We here at the Nonprofit Quarterly are trying to make sense of the Obama Budget right along with all of you. As always, there are a thousand moving pieces which can get shaped/warped/hijacked in a hundred different ways as they pass through the hands of lawmakers, intermediaries, state administrations, and agencies. So a “just the facts, ma’am” approach to understanding the first Obama Budget does not work any more than it did with the Bush Budgets. So I have included a few things here that I hope will be useful in understanding what bears watching. One is Rick Cohen’s first installment of an analysis of the Obama Budget.

Then, additionally, I just need to address myself once again to the issue of social innovation or social entrepreneurism. These terms that accompanied the Obamas to the White House are now institutionalized, albeit without firm form (at least as far as we know) in the Office of Social Innovation.

The limited statements that have been issued regarding the office include one made by Michelle Obama on May 5 referring to a few fairly large nonprofits with better than normal access to venture capital as innovative examples. Our sincere hope is that these statements do not imply that this office believes that most of the innovation in the sector happens within such already built out institutions. Our experience is that innovation among nonprofits happens in every conceivable size institution and entrepreneurism is the soul of the sector. But, even with that, a lack of capital that can be applied systematically to research and development in small settings often results in the loss of national programmatic advancement. The development of an innovation into a proven practice which is of use to a whole field takes something extra.

One of the ways that innovation sparked in a creative single community gains impact is indeed through the necessarily rare big investment and championship of a major national foundation, as in the case of some of the organizations mentioned as examples in Michelle Obama’s statement. But another important way that innovation is developed and circulated is through effective intermediary networks. The story here is of the Colorado Rural Housing Development Corporation, an organization that both innovates and makes use of innovations piloted elsewhere in part aided by its relationship with national community and housing development intermediary groups. When you read the story, you will likely be as impressed as I was with the creativity and agility of this organization, and its ability to mix and match resources to craft an end result that best serves community.

The type of support for more widespread innovation that can come through intermediary groups can include consistent highlighting of the variety of practices that are showing good results in particular communities where they were originated, the tracking of whether or not that particular model plays well elsewhere, and the selling to government of programs that do replicate well. Granted, this approach does not build an institution as much as it does a field and the communities being served by the field but I am assuming that in a moment where we might be able to develop a new kind of relationship between government and nonprofits, that we should try to gain traction for the idea that government can and should expect to find valuable social innovations in unlikely places — very often at the margins. Because that is where it often starts.

The use of networks to get things done should be second nature to the Obamas so we hope that the same idea will carry through in the job of locating and supporting social innovation — particularly in fast moving targeted fields like health care and housing where we will need to move ideas quickly from isolated experiment to field wide practice.

Anyway, as usual, we’d love your comments about any piece of this letter.

And stay tuned for our next installment of “Nonprofits in the Age of Obama”.