective understanding, real ownership and active support of the agreed-upon strategic directions. Such engagement inevitably generates much more interest in both the process and the plan; often leads to far better ideas; and makes the process a shared endeavor.

Traditional strategic planning, when done thoughtfully, allows organizations to better understand the context in which they operate, as well as the risks and opportunities of that context, while ensuring a continued focus on key strategic considerations. But these organizations need to use their strategic planning as a platform to remain nimble, become more analytically sophisticated and promote innovation.

Several specifics:

• Including explicit criteria by which to evaluate new opportunities, guide resource allocation and consider alliances with other institutions. Doing so will permit flexibility of action while maintaining clarity of overall institutional focus.

• Creating mechanisms that will allow the organization to be highly supple in anticipating or responding to rapid change. Such mechanisms might include explicit commitment to supporting experimentation within the organization or building an internal laboratory to test out innovative ideas. In effect, these mechanisms build ongoing internal strategic planning and experimentation into the heart of the organization.

• Ensuring ongoing monitoring of progress towards strategic goals through annual report cards or dash-boards, creating a standing committee charged with reviewing key metrics regularly, and periodically reviewing the continuing relevance of the plan itself.

• Making institutional risk assessment an ongoing focus at both the Board and executive level in order to (1) better understand high-level strategic and systemic risks arising from the external environment and (2) place on-going operational and financial risk assessment in a larger context.

Moving Beyond Traditional Strategic Planning

Other institutions may be strategically better positioned by geography, distinctiveness, competitive strength and financial stability. They also may have clarity of core values, cognizance of institutional history, openness to current and prospective possibilities and decision-making supported by analytic rigor.

These organizations may not need to regularly undertake traditional strategic planning because they already have a clear internal strategic design that encourages innovation and entrepreneurial experimentation. They largely understand their context, have a capacious enough strategic framework to quickly adapt to changing circumstances, and have the appetite and confidence to consider bold strategic moves that (re)define their institutions. They are also analytically sophisticated, fully understand their internal cost structure, and have rolling longer-term financial plans. They are expert at strengthening and extending their brands and understand the role that new media can play in these efforts. And sophisticated fundraising is an integral part of their DNA.

These organizations are more likely to focus on more powerful strategic initiatives, in no small measure because they can do so from firm strategic foundations. Thus, they may be intent on developing significant institutional alliances with other, strong, strategic partners that can leverage their program capabilities, geographical positioning or service delivery. They may be undertaking extensive physical expansion, both in their immediate vicinity or far beyond their neighborhood. They are likely to be exploring the possibilities of technology to reach new audiences, extend their virtual reach and augment their central business model. And they recognize and embrace the power of sophisticated marketing, outreach and visibility to strengthen and deepen their brand, influence and impact.

These organizations are defined by continued strategic thoughtfulness, ongoing alertness about changing circumstances and comprehensive, sophisticated institutional risk assessment. They view the world through a strategic lens which gives them greater insight into the possibilities and challenges and they are always alert to the need to adjust their strategic lens as conditions change.

The Continuing Importance of Thoughtful Strategy Formulation

We remain convinced that strategy formulation is more important than ever. Every organization should have a well conceived internal strategic perspective that is understood by both the Board and executive leadership. A deep understanding of the overall institutional context and social environment as well as a clear strategic perspective are key to successful strategy formation. Individually tailored project teams, interdisciplinary expertise and flexible arrangements are ever more important. Leadership experience, seasoned consultants and a vigilant outlook on socio-economic processes will prove to be the central ingredients of high-impact, large-return strategy planning.

Anthony Knerr and Viktor Böhm are Managing Directors of AKA | Strategy.