This article was originally published in AMI Magazine's February 2018 edition.
Disruption is everywhere – and it’s not just affecting how associations operate, but causing them to question their core business models. Exciting new ideas are emerging, as associations confound their reputation as conservative late-adopters by embracing innovation. Below are four disruptive business models challenging the way we think about membership organisations...
1. The hybrid association
Hybrid associations combine the social logic of a not-for-profit with the commercial logic of a for-profit business. By harnessing the strengths of both models, hybridisation allows for entrepreneurial behaviour within associations, while measuring organisational performance in terms of financial sustainability and high growth. Hybridisation is moving away from a membership-centric model towards business models centered on sustainable revenue generation and growth.
Of course, a not-for-profit selling products or services may have to pay tax on revenues associated with those activities. Recently, some associations have reported being advised that they could lose their tax-exempt status if the profitable activities are insufficiently connected to what is deemed to be their primary charitable purpose. The creation of a for-profit subsidiary could be considered if that is the case, or other forms of hybridisation.
For instance, the Ontario Good Roads Association (OGRA) successfully developed software applications pertinent to members, like many associations have in the recent past. It provides these services as a free benefit of membership, but also sells these products outside of their primary circle to generate revenue.
The Canadian Revenue Agency deemed that this revenue was, ‘not in keeping with the primary purpose of the association’, thus jeopardizing OGRA’s not-for-profit status. To counter the charge, OGRA created a for-profit subsidiary and transferred the relevant assets to the new company. The for-profit entity operates with a totally independent board, pays tax on profits, and has the ability to declare dividends which are paid back to OGRA – the sole shareholder. This protects the association and the product, while allowing the pursuit of the core mission. Hybridisation will become more prevalent in 2018 and 2019 as associations look at ways to diversify revenue streams.
2. Private or commercial associations
It sounds like an oxymoron – and purists will no doubt shout heresy! – but private or commercial associations are now, officially, a ‘thing’. In economic terms, a not-for-profit organisation uses its surplus revenues to further achieve its purpose or mission, rather than distributing its surplus income to the organisation’s shareholders as profit in the for-profit or commercial model. Very often, associations are seen to be hampered by inflexible structures and boards. The premise is that the private or commercial association model would permit them to tackle this through increased efficiency and decreased bureaucracy, while pursuing similar missions.
Some issues with the not-for-profit model that private associations seek to counter include:
- Barriers in creating products or services that could generate profit
- Difficulty attracting or retaining quality employees due to lower salaries and less ‘sexy’ work environment
- Fewer funding resources and no possibility of attracting investment
Establishing a for-profit organisation would allow associations to realise gains if their business becomes successful and allows revenue diversification more easily.
Private organisations can promptly implement useful private sector management models and business practices. According to Doreen Ashton Wagner of Greenfield Services: ‘Many non-regulated professional or trade associations are headed in this direction. If there is no need to regulate or advocate, then the educational and networking needs of individuals often will be better served by entrepreneurs’.
While private associations have freedom from the constraints of bureaucracy, their members are essentially subscribers to a service owned by shareholders. This creates its own problems, diluting the feeling of inherent trust that not-for-profit associations can foster. Members may also suspect the association has divided loyalties between its mission, its commitments to its shareholders, and its members’ interests. Target audiences are more likely to feel cynical about a commercial association’s marketing tactics and perceive them to be less transparent than not-for-profits.
Many new associations that are arising on the international scene, largely created by new industries, are private. (This will be explored in the next edition of AMI magazine).
3. Communities > members
Some associations are now essentially platforms or online communities, without membership dues, where members become subscribers to a network or a knowledge community. They typically provide open-access to content freely and widely. They have little or no staffing structure, often relying on volunteers and using existing collaborative platforms like social media to engage their community.
An inspiring case is the Interaction Design Association (IxDA), a member-supported organisation dedicated to the practice of interaction design. Since its launch in 2003, IxDA has grown into an international network of more than 100,000 members in 50 countries.
Another example is AssociationSuccess.org, an online community and digital publication for association professionals. They work with their community to publish free content, including articles, eBooks, educational videos, and virtual events. Because participation is free for all, it attracts a wider audience and allows for thought leadership to flourish without constraint.
4. Redesigned and rebranded associations
Organisational design is the integration of structure, processes, and people to support the implementation of strategy. Many associations are feeling the call to redesign themselves, and this should imply going beyond restructuring membership models or introducing new products. Jeff de Cagna, of Foresight First, argues that redesigning should be a broader and more meaningful strategic framework for radical new value creation that does not position the selling of memberships as the cornerstone of future business models.
We have recently witnessed in our industry the transformation and rebranding of the International Live Events Association (ILEA), formerly the International Special Events Society (ISES). They took advantage of this change to adopt a ambitious strategic plan and develop a new content hub, ILEA Experience, to secure its leadership role in the space of live events.
Design Thinking, a methodology developed for product design which is now being used in organisations, is a great tool for redesigning an association. Contrary to traditional organisational design, the design thinking process revolves around your customers and fosters an openness for iterations, tests, fast failures, learning, and an active support of creativity.
The Health Financial Management Association (HFMA) is an excellent example of an association doing a full 360, not just a cosmetic change, by using Design Thinking as a tool to innovate their business model. They decided to find out as much as they could about what their stakeholders wanted and needed, and sourced solutions inspired by and rooted in the humanistic needs of members. Both their staff and board interviewed and shadowed members in their workplaces for weeks to find out how HFMA could best serve them. This created hours of storytelling that was shared and collated into themes and challenges, as defined entirely by members. New projects and ideas for revamping the association grew directly out of this research, and they are in the process of implementing the major projects that were developed subsequently. They have already yielded an impressive new revenue stream and generated contagious enthusiasm amongst their stakeholders in the process.
The most successful new models and redesigns can be hugely transformative .The association world is in flux, and we remain on the lookout for inspiring and innovative models arising in the near future.
About the Author
Genevieve Leclerc is an association strategist, dedicated to ‘innovation and value creation for all stakeholders of the association meetings industry’. She is the President of Caravelle Strategies and is based in Quebec, Canada.