Institutions and the power to drive change

Combined with ideas and individuals, industry trade associations have the power to fuel prosperity in the digital economy—but are they ready to help lead the way?

The power of association

Actionable ideas and empowered individuals are essential for innovating B2B, but if distribution is to achieve its fullest potential in the digital age, something more is needed. Distribution's private institutions—especially industry associations—can harness the social power of communities, castigate complacency, and lobby vendors, educators, and government to catalyze change. Industry associations cannot replace the competitive drive of solo leaders and changemakers, but they can force debate, seed incubation, and reform governance. Incumbent institutions can be guiding lights and force multipliers. Still, like all established organizations in disruptive times, they must first wake up, recognize change, and boldly act on the responsibility that falls onto their shoulders. 

In a landmark paper published by the Hoover Institution, economists John Cogan and Kevin Warsh explore the relationship between individuals and institutions and, in no uncertain terms, emphasize the power of institutions:

The nexus between individuals and institutions can determine a country's performance. Human agency affects institutions, and institutions affect human agency. The quality of a nation's institutions is more important than natural resource endowments. The design of public institutions is a prerequisite for a country to achieve its potential. Private institutions, or associations, must be given space and scope to rise organically from free individuals pursuing their common interests. [Emphasis added.]

Do distribution's industry associations understand their immense power and determinative role in helping markets, the economy, and our society transform for the digital age? In a word, no. I don't see it. Some are acting on their responsibility to help members, and some of those are taking bold action. But with a few exceptions, the mindset behind these actions is defensive, driven by a need to help members weather change and, by doing so, help the association survive as well. The professional managers that lead industry associations serve at the pleasure of their members. Their actions are bounded by the risk of doing more than members request or offering foresight that goes beyond what members can imagine. This is more than a problem; given Cogan and Warsh's assertions, it is a crisis. 

In distribution, trade associations are long-standing institutions traditionally charged with helping members network, stay current with trends, benchmark operations, and manage supplier relationships. These activities amount to the maintenance of the status quo. Mike Marks, distribution's hyper-respected truth-teller, tells the tale:

Industry associations can impact the viability of distribution given the digitization of marketing channels. The quality and actions of the association's professional staff are key. They must first accept that success is about something other than keeping members happy, especially those who volunteer their time. The association's staff must keep members from staying in a comfortable cocoon, hanging out with peers at industry events, and shepherding projects designed more to minimize member work than to create stress that will lead to progress. Associations must jerk members out of isolation, challenge them to respond to disruptions, and make them aware of the speed at which change takes hold. Associations understand that their organization's mortality is at stake, some are fading away, and others are dead men walking. Industries are consolidating, and the boundaries between lines of trade are softening, which offers some associations the chance of a new life if their leaders invest and act at scale. Many distributor owners are thinking of selling their businesses and walking away, and some association leaders are essentially doing the same, treading water and waiting for retirement. Chaos is everywhere, but there is opportunity in chaos. Association leaders must partner with the few members operating aggressively at the leading edge and pull all other members forward. Or let them fade away. The future requires innovation, and speed will separate winners from losers.

Cogan and Warsh offer a framework for effective economic governance by government, but they note that innovation can only come from the private sector. Reaching back to our nation's founding principles, they reveal the potential impact of distribution's private institutions with help from Alexis de Tocqueville's seminal work, Democracy in America:

Private institutions—corporations, universities, media organizations, nonprofits—are fundamentally different from their governmental counterparts. Private firms are not state actors. They do not have the ability to command behavior; individuals must consent. In competitive markets, individuals have the right and ability to choose with which private institutions to conduct their affairs. Tocqueville admired the free-form "voluntary associations" that give vitality to civic affairs.

Digital technologies are radically reshaping how we live our lives and do our work. Distribution’s innovators see opportunity in change, and are working to do their part. Private institutions—especially industry associations—must step up. Now is the time.

Foresight and footsteps

I am committed to helping distribution survive and thrive in the digital age. I'm honored to work with associations committed to playing their part, especially the National Association of Wholesaler-Distributors (NAW), the National Association of Electrical Distributors (NAED), and Canada's Heating, Refrigeration and Air Conditioning Institute (HRAI). Each of these associations is committed to advancing a conversation about the future of distribution, developing the ideas that will reshape our markets and ensure prosperity, and working to identify and empower individuals and innovators.

To date, my work with NAED has made the most progress, guided by a team of leaders known as the Futures group and launching a monthly Office Hours live chat charted with talking about what the industry isn't talking about. Paul Kennedy, CEO of the Dakota Supply Group, speaks passionately about NAED's Future Group mission and progress here. I encourage all my readers to visit the Futures Group resource page, register for upcoming Office Hours, and share their ideas and experiences.

As always, please leave your comments below or reach out at mark.dancer@n4bi.com.