4. Business Model
How we pay our bills
How we pay our bills
As a nonprofit, we draw a distinction between customers and users. By customers, we refer specifically to those individuals and organizations that generate revenue for Public Innovation. This includes funding sources such as foundations, public agencies, other nonprofits, corporate sponsors, and individual donors. In contrast, our users are those individuals and organizations who engage on our platform and benefit from our activities.
|Social Impact Leaders||x||x|
|Business, Technology, and Creative Professionals||x||x|
Regardless of whether we’re discussing the customer or user segments of our target market, all participants are collectively identified as change agents: individuals and organizations with an interest in helping to accelerate quality of life improvements across the Sacramento region.
As originally conceived, Public Innovation was solely focused on the public sector and, consequently, the work of public servants. In addition to telling their stories, Public Innovation sought to provide greater innovation capacity for those who work in government. Of course, our thinking has evolved and matured based on the feedback we’ve solicited about how best to empower these public sector change agents.
Through our customer channels, Public Innovation will offer a suite of services for public agencies including civic technology development, citizen experience design, placemaking, community building, and storytelling. Users in the public servant segment will be liaisons between their agencies and Public Innovation’s civic network. In this role, they will be empowered to share information, connect with other change agents, and initiate new projects.
Previously, the social impact leader segment would solely comprise nonprofit staff and community leaders. However, today’s social impact landscape is quickly evolving and now includes new corporate structures such as benefit corporations, flexible purpose corporations, and even for-profit companies. And while social impact leaders often perform work similar to their public servant counterparts, leaders in this segment often have greater autonomy in the ways they approach social change.
Along with offering services to social impact leaders, Public Innovation will empower these users to amplify their impact and reduce the friction inherent in collaboration among myriad stakeholders. Social impact leaders also will be called upon to mentor aspiring changemakers.
Aspiring changemakers consist of the set of users we want to engage as potential future civic and social entrepreneurs. Through a differentiated set of offerings, we'll provide support for both high school and college-age students. We'll expose career opportunities available in this space and help young people with good ideas to make them reality through the development of sustainable business models. Support will include a mix of office space, tailored education, mentorship, and risk capital. We will rely heavily on organizational partners and other user segments to incubate these projects.
Public Innovation benefits from engaging the business, technology, and creative communities because insights from these professionals will help us tackle economic development issues that directly affect them. Similarly, this user segment will be able to connect with and support civic projects and other social impact initiatives with which they want their organizations affiliated. We also will recruit some of these professionals as mentors and advisors.
Engaged citizens who do not necessarily fit into our other user segments are critical to measuring our impact. That is, they are the primary beneficiaries of Public Innovation’s work. We want to help people find quick answers to the question, “Who’s doing what and how can I help?” Because much of the value we create will be qualitative, feedback from citizens will help us create a civic experience that is citizen centered through extensive usability testing. And we'll provide ongoing opportunities for everyday citizens to contribute to our projects and participate in our events.
Beyond the earned income we'll receive from fee-for-service opportunities, we'll additionally seek one-time seed funding totaling $250,000 over the next two years. We expect prospective board members to help us obtain this funding. In addition to one-time funds, we expect to provide project and event sponsorship opportunities for organizations. Similarly, there will be opportunities to solicit individual contributions through crowdfunding for specific projects, as appropriate.
Public Innovation is committed to co-creating public value. Regardless, of the level of engagement by our region’s residents, it is our explicit intent have a positive impact on the environments within which they live, work, and play. The following are our value propositions:
Measurable improvements to quality of life. While we don’t promise any silver bullets, we will bring a new level of transparency to how quality of life is measured and commit to specific gains we believe we can achieve through our activities.
A more vibrant civic culture. Our activities will make the region’s civic culture more vibrant by opening up new channels for civic participation among more diverse residents. We believe social change can not only be fun, but also infectious.
Frictionless collaboration. Collaboration is hard. That’s why we’re working to remove as much friction as possible. Fostering a culture of organizational openness enables information about who’s doing what to flow more freely.
Increased civic capacity. To tackle our region’s biggest problems and fully leverage new opportunities, we need the individual components of the larger ecosystem to work in harmony and provide the necessary capacity to effect change.
Greater social cohesion and interdependence. We live, work, and play within different communities. By bringing a new level of transparency to the connectivity across these communities, we form tighter social bonds and recognize our interdependence with each other.
More human workplaces and better organizational cultures. Organizational culture is critical to the level at which organizations perform. If we are to truly bend the curve, we must co-produce more human workplaces that inculcate the conditions for innovation.
More opportunities for serendipity. Our emphasis on placemaking and improved utilization of public spaces are intended to increase the number of serendipitous collisions between people and ideas. These interactions are helpful for generating new combinations of existing ideas.
Greater accountability and public trust. With a better understanding of the leaders, organizations, and initiatives moving forward throughout the region, citizens will be better equipped to know where their money is going and the corresponding outcomes that result.
New solutions to big problems. It’s not sufficient to continue the same approaches to the same problems that have lingered over the years and expect a different result. Public Innovation will create a safe environment for trying new approaches that can have greater impact at lower costs.
Resources to improve social equity. Technologists are often characterized as homogenous groups of “solutionists” who are uninterested in big societal problems. We will disrupt that perception by targeting our resources in underserved communities and by adding capacity to organizations already working in these areas.
Greater civic efficacy. Despite political gridlock at the federal level, state and regional leaders are actively moving initiatives forward. Our efforts to bring these leaders onto the same platform as engaged citizens will enable faster citizen-driven problem solving.
Taken together, these individual value propositions holistically culminate into a better civic experience.
The basic question our channels will answer is how best to reach our users and customers. Here, we identify the platforms through which we will both raise awareness and engage the public.
The new publicinnovation.org will serve as our primary engagement platform. While we have no intention of building yet another social network, we will create a secure, authenticated area of our site, my.publicinnovation.org—that we are coining CivicExchange. The concept of CivicExchange was first conceived by a team at the first CivicMeet Sacramento event and adds additional elements from a subsequent CivicMeet idea, the Human Capital Connector. The platform will enable frictionless collaboration to drive civic action. We’ll employ an agile, build > measure > learn development cycle to add new features over time, based on the activity and feedback of our users. A beta version of the platform will enable users to express their interest in programs and projects based on their profile.
Through our media partners and earned media opportunities, we'll tell the stories of change agents who are taking our region to the next level. Similarly, we'll solicit user-generated content that can be cross-posted on other platforms to reinforce the collaborative nature of our work. In particular, we emphasize the use of video to exploit new content distribution models and explore revenue opportunities.
We believe content distribution is critical to our success and reflects one of the biggest challenges facing the region: namely, there is much activity already happening that positively impacts our communities, but little awareness about these efforts due to fragmented content delivery. The most immediate opportunity we are exploring is a partnership with the Sacramento Press that would provide their platform with well-produced video content and provide Public Innovation with a channel we need to tell these great stories. And as a technology-driven organization, we hope to extend our platform by leveraging new video devices such as Google Chromecast and the Roku Player.
Social media allows us to distribute short-form content across many channels, although for the same reason these platforms are heavily saturated as they’ve become personal marketing tools for everyone who has something they want to share with the world. However, platforms such as Twitter have allowed us to connect with individuals and organizations at a global scale who are developing similar models to drive civic and social impact. Increasing awareness through social media continues to be an important component of our multichannel marketing efforts.
Returning the theme of human capital as a critical asset, our formal and informal networks will determine the extent to which we're able to drive impact across the region. We expect that members of our board of directors will connect us with the region’s anchor institutions and guide our strategy to maximize synergy across the innovation ecosystem. Our advisors, who comprise high-level practitioners in the field, are well-positioned to help us discover unmet needs of public agencies, nonprofit organizations, and the business community. And, of course, we expect that our partners will use our platform to share knowledge and launch new initiatives.
To, again, distinguish between our users and our customers, we remind readers that Public Innovation is an open platform. While we have developed six specific user personas to tailor engagement and curate relevant content, anyone can be a user of our platform. On the other hand, our customers are those users who generate revenue for Public Innovation.
Our major customers will be public agencies interested in deploying bleeding edge civic technology for their constituents and employees. We also expect interest from nonprofit organizations and businesses looking for simple, locally developed solutions. We'll maintain ongoing relationships with our customers through service agreements, impact measurement activities, and engagement through our other channels.
Public Innovation will require initial seed funding to build up our internal capacity, demonstrate our value proposition, and have sufficient runway to become self-sufficient. Beyond initial seed funding, we'll pursue a diversified set of revenue sources from foundations, individual and corporate donors, and earned income opportunities.
We expect philanthropic foundations to be interested in our hybrid model that combines the features of place-based project incubation with civic technology. Given our unique approach to driving social impact, there are few projects in the region where we would be unable to add capacity and value. To that end, we'll approach different foundations to identify where their current investment priorities lie and seek to find areas of common overlap. Those opportunities could include: using tech-based skills training to increase diversity among students interested in STEM careers; developing innovative solutions to manage and mitigate the impacts of homelessness; or, modeling new methods of impact investing through microgrants to incubate new social enterprises.
Public Innovation will seek tax-exempt status under Internal Revenue Code Section 501(c)(3). This will position our organization as a ripe investment vehicle for individuals who want to invest in projects that have a good chance of improving quality of life in the region. Similarly, companies that are committed to corporate social responsibility should find Public Innovation’s activities well-aligned with their own regional priorities. To that end, we believe the best approach is to direct all donations into a single social innovation fund–that we, ourselves, will invest in–and solicit public input on which projects should be funded on an annual basis. However, this approach only makes sense after we’ve become financially sustainable. In other words, we we will direct individual and corporate donations to our seed capital fund until we reach the point where we are receiving sufficient predictable revenue from other sources.
Earned income opportunities will become our most important revenue source, as it will give us the most autonomy and flexibility in the types of projects we choose to pursue. It's also our golden path to fiscal sustainability and future growth. We'll pursue earned income across three categories: (1) fee-for-service, (2) channel partnerships, and (3) corporate sponsorships.
We will offer a suite of services through our Public Innovation Labs program. These services will be in the following areas:
Our civic technology services include custom web and mobile application development, ranging from basic websites to fully integrated, cross-platform applications that fill a variety of needs. We also provide user experience consulting, including visual design, interaction design, information architecture, usability testing, user research, and content strategy. Similarly, we’re capable of deploying crowdsourcing tools such as ideation platforms and text message/SMS voting for live events. We also build tools to streamline back-office functions and integrate databases with custom application programming interfaces (APIs).
We’re interested in helping public agencies provide delightful experiences to their constituents through the application of human centered design. By blending our unique expertise in user experience and public administration, we’re capable of identifying and solving the unmet needs of citizens. This capability is especially helpful for transactions that require interactions with multiple agencies across different levels of government. We provide service design, ethnographic research, and prototyping services to minimize the number of touchpoints a citizen must encounter to solve a particular problem.
While we do not currently have the internal capabilities to support placemaking services, we can refer clients to our partners who specialize in creating public spaces that maximize happiness. Services such as community visioning, urban planning, and prototyping will create greater opportunities for serendipity. Celebrating public spaces reinforces our commitment to building community and moving urban innovation forward throughout the region.
Public Innovation’s Impact Incubator will be a space for developing social entrepreneurs and their ideas. Through business development activities, we we'll help aspiring changemakers craft and test their business models to drive social impact. We'll provide workspace, mentorship, and risk capital to those with the most promising ideas. Similarly, we'll create an innovation fund that will enable others to engage in regional impact investing and in which Public Innovation will invest. We'll also leverage crowdfunding and social impact bonds to fund specific projects for which such tools are appropriate.
Public Innovation will support intrapreneurs—entrepreneurial-minded individuals who want to create change within their organizations (instead of launching new ventures)—through our Public Innovation Fellows Program. We expect our fellows to primarily come from public agencies and nonprofits in the region, but also are open to allowing participation by private sector intrapreneurs. Additionally, for those organizations seeking organizational development consulting services, we can refer them to our partners who possess greater expertise in this area.
Although we aim to have impact that creates a measurable difference in peoples’ lives, it’s critical that we tell those stories in a compelling way to create further demand for our work. Specifically, we use video as our preferred medium and are working to develop aggregated content distribution channels that enable all individuals and organizations working to make a difference to tell their stories, as well. We're at a unique moment in history where we can take advantage of the opportunity to reach an unprecedented audience at minimal cost.
Channel partnership are those relationships we'll establish with other civic startups to market and sell their products and services to customers across the region. This solves a problem for us when a customer seeks a solution that already is available from another vendor, but for which the opportunity cost exceeds the time we would spend to develop a similar solution that may only be marginally better in quality. So we'll seek to forge two types of partnerships with these companies using: (1) a reseller model, and (2) a referral model.
As a reseller partner, we'll act as the end-to-end touchpoint for customers by working with other civic startups to sell and deploy their products and services. Because we're better equipped to understand local needs and have established relationships with public agencies and nonprofits in the region, we can ensure that a particular technology is an appropriate solution. This benefits civic startups because it reduces their sales overhead, which is critical for young companies lacking a sales team. In return for managing the customer relationship, we will receive a percentage of each sale.
As a referral partner, we'll refer customers directly to other companies and those companies will manage the sales funnel and customer relationship. This arrangement is a better fit for startups who have a dedicated sales staff. In return, we'll receive a smaller percentage of each sale than if we were a reseller.
Regardless of which channel partnership model we pursue with a particular company, they'll need to meet the high quality standards we set for own products and services. We recognize that partnering with companies who do not meet those standards will reflect poorly on us and damage our credibility. Therefore, we will be highly selective in the companies with whom we choose to partner.
Aside from fee-for-service and channel partnerships, our last earned income revenue stream will be through corporate sponsorships. This is distinct from corporate donors who give tax-deductible donations and, instead, refers to our private sector partners to whom we'll offer marketing opportunities—provided there is alignment between our efforts. Such sponsorships will help us offset the costs of specific projects and events, and provide opportunities for companies in the region to expand their involvement in the community through corporate social responsibility.
The key resources we need to drive impact include human capital, trust, talent, and efficient processes.
Human capital is our most important asset. One premise behind Public Innovation is that we’re unleashing a new set of tools that reduce some of the friction associated with collaboration and we can thereby empower individuals and organizations to collaborate on a larger scale than is realistically feasible today. But this assumes, of course, the voluntary participation and authentic thirst for impact among participants. We also need a diversity of perspectives to foster inclusive solutions that don’t leave underserved communities behind. In addition, diversity is a critical factor in driving creativity. We are confident that new voices will lead to greater choices and accelerate quality of life improvements that benefit all residents of our region. Another way to interpret our need for human capital is through a concept coined by Clary Shirky, known as cognitive surplus:
We intend to be a transparent organization. In fact, this plan is just a starting point for the conceptual OpenOrg standard we are developing. OpenOrg will define the parameters by which non-governmental organizations can achieve transparency in a way that enables meaningful analysis of the social impact sector utilizing standardized, machine readable data. But we are not pushing transparency for transparency's sake; instead, we believe transparency will foster trust among our partners and members of the public. And much of that trust is derived from our openness—meaning that, as a platform organization, anyone is welcome to be part and parcel of the process. In other words, we gain trust not from the information we disclose, but rather the opportunities we provide for others to co-create impact. Many of our current institutional structures inhibit this type of radical openness, but development of the Internet itself has validated the proposition that the rate of progress accelerates when anyone is empowered to make a positive contribution.
Another key resource that will be critical to our success is internal talent. Specifically, we need generalists who excel in multiple areas and innately recognize patterns and connections across different disciplines and spheres of activity. Specifically, we’ll need to form a multidisciplinary team that can share knowledge in the following areas, allowing us to innovate at a rapid pace: technology, design, public policy and administration, nonprofit management, marketing, strategy, and community development.
In order to effectively scale collaboration in the region, we will need to overcome its inherent inefficiencies. We are committed to respecting time and opportunity costs that belong to individuals and organizations who choose to engage with us. To that end, we'll offer turnkey opportunities to participate that remove as much friction from the process as possible, allowing us to increase our collective impact.
Our major activities can be grouped into five categories: community building, civic innovation, social innovation, urban innovation, and regional innovation.
To achieve strength in numbers, we must focus on building community. That means creating opportunities to establish authentic relationships based on trust. By bringing together stakeholders that are not accustomed to working with one another, we'll catalyze new opportunities to innovate. But it will take time for these relationships to be forged. Not all actors will be familiar with each other and there'll be new actors who want to collaborate but lack a track record. And yet, it’s these upstart individuals and organizations who will have the most to contribute. Therefore, we want to provide the space where we can familiarize ourselves with our each organization's idiosyncrasies. Our vision of success includes the ability to launch projects with agility and speed, precluding lengthy negotiations over contract terms or extensive memoranda of understanding. All of this requires a community that’s built on trust.
Our civic innovation activities will primarily involve the development of civic technologies that better connect individuals to their communities, and their communities to the larger region. Our approach to civic innovation is differentiated from our approach to social innovation insofar as there is a greater emphasis on the work by public agencies and other areas of governmental influence—versus those areas typically under the purview of nonprofit organizations. We believe there are limitless opportunities to invent the future of human-government interaction (clearly borrowing from the field of human-computer interaction). Highlighting and rewarding the work of creative public servants will be key to validating and advancing new approaches to public administration.
Although there is not a clear line between that which is civic and that which is social, the sphere of social innovation, generally, begins where civic innovation ends. In short, there simply are problems that cannot be solved through a particular public program or policy. Instead, social innovations require fundamental changes in the way humans treat each other. Whether through social norms, market behavior, or other forms of interaction, social innovation is a way to develop solutions to address unmet needs that are the result of issues like homelessness, inequality, and other manifestations of a lack of opportunity. Public Innovation will incubate the next generation of our region’s problem solvers by helping them develop their ideas and launch new social enterprises.
Our activities in the urban innovation space will address issues around underutilized public spaces, such as rooftops and alleyways. This focus on placemaking will bring synthesize our other innovation channels and raise awareness of activities of which we’re in pursuit. We also need to leverage open data to create smarter cities.
One of the advantages Sacramento enjoys is the existing foundation that supports regional collaboration and industry clusters. By continuing to leverage a regional approach to problem solving, we can differentiate ourselves from other areas that restrict their innovation ecosystems to a single municipal level. There are many ways to think about our region as a system and build new tools to help citizens recognize the complex interdependence that exists across this ecosystem, and the multiplier effect that can be achieved when we establish and tackle priorities at a regional scale. We'll build the scaffolding to easily scale our projects to a regional level and allow replication by others.
True to our belief that the network is the innovation, our partners are key to bringing life to the innovation ecosystem.
Our funders will be our most important set of partners. To get off the ground, we’ll recruit the initial members of our board of directors. Directors will be expected to fundraise a fixed amount of seed capital on behalf of Public Innovation to provide us with runway over our first two years.
Other non-earned income funders will include foundations and other donors who are interested in supporting specific programs and projects. We'll reach out to those entities, as we discover opportunities where our priorities are aligned and where we can create synergy.
Another critical partner will be our fiscal sponsor. Fiscal sponsorship is the mechanism by which organizations seeking nonprofit status are eligible to accept tax-deductible donations and other forms of support until they receive official tax-exempt status from the Internal Revenue Service. As is common in a fiscal sponsorship arrangement, we'll compensate our sponsor with ten percent of our revenues until we receive our tax-exempt status and achieve complete independence. We expect our fiscal sponsor to assist with administrative, accounting, payroll, and other forms of support so that we can focus on program and project delivery.
We wish to partner with as many public agencies as possible in the region. Beyond the 22 cities and six counties in the Sacramento Area Council of Governments region, we believe it's important to establish partnerships with various state agencies, special districts, and school districts, as appropriate. For example, many of our civic technology projects will require a citizen-centered approach to user experience and, therefore, necessitate significant interagency collaboration. Similarly, because of the numerous opportunities to reduce the operational costs of public agencies, we expect government to be our largest source of earned income.
Civic leaders have close relationships with their constituents and a keen understanding of the challenges citizens face on a daily basis. Elected officials, public managers, and nonprofit executives will help inform our project selection and help us identify unmet needs at a community-level. These leaders also have the ability to convene stakeholders and organizations to marshal momentum behind civic issues. We hope to be an indispensable tool that adds capacity for these leaders to tackle the most critical issues they face. Similarly, we want to highlight the valuable work they do through compelling stories.
Our peer organizations comprise other cross-sector backbone organizations and issue-specific nonprofits with similar goals of improving quality of life. It’s important that we position ourselves as complementary and seek ways to add value. Conversely, we want to avoid going after the same grants and being perceived as a potential competitor. After all, we recognize that collaboration is always preferred over competition. Having said that, collaboration is a two-way street and we need these values reciprocated in order for this vision to be fulfilled.
We also believe it’s important to partner with the technology community given our strategy of using technology to drive civic and social impact. To the extent that local tech firms are interested in this space, they'll find an open door at Public Innovation. Similarly, we can help companies identify new market opportunities where it does not make sense for us to focus.
Much of the work done by researchers requires longitudinal data, so it takes time before new phenomena can be identified as a meaningful trend. We find similar patterns among professional associations, as well. However, both higher education institutions and professional associations alike are attractive as potential partners. In particular, both groups have deep expertise that can be helpful in informing the direction of Public Innovation’s work. In turn, we can help inform their work by providing data and insights about what's happening on the ground.
Given the nature of innovation, we hope to attract a set of media partners who are interested in helping us share the stories of progress. Media coverage in this space often is focused on negative stories about conflict, mistakes, and failures. We want to turn the tide and shed a positive light on the work of our region’s public and social sector. With a few strategic media partnerships, we'll have a distribution channel to share those stories with a much broader audience.
The primary cost of our operations will comprise salaries. We project our first five years of costs to consist of the following:
|Social Innovation Fund||6,250||14,766||28,301||36,885||42,418|
|Salaries & Benefits||246,560||255,357||335,358||347,112||359,389|
|Rent & Utilities||3,600||12,000||24,000||24,000||24,000|