Five years ago in the face of cuts in grant funding and an ongoing economic crunch, the defining challenge for charities was to find new revenue streams which could support their ongoing work.

Fast forward to 2015 and third sector organisations face another existential challenge: equipping themselves for a future where the ability to do anything, from the delivery of front line services to marketing and volunteer engagement, will be defined by their IT and digital capability.

How well are charities dealing with this challenge? New research commissioned among charity decision makers to examine this issue, published in Eduserv's report 'Creating The Right Environment for Digital Transformation' paints a mixed picture.

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Starting with the positives, it is clear that charities understand the game-changing possibilities that new digital platforms offer their organisations.

In the year ahead charities say their priority is to invest in IT which will improve the way they deliver services and engage with their volunteers. These areas are ones which they acknowledge as having been neglected in the rush to support marketing and fundraising activity.

Despite this ambition however, there appears to be a lack of clarity about how they will get there.

Part of this is down to strategy. When researchers at Eduserv spoke to those responsible for driving digital transformation in their organisations we found this is caused by a knowledge gap: many of those at the top of charities have yet to grasp that digital transformation is not about using technology or digital platforms to replicate existing activities but about fundamental transformation of the way charities go about doing their business.

Linked to this is a second challenge around structure. Delivering on the needs of the digital-first charity requires different ways of organising and managing teams. In many charities progress is stalling because they are relying on the same old structures and working relationships to deliver projects rather than changing to meet the needs of a digital future. 

What this means in practice is IT and digital are failing to add value because they are seen as service providers and support functions rather than business partners.

The last challenge is around infrastructure. Here, it is clear that charities are not only failing to put in place the right IT platforms but they are failing to invest in people with the right skills to support their digital future in their IT teams. This is leaving them in a poor position to meet the evolving challenges presented by the digital environment.

Looking across these three themes it is clear although charities say they are ready to move to a digital future, many are likely to fall short of their ambitions because they are not setting themselves up for success.

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There are practical steps that charities can take to overcome this.

First, is to embed digital capability at the top of organisations among trustees and in the leadership team -- so that digital is embedded at the heart of a charity's strategic thinking.

Second, is to support this by building a digital-first culture throughout the charity. It is not realistic to expect digital and IT teams to drive change from the margins as support functions.

This cannot be done without investment in skills which give people the capability to change and tools ?C in the form of IT and digital platforms - which allow that change to take place.

A failure to grasp the importance of this investment will not leave charities tinkering around the edges of digital transformation but failing to take the steps which will keep the fit for the challenging future they face.

Sourced from John Simcock, head of charities, Eduserv