Why business model thinking matters to associations

This post appears as an article in the May/June 2012 issue of Success by Association, the magazine of Association Executives of North Carolina. You can download a PDF of the article (512 KB). If your association would like permission to republish this article, please submit a request through the P.I. contact form and provide details in the Message box.

Building a 21st century organization is not an endeavor for the faint of heart. Working against both the irresistible forces of intense and relentless societal transformation and the immovable object of an enduring yet failing association orthodoxy, association boards, CEOs and C-Suite executives, along with other staff and voluntary leaders, must collaborate to prepare their organizations to thrive in a volatile and uncertain future.

Finding the next trajectory of association success begins with the challenging yet necessary work of business model innovation. Business model innovation demands that associations identify imaginative ways to create and deliver radical new value to their stakeholders, begin building future market share and capture sustainable revenue streams back into their organizations. Unfortunately, the vast majority of association leaders have not been prepared to engage in deep thinking about their business models. This article examines why staff and voluntary leaders alike must build their capacity for business model thinking by outlining the critical roles these leaders play in the work of business model innovation.

The board of directors–The board is the core stewardship group for every association, including stewardship of the business model. The fiduciary responsibility that lives at the heart of board service extends far beyond the oversight function traditionally performed through the review and approval of audits, budgets and 990s. It also must include a deep understanding of the dynamics of the existing business model, including its structural flaws and systemic weaknesses. In every association, the board must constantly monitor the health of the current business model, understand and track potential disruptive threats and work with the CEO and C-Suite executives to pursue business model innovation as the inevitable erosion of the existing model occurs.

The chief executive officer–At this perilous time in the history of their organizations, association CEOs do not want to be caught on the wrong side of conventional wisdom. All CEOs are evaluated on the success or failure of the association’s value creation efforts. With this in mind, the CEO must be the primary driver of constant business model reinvention and innovation. The CEO needs to work in concert with the board and her direct reports to ensure the work of business model innovation identifies more powerful and more meaningful ways to execute the association’s strategic intent through the careful integration of purposeful action with profitability. The CEO also needs to collaborate with other leaders to ensure new business model concepts receive full consideration, with only the most promising ideas earning the opportunity to be prototyped and tested.

Other C-Suite executives–In partnership with boards and CEOs, C-Suite executives need to play dual roles in the work of business model innovation. On the one hand, they must understand how their individual functions or portfolios contribute to the strength or weakness of the association’s existing business model. On the other hand, as senior leaders working for the organization’s future success, they must be able to think holistically and look beyond their own spheres of responsibility to consider the possibilities of new business model concepts that may not be financially or politically advantageous to their current functional areas.

Within the C-Suite team, three officers play particularly important roles in the work of business model innovation. Even as new business model concepts are considered, the chief operating officer (COO), along with the chief financial officer (CFO) must ensure the current business model functions as well as possible, whatever its limitations. The CFO’s financial expertise accords to this individual a specific responsibility to build the understanding of the board and other leaders on the deeper functioning of the existing business model, especially with regard to issues of profitability. The unique insights of the chief information officer (CIO) into the influence and impact of emerging technologies can help the association’s leadership make more intelligent decisions around new business model concepts.

In the 21st century, the forces of relentless societal transformation will compel association boards, CEOs and C-Suite executives to make business model innovation a continuing priority. Association leaders must reject complacency and rise to this challenge by building their capabilities for business model thinking without delay. It is the best opportunity these leaders will have to create a more vibrant future for their organizations.

Jeff De Cagna

Jeff De Cagna is chief strategist and founder of Principled Innovation LLC, and a contrarian thinker on strategy, business models, governing and the future of associations.

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