"He doesn't know what he's talking about," declares Michael S. Olson, CAE, president and CEO for the last two years of Washington, D.C.-based American Society of Association Executives. The "he" is Industry Standard reporter Greg Dalton, who in February wrote a column portraying trade associations as dinosaur institutions throwing party conventions, doomed for failure in the fast-moving, money-centered dot-com universe.
"They lobby governments, issue newsletters, and, of course, provide an excuse for sales andpeople to get together once a year in a sunny locale to flog their wares and party," Dalton began his "Roadkill" article. "But Internet exchanges are moving in on just about everything else that trade associations do--from serving as information hubs to refereeing relationships among members." With venture-capital-backed companies creating Internet portals for business transactions and information exchanges within every niche industry, traditional industry associations and their trade shows are likely to be "the next roadkill of the new economy," Dalton concluded.
As head of the world's largest association of associations, Olson fired off a letter to the Industry Standard, dressing down Dalton for what he called "a serious lack of understanding about what associations do." Olson outlined associations' raison d'otre, mainly that 95 percent of associations provide professional development and training programs, often together with their trade shows; that many have certification, performance, and safety requirements that protect consumers; and that fully two-thirds of all associations collect and analyze data and conduct research, much of which is used for legislative and regulatory purposes.
As for Dalton's party image of trade shows, Olson wrote, "Trade shows are the only marketing medium besides direct sales that provide face-to-face contact at an actual venue to see how the product works."
Despite his obvious vexation with the Dalton column, however, Olson admits that it served as a "wake-up call to make us more agile in the Internet age we find ourselves in."
The Best of Times--and the Worst? The Internet age is in some ways the best of times and the worst of times for nonprofit groups. Many if not most associations are experiencing increases in their budgets, programming, and convention and/orattendance. Olson points to ASAE's own growth as a prime example of the trend. Last year's annual meeting, for example, set a record at 6,000 attendees, and this year's meeting will surpass that, he predicts.
But even as they enjoy success, associations must adopt a major attitude shift, he says, in order to meet the onslaught of Web portals that are able to deliver the content, community, and commerce in a way that the world demands--instantly.
"This is the most challenging period in the evolution of associations in the last 200 years," Olson asserts, sounding a chord of concern not totally out of alignment with issues raised by Dalton. "And we have to have a set of skills that is different and more diverse than even 10 years ago. We have to have a more open attitude to the obvious fact that we are no longer the exclusive delivery system to special-interest members."
Keeping a balance between thinking like a dot-com entrepreneur and preserving the service mission of associations is the most valuable skill to acquire, Olson says, but the learning curve is steep. It's not just a matter of how to use the new tools--online RFPs, virtual trade shows, Web conferencing, market research--it's a question of which is best for the association.
"The successful association and meeting manager has to learn how to partner with them [dot-com companies], use them to their advantage, and not be defeated by them," Olson says.
That's the reason why he invited VerticalNet's CEO Mark Walsh and the portal's co-founder Mike McNulty to speak to a group of 60 association executives at ASAE's Think Tank conference in February. VerticalNet is, of course, the most widely known and emulated for-profit provider of Web portals for dozens of business niches. Walsh and McNulty were the last people one might think would be leading a brainstorming, future-looking meeting of nonprofit executives. After all, isn't that almost sleeping with the enemy? Olson says he took a lot of criticism for inviting VerticalNet, but the move fit in with his grand plan.
Confronted with the realities of the new economy, Think Tank participants explored several new business models for associations. They ranged from partnering with a for-profit entity to associations finding their own venture capital. (See sidebars page 40.)
"What we're seeing with the emerging dot-coms is an opportunity for us to enter collaborative ventures to help our members access information and communities," Olson says. "I literally get a press release a day from one association or another announcing a partnership with a dot-com. But no one is that far along with a real business plan that is unfolding in real time, where it's become an operation plan. There are thousands in the development stage."
Just Do It--and Fast For-profit Internet companies exist to make money, Olson says, and since there is no money in serving the membership with professional development, advocacy, or fighting bills in Congress, associations need not fear involvement by Internet companies in these activities. But associations do have revenue streams, often lucrative, and obviously the dot-coms are zeroing in on those.
To fend off the feeding frenzy, Olson points to the final report from the VerticalNet Think Tank conference where the very notion of traditional association governance was dismantled: "Governance can be the death of good ideas, and the excuse for cowardice. Gather the people who need to decide electronically, and just decide. If you get it wrong, move just as fast to get it right. Speed is more important than accuracy."
For the past year, ASAE has embraced this philosophy "totally," Olson says. "We use a model of strategic governance where the board is empowering the staff to make decisions as long as they're within budget and policy parameters. It's a significant philosophical change and the happy irony is that it has strengthened relationships between the board and the staff and makes everyone more accountable."
Olson does not rule out future dot-com partnerships for ASAE, but the recent news of Dallas-based International Association for Exhibition Management's (IAEM) partnership with b-there.com, a Westport, Conn.-based Internet housing, registration, and travel management provider, raised Olson's eyebrows. Part of the alliance included a $500,000 cash and stock option donation to the IAEM Foundation to provide members with Internet education. "I can't criticize it," Olson says, "but IAEM's is not a road we would travel."
The meetings and trade show industry is early into this "new economy," and a persistent fear among association convention and trade show managers is that developing online alternatives will simply cannibalize revenue from the live events. This is a concern at many associations, where meeting and trade show revenues are the biggest income stream. Don't buy into the fear, says Olson.
"Our online resources only expand our markets rather than threaten our base," he says. Olson explains that Web-based distance learning is another opportunity to entice that segment of the membership that rarely attends face-to-face meetings. So, online offerings can both provide education and be used as promotional vehicles for ASAE's in-person educational programs.
Olson's advice comes with a caveat: be skeptical. To mitigate the risk when jumping into a dot-com partnership, he says, the association must see itself as the senior partner in that relationship. For instance, if an association enters into a revenue-sharing agreement with an Internet company, the association should negotiate the bulk of its share up front, because the gamble begins when the relationship forms.
"Once an association's strategy unfolds," Olson says, "it has to fully commit to providing funding and resources to make it work. Some of the work can be outsourced, but the bottom line is that it takes a willingness on the part of boards and staff directors. We simply can't afford to be left in a cloud of dust."
Point and Counterpoint ASAE's CEO Michael Olson strongly believes that the number-one responsibility of associations these days is to develop a Web-based business strategy. But most associations are clueless when it comes to Web business plans and strategies, according to Kevin McDermott, principal of the technology consulting firm, Major Scale Technology, and a Web columnist for this magazine. "The fundamental problem," McDermott says, "is that senior management is afraid of it, they don't understand it, they delegate it, and then it's forgotten."
The irrational exuberance that floated the dot-com world up to the stratosphere was, of course, unsustainable, McDermott says. "Money was being thrown at anything that smelled vaguely of dot-com, but since the NASDAQ retrenchment in April, it won't happen anymore," he says.
Indeed, a recent article in the New York Times reported big trouble for Internet giants such as Yahoo!, eBay, and most conspicuously Amazon.com, which according to a Lehman Brothers report is "weak and deteriorating." The Times further noted that dot-coms are trying a variety of tactics--employee layoffs, reconceptualizing their businesses, and raising advertising fees--to show they can move into the black.
And that's where associations have the edge, McDermott insists: "Conceivably, associations don't have to make money; they just have to break even. They may not know it, but it's a huge advantage [over for-profit companies]."
When it comes to adapting to the changing realities of the association world, "meeting planners and trade show organizers are kind of stuck," admits McDermott. "They're not influential enough, but rather than try to move their organization, they should examine the market for good Web tools that already exist. They have to find ways to get those guys [Web technology vendors] in--it's far less risky to bring in a vendor than to do it in-house, but it gets associations off the dime."
Move It or Lose It About 60 association executives listened to VerticalNet's side of the story at American Society of Association Executives' Think Tank forum in February and then spent two days brainstorming how associations will meet the challenge of the digital divide--at the same time designing the new association of the future. Below are some key insights made by several participants in the conference. A final report on the Think Tank was released by ASAE in the spring.
"I believe that our association community can develop its own portals and its own vertical integration streams. Our reason for existing is as vital as ever: Associations offer the opportunity to create meaningful relationships with others.... But another difficulty is changing the way we think. The Internet is advancing at such a rapid pace that in today's climate, six months is a very long time. No longer do we have the luxury of a two-year planning process. . . .
"We also have to change the way we face new challenges....We need to jump in no matter how deep the water may seem. This requires us to be proactive, unafraid to take risks. We must quickly plan the new services and education we want to provide--and act today rather than sitting back and waiting."
--Harriet L. Fader, MA, CAE, executive director of the Diabetes Association of Greater Cleveland
"Will our members stop paying dues and leave us if they can get the same information free from the likes of VerticalNet? Probably not in the short term, but maybe in the long term. We now have loyal members who look to us, not virtual communities, for professional services and information; but we won't maintain this loyalty if we rest on our laurels. Our members are savvy people who will do what is best for themselves and their organizations. If they can get all they need for free, why should they pay?"
--Karen L. Hackett, FACHE, CAE, executive vice president of the American College of Healthcare Executives, Chicago
"Like it or not, associations are operating in an Internet world--but they're unable to run at Internet speed. Associations set goals based on the competition in today's marketplace, when they should be planning to take on the competitors of tomorrow. Financially, associations are not in the same ballpark, or even the same league, as our high-tech competition. . . .
"Walsh (CEO of VerticalNet) was dead right on all three points. My association moves slowly, makes plans in the conventional old way, and could never dream of investing millions to develop programs and services. Business as usual isn't going to work anymore. . . .
"We have to stop thinking that all things of value to members must have our association's name and logo on them. We must acknowledge that we can no longer be the full-service organization for everyone in our industry or profession. And we must cultivate close relationships with members to carry us through."
--Mark Levin, CAE, president of the Chain Link Fence Manufacturers Institute, Columbia, Md.
Future Shock Here are some new business models for associations discussed at the ASAE's February Think Tank, which featured presentations by VerticalNet founders Mark Walsh, CEO, and Mike McNulty. * Launch a for-profit company as the revenue-generating engine for your nonprofit organization and purpose. Some high-profile associations have already adopted this strategy: The American Medical Association partnered with others to create the for-profit medical portal Medem.com. And the Packaging Machinery Manufacturers Institute recently spun off its virtual trade show site, Packexpo.com, partnering with Cendex Corporation for the capital backing in a for-profit joint venture.
* Take a cut of routine business transactions in your arena: license your products, seek royalties on whatever you sell, charge subscriber fees--whatever works.
* Go after venture capital to fund research and technology for creating new products and services, and yes, issue stock and pay dividends to shareholders to make it worth it.
* Create franchises or retail operations or strike alliances with partners you never imagined being interested in your world.
* Leverage your credibility and relationships with members and consumers to connect them to services they can trust--whether the association is the provider or not.