How Trade Associations Facilitate Innovation

There was a great article called “Innovating Through Design” in the Dec. 2006 issue of Harvard Business Review. The article explored how informal collaboration amongst design professionals in Lombardy, Italy, produces incredible innovation in product design.

The Lombardy firms’ R&D operation, for the most part, can be found neither inside the companies nor in interactions among them. Rather, it comprises a free-floating community of architects, suppliers, photographers, critics, curators, publishers, and craftsmen, among many other categories of professionals, as well as the expected artists and designers. The members of the community are prized as much for their immersion in a discourse as for their originality.

A takeaway from the HBR article is that strong industry clusters and business communities emerge, not only as byproduct of large universities, but by a willingness of firms and individuals in a region to engage in discourse and collaboration.

Trade Associations as Connectors

From Pop Art’s experiences, we have found that trade associations play a huge role in facilitating discourse and collaboration. It is a myth that trade associations are primarily about promoting an industry through activities such as public relations. On the contrary, most trade associations devote most their resources to topics such as “industry standards,” “education” and “workforce development.”

They connect CEOs with CEOs, engineers with engineers, designers with designers. They build social networks (both online and offline) and hold formal educational seminars.

When I have a business problem, I can share it in confidence with other trade association executives who I have grown to know over the years. When I need to find a new supplier or key employee, I can tap into my trade association contacts. Often, I attend a trade association event where I hear about a new concept, technology or story. The concept may not directly apply to my firm, but I am able to synthesize the ideas and gain valuable takeaways.

The ROI of Building a Strong Community

It may be easy for a company like Intel to justify belonging to a trade association of semiconductor manufactures. But why should Intel support the local software association or advertising federation? Certainly Intel executives already have plenty of peer groups and collaboration partners. And why should a company like Pop Art support a trade association of start-ups, if our company is no longer a start-up and very rarely has a client that is one?

The reason is that companies like Intel and Pop Art benefit enormously from the strong companies that trade associations help foster. It’s a low-cost way to build a strong community that benefits the broader industry. For example, a great start-up might attract a stellar engineer to our region, and that engineer might lead a speaking panel that larger companies learn from. Or even better, that engineer (or a friend of the engineer) might later go work for Pop Art or Intel.

When Intel sponsors a trade association event, it builds tremendous goodwill and mindshare. Because Intel is so supportive of trade associations to which I belong, not only am I more likely to buy Intel’s products, but I am much more likely to recommend Intel when my friends in New York, Los Angeles or Portland are seeking a job.

And on a political note, when large companies support the community, they are much more likely to receive essential political support from small companies when the large companies really need it. The Small companies will not blindly follow the lead of the large companies; but at the very least the small companies will listen and discuss the needs of the large companies who form the anchor support of trade associations. Simply put, when you get to know somebody, you are more likely to empathize with them.

Trade Associations and Politics

Trade associations are often poorly portrayed by Hollywood, the media and politicians. The “Trade Federation” in the Star Wars films and the “Spacing Guild” in the Dune novels are antagonistic forces that seek to maintain monopolies on trade. Politicians and the media portray trade association lobbying as representing “special interests,” often working against the common good.

Some trade associations devote a small portion of their dues to “lobbying and advocacy” activities. Trade associations may also maintain political action committees (PACs) to engage in lobbying. Other trade associations do not engage in any political activities.

I have spoken with CEOs who get nervous about participating in a trade association’s political activities. Reasons are cited such as:

• “I am not sure that I support their political agenda.”
• “I don’t want my business engaged in politics.”
• “I don’t want to offend our customers or employees.”
• “I don’t want to be a political pawn of big industry.”

As far as politics are concerned, I believe that trade associations do far more good than harm. Trade associations play a huge role in educating elected officials regarding topics like: the need for skilled workers, long-term macroeconomic trends and how various legislation will affect businesses. I think it’s safe to say that not every legislator understands business and economics. And certainly, not every business executive understands legislative political.

The majority of lobbying that I see from Pop Art’s trade associations is lobbying for increased education funding in the arts and sciences. Most CEOs don’t earn huge salaries. Most CEOs want livable communities, clean and safe environments and opportunity for all. The political needs of metropolitan CEOs and their owners is most often in-synch with the needs of labor and the community at-large. And when it isn’t, there are plenty of voices representing the other side so that politicians can listen to effective discourse.

In general, trade associations won’t advocate a policy position unless the vast majority of its membership is in agreement. I believe in change from within the system, and I would rather have my voice heard than sit on the sidelines. Our involvement in trade associations offers us a window into issues and perspectives that we might not have know about otherwise. Our firm benefits from our ability to influence political discourse within trade organizations, and from the power we have to rally other companies to our causes as well as our potential to block the trade association from taking policy positions to which we wholeheartedly object.

Challenges faced by Trade Associations

Trade associations face numerous challenges, including: maintaining membership in light of M&A activity, finding sponsors and putting on events. The bottom line is that there are more and more trade associations, probably too many of them. New trade associations pop-up frequently, but trade associations fade away slowly, and rarely burn-out. Keeping their mission and their content relevant is perhaps the biggest challenge.

Working in a trade association is a tough job. Many trade association employees work 12-hour days, with little job security or financial up-side. They must balance lots of politics and the egos of CEOs who make up their constantly changing executive boards.

The best trade associations have low staff turn-over; this helps their employees to best serve as connectors and helps advance the interest of their members.

The best trade associations also have very dedicated volunteer boards who are passionate and generous in making the association relevant and viable. The best board members are inclusive. They do not promote the “Old Boy’s Network” with cliquish and controlling behavior; rather, they are very open and inclusive in welcoming new members and ideas.

Conclusion

The ROI of trade association membership is largely intangible; however, it is outstanding nonetheless. It is in your self-interest to liberally join, sponsor and participate in numerous trade associations. If you are a good member, the trade association staff and board members will go out of their way to help you.

If you are open-minded to talking with other firms, both your competitors and firms not directly in your field, you might stumble upon some new innovations. Successful industry clusters, business communities and ideas will emerge; this is essential to your firm’s long-term success and the growth of a prosperous society.