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The intense impact of societal transformation is pushing more associations across North America and around the world to accept the serious yet essential challenge of reinventing their existing membership-centric business models. To build their organizations to thrive in the years ahead, it is critical that senior decision-makers adopt a generative framework for shaping new business models that can create thick value for their 21st century stakeholders. 

Among the many influential companies that have been rewriting the rules of new value creation over the past two decades, online retailing giant Amazon stands out as the primary driving force behind the markedly increased expectations of value among today’s stakeholders. If the following feedback from the Amazon website is even a small indicator of the company’s success at meeting and exceeding those expectations, there is good reason to believe associations can learn much from its example:  

“Amazon, if I could, I would seriously make out with you right now. Yes, I said it.”

Nevertheless, some association decision-makers may question the usefulness of Amazon’s approach to their organizations, considering the enormous scale of the company’s operations and resources. In response, I offer two thoughts. First, a reminder that Amazon was founded in the summer of 1994, barely more than two decades ago, and it did not enter into existence as the enterprise behemoth it is today. Second, as they begin to think about their business models in new ways, association decision-makers can benefit from something that Amazon did not have when the company got its start: its own impressive twenty-year track record of business model innovation.

Understanding The Amazon Test

Before explaining what I call “The Amazon Test,” it is important to share the definition of the term business model used throughout this article. A business model is the rationale of how an organization creates, delivers and captures value, and functions as the holistic framework for integrating an association’s commitment to taking purposeful action on behalf of (and in collaboration with) its stakeholders, with the pursuit of a responsible level of profitability. This is a critical point for association decision-makers to keep in mind, since the more ubiquitous term “non-profit” describes an organization’s tax status rather than its business model.

Most associations today operate on membership-centric business models, i.e., models that focus on selling memberships as the primary driver of value creation, delivery and capture. Within these business models, the key criterion used in making every significant organizational decision is the possible impact (either positive or negative) on membership sales. This is a significant limiting condition that often interferes with the exploration of meaningful innovation opportunities in favor of protecting the status quo. Membership-centric business models have provided associations with a measure of financial resilience during more stable and predictable times, and yet today the relentless power of transformation continues to complicate the underlying strategic and financial dynamics of membership. To overcome these concerns, associations must adapt to new realities and risks, and focus their future business models on creating greater stakeholder value.

To facilitate a different way of thinking, I have created “The Amazon Test” as a generative framework for innovating association business models for the future. After interacting with Amazon for many years as a customer, as well as observing and researching the company’s business model as part of my work as a strategic advisor to associations, I have developed three compelling questions for Boards and not-for-profit Chief Staff Officers and executives to consider both in evaluating their existing business models, and to spark fresh thinking about what is next for their organizations.

How does your association create an actual experience of value within every stakeholder interaction?

Over the last two decades, Amazon has created and refined what is, arguably, the platinum standard of value creation for its customers. The company started out selling only books, but it is now the first place most people look for just about anything they need or want. If you can imagine it, there is a good chance you can buy it on Amazon. At the heart of the company’s success is its single-minded focus on its customers, as well as the consistency of its customer experience over time. Whether you are exploring your buying options, making an actual purchase or arranging to return an item that did not work as anticipated, Amazon makes each process simple, convenient and even beneficial for its customers.

Now, of course, it is impossible for any organization to create an actual experience of value in each and every stakeholder interaction. No one is that good. Yet Amazon comes much closer to this high level of performance than any other enterprise in the marketplace today. (Ironically, as a result of the company’s current dispute with French publisher Hachette, Amazon has made it far more difficult for its customers to buy books from Hachette’s various imprints, and is thus violating the first part of The Amazon Test.)  Associations, in contrast, mostly struggle in this area. In far too many organizations, the traditional pay-to-play membership offer lacks substantive real world value, a problem that usually results in soft member retention rates. To compensate for the shortcomings of membership, many association decision-makers believe their organizations must work harder to create and communicate a “perception of value” to stakeholders. In a world in which the Amazon example is so influential, however, association business models need to be reinvented to help stakeholders realize an actual experience of thick value, not occasionally, but repeatedly over time.

How does your association innovate consistently to expand the surface area of possible value creation?

Although Amazon is the world’s largest online retailer, the company has innovated its business model to offer new forms of value to both consumers and business customers. For example, Amazon’s family of electronic devices, including the Kindle e-book reader, the Fire tablet and the recently introduced Fire smartphone, creates new ways for customers to interact with the company’s growing library of digital content, as well as quick access to products for purchase. Amazon Web Services (AWS) offers the same underlying technology infrastructure on which the company runs its retailing operations to other organizations for websites, mobile applications and other purposes. AWS customers include social media site Pinterest, Netflix and the U.S. Central Intelligence Agency. From Amazon Prime (two-day delivery subscription service) to Amazon Mechanical Turk (crowdsourcing human intelligence to complete tasks) to Fulfillment by Amazon (small business product selling and delivery), the company’s business model has achieved a broader reach and formed more meaningful connections with customers that will continue to produce additional opportunities for new value creation in the years ahead.

In 2014, many associations still find it challenging to pursue the kind of deep and ongoing innovation that Amazon has embodied throughout its twenty-year run. Once again, the membership-centric business model is a severe limiting factor, both strategically and financially. In strategic terms, associations have organized all value creation activities around membership, leaving their stakeholders with a binary choice: join the association as a member or remain a non-member and we will continue to ask you to join. This approach rarely leaves any white space in which to negotiate other types of stakeholder relationships grounded in the serendipitous possibilities of innovation. In financial terms, most membership value propositions seek to lower costs for stakeholders, usually by building in significant cross-subsidies from third-party revenue streams such as advertising, exhibits and sponsorship. As a result, controlling service costs must be a top priority within membership-centric business models, which frequently leaves few resources to make serious investments in the work of innovation. To build their organizations to thrive, however, association decision-makers must overcome these constraints and reimagine their business models to connect with a broader set of stakeholders who are seeking (and interested in helping to create) new forms of value that do not depend on membership.

How is your association building a platform through which stakeholders can contribute to new value creation?

Not only does Amazon make shopping and buying simple, it greatly enriches the experience by encouraging customers to rate and review their purchases on the company’s site. This kind of direct feedback helped many customers overcome their early concerns about making purchases online, while today it serves as a critical information and education resource. As a regular Amazon customer, I have gained invaluable insights from the real-world experiences of other customers, both positive and negative. Indeed, many Amazon customers report finding customer ratings and reviews more believable and useful than official product information provided by either manufacturers or sellers. By enabling direct customer participation, Amazon has built deeper trust and confidence in the integrity, as well as enhanced the quality, of its very powerful business model.

Over the last decade, many associations have made significant investments in online community technologies with the good intention of engaging their stakeholders in conversation, content creation and collaboration. Within membership-centric business models, however, these technologies are usually treated as member benefits, and their impact is evaluated as part of member satisfaction metrics. Following Amazon’s lead, association decision-makers need to maximize the impact of their technology investments by reimagining how those tools can create a different center of gravity within new business models focused on the creation of thick value instead of selling membership. In the years ahead, associations will need to shift Board and staff mindsets to a “digital first” approach to innovation from the traditional “analog” ways of doing business they have pursued for decades.

Despite all its achievements over the last twenty years, Amazon is far from perfect. The company is widely (and fairly) criticized for some of its business practices, including the questionable treatment of fulfillment center workers, hardball tactics with publishers, retailers and other customers/partners and the failure to generate consistent profits for investors. These shortcomings are significant, and could derail Amazon’s future success if they continue. At the same time, Amazon demonstrates a remarkable ability to develop and execute on a compelling business model that is, at once, adaptive to shifting customer problems, needs and outcomes, and resilient in the face of strategic and marketplace volatility. To thrive in the 21st century, association decision-makers need to put in place similarly adaptive and resilient business models through a rigorously creative process that begins with framing up convincing and actionable responses to the three questions of The Amazon Test. It is a test that all associations must learn how to pass.