Could Profit Motivated
Trading Portals
Displace Associations?
By
Joe Katzman, KPMG Consulting, Canada
Edited
by Jerry Ash, Association of Knowledgework
Opinions
expressed here are those of Jerry Ash and Joe Katzman, not necessarily
those of KPMG.
When Jerry Ash,
chief executive of the Association of Knowledgework, first read
a white paper produced by The Delphi Group regarding a third
generation e-business portal, he saw an electronic framework
that could define communities of practice, create community channels
and promote collaboration activities among communities of practice
online that might displace the need for traditional professional
associations.
When he said as
much in a message posted to the discussion group of what was
then the Association Knowledge Management Network, Joe Katzman,
KPMG, Canada, validated the view with an alert to associations
that resounded among the 300 KM-Net members.
Here is what Joe
Katzman had to say:
 Portals, CoPs & B2B
This is part of
what I meant [when I wrote earlier about B2B portals potentially
displacing associations].
But only part. In
my opinion, communities of practice inevitably wither unless
they're strongly tied to business needs and business results.
That doesn't always have to mean dollars and cents but a strong
tie to some form of currency (and reputation is also a form of
currency) is pretty much a must have.
So, let's look at
industry trading portals like ChemDex.com, eSteel.com, govWorks.com and others. They're proliferating
like weeds these days, and sites like Healtheon/WebMD are even venturing into fairly
specialized areas like medicine. These portals are driven by
transactions, but they need a hook to differentiate themselves
and survive the coming shakeouts. Enter knowledge sharing as
a differentiator, along with a few important advantages over
their traditional association counterparts.
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Comparing portals and associations
- The portals have
access in real time to valuable aggregate data about their industry
and its patterns, which they can sell or offer as inducements
to members. How's your association doing in this area?
- They naturally
have a large membership base and mailing list, as many industry
people need to be registered there in order to accomplish their
daily jobs. Is your association that vital?
- Their site is also
a strong magnet due to its frequency of use by industry insiders
. . . so on-line conferencing is less likely to die from lack
of visitors.
- They have significant
financing, along with an advanced e-business infrastructure as
a matter of course. Does your association?
- Items like member
& skills directories etc. aren't just nice frills, they become
part of the basic business infrastructure that lets these entities
make money. They build these motivated by profit, which changes
the personal reward calculus for implementers substantially.
Are these seen as critical enablers by your association, and
tracks to advancement by the ambitious? Or as nice to haves that
will suck massive personal energy for little reward, something
we might try sometime if we get some cash to play with?
- Membership fees?
What membership fees? They make money in other ways.
- They already have
an administrative infrastructure, the majority cost for most
associations. How much of your association's budget goes to administrative
infrastructure?
If I'm an association
(and not also a quasi-regulatory body or performing some other
legally required function) in an industry which is not resistant
by its nature to industry trading portals, this would scare the
hell out of me. It should.
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Social events all that's
missing in portals
The only thing the
portal model doesn't have is the social events and junkets/conferences.
My Dad is in the steel industry. Every year the industry association
has a convention. I guess Hawaii has a bigger steel industry
than I knew, because they seem to go there a lot. Sounds stupid,
but real business is conducted there and I bet it helps them
keep a lot of members. People join these associations to meet
others face-to-face as much as anything else, and this creates
a certain level of loyalty and knowledge sharing not possible
online.
So, the smart industry
trading portal looking for a competitive edge will gravitate
toward owning or building an industry association. Preferably
THE industry association. And since they already have an administrative
infrastructure, adding industry conventions and get-togethers
to their repertoire shouldn't be all that hard. Look at Fast Company's "Company of Friends"
for one potential model.
When that happens,
given all of the advantages outlined here, how many industry
associations will be able to compete? Damn few is my guess. If
your association isn't at least striking up relationships with
the folks running trading portals in your industry, I'd start.
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In the New Economy, size
does matter
Earlier, Richard
O'Sullivan wrote that "An Association Ain't No Dow Chemical,"
noting that:
It is fair then
to compare large firms to large associations and SMEs (small
and medium enterprises) to SMAs (small and medium sized associations
if we can coin an acronym). What we find are similar decision
making among small businesses regardless of status.
My first comment:
A lot of small businesses think Wal-Mart is unfair. That may
be true, but it still put them out of business.
As it happens, the
Internet works well for very small businesses, because the build
out of infrastructure and portals like works.com, intacct.com
etc. can lower their costs of doing business and industry portals
make some kinds of information (like RFPs) more easily available.
But they're uniformly consumers of Internet infrastructure that
others have built. In other words, not innovators.
The Internet is
also great for large organizations. They can put up the infrastructure,
and also have the clout to lead others to use it. IF they're
fast enough and have some vision, usually a pretty big "if."
The big effect of venture capital is to substantially accelerate
the innovation pressures online, by helping small organizations
capture important positions in the economy and grow rapidly.
The big guys then feel the pressure and become a lot less slow
-- depending on their timing, this may or may not save them from
competitive erosion. Witness industry trading portals started
by the Big 3 automakers, Sears, Sabre, and others.
This bipolar characteristic
makes the Internet a very unsafe place for small or medium sized
organizations who want to carve out their own destiny. Absent
the resources to innovate like the big guys or the ability to
cheaply buy shared use of ready-made infrastructure for their
needs, they find themselves squeezed unless their industry is
very fragmented. Third place or below is a very viable position
in the regular economy. It ranges from very tough to nonviable
on the Internet.
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Top 5 things to do next
As a Top 5 list,
associations need to:
- Realize that you're
in a fight for your organization's life here. For perhaps the
first time, it's worthwhile for other organizations to take a
profit motivated run at you (or key pieces of what you do) with
the aim of displacing you. Worse, by the time the signs of that
are obvious to everyone, you're dead. You don't have the size
and leverage to afford many mistakes.
- Think about knowledge
in far broader terms -- how can you help people to compete and
win in your industry? Because that may be the level of delivered
value required.
- Begin discussions
with relevant industry portals around cooperation and co-branding
-- but realize that not all portals will survive and act accordingly.
- Work on speeding
up your idea to implementation cycle to "Internet time"
via low risk pilots, de-bureaucratizing, etc. Then start a program
to benchmark and aggressively scour other associations, industry
practitioners, and even other industries for key ideas. Too many
organizations reverse that order, and just create frustration
and burnout. You rely too heavily on volunteers to risk that.
- Look at the rewards
structure for members. Are they rewarded for helping you grow
and succeed? If so, how can you accelerate that effect? If not,
why not?
In short, treat
the association as an organization looking to maximize its potential
value in the event of a merger . . . it's good discipline. Besides,
it may be your future.
Joe
Katzman
Toronto,
Canada
Editor's note . . .
While sounding the
alarm, Katzman inserted these double edged words:
"The smart
industry trading portal looking for a competitive edge will gravitate
toward owning or building an industry association."
Though Katzman didn't
say it directly, he implied that third and fourth alternatives
are also possible -- affiliations and joint ventures. I agree.
A marriage between
technology companies with third generation portal capability
and associations with existing frameworks of direct human interaction
does make sense because enterprise portals lack the added dimension
of personal contact through physical meetings, conferences and
conventions. As portal shakeouts loom, the prestige factor and
closeness to their industry will make them well-disposed to such
discussions. Or to acting unilaterally in this area.
The question is
whether your association will strike up these kinds of alliances
while that option is still on the table. The clock is ticking....
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