by: James Young
A Practical Guide for Associations and Nonprofits
Language conveys meaning.
Most associations and nonprofits are purpose-driven organizations. Like any organization from any industry (private, public, corporate, government, etc.), associations are in the value creation business.
But associations are not software companies or home stores (like Home Depot or Lowe’s). They have a unique business model, a different value proposition, customers who desire community and connection, and an active, boots-on-the-ground, volunteer-based governance model.
This doesn’t mean we don’t or shouldn’t create value and it doesn’t mean we can’t use the word product to convey what we do and how we serve.
The Product Community is a product development learning community designed specifically for associations.
The Indispensability of Product
“A product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its value.”
The word ‘product’ can have a negative connotation, especially to those who work in associations or nonprofits. Here are some possible reasons why:
- It sounds corporate or transactional
- It’s conveys making money at the expense of our emphasis on community
- It goes counter to the mission of purpose-driven organizations
I’d like to make the argument that product – making, choreographing, organizing, selling, connecting, delivering, remixing – is exactly what associations do (and have always done): provide value to a customer.
Investing in product is member-driven value production. Here are the fundamental benefits for associations or nonprofits:
- Product is people first. Most associations are membership-driven communities. We are people organizations enlivened by purpose. Product puts the member experience first. In doing so, the membership becomes an outcome of a thriving value experience.
- Product is value creation. Creating value is a core function of associations and nonprofits. In understanding, empathizing, and building serial relationships with our members, we create experiences that not only draw people to our organizations, but energize them in new ways.
- Product is leverage. As we have written in previous articles, the magic of product is the magic of entrenching ourselves in the member experience and to use this knowledge to better anticipate a member’s value needs. This way, natural pathways form and members find connection and growth.
- Product is growth. Growth in the world of associations is directly linked to robustness and health of a community. We are people-based so growth is reach (number of people touched), revenue (ensuring long-term financial health), and engagement (multiplier effect driven by sustained connection in a community of care).
- Product is community. Investing in product is investing in cross-functional collaboration: among and across staff and volunteer functions. Cross-functional community-building is a superpower in creating and sustaining new value for associations.
- Product is impact. In synthesizing the above benefits – people, value creation, leverage, growth, community – perhaps most importantly, an investment in product is an investment in moving the needle on our core purpose. Yes, we exist for our membership, but we really exist to serve membership as we make an impact on important problems.
So what is a product?
Quite simply: a product is a tangible or intangible item or service that is created and offered for sale to consumers. It can be manufactured, designed, or provided by various industries and organizations. Here are descriptions of products from different industries (three for-profit and three nonprofit) and an accompanying graphic to put these products into context:
- Product: Smartphone
- Description: A smartphone is a handheld electronic device that combines mobile communication capabilities with features such as internet browsing, multimedia playback, and app functionality. It includes a touchscreen interface, a powerful processor, a camera, and access to a range of applications and services.
- Product: Electric Vehicle (EV)
- Description: An EV is an automobile powered by an electric motor, using energy stored in rechargeable batteries. EVs offer an eco-alternative to gas or diesel- powered vehicles, reducing dependency on fossil fuels. They often feature advanced technologies, regenerative braking, and longer-range capabilities.
- Food and Beverage.
- Example Product: Organic Coffee
- Description: Organic coffee refers to coffee beans that are grown without the use of synthetic fertilizers, pesticides, or genetically modified organisms (GMOs). It is cultivated using sustainable farming practices, ensuring conservation and promoting biodiversity. It is considered healthy and known for its natural flavors.
Anthony Francescucci; Joanne McNeish; and Nukhet Taylor
- Example Product: Professional Membership
- Description: Membership provides people in a particular industry or profession access to a range of benefits, resources, and opportunities for networking, professional development, industry insights, or participation in industry-related forums. Membership aims to support professional growth by providing access to a community of like-minded professionals.
- Association or Nonprofit.
- Example Product: Annual Conference
- Description: An annual conference is an event organized by an association or nonprofit that brings together professionals, experts, and stakeholders in a particular industry or field. It serves as a platform for networking, knowledge sharing, and professional development. Annual conferences often feature keynote speakers, workshops, panel discussions, and exhibitor showcases.
- Example Product: Online Certification
- Program Description: An online certification program offered by an association is designed to enhance the skills and knowledge of individuals in a specific profession or industry. These programs can provide structured learning modules, assessments, and practical training to help participants acquire expertise and credentials.
As we can see from the continuum, and no surprise due to our emphasis on community engagement, associations and nonprofits are largely in the intangible service business. With possible rare exceptions, it doesn’t make sense for associations to create and sell physical products.
An Overview of Value Creation
“What is a cynic? A man who knows the price of everything, and the value of nothing.”
Associations are in the value creation business. This is a vital bridge to understanding the importance and potential vitality of investing in product.
As you can see from the below list, value creation in for-profit organizations is different, but not that different. Look closely at the descriptions and imagine how associations or nonprofits can retain true their purpose, yet also invest in product innovation, become more efficient operationally, satisfy customers, and expand into new markets.
Sounds about right.
Value creation in for-profits refers to the process of generating economic value for a company, its shareholders, and its stakeholders. The primary objective of for-profits is to generate profits by delivering products, services, or solutions that fulfill customer needs and create a competitive advantage. Here are a few examples of value creation in a for-profit setting:
- Product Innovation. Companies invest in R&D to create innovative products or improve existing ones. For example, Apple’s introduction of the iPhone revolutionized the smartphone industry and created significant value for the company.
- Operational Efficiency. By streamlining processes, optimizing supply chains, and reducing costs, orgs can improve their operational efficiency. This can lead to higher profitability and competitive pricing. Walmart is known for its efficient supply chain management, which enables them to offer lower prices to customers.
- Customer Satisfaction. Delivering exceptional customer experiences and meeting their needs is crucial for value creation. Amazon’s focus on providing a seamless online shopping experience, fast delivery, and excellent customer service has contributed to its success and customer loyalty.
- Market Expansion. Entering new markets or expanding existing ones can create value by tapping into new customer segments or geographic regions. An example is Coca-Cola’s global expansion, which allowed them to reach customers worldwide and increase their market share.
Value creation in an association is slightly different, yet complementary. As associations or nonprofits typically aim to serve members, advance a cause, and/or contribute to the growth or make impact in an industry or problem-space. Here are some examples of value creation in an association:
- Knowledge Sharing and Professional Development. Associations provide diverse platforms for members to share knowledge, best practices, and experiences. We organize conferences, seminars, and training programs to enhance members’ professional skills and expertise. For instance, the Project Management Institute (PMI) offers certifications, networking opportunities, and industry resources to project management professionals.
- Advocacy and Representation. Associations advocate for their members’ interests and serve as their collective voice. We engage in policy discussions, influence regulations, and advocate for the needs and concerns of the profession. The American Medical Association (AMA) represents physicians and promotes policies that improve healthcare access and quality.
- Networking and Collaboration. Associations facilitate networking among members, fostering collaboration, and creating opportunities for personal and professional connection. For example, the American Bar Association (ABA) provides a platform for lawyers to connect, share insights, and collaborate on legal matters.
- Research and Thought Leadership. Professional associations often conduct research, publish reports, and provide thought leadership in their respective fields. This helps us advance knowledge, shape industry standards, and drive innovation. The American Society of Civil Engineers (ASCE) publishes research papers and guidelines that contribute to advancements in civil engineering practices.
Overall, value creation in a for-profit setting revolves around generating profits and delivering customer value, while in an association or nonprofit, it focuses on serving members’ professional interests, advancing a cause, promoting a field or industry, and shaping and advancing a profession as a whole.
Both product and value creation are important concepts, but they have different focuses and implications. Here’s a breakdown of their similarities and differences:
- Business Context. Both product and value creation are fundamental aspects of running a successful business.
- Customer Orientation. Both concepts revolve around meeting the needs and desires of customers.
- Competitive Advantage. Both product and value creation can contribute to gaining a competitive edge in the marketplace.
- Focus. A product primarily emphasizes the tangible offering that a business sells to customers, whether it’s a physical item or a service. Value creation, on the other hand, places emphasis on the overall benefits, satisfaction, and positive outcomes that customers derive from using a product or engaging with a organization.
- Scope. Product refers specifically to the features, functionality, design, and attributes of the offering itself. Value creation encompasses a broader perspective, taking into account the entire customer experience, including pre- and post-purchase interactions, customer support, brand perception, and more.
- Outcome. The goal of a product is to fulfill a customer’s specific need or want, providing utility or solving a problem. Value creation aims to go beyond meeting customer expectations and deliver additional value that exceeds what the customer initially anticipated, fostering loyalty, satisfaction, and positive word-of-mouth.
- Measurement. The success of a product is often evaluated based on factors such as sales, market share, and customer feedback related to the product’s features and performance. Value creation, however, may be assessed through a variety of metrics, including customer satisfaction ratings, customer lifetime value, repeat purchases, referrals, and overall customer loyalty.
- Longevity. Products can have a limited lifespan, as they may become outdated or replaced by newer versions or competitors’ offerings. Value creation is a more enduring concept that seeks to build long-term relationships with customers by consistently delivering exceptional experiences and benefits.
In summary, while a product focuses on the tangible offering itself, value creation extends beyond the product and encompasses the entire customer experience, aiming to exceed expectations and foster loyalty.
Both concepts are important for associations or nonprofits, but value creation places a greater emphasis on customer-centricity, impact, and long-term sustainability.
Investments, Outcomes, and Returns
“The biggest differentiator and value proposition of an organization is the community of people who use, improve, and advocate for your product. This is why community-led growth is one of the hottest durable growth strategies today.”
In one of our recent articles, we drew distinctions among inputs, outputs, and outcomes. Here we want to address an association’s investment in product development (think of this as inputs) and the derived outcomes by investing in product:
ROI is a financial metric used to evaluate the profitability and effectiveness of an investment. However, the interpretation of ROI can differ slightly between for-profit organizations and nonprofit organizations.
For a for-profit organization: ROI measures the financial return on an investment made by a company. A higher ROI indicates a more profitable investment, and it is commonly used to assess the efficiency of various projects, marketing campaigns, or capital expenditures.
For a nonprofit organization ROI can have a slightly different meaning as the focus is not solely on financial returns. Nonprofits often aim to generate a social or environmental impact rather than maximize financial gains.
Therefore, ROI in the nonprofit sector is often referred to as Social Return on Investment (SROI) or Impact Return on Investment.
Here is a graphic that broadens the concept of ROI for purpose-driven organizations.
SROI takes into account both the social outcomes and the financial investments of a nonprofit organization. It seeks to measure and quantify the social impact generated relative to the resources invested. SROI typically involves a comprehensive assessment of the org’s outcomes, including tangible and intangible factors, as well as the monetary value of these outcomes.
Focused Value and Healthy Culture
Investing in product is an intentional investment in people.
I believe in the association because I believe people will always want to be connected to shared concerns, purpose, or problems.
People will always want to engage in a focused way. People will always want to learn, but also to solve problems or move the needle in a profession or industry.
But this isn’t enough.
I also believe in strategically-focused organizations that celebrate engagement, but also make shrewd choices about their identity, investments, and outcome.
Good associations deliver value, celebrate community, and foster connection. World-class associations do this, but make lasting-impact through value creation and product development.
About the Author
James Young is founder and chief learning officer of the Product Community®. Jim is an engaging trainer and leading thinker in the worlds of associations, learning communities, and product development. Prior to starting the Product Community®, Jim served as Chief Learning Officer at both the American College of Chest Physicians and the Society of College and University Planning.