Association boards, CEOs and senior executives will need to answer a wide variety of questions as they embark on the work of developing new business models to enable their organizations to thrive over the next decade and beyond. Of unique importance, however, will be how these leaders work through three critical design challenges that may well determine whether their new business model concepts will be able to achieve both purposeful impact and sustainable profitability.
The practical challenge: Making the shift from membership-centric to value creation-centric business models.
In a series of blog posts last summer, I outlined five reasons why membership is “killing” association business models. While I certainly encourage you to read those posts, here is the key point: the shifting economics of membership, combined with greatly increased stakeholder expectations, are making membership-centric business models strategically and financially problematic for many associations across different industries, professions and fields. Despite these difficulties, tradition continues to trump innovation, as selling memberships remains the all-encompassing logic of association business models. Some associations are so committed to maintaining their membership-centric business models, they are now giving membership away for free, a tactical choice that can create unintended consequences for strategic intent.
So, I describe this as the practical challenge not because I see it as an easy one for association leaders to overcome, but because it offers the clearest pathway to jumpstarting business model innovation. Associations are expending considerable energy and attention on selling memberships because doing so helps them achieve their internal outcomes. By refocusing those efforts on the work of new value creation, associations can make it possible for a broader universe of interested stakeholders, situated in both core and meaningfully adjacent market spaces, to achieve the outcomes those stakeholders decide are important to them.
The process challenge: Managing the transition from “form-making” to “form-finding” in business model design.
A few years ago, I had the privilege to hear MIT Media Lab professor Neri Oxman give a brilliant talk at the Business Innovation Factory Summit in which she made the distinction between “form-making” and “form-finding” in design. Put simply, in her work, Professor Oxman focuses on design as a process of natural discovery, not as a by-product of the designer’s all-knowing vision. Making this same shift in the approach to designing new business models is a necessary, yet non-trivial challenge for associations.
“Form-making” in the business model design process typically involves designers (leaders) in a socially-constructed process of building agreement around the key assumptions that will drive the creation and delivery of new value to stakeholders, as well as the capture of profitable new revenue streams for the organization. The designers make the important decisions, and then seek feedback from external stakeholders. “Form-finding” in business model innovation is about pursuing compelling value conversations with stakeholder networks, and actively collaborating with those networks to “find” (co-create) mutually-beneficial business model designs based on a shared understanding of desired outcomes and possible opportunities. In the short term, associations will continue to pursue both approaches, and over time, the transition to “form-finding” will require associations to fully embrace serendipity, empathy and discovery (SED).
The progress challenge: Designing business models that can be both adaptive and resilient.
By overcoming the practical and process challenges, associations will develop the right design mindset and approach for business model innovation. To reorient their organizations toward long-term strategic success, however, association leaders also must work through the progress challenge, as it is the most significant obstacle they will face in taking their associations to the much-desired yet rarely-reached “next level.”
The progress challenge for associations is developing business models that are both adaptive and resilient. On the one hand, adaptive business models unleash the generative power of network effects, making it possible to capitalize on new opportunities as they emerge. On the other hand, resilient business models create meaningful connections with stakeholders who recognize the shared economic, social or other value embedded in those relationships. (Kickstarter is an example of a company with a business model that demonstrates both adaptivity and resilience.) While traditional membership-centric association business models have demonstrated resilience over time, they have been anything but adaptive. Among the chief considerations for associations as they develop new business model concepts that integrate both attributes will be how best to harness the power of game-changing technologies to create smarter and thicker stakeholder value.
How will your association begin to tackle these business model design challenges? Please post your thoughts and questions in the comments below. And if you haven’t already, please subscribe to the P.I. Blog either by email or RSS. Thanks for reading!