Rarely discussed yet critically foundational: Business Model among Indonesian Think Tanks

[Editor’s note: This post was written by Ashari Cahyo Edi, Research Associate at Institute for research and Empowerment (IRE) and Lecturer at Department of Politics and Government, Gadjah Mada University and Leandro Echt, consultant of the Centro de Análisis y Difusión de la Economía Paraguaya (CADEP) and member of the On Think Tanks and Politics & Ideas teams, after a round of presentations of their study on think tanks in business models in Indonesia. The study is one of the projects developed under The On Think Tanks Exchange.]

In the business world, designing and re-examining business models is a must. Indeed, innovation in business models is seen as a way to be leading producers of novel products and services. However, the business model is as important to think tanks as it is to any other enterprise. Ralphs (2011) defines a business model as ‘the manner by which the think tank delivers value to stakeholders, entices funders to pay for value, and converts those payments to research with the potential to influence policy’.

Our study focused on eight dimensions of think tanks business models: 

  1. Value proposition, 
  2. Core business activities, 
  3. Governance, 
  4. Funding structure, 
  5. Leadership, 
  6. Staffing, 
  7. Financial management, and 
  8. Communications. 

This approach allows to address each dimension by looking at the interdependence between them. For instance, think tanks are concerned about raising more funds, but how often do they think about the implications of their funding models on their research activity? How many times do we see them covering a broad set of activities (from research to capacity building) without hiring (or having the capacity to hire) qualified professionals that can deal with their specifities? How often does the composition of their Boards not reflect the needs of the organisation?   

Despite the importance of these reflections, discussions about business models among think tanks in Indonesia is quite rare. In October 2015 we had the opportunity to present the preliminary findings of our study and validate some ideas in Indonesia. Two meetings took place in the Yogyakarta, where the discussion focused on one of the most relevant dimensions of think tanks business models: the funding scheme. The first meeting gathered local think tanks and NGOs at the Institute for research and Empowerment (IRE) and the second one was hosted by the Department of Politics and Government of Gadjah Mada University.

A third meeting took place in Jakarta, at the Knowledge Sector Initiative‘s office. In the following lines, we present some of the highlights of the rich discussions and exchanges we had.

At IRE, several topics were discussed, including, the independence of think tanks, the role of donors, fundraising strategies, the role of the private sector and governments in supporting research, among others.

Regarding think tanks’ funding in Indonesia, Renny Anggriana Frahesty, Executive Director of Narasita Foundation, a local think tank in Yogyakarta working on research, advocacy and capacity building in the area of gender and MDGs mainstreaming in public policy, acknowledged that think tanks and NGOs are too absorbed with implementing projects. She recalled that, at the end of 1990s, several donors had warned think tanks and NGOs that international funding was about to shift their priorities away from Indonesia. Nevertheless, insufficient efforts were made to address this. Many NGOs and think tanks still stick with their old business models, models that assume the full support of donors.

Participants also agreed that important reasons why think tanks do not discuss funding models as much as they should is their reluctance to expose their “dirty laundry”, fear of revealing the organisation’s “key recipe”, or even their inability to escape from their comfort zone.

Halid, an activist of Indonesian Friend of Earth, shared his organisation’s policy on funding. Indonesian Friend of Earth prohibits its organisation from accept funding from government, corporations and international donors that are seen to have a negative track record. Maintaining independence is paramount since their success of advocacy relies on their credibility. Lunch is not free, and Halid believes receiving funds from them would be followed by request to act in favour of the donors.

To cope with that situation, Indonesian Friend of Earth is currently developing a new concept of funding. The organisation believes that the Indonesian public in general and more specifically the community has the capacity to raise funds for social causes. Indonesians are eager to contribute small amounts of money to charities working for disaster relief, for instance. Tangible impacts, in this respect, are the key to attract people to donate. Yet, it should be considered that funds from the general public or communities usually cover activities but not staff salaries.

Paula from CD Bethesda, a not-for profit focusing on community development in sanitation and hygiene, shared her experience in raising domestic sources of funding. She mentioned that funds raised from domestic sources only covered the operating budget of the organisation. Financing programmes needed international donors. Yet working with donors, such as with a consortium as her organisation has been, endangered their autonomy. The agenda is set by the consortium, leaving limited space for the members to influence it. The question is then how can think tanks and NGOs protect their independence?

Some insights came from the experience of Grupo FARO, a think tank in Ecuador. The organisation has set limits for the proportion of total funding that one donor can provide: Grupo FARO cannot receive more than 30% of its total annual budget from one funding agency. CIPPEC, an Argentinian think tank, also provides a good lesson to deal with funding from companies. In order to mitigate companies’ influence, the grants it received from them are directed to support research or policy advocacy that is issue based, not project based. For example, instead of funding a specific CSR project, grants from corporations have to be used to support all CSR transparency and accountability research and communications.

The discussion at Gadjah Mada University was also enlightening. One aspect regarding the funding model that was discussed at the event was think tanks’ approaches to raising funds. Generally speaking, think tanks have two main options: centralised and decentralised fundraising. Each has its pros and cons, depending on the context within which the think tank operates. Ermy Prasetio, from Article 33, explained that in her organisation, responsibilities for searching for funding are assigned to each research division. For instance, to respond to calls from donors asking for proposals in the area of good extractive governance, it is the job of the responsible for the extractive governance division to write the grant proposal.

Think tanks at Indonesian state universities are also unique. As stated by Nurazizah, lecturer and researcher at the Department of Politics and Government, the department does not need to pay monthly salaries since all researchers and lecturers are member of the civil service. Because the university has a strong national and international reputation, fundraising is not an issue. Government agencies at the national and local levels, as well as donors, come to the university to offer it projects. Therefore, while other think tanks face scarcity and get absorbed with project based fundraising the research center under the Department faces the paradox of plenty.

While the meetings in Yogyakarta focused on the funding model the discussions at the KSI office in Jakarta concentrated on business models in general. We presented the preliminary findings of our study and discussed typical questions that think tanks asked themselves for each dimension of our approach and reflected on different responses that think tanks provide to these issues.

The meeting in Jakarta was also very helpful to pick-up many methodological recommendations form senior researchers. Dadi Darmadi, Director of Advocacy and Knowledge Management at Syarif Hidayatullah Islamic State University, hoped that the report can abstract the core lessons learned about business models from the six case studies that have been undertaken. Understanding the potential strength and weakness of each dimension can represent invaluable lessons for other think tanks, not only KSI grantees. The discussion at KSI offices in Jakarta was recorded and it is accessible here:

We are finalising a synthesis paper that discusses lessons from our approach to think tanks business models applied to six case studies. The different debates in Indonesia gave us lot of food for thought and inputs to enhance our exploratory analysis on an issue that is still under-studied in the think tanks world. We wish to offer our sincere thanks to those who invest their time in exchanging with us in Indonesia, to the different institutions that generously hosted the meetings, and to On Think Tanks Exchange and donors that keep supporting collaboration among think tanks worldwide.

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