Taking the for-profit road.
The American Association American Association refers to one of the following professional baseball leagues:
or adult education
Any form of learning provided for adults. In the U.S. the University of Wisconsin was the first academic institution to offer such programs (1904). , AACN AACN American Academy of Clinical Neuropsychology
AACN American Association of Critical-Care Nurses
AACN American Association of Colleges of Nursing
AACN Advanced Automatic Crash Notification (General Motors) still was saddled with deriving two thirds of its revenue from dues and program registration. Chief Executive Officer Sarah J. Sanford borrowed an idea from her years at a profit-oriented hospital: Look at the larger market and diversify.
"The premise for diversification was that there were accessible niche markets A niche market also known as a target market is a focused, targetable portion (subset) of a market sector.
By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. that would build on the competencies we already had. That way we could create new revenue sources and growth in services that weren't justified if we just did them for AACN," says Sanford. A work group (including staff, current and past board members, and volunteers with for-profit backgrounds) spent 13 months developing a rough business plan. AACN's primary vehicle for diversification would be a for-profit spin-off The situation that arises when a parent corporation organizes a subsidiary corporation, to which it transfers a portion of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the parent corporation's shareholders. . The plan included outsourcing three major association functions - publishing, printing and fulfillment, and meeting planning - as well as marketing those services to others.
Is this a better way to run an association? "Yes, but it's easy to underestimate the unintended consequences For the "Law of unintended consequences", see Unintended consequence
Unintended Consequences is a novel by author John Ross, first published in 1996 by Accurate Press. ," Sanford warns. Two years into AACN's start-up of the for-profit business InnoVision, she offers lessons learned.
Start with your strength. "We went after niche markets based on our competencies. Unlike an entrepreneurial start-up, where you build a product around a market, we spent time getting existing services out to new clients," Sanford explains. Publishing had been AACN's most successful program. In fact, it was growth in ad revenue from AACN's two member journals that Sanford feared would jeopardize jeop·ard·ize
tr.v. jeop·ard·ized, jeop·ard·iz·ing, jeop·ard·izes
To expose to loss or injury; imperil. See Synonyms at endanger. the organization's tax status - thus supporting the need for diversification. Launching the journal Alternative Therapies in Health and Medicine "was congruent con·gru·ent
1. Corresponding; congruous.
a. Coinciding exactly when superimposed: congruent triangles.
b. with our vision but not intended for members," Sanford says. "It responded directly to market data showing consumers spending significant discretionary dollars on alternative therapies." Published by InnoVision, AACN's for-profit subsidiary, Alternative Therapies filled a new market niche.
Limit the experiment. AACN rushed three association functions out the door, outsourcing publishing, mail house, and meetings to the new for-profit. "That's too many," Sanford says with a tired sigh. "I wish we had focused on one or two complementary services."
How much to outsource also matters from the for-profit's perspective. "AACN is a significant InnoVision client. The fine line you have to walk is between looking at the parent association as the priority client and recognizing that if you neglect other clients, the parent suffers," Sanford says. "Anecdotally, we strive to keep the parent's percentage of work below 40 percent of the for-profit's load."
Consider staff and systems. These components are critical at first. "Unless you have enough capital to have a [separately staffed] organization, you have to integrate, and it can require individuals to wear too many hats in some crucial roles," Sanford reflects.
"While you are growing, you don't want to duplicate systems - that just increases overhead. On the other hand, using management and financial processes designed for a nonprofit A corporation or an association that conducts business for the benefit of the general public without shareholders and without a profit motive.
Nonprofits are also called not-for-profit corporations. Nonprofit corporations are created according to state law. can kill the for-profit, because they tend to be more labor intensive Labor Intensive
A process or industry that requires large amounts of human effort to produce goods.
A good example is the hospitality industry (hotels, restaurants, etc), they are considered to be very people-oriented.
See also: Capital Intensive, Trading Dollars ."
Have separate boards. "If you have overlapping staffs, as we do, an effective way to establish the arm's-length relationship is to have a separate board," Sanford says. "That was an expedient ex·pe·di·ent
1. Appropriate to a purpose.
a. Serving to promote one's interest: was merciful only when mercy was expedient.
b. way for us to profit from business expertise without hiring consultants or staff."
Notice cultural shifts. Staff pushed for InnoVision's success - to a fault. Sanford tells a story about a client who asked for a change in a report format. "We found out the person in information management spent 20 hours developing a new form," she exclaims. "Because [in the association], if a chapter had called, we'd just do it for them, that's the mentality. People were killing themselves to meet customer needs. That's good in concept, but it can destroy your margin."
Define success. The lesson Sanford drew from that experience was to "clarify in advance what success will look like for this client population. What are your parameters?" Changing a report format, for instance, "can be done, but it may have to be done on an hourly basis."
Be prepared to switch markets. "When you are selling products rather than letting the market tell you what products will sell, you are vulnerable." Sanford found that out when AACN went after new meeting planning clients among nursing associations. The receptivity of an attractive market "flipped from moderate to hostile in six months," she recalls. A multiple management firm had gone out of business, spooking some groups, and changes in the health care market finally began hitting membership and meeting registration. "Nursing looked at InnoVision as the new player and said it was AACN's attempt to take over. We decided not to fight that battle. We stayed in the association market but went away from nursing."
Accept the learning curve. "Put in the time," advises Sanford. "Understand what you are trying to sell and be very clear what your potential customers are seeking." If you target other associations as customers, you can expect some commonality com·mon·al·i·ty
n. pl. com·mon·al·i·ties
a. The possession, along with another or others, of a certain attribute or set of attributes: a political movement's commonality of purpose. . "But you don't know Don't know (DK, DKed)
"Don't know the trade." A Street expression used whenever one party lacks knowledge of a trade or receives conflicting instructions from the other party. what the real hooks are for that group," says Sanford. "Our approach is to ask up front, 'What are your hills to die on? What's really important to you?' We engage in that discussion even during the pricing and bidding process."
Start with a pilot. AACN started with friends. "We went to industry partners to offer our services. In one case, we asked to pilot a service with them. We wouldn't charge to use them as a learning lab. That ended up getting a lot of business from them and a lot of referrals."
Expect a long day as CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . Sanford wears the executive vice president hat at InnoVision while still leading AACN. "Normally, you probably spend 20 or 30 percent of your day investigating and learning, flexing and rolling with it. Since starting this diversification, I'd say it has been closer to 70 percent during the first 18 months."
Spend enough money. "If it's going to break you to have a 10 percent overrun 1. overrun - A frequent consequence of data arriving faster than it can be consumed, especially in serial line communications. For example, at 9600 baud there is almost exactly one character per millisecond, so if a silo can hold only two characters and the machine takes on something, then better not try it," advises Sanford. "It's a new culture, and most nonprofits can't afford to hire enough experts to avoid making mistakes."
AACN has a three-year plan The Three-Year Plan of Reconstructing the Economy (Polish: Trzyletni Plan Odbudowy Gospodarki) was a centralized plan created by the Polish communist government to rebuild Poland after the devastation of the Second World War. and an initial capitalization of $2 million. "That was a little slim," Sanford says. "To be successful, a for-profit has to be able to respond to opportunities."
Apply what you learn to the association, too. "We used to say, 'Gosh, this seems to be a member need; how can we do that without losing our shirt?' Now we say, 'What's the market potential here?'"
Sanford points to AACN's annual meeting as an example. Trading on exhibitor interest in different membership groups, AACN added two parallel meetings for members otherwise uninterested in the main meeting.
"Look at what other activities or synergy you can establish with what already exists," Sanford recommends. "Think more comprehensively: It adds to the complexity, but it also adds to the fun."
* Put your foot in, not your toe. If the market is there, go for it.
* Invest and be willing to wait for the return.
* Don't try diversification without a progressive board backing you up.
Kristin Staroba is a freelance writer based in Takoma Park, Maryland Takoma Park is a city in Montgomery County, Maryland. The name reportedly comes from an American Indian word meaning "high up near heaven". The population was 17,299 at the 2000 census. .