Association Business Model Innovation

The coronavirus pandemic has brought to the fore the importance of reviewing an association’s business model.
By Octavio B. Peralta

While there are as many definitions of business model as there are ways of doing it, a simple way to define a business model for me in the context of an association is this – the best way to generate revenue and have a surplus.

There are of course other aspects of a business model but, in the end, strong financial results and performance matter most for a purpose-driven organization such as an association. As an association executive myself, the financial health of my association, especially in these trying times, is the one thing that keeps me continuously vigilant and constantly finding ways to sustain.

In a recent virtual forum that my organization, the Philippine Council of Associations and Association Executives (PCAAE) has held, the panellists and a majority of the 300-attendee audience unanimously cited financial loss due to the pandemic as their most challenging concern. In short, it is about the survivability of their associations.

This has made me revisit one of the articles I read years ago entitled “Disrupting Beliefs: A New Approach to Business Model Innovation” written by Marc de Jong and Menno van Dijk that was featured in the McKinsey Quarterly. Here, they provided a five-step business model innovation re-frame for for-profit companies which can be adapted to associations, as follows:

Step 1 – Study the dominant business model of a same-purposed association like yours by noting its long-held core belief on how it creates value. In general, scale (e.g. number of members) is considered crucial to an association’s ability to generate revenues, thus more members mean more revenue (from membership dues and non-dues revenue, e.g. event registrations, certification programs, publications, etc.).

Step 2 – Analyze this core belief further and derive impressions that support this belief by determining, for example, how member engagement, technology adoption, regulatory compliance, or operational systems affect your association’s value addition and differentiation. All these factors come into play right now due to current regulations on social distancing and restriction on face-to-face group gathering. Associations are presently engaging members by organizing virtual events and using digital technologies to enhance content curation and enrich communication channels.

Step 3 – Turn an existing belief upside down and ask “what if?” by, say, formulating a radical new assumption or proposition for doing things. For example, as Wikipedia has postulated, that you can get work done in bits and pieces by encouraging everyone worldwide to contribute their knowledge on a subject on an accrual basis. Or, as is happening today while association staff works from home, this arrangement could be the new normal going forward.

Step 4 – Test your assumption or proposition, since many re-framed ideas may not work in the real world. Perhaps your best option would be to apply a re-frame that has already been tested and proven in a business setting. Unlike product or service innovations which are not well-disseminated, business model innovations in industries are more known and available such as similar experiences of sharing organizations like Airbnb, Uber and others.

Step 5 – Reposition your new belief into your new business model. Once your association has decided on a specific re-frame, new ways of doing things will correspondingly manifest themselves in terms of, among other things, new governance and management systems, member engagement, revenue generation and asset capture.

A final thought – it takes informed risk-taking and good timing to be able to transition from your existing association business model to the new one. I think if there is one silver lining out of this pandemic, it is the opportunity for associations to look again at their current business model and start a re-frame as suggested here.

Octavio ‘Bobby’ Peralta

Affectionately called, "The Association Man," by his friends and peers, Bobby, a Filipino, is currently the Secretary General of the Association of Development Financing Institutions in Asia & the Pacific (ADFIAP), Member of the Board of Governors of the World Federation of Development Financing Association (WFDFI), Founder & CEO of the Philippine Council of Associations and Association Executives (PCAAE), and President of the Asia-Pacific Federation of Association Organizations (APFAO). He is proud to be a member of the American Society of Association Executives (ASAE) and an Active Member of the Union of International Associations (UIA).