Naw association executives council innovation in association business models
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NAW Association Executives Council Innovation In Association Business Models. The Fairmont Hotel Grand Ballroom 1, Ballroom Level Washington, D.C. January 28, 2013 1:15 to 4:30 PM. Discussion Leaders Mike Marks & Steve Deist. About IRCG .

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Naw association executives council innovation in association business models

NAW Association Executives CouncilInnovation In Association Business Models

The Fairmont Hotel

Grand Ballroom 1, Ballroom Level

Washington, D.C.

January 28, 2013

1:15 to 4:30 PM

Discussion Leaders

Mike Marks & Steve Deist


About ircg

About IRCG

  • Mid size consulting firm founded in 1987 that provides advisory services for manufacturers, distributors, private equity and other ownership groups

  • Our expertise is in market accesswhich measures how well a firm’s resources are aligned with their real opportunities for growth

    • Services include strategy development and execution, channel management, operational alignment, incentive design, and sales force optimization

  • We are well recognized for our industry depth and experience

    • Many completed industry research projects for NAW and their member associations, and we are both permanent faculty members at the University of Industrial Distribution (UID)


Agenda

Agenda

1:15 to 2:45

The Short List Of Member Challenges

A Recap From Quebec On Business Models

2:45 to 3:00

Break

3:00 to 4:30

Group discussion:

Reenergizing An Association

Association Vitality Index

Addressing Capability Gaps

It’s not about what we’re selling, it’s about what they’re buying


Death of the generalist

Segment #2

Don’t

Care

Segment #1

Nice to

Have

Don’t

Care

Nice to

Have

Critical

Needs

Critical

Needs

Death of the Generalist

$$$$

$$

$$

“The specialization trend has been unkind to the association incapable of serving an increasingly diverse membership”

A “one size fits all” model means spending more money but providing less of the critical services

Targeting segments allows us to tailor our investment for maximum effect


Strategic evolution

Strategic Evolution


Key future forces

Key Future Forces

If we want to skate to where the puck is going to be, we need to understand the fundamental forces affecting our members

The buffet of choice: customers are taking control of the sales process and information flow

The search for growth: mature markets and a stagnant economy drive consolidation, impersonation and invasion

Workforce issues: the imminent loss of tribal knowledge has now become an emergency

1.

1.

3.

2.


1 the buffet of choice solomo

#1 The Buffet of Choice: SoLoMo

Some factoids from Grainger’s Geoff Robinson in emarketter.com, June 2012

Grainger’s mobile activity has increased 400% in the past 12 months

Over 50% of its users feel comfortable ordering over mobile devices.

Google reported that 1 in 7 searches are now done on mobile devices.

Customers are no longer just passive consumers of a product or service. They help to create it!

Information can be accessed from anywhere at anytime

Solutions are tailored based on time and place


Judo moves

Judo Moves

Your members largely know what the issues are. Their challenge is how to approach and address them.

The following are the top techniques that have proven to be the most powerful for IRCG clients who best reflect your membership

Intentional selling

Tailored service levels

Customer centered innovation

Market driven priorities

The right tool for the job

Analytically led decision making

  • Judo is about working with the forces of nature rather than trying to confront negative energy head on.


Intentional selling example

Intentional Selling Example


Roy vallee executive chairman avnet

  • Executive Insight

Roy Vallee, Executive Chairman, Avnet

What should keep distributor managers awake at night?

Finding pathways for continued profitable growth that in today’s uncertain environment requires risk taking and innovation

Being able to attract and engage the new generation of workers

Being able to effectively allocate your resources (people and money) in a changing environment (sometimes reallocating is the biggest challenge)

Source: MDM October 25, 2012. Full interview available at www.mdm.com/ext/html/executivebriefing-7min-archive.html

Consultant takeaway: these issues represent a profound and fundamental challenge to the risk averse, tactically focused “owner operator” distributors that represent the bulk of association membership


Ideas from quebec and elsewhere

  • Building on the Foundation

Ideas from Quebec (and elsewhere)

We need to get closer to members and their customers (insight rather than anecdote)

Stay away from competitive levers: focus on the size of the pie, not how it’s sliced

  • Market strategy

  • Best practices

    Huge value in timely, relevant and credible data

  • Flash market reports

  • True benchmarking based on consistent process metrics

    Raise the profile of wholesale-distribution for Gen X and Y employees

    Great value in network effects

  • Leverage by providing extra services or functional discounts for value added participation

    Offline association strategy development (conspiracy of effectiveness)


Agenda1

Agenda

1:15 to 2:45

The Short List Of Member Challenges

A Recap From Quebec On Business Models

2:45 to 3:00

Break

3:00 to 4:30

Group discussion:

Reenergizing An Association

Association Vitality Index

Addressing Capability Gaps

We will draw heavily from this book and it may be challenging


Business models

Business Models

A business model describes the rationale for how an organization creates, delivers, and captures value

At the simplest level there are two parts; how you add value to a market, and how you extract value (get paid)

If your model provides better value/cost ratio then you will grow with those customers who choose you over other alternatives

You will start to fail if you don’t provide a better value/cost (time & money) ratio in the increasing range of alternatives

At the time failure is described as being subject to the economy, rising cost & time pressures, technology, and competitive alternatives

Remember that your association started as a monopoly but your members have many more choices today


The business model canvas

The Business Model Canvas

4. Relationships are established and maintained with each Customer Segment

7…by providing a number of key activities

8. Some activities are outsourced and some resources are acquired outside the enterprise

1. An organization serves one or several Customer Segments

2. It seeks to solve customer problems and satisfy customer needs with value propositions

6. Key resources are the assets required to offer and deliver the previously described elements…

3. Value propositions are delivered to customers through communications, distribution, and sales channels

5. Revenue streams results from value propositions successfully offered to customers

9. The business model elements result in the cost structure

Efficiency

Value Creation


Generic trade association canvas

Generic Trade Association Canvas

Group events in multiple venues

Advocacy

Standards promulgation

No next best alternative (monopoly)

Committee engagement

Specialized knowledge that is hard to obtain

Early warning on specific threats and opportunities

Access to trading partners

Education

Affinity meetings

Third party service providers

Buying & marketing groups

NAW/AEA/NAM

  • Categories of distributors

  • Suppliers

  • Service providers

  • (Aren’t there discrete groups within each category?)

Internet

Print communication

Member outreach

Intellectual property

Owned patents and standards

LMS or other software

Talent

Trade shows/conventions

Member dues

Paid seminars and workshops

Licensing fees

Staff

Marketing & sales

Event costs

Research investments

The interesting part is in the specifics when looking at each customer segment


The apple i tunes business model

The Apple i-Tunes Business Model


The multi sided business model

The Multi-Sided Business Model

Multi-sided platforms bring together two or more distinct but interdependent groups of customers

The platform is valuable to one group of customers only if the other groups of customers are present

The platform creates value by facilitating interactionsbetween the different groups

  • What specific interactions (not just activities)?

    The platform grows in value to the extent that it attracts more users, a phenomenon known as the network effect

  • Growing numbers of members is the old measure

  • The other measure is engagement (depth and numbers per member) which measures largely unseen and unmet demands


The apple app business mode l

  • Multi-Sided Platforms

The Apple App Business Model

The spooling of the turbocharger is called the network effect


Short team exercise from quebec

Select the person who has traveled to the most exotic location as your spokesperson

The network effect occurs when the needs of all customer segments are met with balance- so compare notes with team mates around:

How are distributors treated as a favored class?

How much association revenue is linked directly or indirectly to supplier participation (imagine that they are gone)?

What other constituencies or sub segments can be supported?

How well are you being balanced in facilitating interactions?

Be prepared to share your answers

You will need this insight for the group discussion after the break

Short Team Exercise (from Quebec)


Agenda2

Agenda

1:15 to 2:45

The Short List Of Member Challenges

A Recap From Quebec On Business Models

2:45 to 3:00

Break

3:00 to 4:30

Group discussion:

Reenergizing An Association

Association Vitality Index

Addressing Capability Gaps


Agenda3

Agenda

1:15 to 2:45

The Short List Of Member Challenges

A Recap From Quebec On Business Models

2:45 to 3:00

Break

3:00 to 4:30

Group discussion:

Reenergizing An Association

Association Vitality Index

Addressing Capability Gaps

The fundamental principle is to find unmet needs (pain or frustration in a few members) and create a fulcrum to leverage this energy to scale into the larger group

It is inherently about a narrow focus that is small and bright


The generalist value proposition

From the 2004 AEC Meeting in Colorado

The Generalist Value Proposition

Consultants & Studies

Personal member agendas

Tradition

Newsletters & spam

Member surveys

Trade show

New ideas

Education Foundation

Trade Association

Since 2004 we have added Facebook, Twitter, and LinkedIn


Factors affecting association growth

Factors Affecting Association Growth

1. Market Convergence (DHI)

As product silos evaporate nontraditional players begin competing with your members. This is driven by “the grass is always greener” scenario and customers’ desire to consolidate their supplier base (a zero sum game)

2. Industry Concentration (NAED)

Consolidation is really about concentration for the sake of market power. Is the market share for the 10 largest suppliers or the 10 largest distributors increasing or decreasing? Is it fast, slow, or accelerating?

3. Imminent Threat To Survival (HIDA’s medical device tax)

This is an external threat that disrupts the fundamental value propositions of your members to their customers, most often created by changes in legal frameworks. Advocacy may be the only viable solution.


4 value proposition erosion opeesa

4. Value Proposition Erosion (OPEESA)

Remember that a value proposition is focused on a served customer segment

  • Generalist models erode the quickest

  • All erode over time (Edgar Schein’s Adaptive Coping Cycle, e.g. John Deere)

    The real strategic question is what are your multiple value propositions and which group do they serve?

    Association membership is generally 1-10% of published NAICS firm counts

  • Members believe they are the elite and the other 90%+ is not

  • We focus on meeting needs of the existing few, not the missing many

  • Measures are around views of existing members

    How does the other 90% view your 10%? Is asking the 10% the right way to find out?


5 value proposition competition seda

5. Value Proposition Competition (SEDA)

Associations, as monopolies, were built on providing:

  • Networking among peers

  • Supplier access to their “customers”

  • Creation of specialized information

  • Education on common issues

  • Advocacy on common issues

    How much are emerging value alternatives gaining traction in your industry?

  • Buying and marketing groups, TEC and Vistage groups, major suppliers doing their own distributor meetings and PAR Reports, the Internet, your distributor member’s end user associations

  • If your association were hit by a bus tomorrow what would be the first critical thing missed that isn’t provided elsewhere?

  • Are your core member needs becoming polarized by size, focus, globalization, or ownership structure?

Most distributor trade associations offered a generic service package and they were separated by the vertical product silo defined by the supplier base


Association vitality score

  • Modified from the 2004 AEC Conference in Colorado

Association Vitality Score


Creating a fulcrum

Creating A Fulcrum

Always relying on the big launch with lots of involvement is effectively solving every problem with a hammer

Sometimes finding something small, bright, and resilient and setting it on fire has a higher probability of becoming self sustaining over time

Don’t forget that you are not in a rush

http://sethgodin.typepad.com/seths_blog/2013/01/understanding-idea-diffusion.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+typepad%2Fsethsmainblog+%28Seth%27s+Blog%29


Group activity

Group Activity

Pass in your five number scores and we will tabulate the groups responses during your activity

The energy to start a brushfire is contained in three broad ideas

Addressing members’ critical business needs (although they may not be widely recognized yet), not ours

Creating new value propositions for smaller segments of members that can be isolated from the whole

Letting go of some current activities where we are being held hostage to history, so market forces become a wind at our back instead of in our face

The task for each table is to consider the factors and apply them to our associations to identify a small and bright source of energy for change or renewal

This is actually very difficult and it is not about making your members successful (vitamins) rather finding anger and frustration (pain killers)

We will share our results starting at 4:10 so good luck!


The path forward

The Path Forward

We all need to develop and execute on a coherent strategy

The lodestar is understanding and meeting unmet or unrecognized member needs (they don’t know so asking them is pointless and irritating)

  • 20% of your members use 80% of what you actually provide

  • Significant resources are wasted trying to make members successful in spite of themselves

    “They shuddaoughtawannna do it!”

  • When they don’t respond we raise our voice with more email, faxes, and phone calls so they often avoid us

  • Sometimes the best strategy is to let everyone see a small group move ahead and then they will act so they don’t fall behind

    It is hard to kill a trade association quickly - they slowly fade away

  • The last Senior Staff Executive with a strong comp package is the easiest position to fill


Your personal game plan

Your Personal Game Plan

Buy the book and do a business model canvas with your own board

  • Have them design a competitive trade association to help determine what you can change (ask Nancy how to do it)

    Start a dialog with your best and brightest members to:

  • Start doing some segmentation to find some unmet needs or shared pains

    • Because pain pills outsell vitamins

    • Examine future forces for key opportunities

  • Start creating smaller group value propositions that involve non executive members

    Build a real strategy that starts with the external market and then does tradeoffs

    Most important for most is finding stuff to STOP doing


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