In my last installment, I went over strategic approaches for impact innovation. This week, I’m getting more pragmatic: how does an impact innovation fit into a mission-driven organization’s business and what becomes of it over the long-term?
Business Models for Impact
Every organization, even a civil society organization, has a business model. This is the way the work is funded, what the work is, and who benefits. An organization’s business model determines the innovation path that is available to them, and vice-versa. Clarifying this relationship early is useful to plan around to avoid disappointment later on. I think it’s also useful to keep in mind to avoid personalizing criticisms–it takes all kinds to make a world because some choices foreclose some paths.
For example, Faradj Koliev published a recent paper illustrating a point I often make: substantive change is often the result of pursuing multiple approaches simultaneously, in this case international pressure and interpersonal relationship building. But, a single group can’t credibly pursue both. A business-friendly model may reduce barriers around privacy and collaboration, but it can often fail to create real momentum or urgency. An advocacy organization may consider naming-and-shaming key to their theory of change, but this forecloses the possibility of providing data or services to firms that may get named because potential clients would understandably worry about a conflict of interest. In my experience, it’s best to accept that reality, but not give up. Instead, consider partnerships and coalitions, subsidiary relationships, spin-outs, or other ways of resolving the essential conflict in the business model.
A key difference between NGOs and businesses is the separation of revenue and beneficiaries, and funders should weigh this in their strategies as well. Philanthropic funding has advantages over other revenue sources, such as the ability to work openly to demonstrate a point or seed new activity. There are some activities that may never be self-sustaining, or may be thought too risky, but still have high potential to be impactful.
Revenue Models for Impact
A revenue model is a more concrete plan for funding an organization’s work. In simple terms, it is a budget in a spreadsheet, with a forecast that extends a few years into the future. Most nonprofits and their activities begin with philanthropic funding, like grants or giving from small donors. A great technology innovation can become part of the organizational revenue model, as well.
An impact organization that wishes to generate revenue out of a technological or data innovation may do so by licensing it in a commercial arrangement, or by generating revenue from the delivery of the data or technology. Universities, for example, often have contractual agreements with researchers that assign the university a percentage of ownership for patentable intellectual property, which offsets the initial costs of filing and aligns financial incentives with practice and therefore impact. Nonprofits may also operate a cross-subsidy model, charging for-profit clients while subsidizing access for researchers, students, or other types of users.
Organizations that prioritize openness of intellectual property sharing like OpenCorporates and Wikimedia, for example, commercialize delivery of their data. They allow nearly anyone to search their content, but for-profit organizations that wish to integrate the data with their own systems require a commercial license. Wikimedia’s enterprise page explains the value proposition quite clearly. The license fee pays for API access or an automated regular complete delivery.
Sometimes an intervention belongs with a consortium of dues-paying membership, like an industry association. This is particularly suited to pre-competitive standards and shareable frameworks that benefit entire industries through network effects.
Organizationally, an NGO may be able to build out a self-sustaining revenue model, but this is not the only legitimate goal. Some organizations and interventions may have an end date or a wind-down plan that is part of their broader strategy: building up a capacity, proving out its usefulness, and then transferring it to government or markets. Indeed, as we saw during the massive contraction in development aid in 2025, to avoid an abrupt and calamitous exit, it is a good idea for an organization to have at least a basic plan for what should happen if the organization experiences a collapse in revenue. Having an explicit model of sustaining revenue versus conditions for wind-down can help an organization navigate those tough moments with clarity.
Exit Models for Impact
An impactful innovation may begin its life one way, as a proof-of-concept funded by a foundation, for example, but it may not necessarily achieve scale or sustainability under that model. Over the long term, some philanthropic donors will tire of supporting an innovation that is mostly stable, and stability is often required for businesses or governments to invest in adopting your innovation. They don’t want to waste resources like staff time, creating a dependency on a product that undergoes major revision in every two-year grant cycle. The Robert Wood Johnson Foundation commissioned a good overview here (pdf) of how an organization can plan for a responsible exit, which is written for the organizational level, but much of the advice can be applied at the intervention level as well. For example, announcing in advance that you are ending support for a tech innovation gives others the opportunity to step in before the expertise that developed it moves on.
My mentors from the Global Development Incubator encouraged me to think of interventions as having multiple phases that may require different models to support, and ultimately, an exit path. A business exit is defined by what happens to the equity. In simplest terms, it can be self-sustaining and remain private, it can be acquired, and it can go through the process to be listed on a public securities exchange (IPO).
An impact innovation can undergo a different kind of exit, and planning for it can make the difference between a tool that becomes a dead letter and one that makes a lasting impact. In some cases, they become self-sustaining and run by the organization that developed it.
An impactful innovation can be licensed to other entities, a path that many research organizations like universities pursue. This path requires some infrastructure and know-how, like lawyers, but planning for this early can help you signal that entering a licensing deal with you will not create undue turbulence, like the abrupt collapse of an agreement the business has depended on. It can also be a fast-track to impact because you can leverage the know-how of an organization that is already scaled instead of scaling yourself. I’ll go deeper into licensing for impact in my next installment.
The innovation may be so demonstrably useful that it can be transferred to the government, or another durable institution takes it on as a function. For software and data, this might be something like the Linux Foundation, a library, or a data trust. For example, Databricks developed the machine learning development framework MLFlow for its own platform and later transferred it to the Linux Foundation, which specializes in supporting open source software, hardware, frameworks, and data. It’s worth noting here, however, that MLFlow was always open source–an open source licensing model does not automatically translate to impact and adoption.
The innovation may be reduced to a lightweight framework that allows people to replicate it in a decentralized way, allowing it to be absorbed by the target entity or the commons. Finally, it may undergo a managed sunset; sometimes drawing attention to your organized withdrawal can encourage others to step up, and documenting it carefully can help others pick it up again in the future.
Exit readiness is something you can build at any point, and the earlier the better. It helps clarify what constitutes success, even if it’s not what you imagined at the outset. One cultural norm of entrepreneurship is worth borrowing: know that some new ventures and ideas come to an end, and it is not a reflection of your personal worth. Personally, I found it helpful to have a dog (any pet will do), who could never understand that I had failed at something, even if someone had tried to explain it to him. You are not your work, and people will still love you.
Spyros Vierthaler, photo by Shannon Stewart. All rights reserved.
Thanks to Ben Savonen at GDI for responding to an earlier draft of this piece.