The Truth About Nonprofit Disruption
Nonprofit disruption has been a topic of conversation for what seems like forever, but at what point does a disruption become the status quo for nonprofits?
We used to talk about disruptive technology. Now, we call them iPhones. Demographics are shifting, markets are globalizing, and social trends are reshaping our world.
On top of all that, those dang Millennials disrupt everything they touch. We’ve been talking about them forever, too, but Millennials are now turning 35 and firmly entrenching themselves in all sectors of business and society.
Disruptions surround us. We are immersed in the constant, rapid change of nonprofit disruption. The question is, “Which ones truly matter?”
Not all change is disruptive, and not all disruptions change things. Humans are constantly looking for patterns and tend to find them, whether they are genuinely there or not. Unfortunately, not everything has a pattern.
The following are two examples of nonprofit disruptions that upend our perceived patterns.
A Disruptive Exit
Membership drives products, advertising, fundraising, and everything about membership as an ecosystem. The more people engage with the ecosystem, the better for membership and vice versa. If you disrupt one part of the system enough, the whole system gets disrupted.
That’s what makes it so complex.
For example, look at insurance. Many associations offer insurance, and it is often one of the top reasons to join. According to Sequence Consulting research, it is also one of the strongest predictors of renewal: Non-buyers renew at 70 percent, one product renews at 90 percent, and more than one renews at 95 percent or more. This is especially true with first-time members.
Some of these relationships go back decades. Hundreds of millions of dollars of business are shoved off onto other carriers or left behind. What gives? For one, it’s a lot riskier than it used to be—a raft of new regulations in the last few years.
AARP invented the affinity insurance model in the 1950s to get insurance for retired teachers, and we’ve all been doing it pretty much the same way ever since. We let an insurance carrier use our brand and member list, and they do most of the work; we get paid a royalty, and our members like it.
So, insurance is an excellent thing. It makes money, and it drives membership. If it ain’t broke, don’t fix it.
In the last few years, most major insurance companies have either exited the affinity business or are headed for the door. Voya is out. AIG is out. Hartford dumped a massive chunk of business. AXA left the US life business. MetLife and Transamerica rolled it into their employer business, as did Assurant. Liberty Mutual stopped doing direct mail.
Some of these relationships go back decades. Hundreds of millions of dollars of business are shoved off onto other carriers or left behind. What gives?
For one, it’s a lot riskier than it used to be. In the last few years, a raft of new regulations has made life a lot harder for insurers, and it’s made associations scarier to do business with.
Of course, if you dig deep, the truth is it’s just not worth it for insurance companies anymore. Your list is not as valuable as it used to be. They can find your members for themselves, and they probably know more about them than you do because they’ve invested millions in data and analytics.
“Understanding how these nonprofit disruptions are affecting your organization is the first step in creating new patterns that will keep you ahead of the curve.”
A Disruptive Entry
Most associations have a handful of products or partnerships that drive their business. Content. Publishing. Advertising. Education. What if someone could disrupt every piece of that equation in one fell swoop?
Much to the chagrin of organizations that have been around for decades, a six-year-old online startup has a 60 percent market share of one of the most prominent professions. As a result, it is now aggressively stealing business from dozens of leading associations.
Worse yet, they’re getting away with it.
Doximity launched in 2011 as the “LinkedIn for doctors.” Since then, they have grown to 600,000 members by building on groundbreaking partnerships and platforms that:
- Form HIPPA-compliant online communities at will
- Deliver continuing education for free
- Rank and navigate residency programs and hospitals
- Curate hundreds of medical journal feeds for you, as an individual
- Provide authenticated medical credentials accepted almost everywhere
- Deliver customized employment and referral opportunities for physicians and hiring managers
- Provide a comprehensive list of medical facilities and pharmacies nationwide they can speed dial
You could try to beat them on price point, except that membership is free. All members have to do is validate their profile because Doximity already has their data.
The company currently has 180 employees, half of whom are developers, and a cool $80 million in funding. They’ve partnered with US News, Cleveland Clinic, and others, and now they are expanding to include all licensed medical professionals.
Nurses, dentists, pharmacists, social workers, physical therapists, chiropractors — anyone licensed by the state. This year alone, they’ve added 200,000 members.
They, and other groups like them, are coming after parts of the core association value proposition with a radically different, never-before-seen model, and they are doing it at internet speed.
What Can You Do To Solve It?
Sequence Consulting suggests that there are several different ways to address the coming nonprofit disruptions:
- Rest on your laurels – Rely on “safe” sources of income and assume they always will be. Also known as the “Ostrich Strategy.”
- If you can’t beat ‘em, join’em – find ways to partner with new entrants
- Circle the wagons – protect the core of value propositions that only you can provide
- Outflank ’em – find holes in their offerings you can attack by doing it different or better
- Back to the drawing board – radically rethink what you do and how you deliver it
There is no one correct answer, and none of them are easy, but understanding how these nonprofit disruptions affect your organization is the first step to creating new patterns that will keep you ahead of the curve.
Chris Vaughan, Ph.D.
Chris Vaughan is the Chief Strategy Officer at Sequence Consulting, with over 20 years of experience helping associations grow. Specializing in membership and revenue strategies, Chris partners with organizations to deliver transformational growth and enduring change.
