Associations and Their Ongoing Problems with Strategy
Go out and find a copy of the June Harvard Business Review Magazine (sorry, I know it's old news now, but there must be some out there!). The cover spotlight is on "Strategy for Turbulent Times" and the first article in that section is by Rita Gunther McGrath on "Transient Advantage." She argues that the days of long-term competitive advantage are for the most part over. Some companies may still achieve it, but they will be the exception rather than the rule. The rest of us are going to jump from one transient advantage to the next, because the markets are changing that quickly. The organizations that figure out how to move through these transient advantages more adeptly are going to be the successful ones.
I love this idea, but I think it will be hard for associations to swallow, simply because most of them have been enjoying a sustained competitive advantage for a long time. Like decades. McGrath points out that companies (particularly ones that have had an advantage for some time) are going to resist the truth that times are changing. So she provides a simple assessment. If you answer yes to four or more of these questions, you may be in trouble:
- I don't buy my own company's products or services.
- We're investing at the same or higher levels an don't getting better margins or growth in return
- Customers are finding cheaper or simpler solutions to be "good enough"
- Competition is emerging from places we didn't expect.
- Customers are no longer excited about what we have to offer.
- We're not considered a top place to work by the people we'd like to hire.
- Some of our very best people are leaving.
- Our stock is perpetually undervalued.
Okay associations, let's be honest. The first one and last one don't even apply to you, but I bet you said yes to four of those anyway. McGrath says this is a warning sign that "you may be facing imminent erosion." I think that's what's going on here. It's not about whether the membership model is dead, or if you are relevant, or if you follow strategic planning best practices. It's simply a matter of you having lived for a long time with a sustainable competitive advantage, and it's now eroding. McGrath points out that there are actually clearly defined stages in managing advantage. When you're on top, you're in the "exploit" phase. You gain market share and force competitors to react. You need people who are good at analytical decision making and efficiency.
And associations have been there for decades. That's why your strategic plans simply describe what you do or set growth targets for established activities. Just keep implementing. Get better satisfaction scores at your conference. Increase member retention by 1%. Exploit that advantage. This has clearly been working, so I get why this has been your focus.
But if you answered yes to four or more of those statements above, then your advantage is probably slipping. Given the transformation brought on by the social internet (and the fact that your business model has been based in education/information and networking--the heart of the social media transformation), I'm not surprised. So now you're in a new phase regarding your competitive advantage, that McGrath calls "reconfigure." You have to reconfigure what you're doing to keep your advantage fresh. To do this, you need people who "aren't afraid to radically rethink business models or resources."
Hmmm. Turns out that if you've been set up for exploiting for a long time, this reconfigure work might throw your people for a loop. To some extent this new new work just won't make sense. It may not fit with your structure or your current processes, or your traditional metrics. So you're good at strategic planning for an organization with a sustained competitive advantage, and that is precisely why you are very bad at strategy in a transient-advantage economy. You're not so good at rethinking business models or shifting resources to new experiments. And the deeper you dig, the more you'll realize that it goes beyond your strategy process and into your culture, structure, and skill-sets of your people. McGrath talks about this, but I'll save it for another post.