Funding For Purpose Innovation
Australia ranks 7th out of 25 OECD countries in innovation. This is from a study of innovation active businesses in Australia. How does our for purpose sector or not for profit and social enterprise sector rank globally? It doesn’t. Why? Because we don’t even bother to measure how innovative our sector is, globally or locally. Peter Drucker who said “what gets measured gets managed”, would say we clearly haven’t made much of a go of managing innovation in the for purpose sector.
Perhaps I’m being rash or somewhat hyperbolic. We have some important innovation awards and industry awards and we used to have a not for profit innovation index as recently as 2017. I know because I went to one of their events! It was small, but meaningful and provided an incentive and platform for not for profits who innovated to be rewarded for their efforts and to set an example for the rest of the sector. This isn’t to say that innovation isn’t happening in the sector. It surely is.
Let me take you through some of our key challenges as a sector, which are: increasingly the visibility of for purpose innovation, properly resourcing and rewarding this vital work and finally re-conceptualising how we prioritise, value and fund innovation efforts sustainably.
Mycelium, networks and surfacing best practice
It is happening at the coal-face and surfacing often at medium to large not for profits and social enterprises who have the funding, reputation and courage to share their innovation projects publicly. But much of it is hidden underground like mycelium. Mycelium is a breathing connected organism, much like how we are all connected through our neighbourhoods and activity. If we look hard enough in the right places we can find them.
These places are often hidden communities of practice or practice networks, where collaboration can thrive. This is important and should be promoted and further developed. These are places where trust has developed to the point where there is no fear of theft, attempts at replication or lifting others intellectual property. Sacred spaces where innovation practitioners and leaders work together for the benefit of the sector and the community.
Whilst mushrooms can exist happily underground and don’t need inspiration to grow, humans need sunlight and an opportunity to share our great works so that we have things to aspire to. When great innovation efforts happen, succeed or fail, open spaces are needed where these efforts can be shared, celebrated, discussed and learned from. I wonder how much faster we could progress as a sector if we had an open community space to share what we are working on and what works and what doesn’t work. This would create opportunity for inspiration, collaboration and less time spent on things that may not be great or executable ideas.
This can be modelled on existing academic networks and communities, but be far more practical and applied. I don’t have to imagine too much here, because for a long time the UK has utilised “What Works” communities and networks to synthesise and share findings on what works, what doesn’t and includes information such as effect sizes and confidence ratings too. My favourite application of this is the OECD Observatory of Public Sector Innovation, which maps and shares how behavioural insights units globally are rolling out their experiments and sharing live results.
Funding innovation and the five avenues
One of the most common questions I get when presenting about innovation in our sector is “how do you fund innovation?”. There are many ways to do so, but here are the five most common avenues and the usual responses I hear-
Do you currently have an innovation budget? 95% of the time the answer is no.
Do you have a budget for product development or service improvement? It’s usually a yes, but not much and we use it for a range of things.
Do you have a training and development budget? It’s usually a yes, but not much. But we try not to spend it.
Do you have a corporate overhead? Yes, but it only funds our corporate and people and culture areas.
Do you receive government or philanthropic funding? Yes, but I didn’t think we could fund innovation from this.
These avenues and especially the reponses are not set in stone. They are default settings. Default settings remain default choices unless we question and change them. The most common way I’ve seen for purpose organisations attempt to do innovation is through applying for relevant government or philanthropic funding to build new products or services, where innovation is stated as a core criteria or metric of success.
This is understandable as innovation is now a key criteria for a huge number of grant funding opportunities. However, the circle doesn’t square easily as to fulfil this criteria you’ll generally need to demonstrate there is currently innovation resourcing and activity in place to be eligible.
We have a classic chicken or the egg situation here. What comes first, you funding innovation or your innovation efforts funding you? Well, it isn’t easy to win grants even if you pepper your grants with the word innovation. The sub-text might read to funders as you essentially saying “yes innovation is important but I’ll only start doing it if someone else pays for it!"
And what if you don’t win the grant? Will you wait for the next one? Will you not start your innovation journey at all? An alternative approach is to understand that developing a strong innovation program, capability and culture can help you develop an edge, competitive advantage or unique value proposition that sets you apart from the rest.
The business case for innovation
Experience and consulting with a range of leaders in our sector tells me that it takes a few years to develop a leading innovation program and culture in a given not for profit or social enterprise. So you are well entitled to ask beyond the apparent, what then is the business case for doing so? Below is content adapted from one of my most scribbled down or photographed slides that I’ve shared during presentations on innovation in the for purpose sector. It shows how innovation efforts translate to return on investment over time for businesses, usually from a revenue-centric standpoint-
Capabilies Deck, Shackleton Labs 2026
As with most things in life the statistics tell us only some of the story. I would say that in the for purpose sector, that has historically and currently under-invested in core technology, software, capacity and capability building and digital skill development, that the returns from investing in innovation will be considerably higher because we are newer to it and there is a lot of early wins and low hanging fruit to be had. It’s also a great time to invest given that so many workers are investing their own time and resources into AI up-skilling and agent-building. We have a creative and talented workforce ready to leverage these opportunities.
Our wonderful for purpose sector is home to 12-13% of the Australian workforce and generates 6-9% of our overall GDP. I can’t wait to see what happens when we start to invest in innovation at a similar level to our corporate sector counterparts. Of course there are some differences in how we’d endeavour to measure this contribution and it’s benefits first at the individual and then macro level. Let’s start by expanding how we think of the benefits of innovation beyond just the traditional revenue lens. We might ask the following questions and get these responses-
What is the difference in revenue we see that we can attribute to our innovation investment? We are winning more grants, developing more new scalable products and services, securing more contracts, improving productivity
What is the difference in our reputational, brand value that is related to our innovation investment? We are profiled as innovation leaders, increased NPS, brand value, reputational value and reach, more media coverage
What is the difference in our culture that is related to our innovation investment? We see increased eNPS, employee satisfaction, retention and ability to attract new highly skilled staff, less absenteeism, presenteeism and quiet quitting
What is the difference we make to partners, community and our beneficiaries? We have more aligned partnership opportunities, greater community impact and we are able to better serve our beneficiaries or customers
It’s an interesting one to consider all the ways we as a for purpose sector can improve and think about the value of innovation beyond just the revenue line. If you are on an innovation journey or are now considering one, Shackleton would love to meet you. Book a discovery call today.
