Thursday, July 17, 2008

3 Fundamental Theories for Associations

This stuff isn't news. The ideas have been around for awhile, but anyone interested in associations and how they use the new media should be familiar with them. These "Laws of the Internet" should be the guiding principles of a digital strategy for associations.

One is Moore's Law, is a 40 year-old prediction which holds that every 24 months computing power doubles while chip prices remain constant. It’s held pretty steady over the years. You’ll see Moore’s law in action in products like USB drives and digital media (camera) cards. Some associations now provide USB drives loaded with speaker presentations for their convention attendees in lieu of paper. Who would have thought they'd get so cheap? The implication for associations is that you can plan ahead for projects that are not possibilities now.

More importantly for associations, there are two other laws: Metcalf's Law and Coase's Law.

Metcalf's Law- The value of a network.
According to Robert Metcalf (3Com), the value of a network (telephones, people, computers) increases dramatically with each additional user. Metcalf's Law values the utility of a network as the square of the number of its users. Value = N2 , where N = an individual user. The potential for unique interaction between 1000 people is 1,000,000. Consider that the value of one fax machine is 0. This holds for the value of information as well as the value of an association membership. Start thinking of your association as a social network.

Coase's Law-The nature of the firm or why organizations exist. Why associations exist.
Here’s where things get really interesting.
Ronald Coase was awarded the Nobel Prize in Economics for his discovery of transaction cost. According to Coase, firms exist to the extent that they reduce transaction costs effectively. In our case the firm is the association. The transaction costs that an association reduces are primarily the barriers to:
  • access to information

  • opportunity to network with like-minded individuals

Social media, social networks, and the hyperlinked, indexed web present challenges to associations on both of these items. However, if an association recognizes their primary value is in the strength of their network (membership) and their ability to reduce the transaction costs of access to information and access to like-minded individuals, I think they can overcome these challenges. More on this in future posts.

Grow your network
Share your knowledge
Let your members have conversations
Increase your value

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