The Right Business Model Puts all the Wheels Into Alignment
Have you ever pushed a shopping cart with a loose, squeaky wheel? That one misalignment makes getting around the store frustrating and difficult.
Associations move toward success on these four wheels.
- Insightful strategic planning
- Effective and attainable goals and objectives
- A capable team
- And a business model that maximizes the market
When you’re trying to get ahead, each of these elements needs to be in good working order.
We devote significant time and scrutiny to the first three areas. But how many organizations regularly make a deep dive into their fundamentals. The business model, that drives planning and execution, gets short shrift.
Your business model is the approach you take in the marketplace to make a profit. It includes target markets, the configuration of products and services you offer to those groups, and the expenses incurred in the process. Pricing and costs are the levers that create positive or lackluster performance. If the business model you pursue isn’t right for your constituents and their professional environment, it will be difficult to achieve the alignment needed for success.
Confront the Hard Questions
Leaders are all too happy to debate the pros and cons of a new sponsorship package. But most shy away from considering unique venues and prospects for support. I understand that. People are happier avoiding risk and change. The reluctance to tinker with what appears to be working well enough is not surprising. The difficult questions get left on the table. No board wants a risky experiment on their watch and no CEO wants to be the leader who “fixed” something that wasn’t broken.
Five years ago, that attitude might not have been a problem. But we all know that the world has changed. The current economic, social, and political news should be enough to convince anyone that disruption is business as usual. Your organization’s performance needs to be better than good to move through an environment that would challenge a shape-shifter to adapt.
In early 2020, I thought that the pandemic would be a tipping point. I imagined that it would cause association executives to rethink their approaches and assess their market positioning. Of course, meetings received this special attention because there was no choice. I’m not sure we’re also seeing products, services, education, membership structure, and marketing with fresh eyes.
In a July 2020 .orgCommunity survey, a total of 73% of participants agreed, or strongly agreed, that the pandemic was accelerating trends requiring changes in the role of associations, their underlying business model, and their strategic direction. Also, 54% strongly agreed that shifts in the environment might threaten the viability of many groups.
But there was a disconnect. A surprising number of participants did not anticipate, and were not considering, the need for any significant post-pandemic change. Just under half, or 40%, did not foresee any long-term revisions to their product portfolio. Almost 60% believed their membership models would resume pre-pandemic patterns, and 41% saw in-person networking opportunities returning to the status quo.
I’m not advocating that organizations change simply for the sake of shaking things up. But I am passionate about the need to understand your customers, their current and future threats and opportunities, and adjust accordingly.
Discover Growth in Change
Back in 2019, I interviewed Garth Jordan for our book, “Association 4.0: An Entrepreneurial Approach to Risk, Courage, and Transformation.” Garth is currently CEO at the American Animal Hospital Association. When we talked, he was Senior Vice President, Corporate Strategy, for the Healthcare Financial Management Association.
Garth is exactly the kind of innovative thinker that I wanted readers to learn from. Even before the pandemic, he offered this prescient advice. “A lot has changed over the last 10 to 15 years. Associations are still among the more risk-averse industries, a luxury we can no longer afford. Fingertip content, education, and unique digital community experiences are eating away at our primary business model. Leaders are beginning to realize that tradition offers no safety.
“My passion revolves around risk-taking and challenging. I’m compelled to reverse any complacency within associations. I want to challenge leaders to think differently, to use technology in innovative ways, to reconsider our business model, and to lead with a fresh perspective on everything from product lines to member service.”
Build What Your Constituents Want
When Garth was hired at HFMA, the 38,000 plus-member organization was facing challenges. The association serves financial professionals and providers who work in healthcare settings. The industry was chaotic with mergers and downsizing, and membership recruitment and renewals were mature and nearing the top of the dangerous slide.
Design thinking was the catalyst that allowed HFMA to explore the future through a new lens. This problem-solving methodology centers around developing a deep understanding of your constituents and building what they want and need. Adapting design thinking as the framework for their strategic planning process, Jordan and his team launched the organization on a multi-year journey of radical transformation.
From new technology to unique products and services, HFMA made sweeping changes in its operations, including launching a single all-inclusive membership price. “It was a 24 percent increase over the previous cost,” Jordan recalls. “We were nervous—even with all the research backing our decision. But renewals grew almost immediately. Seven months later, we launched the fully integrated digital platform which enabled scalable growth into new markets.”
Turn Opportunity into Revenue
Brent Gibson is another leader who made bold organizational shifts to align his association’s business model with market demands. Brent is Chief Health Officer of the National Commission on Correctional Health Care and Managing Director of NCCH Resources, Inc.
NCCHC is not a typical association. There are no members. Brent describes the organization this way, “We are a very serious accrediting business. Writing and surveying for standards compliance is a primary activity. With this kind of structure, there are limited sources of revenue. We need to create new strategies to generate financial resources,” Brent observes. “Being sustainable is as essential for a nonprofit as it is for any other business.”
NCCHC Resources is a nimble, innovative partner for its more traditional parent organization. While NCCHC focuses on activities such as accreditation and certification, its resources affiliate actively seeks new business and identifies gaps where additional services are needed.
“We find niches where we can develop programs, and we turn those opportunities into revenue,” Brent advises. “Ideally, we’re developing long-term customers who will provide an ongoing source of support. Those more concrete revenue streams are very good for the business.”
As the enterprise grows, Brent also creates the new systems that are needed to manage a larger, more complex workload. “We’re supervising multiple contractors across projects and many different statements of work. We are constantly called on to solve unique problems. For me, being entrepreneurial is centered on finding new ways to support our mission to ensure high-quality health care.”
Brent sees associations moving away from traditional models. “Membership dues, certification, and accreditation programs may not remain the reliable revenue generators that they always have been,” he notes. “I read about challenges to these programs almost daily and their value is under scrutiny by some. I feel as though growing those services may take longer than business realities demand and so it is a good idea to always look for other sources of revenue. More generally, much of what associations have typically done, the convening of people and ideas for mutual interest, is now provided for free on social media.”
Become Knowledge-Based
With competition for both ideas and expertise growing throughout the nonprofit sector, CEOs need to embrace the qualities required for success in a more Darwinian marketplace. Unassailable business acumen and the ability to develop knowledge-based organizations, where strategy is driven by data and informed intuition, will be fundamental. “In most cases, a business decision is not a math problem with a single solution,” Brent advises. “CEOs will need to be able to take timely, decisive action to move their organizations forward.”
Garth and Brent are entrepreneurial leaders. Their aggressive approach to change may not be a good fit for every organization. But don’t allow one squeaky wheel to slow your progress. Find the courage to examine your business model. Get to know all your members, not just the ones who regularly volunteer. Figure out who is missing from your community. Understand the young professionals that you need to recruit and give them a seat at the table. You don’t need to be an entrepreneur to grow, but you must be bold enough to change.
