The following is a conversation between Michael Gianoni, President and CEO of Blackbaud, and Denver Frederick, Host of The Business of Giving on AM 970 The Answer in New York City.
Denver: Whether you use their services and products or not, there are very few people in the nonprofit world who are not familiar with the name Blackbaud. They are the one company that is synonymous with software being deployed by organizations to power social good. And it’s a real pleasure to have with us tonight their President and CEO, Mike Gianoni. Good evening, Mike, and welcome to The Business of Giving.
Mike: Thank you, Denver.
Denver: Tell us about Blackbaud, and give us a little history of the company.
Mike: Blackbaud is headquartered in Charleston, South Carolina. We are a publicly traded software company. We are now the 24th largest Cloud software company in the world in any category. What’s unique about Blackbaud is we are exclusively focused on the social good economy, and so our customers are customers that are nonprofits, in the class of American Heart and American Cancer, Save the Children, also higher education institutions like Clemson University or Georgia Tech or Yale University, K-12 private schools. We have thousands of K-12 private schools around the world. In fact, we have over 40,000 customers globally in over 50 countries.
Denver: You work exclusively 100% with nonprofit organizations. How do you believe that improves your offerings for the sector?
Mike: What it does, Denver, is it produces a focus for us in how to drive digital transformation in the nonprofit sector across these different types of nonprofits. So, our solutions are not provided to for-profit institutions. So, we’re not trying to retrofit a software solution into the space. Our engineering efforts are solely focused on the needs of these types of institutions.
Denver: Do you find a difference? I know you came from private industry. Do you find a difference in selling to nonprofit entities than what you experience when you are selling to businesses?
Mike: That’s a good question. It’s not really different because the desires that nonprofits have are equivalent to financial services institutions or manufacturing organizations which is: how do they get value out of advanced software capabilities to either drive their revenue or reduce their operating costs and make their operations more efficient? It’s the same needs. In fact, what’s happened in software… because software has impacted our personal lives so much… we conduct our personal banking on the phone now. The expectations are high, whether you’re in a nonprofit or a for-profit which is: why can’t I conduct my business life like I conduct my mobile banking life on my phone? So, those things kind of cross over.
Denver: Let’s take an example; an event that a nonprofit might conduct to raise funds and see how Blackbaud can help support and enhance that function. I think everyone in this audience is either participated in a walkathon or helped contribute to a walkathon. Tell us how Blackbaud’s suite of services would help support that event from start to finish.
Mike: An event like a walkathon or a bicycling event, they’re typically organized by volunteers who will organize a team and then connect with teammates via social media connections, and then start to raise money and organize folks for the particular event. Our software facilitates all of that. It facilitates organizing the team; it facilitates connections to things like Facebook or other social media avenues. It facilitates actually raising the money and collecting the donations, and it also facilitates collecting the names and addresses and emails of all the participants which remain in the database of the nonprofit for a future outreach, for another future walk or a bicycle ride or another campaign.
Denver: What are some of those products that help facilitate it?
Mike: We have quite a few products. We have CRM products like the data repository for the names and addresses and contact, and also the giving history. We also have online solutions that connect everybody together, and they’re integrated with things like Facebook and Twitter and other social media. So, we tie all that together into a single system purposely built for a nonprofit to conduct the walk– for example, the American Heart Walk.
Denver: Speaking from a perspective of a donor for a minute, explain how a nonprofit organization using Blackbaud will impact, change, enhance, and manage that organization’s relationship with the donor.
Mike: There’s lots of ways to do that depending on donor type. They are all very different. So, if you’re, for example, a K-12 private school, the focus there as a donor is a potential parent of a child in that school. It’s typically the focus or an event. If it’s a university, it’s an alumni. If it’s a church, it’s a parishioner. It’s all a bit different. So, if I choose for example, a university, the university will collect information on their alumni, and they’ll track the alumni based on the degree they got. Did they participate in a sport in school? Where are they now in their career? Can they conduct an outreach to this alumni to convert them into a potential donor based on our software helping the school create a campaign to connect to that alumni and bring them back into the awareness of what’s happening at the institution.
Denver: You even have artificial intelligence built into some of these products, correct?
Mike: We do. The artificial intelligence really makes the data actionable for the nonprofit. So, we’ll have things for, say, a major gift officer at a university; our software will give them a predictive next step. So, it might say for these 10 potential donors, here’s what their profile is, and here’s your predictive next step of how you might interact and contact that donor, as opposed to just leading it to the major gift officer to come up with that creative outreach; the software will have suggested examples on how to do that.
Denver: It might even suggest what to ask them for, how much.
Mike: Yes, it does. Just how much to ask them for and why potentially. There’s a lot of intelligence that we build into our solutions to do that, and we have some that are specific for market type too. We actually have some artificial intelligence for hospitals and healthcare institutions to understand who their patients are. And can those patients become potential donors in the future? Also, for things like performing art centers. Who are my ticket buyers? Can they become potential donors in the future? Our software helps the institution figure that out.
Denver: Really interesting. Blackbaud also provides one-stop shopping in a sense because even if your company, Mike, doesn’t provide the specific service or product, you have partners that do.
Tell us a little bit how that works and who some of those partners are.
Mike: We do. We’ve actually been going much wider in the type of institutions that we support and what we do for them. So, if you go back a decade, we’ve predominantly had software solutions only for fundraising. If you look at us today, in areas like education institutions, we do obviously have our fundraising and our financial systems, but we also have software that runs the school…student information system… enrolling students, classroom management integrated with the fundraising. We actually are running the whole of the school, not just the fundraising side of the school.
Along with that, we have hundreds of partners in our partner program to specifically answer your question, but actually have solutions that fill even more of those gaps for us in particular institutions. We might have partners for churches and things that we don’t do, but their solutions are integrated with ours. So, it becomes more of a one-stop shopping. And that’s critically important in the markets that we serve because a big challenge for our customers and potential customers is integrating all of these disparate solutions together. It is a very big challenge that we’ve been working on solving the last several years.
Denver: I know for people like me, for instance, who are interested in keeping abreast of charitable giving at large, and online giving specifically; there is the Blackbaud index. Tell us about that report and maybe what it’s been showing for 2018 so far.
Mike: We produced a Blackbaud index which shows trends of giving at the macro level. Then we’re starting to produce those by industry as well for some of the particular institution types that I mentioned. We’re starting to produce that index, so it breaks it down to that level. Also, what it’s been showing over the last several years is that online giving is growing very quickly. It’s growing in the mid-teens as a percentage every year, where total giving grows typically 1-1/2% to 2-1/2%– which actually tracks US GDP over the last 40 years in total giving. But online giving is growing in the mid-teens. There’s a conversion happening from traditional giving to online giving. Our platform supports both. We’re helping our customers make that transition into more of the digital world and online.
Denver: Have you seen some practices by some of your customers that have been particularly effective in the online giving space?
Mike: I have. There are best practices out there. We help facilitate some of those best practices for online giving, and it really is becoming more of an online-oriented institutions. Reaching out online, connecting with social media, understanding the talk tracks that are happening on social media and how it applies to your particular institution. In other words, if you are a university, and there’s a talk track out on Twitter or Facebook about your university, and your alumni are in that talk track… how do you connect into that and digitally connect and outreach to those alumni and make that a part of your program? There are quite a few best practices related to digital online giving and online outreach
Denver: Another big challenge that faces a lot of nonprofit organizations is donor retention, which I think is much lower than most people think.
What is the average donor retention for a nonprofit, and what are some of the ways that they can help improve it?
Mike: The average donor retention is all over the map because it’s different if you’re a church or if you’re a university. But there is a high turnover. There are techniques to use, which again are best practices that drive donor retention. One of the big trends that’s coming to the US, mostly from European institutions, is to create sustainers–that’s a donor that might give an amount every single month. So, they just sign up for the year, and they give every single month on a regular basis, and it’s typically the same amount. So, there’s sort of a decision point upfront to give the same amount for a year as opposed to a decision point upfront to give once. A move to sustainer giving is happening in a lot of nonprofits.
But there’s also a lot of techniques for donor retention. Some of them are pretty simple. For example, when someone makes a donation for the first time, make sure you have a personal outreach and say thank you. A lot of institutions don’t actually do that, but we have the data that shows that that significantly drives retention because there’s a personal connection to say thank you for your donation.
And the other thing that we have is we have a service that provides score cards that many of our customers sign up for. You could think of this as sort of a grammar school report card where there might be seven or eight categories, and each category, we will rate the institution A, B, C, or D. And that rating compares that institution to hundreds or thousands of their peers. Someone might get a C minus in online fundraising, but they might get an A in fundraising at their events. Then we can help take that C minus up to a B or an A through better use of technology or better best practices, and that’s one of the services that we provide– the score carding as well.
Denver: That’s a very useful dashboard. It’s funny when you talk about donor retention with all this technology, sometimes just that simple human touch of reaching out, saying thank you, is still the best medicine.
Mike: It is.
Denver: Digital transformation is changing the way we work and live. In certain areas, it’s just blowing up existing business models.
How can organizations embrace digital change to drive more impact?
Mike: There’s a digital transformation to your point happening in every single industry, including the nonprofit industry and all the sectors that we support. We’re driving a lot of that. For us, a lot of it is building intuitive, mobile first, well-integrated solutions that create operating environments for our customers that are more frictionless. As I said earlier, integration is so critically important. If you’re a large institution, you might have over a hundred systems from different vendors, a hundred vendors.
If you’re a smaller institution like a K-12 school, you might have one person that’s responsible for your information technology; you might have 10-15 separate vendors, and the systems don’t talk to each other and don’t share data. Sometimes digital transformation is not just simply taking an operation that’s manual and making it digital. Sometimes it is… like fundraising; it goes from something that’s in the physical world to digital; you then digitally transform fundraising. But sometimes, it’s also to better integration, to take all the manual steps that happen between all these disparate systems away. And the whole institution then, in fact, becomes a digital institution because they run their fundraising and their operations in a digital cloud service environment.
Denver: There goes the Tower of Babel inside these organizations.
You mentioned before you have tens of thousands of customers which include so many brand names– Habitat for Humanity, the American Diabetes Association; but also private schools and hospitals and universities. Share with us a story or two of organizations that have used your products and services, and as a result strengthened their program and operations.
Mike: Feeding American comes to mind where they last year adopted online digital marketing and our integrated donation processing of payments capabilities, and they improved their business by 1/2 million dollars. They were nice enough to make a short video with us which is on our website. It’s about two minutes long, and at the end of that video, their Chief Financial Officer says, “Because we adopted this digital transformation and this set of solutions from Blackbaud, we’re able to improve our business by half a million dollars. And for Feeding America, that’s a million more meals a year.” It’s impressive.
So, we have these kinds of stories across the board. There’s a local Habitat for Humanity chapter in Florida where they adopted one of our new solutions, and an outside third party firm went and studied several of our customers, including them; I think it’s in Dade County, Florida and studied them. And the economic return that they got by adopting one of our new platforms, they paid for our solution in four months because of how their business improved. So their return, their ROI was four months, and that information is somewhere on our website. We have thousands of these stories around the economic impact for the nonprofit through digital transformation. It manifests itself either in them reducing their operating costs or improving their revenue, which in turn, they put the money back into their core mission, which is a big win for everybody.
Denver: When you arrived at Blackbaud a few years ago, Mike, you found a very siloed culture with each product having its own development approach and methodology, how did you go about addressing that issue and creating a far more integrated approach?
Mike: This is my fifth year. I started January of ’14. We were very siloed. We did not run the company as an integrated operating business. That manifested itself with our products, not having a high velocity of innovation or lots of integration, which I explained is really important. So, we changed all of that. The business is now operating as one business. We have driven a lot more innovation in the last several years. We were called out by I think it was Forbes Magazine as one of the most innovative companies, and we were on the, I think it’s the Fortune Fast Tech 25, one of the most innovative, fastest growing software companies… with companies like Amazon and Facebook and those guys.
The business is very different business, and it’s a much higher velocity business. It runs as a single operating unit as a company. But what happens, and what has happened for our customers is now our products and solutions…. We put new features in products every 2 to 4 weeks. Where in the past, it was every 5 to 10 years, we would have a new release of a product. Now, when a customer starts to use one of our solutions, it’s forever upgraded. You don’t wait for the next big thing. It’s changing every couple of weeks.
Denver: You talked about knocking down those silos and integrating and how it’s changed everything. How did you do it? That’s not an easy thing to do.
Mike: There’s a whole bunch of things that we did frankly. We put the senior team together in one physical location. So, you don’t have to wait two weeks to get on someone’s calendar to have a meeting with a peer. You can see them five times a day at the coffee machine. I used some other techniques, like having monthly details operating reviews. So, the senior team at the company will sit in a day and see the operating reviews of the whole company. So, the team starts to see all parts of the company, not just a part that they’re directly responsible for. Because my senior team, what I like to say is: They have two hats; one is the hat they wear for the full-time job they’re in, running that part of the business. The second hat is to help me and the rest of the team run the whole company. Before I think, they only had one hat.
Denver: How would you describe the corporate culture of Blackbaud today?
Mike: The culture has always been a customer-focused culture. We actually attract a lot of people, given the customers that we have and the focus we have. Because of the siloed nature, it was very difficult to operationalize that focus. The culture today is very much an open, transparent culture. I personally have worked with the top 200 people on something in the last year. It’s a very customer- focused environment that, again, really draws a lot of folks. Because we’ve been successful as a publicly traded software company, we attract people who want a career in the software industry and who want to do something good and help these kinds of institutions become better. It’s really a perfect combination.
…in a digital world, you can actually manage something globally a lot better than in a physical world.
Denver: Let me close with this Mike. We have seen some sweeping changes over the past several years which are only going to accelerate, where do you see the market going in the next five years? And how will Blackbaud both prepare for and help shape that market?
Mike: I think it’s what you mentioned earlier, which is digital transformation. As a nonprofit institution, they all have to ask themselves, How does it apply to me? And how do I improve my institution through a digital transformation? And what does it mean for me everywhere in the institution, not just the department of fundraising, but everywhere? And can I improve my mission… whatever that might be… and have a bigger impact in the world by leveraging advanced software technology to help me do that?
Rethink my operation. Rethink that I maybe have a physical operation. And can parts of it be digitized? And in a digital world, you can actually manage something globally a lot better than in a physical world. So, I think that that change is a complex one. It’s very different for every institution. Some institutions have a different digital transformation in front of them on the mission side than others. For example, in higher education, online learning is becoming a pretty big deal as opposed to actual campus learning. So, how do they incorporate a digital experience for remote students that don’t come to the campus? Core mission being delivered digitally as opposed to physically is a big change, and they are thinking about how that transformation may come.
That applies to all the institutions that we work with. So, I think that will accelerate. I think the tools for them will become easier and easier to use. The big focus of ours, we want our customers to be able to pick up a mobile devices and start to be productive without going to a class and then go to a class for more advanced training but not for entry level training– which is: how do I use the software? It should be as easy and intuitive to use as anything that’s on your phone today. So, I think that will actually accelerate digital transformation, when the tools are just intuitive and easy to use. I’ve gotten feedback that that’s case. I spoke to a woman who’s a major gift officer at a university, and she said that for the first time in her life, she works off her iPhone. It’s never happened before. She used to have a whole bunch of paper and fly around the country with files and folders. She just takes her phone now, and she’s able to work that way. She had not yet taken a class for that particular product.
Denver: Well, you can’t make it simple enough for me. Mike Gianoni, the President and CEO of Blackbaud, I want to thank you so much for taking the time to be with us this evening.
Tell us about Blackbaud’s website and about some of the information that visitors will find there.
Mike: On our website, we have some of the information I mentioned: these customer stories where they’ve been able to really improve the business, like the Feeding America video, and there are many many customer stories. Because at the end of the day, that’s what matters on the website.
There’s also this information coming from our Blackbaud Institute around giving trends, and a lot of those reports are published out, and they’re available on our website, and we’re always updating that. Every month or two, there’s some new report around trends and best practices on our website. So, there’s quite a bit there. Of course, there’s the traditional information about our products and services as well.
Denver: And that website is?
Mike: It’s blackbaud.com.
Denver: Fantastic. Thanks, Mike. It was a real pleasure to have you on the show.
Mike: Thank you. I appreciate it. Thank you very much.
Denver: I’ll be back with more of The Business of Giving right after this.
The Business of Giving can be heard every Sunday evening between 6:00 p.m. and 7:00 p.m. Eastern on AM 970 The Answer in New York and on iHeartRadio. You can follow us @bizofgive on Twitter, @bizofgive on Instagram and at http://www.facebook.com/BusinessOfGiving