Engine 2: A Family Foundation’s Experiment in Funding Innovation

The ecosystem in which nonprofits operate is changing rapidly and unpredictably. They must be able to adapt, pivot, and explore new ways to accomplish their mission.

Philanthropy should do the same. All family foundations should value learning and renewal, routinely examining how they are achieving their philanthropic purpose. This may lead to changes in practice, approach, or funding area. In our case, a close examination of how the F.M. Kirby Foundation could increase its impact led to the creation of an entirely new grant program.

As a family foundation with deep connections to the nonprofit communities we support, we saw a need for new approaches that would give our nonprofits some risk capital for new ideas. After all, our donor, Fred Morgan Kirby, was a well-known entrepreneur whose chain of five-and-dime stores ultimately became part of the F. W. Woolworth Company. His spirit of entrepreneurship and belief in stewardship are values that have driven our philanthropy for nearly a century and are woven into the foundation’s DNA. As we witnessed our sector face unprecedented challenges, we knew we had to develop a way to honor our traditions while meeting new needs. 

Our Initial Inspiration

In 2021, Justin was drawn to an article in the Stanford Social Innovation Review, “Twin Engines for Propelling Social Impact,” by Ann Mei Chang and Laura Lazerotti. It explored how the business world’s “Engine 1/Engine 2” concept could help ambitious nonprofits balance current needs with future impact. To sustain long-term growth, a company or nonprofit needs to optimize its core business—Engine 1—while cultivating an Engine 2 to fuel growth. The article’s premise, including its call for funders to incentivize innovation, inspired the Kirby Foundation’s journey to develop a new grant program.

From the start, we took a thoughtful approach. The board and staff members had numerous discussions about the implications of creating a program focused on innovation—defined as a nonprofit’s experimentation with new programs to address unmet needs. Could this be accommodated within our current budget, or would we have to make strategic shifts? Would this be a positive or negative disruption for grantees? And while enthusiasm was high, we acknowledged the staff’s limited capacity to manage an entirely new program.

From Inspiration to Reality

The result was the Innovation Engine Grant Program, which provides a three-year grant of up to $300,000 per awardee to support innovative approaches to serving unmet needs or new constituencies—while continuing to provide general operating support for grantees’ Engine 1.

We determined that the program would have a focused scope, awarding grants only to current grantees with budgets under $4 million. We know many smaller grantees have great ideas but need seed money to transform them into actual programs. Because applicants would already be known to us, the application could be streamlined, and the quantity of applicants would be more manageable for our small team. The board authorized a pilot round of grants in 2025, and we retained an outside consultant for design and implementation support.

Throughout the process, we focused on ensuring the burden on applicants was reasonable while still gathering sufficient information for sound decision-making. We also saw this as an opportunity for family board members and staff members to do review work together, building better alignment between both groups of stakeholders.

To inform our grantee partners about the opportunity, we shared an announcement and hosted a webinar where grantees could learn more and ask questions in early 2025. Forty grantees applied, spanning our geographic and program focus areas. We reviewed applications in the summer, and a review committee made up of board and staff members evaluated finalists in the fall and made recommendations to the full board in December 2025. The three organizations that were awarded grants included a local, regional, and national organization.

Using What We Learned

We believed this project mattered not just for its social return on investment, but for a return on learning. We saw potential to inspire other family foundations to pilot new approaches. We also noticed the program was nurturing new ideas within our grant-supported organizations, even those not ultimately selected. Additionally, the sustained involvement of board members—including younger, newer members—gave them valuable insight into the grants management process.

The learning has continued since the grants were awarded. The foundation surveyed applicants and review committee members to gather feedback, allowing us to create an even better initiative in future years. To ensure our awardees can learn together as they innovate, we will continue to convene executive directors of Innovation Engine organizations in a learning cohort, facilitated by an outside consultant, to support them along their own journey. 

For foundations of any size contemplating a new program, we offer the following essential elements that contributed to the success of the Innovation Engine Grant Program:

1. Take a thoughtful approach: Do not rush; take time to consider all possibilities.
2. Understand your limitations: Assess the potential impact on staff members, systems, and finances and be realistic about what you can accomplish with the resources at hand.
3. Commit to a pilot: Thoughtfully design and implement the program, knowing that this a trial and you can adjust based on what you learned.
4. Focus the program: Create guardrails that keep the program specific and manageable.
5. Engage an outside consultant: Consider leaning on an external consultant for both tactical and advisory support, especially if you have a small staff team.
6. Get feedback: Reach out to applicants and reviewers to gather their perspectives and apply what you learn to improve future processes.

The Learning Journey Continues

Since the pilot, we have continued to reflect on what this initiative means for our philanthropy. We are reviewing survey results and evaluations to plan future rounds of Innovation Engine grants.

Earlier this year, Justin wrote about the importance of holding tradition while embracing innovation, underscoring that family foundations have a particular imperative for stewardship. They must be intentional about adaptation, evolution, and change—recognizing that “the care of the steward might require the innovation of the entrepreneur.” In the end, by piloting a new approach, family foundations may find themselves more fully embracing the values they have long held.