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Digitalization generally refers to the process of applying modern information technology with aim to support organization management, to improve operational efficiency, reduce risks and costs, and, thus improve its management and sustainability.

As profit-oriented organizations, commercial enterprises have always been the pioneers who lead the trend of digitalization. On the contrary, for the NGO, it seems that the overall process of digitalization significantly lags behinds given the facts of motivation inefficacy, organizations’ small size and the insufficient attention to cost control and performance management.

Do NGOs need digitalization？What can we learn from the practice of private sector? This article is intended to give an analytical analysis.

Three Phases of Digitalization in Private Sector

Generally speaking, there are three phases of digitalization in private sector.

Phase 1: Business Activities’ Automation

In the 1980s and 1990s, enterprise management basically realized many practical functions and basic modules, including digitalized office work, digitalized storage of staffs, business, documents, meetings, as well as cross-department and cross-regional cooperation through digital software. However, in this phase, it faced problems of lacking overall digitalization planning and integration between the systems.

Phase 2: Digital System Integration

As of late 1990s, private enterprises extensively embraced all kind of enterprise management systems, including the OA (Office Automation), ERP (Enterprise Resource Planning), CRM (Customer Relation Management), PDM (Product Data Management), and MES (Manufacturing Execution System), etc. These systems laid a solid foundation for business expansion and further produced numerous business data. However, these data were segregated and fragmented, constraining its value in business management.

Phase 3: Business Intelligence

Based on the business data generated from various enterprise management systems, the construction of data warehouse sufficiently meets the need of utilizing data to support corporation management decision. Data warehouse separates the decision-supporting data and then processes and stores these data, to support data analysis and management decision, thus promote business growth and innovation. Moreover, in this phase, the data are not limited to the internal source, but cover different kinds of massive data that affect the business activities. The era of “big data” officially comes.

The Importance of Digitalization for NGOs

Compared to the ambitious improvement in private sector’s digitalization, most of the NGO sector is still at the initial stage, which is simple automation. A handful of NGOs have begun to adopt OA, CRM system, and hardly, only few of them apply data analysis actively.

Why do NGOs need to step forward to the new phase of digitalization?

Strengthening the internal compliance, promoting information transparency and business process accountability are the necessary conditions for building credibility of NGO, as well as the starting point for the digitalization of NGO. Credibility is the lifeblood of NGOs, which is directly associated to the social prestige and their ability to mobilize social resources. National laws and polices (“Charity Law”, “The Guidance of Information Disclosure of Charity Organization”) require NGOs to regularly disclose project implementation information. As the public become more rational to participate in philanthropy, it poses higher requirements on the time efficiency and integrity (such as expenditure, project effectiveness) of information disclosure. How to efficiently collect and process this information become an unavoidable issue for NGOs.

The Pioneers of Digitalization among NGOs

NGOs with the following characteristics are more suitable for stepping forward to the new phase of digitalization: a high degree of business process standardization (such as a standard of project application and management procedure), burdened with staff and project management (the high demand of managing project progress of multiple execution NGOs as well as large volume of donors), in need of standardized business data management (such as standardize project performance data).

Following these rules, we have identified two types of NGOs, for whom digitalization can accomplish a great task with little efforts by clever maneuvers.

1. Foundations with scale

Due to the large size of recipients and execution network, charitable foundations with scale need to collect, analyze and summarize a great amount of project data during its operation. Currently, most of them rely on manually processing, which influence greatly its efficiency. Some foundations, which provide public funding qualification to other NGOs, are responsible for information disclosure on behalf of the fund-collecting NGOs to the public. In this circumstance, the foundations need to avoid possible risks through digitalization.

Taking the “dream box” of Adream Foundation as an example, it is an online interactive platform for online educators, covering data of the “dream centers” and the “dream teachers” in nationwide. The platform has laid a solid foundation for unifying online data collection, management and reporting, to lay a good data base for employee KPI appraisal. It can further demonstrate and visualize the project outcome to donors, and receive recognition by all parties in terms of transparency.

1. Scaled-up NGOs

Scale-up specifically refers to the expanding scale of social goods and services. When the social products and service can be replicated in another place, the digital system can ensure that the operation mode and SOP will be replicated precisely as well. In addition, digitalization can also manage the quality and progress of scale-up, and avoid the problems of uneven quality during scale-up and lack of supporting empirical data. By constantly collecting the business data, NGOs can iterate their products and services, optimize the operation model and manage their performance as private sector does. 

Take the internal management system of Huiling Home for Person with Mental Disability as an example, it contains multiple functions such as finance, HR, scale and service, to improve organizational efficiency. It put its focus on service expansion, service quality control, and profit and cost.

Admittedly, there is still a long way to go for the massive application of digitalization for NGOs, which requires not only technicians and investment, but also the change of leaders’ mindset and the active participation of government, private sector and the public. In the future, VA will combine our expertise in digitalization for private sector to enable far-sighted NGO pioneers to transform into digitalized organizations.