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Disrupted – how associations innovate

In the first of a two-part feature, association strategist Genevieve Leclerc explores how the traditionally risk-averse association sector is reinventing itself…

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 toward business models centered on sustainable revenue generation and growth.

A not-for-profit selling products or services may have to pay tax on revenues associated with those activities in several countries. Recently, some have reported being advised that they could lose their tax-exempt status if the profitable activities are insufficiently connected to what is assessed 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 hybridization.

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. We predict that hybridisation will become more prevalent in 2018 and 2019 as associations are looking at ways to diversify revenue streams.

  1. 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’. An economic terms, a nonprofit organization 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 encountered with a nonprofit model that private associations seek to offset 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 could dilute the feeling of trust that not-for-profit associations can foster. They may feel that the association has divided loyalties between its mission, its shareholders, and its members. Target audiences are more likely to feel cynical about a commercial association’s marketing tactics and perceive them to be less transparent than nonprofits.

  1. Communities > members

Some association 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.

  1. 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 an ambitious strategic plan and develop a new content hub, ILEA Experience, to secure its leadership role in the space of live events.

The most successful new models and redesigns are hugely transformative and are able to make deep pivots at their very core. The association world is in flux, and we’ll remain on the lookout for inspiring and innovative models arising in the near futu

 

*About the author: Genevieve Leclerc is an association strategist, dedicated to ‘innovation and value creation for all stakeholders of the association meetings industry’. Caravelle Strategies.

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