Imagine a European brewery at the dawn of the 20th century facing a momentous decision. Electricity has just arrived—a revolutionary technology that could dramatically increase production capacity. The brewery owner has two choices: build an expensive in-house power generator or wait for utility companies to offer electricity as a service.
The first generation of breweries chose to build their own power plants. It worked initially but required massive capital investment and ongoing maintenance. Soon, utility companies emerged, and newer breweries simply purchased electricity as a service. These second-generation breweries gained a competitive advantage because they could focus their resources on improving their actual product.
Why? Because who generates your electricity has absolutely no impact on how your beer tastes.
This analogy, famously shared by Jeff Bezos during a 2008 talk at Y Combinator (covered on the Acquired Podcast), offers a powerful strategic framework: focus relentlessly on what directly improves your core offering and partner for everything else. For breweries, this meant concentrating on brewing techniques, ingredients, and flavor profiles—not power generation.
For association leaders, this beer taste test provides a clarifying lens for strategic decisions. What activities directly enhance the value you provide to members? What functions, while necessary, don't actually improve your core offering? By answering these questions, you can sharpen your focus, reallocate resources, and ultimately deliver greater value to your members.
Understanding Vertical vs. Horizontal Integration
Before diving deeper, let's clarify what we're discussing:
Vertical Integration means controlling multiple stages of your value chain. An association that creates its own technology platforms, manages its own events, produces all its content, and handles every aspect of operations is pursuing vertical integration.
Horizontal Integration means focusing on your core competency while partnering with specialists for other functions. An association that concentrates on community building and advocacy while using specialized partners for technology, event management, or content development is pursuing horizontal integration.
The brewery example illustrates both approaches. The first-generation breweries vertically integrated by producing both beer and electricity. The second-generation focused horizontally on brewing great beer while outsourcing electricity generation.
The Beer Taste Test for Associations
The fundamental question this framework poses is simple: Does this activity directly improve your core member value proposition?
For breweries, the test was whether generating electricity improved beer taste. For associations, the test is whether a particular function directly enhances member experience and value.
What exactly is an association's "beer"? In simple terms, it's the unique value you deliver to members—the reason they join and remain engaged with your organization. This might be:
- Professional advancement opportunities
- Access to specialized knowledge and resources
- Connections with peers and industry leaders
- Industry advocacy and representation
- Professional credentialing and validation
Your "beer" is the core member benefit that no one else delivers quite the way you do. Everything else—from technology platforms to operational functions—should be evaluated based on whether it directly improves that core value.
Consider these examples:
- Content management systems: Does building and maintaining your own proprietary digital platforms actually improve the quality of member resources you provide? Or could you deliver the same quality using specialized providers?
- Event logistics: Does handling all aspects of venue management, registration, and logistics in-house create a better event experience than partnering with event specialists?
- Technology infrastructure: Does managing your own servers and tech stack actually improve member services, or does it divert resources from functions that would directly enhance member value?
The beer taste test challenges us to identify which activities are truly core to our value proposition and which are supporting functions that could be handled more effectively through partnerships.
Why This Matters: The Cost of Doing Everything
Vertical integration comes with significant hidden costs:
Limited Specialization: When you try to excel at everything, you often become mediocre at many things rather than exceptional at your most important functions.
Capital Intensity: Building and maintaining in-house capabilities for every function requires substantial investments that could be directed toward core value-creating activities.
Innovation Gaps: Specialized partners focus exclusively on their areas of expertise, giving them advantages in innovation and improvement that are difficult to match with in-house resources.
Organizational Complexity: Managing diverse functions increases organizational complexity, potentially slowing decision-making and responsiveness.
These costs become particularly problematic when associations face competitive pressure from specialized entities that focus exclusively on specific aspects of member value (such as education providers, networking platforms, or content creators).
Identifying Your Association's Core Competencies
So how do you identify what truly makes your "beer" taste better? Consider these questions:
- If members were asked to describe your unique value, what would they say? This often reveals your true core competency.
- What would be impossible to outsource without fundamentally changing your association's identity? These functions likely represent your core.
- Which activities would deeply concern members if you announced you were partnering with an external provider? These are probably central to your value proposition.
- Which functions consume resources disproportionate to their direct member value? These might be candidates for partnership or outsourcing.
The answers will vary widely between organizations. For some associations, in-person events might be central to their identity and value, making event expertise a core competency. For others, specialized knowledge and content might be the primary value driver, with events serving as just one distribution channel.
The Power of Strategic Focus in Practice
Association leaders who apply the beer taste test may discover opportunities to create more member value with existing resources by reallocating time, attention, and capital away from supporting functions and toward core competencies.
Consider these possibilities:
Knowledge and Content: If specialized expertise is your core value, imagine reallocating resources from technology management to expanded research capabilities, more robust content development, or innovative knowledge distribution.
Community Building: If member connections are your primary value, consider shifting resources from support functions to enhanced community facilitation, more personalized networking opportunities, or innovative engagement models.
Professional Development: If career advancement is your core offering, redirecting resources from administrative functions to expanded certification programs, personalized learning paths, or employment connections could amplify member value.
Finding the Right Partners
The corollary to identifying your core competencies is finding the right partners for supporting functions. The beer analogy continues to be instructive here.
The breweries that succeeded didn't just abandon electricity generation—they formed strategic relationships with utility providers who specialized in reliable, cost-effective power delivery.
For associations, this means seeking partners who:
- Understand your sector: Partners familiar with association needs can provide more relevant support.
- Complement your strengths: Ideal partners excel precisely where your organization struggles.
- Share your quality standards: Partners should meet or exceed your expectations for excellence.
- Enable rather than constrain: The right partners expand your capabilities without limiting your strategic options.
Looking Forward: Strategic Adjacencies
The beer taste test doesn't mean associations should never expand their functions. Rather, it provides a framework for determining when vertical integration makes strategic sense.
When considering new capabilities or services, ask:
- Does this build directly on our core competency?
- Will this meaningfully improve our member value proposition?
- Are we uniquely positioned to excel at this function?
If the answer to these questions is yes, the expansion may represent a strategic adjacency worth pursuing. If not, partnership might be the better approach.
The Paradox of Utility
There's one more insight from the beer analogy worth noting. While Bezos advised those startups to focus on what makes their beer taste better, he himself built AWS—essentially becoming the utility company in his own analogy.
This highlights an important truth: being the specialized provider in a horizontal market can be an exceptionally powerful position. If your association has developed extraordinary capabilities in a particular function, you might consider whether those capabilities could create value beyond your immediate membership.
Focus on What Makes Your Member Experience Exceptional
Just as European breweries faced transformative decisions with the advent of electricity, associations today must determine which functions truly drive member value and which might be better handled through partnerships.
The beer taste test provides a clarifying framework: focus relentlessly on the activities that directly enhance your member experience and value proposition. For everything else, consider whether specialized partners might enable you to deliver greater value with your existing resources.
When Apple and Google focus on creating exceptional devices and software rather than manufacturing their own power supplies, they're applying this same principle. By focusing on what makes their products distinctively valuable, they deliver experiences their users love.
For association leaders, the path to excellence is brewing the perfect member experience—keeping your resources focused on the ingredients that keep members coming back for another round.
.svg)
