Gary Shapiro on Innovation

By: Interview by Mark Athitakis

Innovation at associations won't happen when leaders aren't ambitious. Consumer Electronics Association CEO Gary Shapiro discusses how boards and executives can do better when they're more flexible, mission-focused, and just a little bit paranoid. (Titled "The Business Case for Thinking Big" in the print edition.)

If you want to promote innovation, you're practically obligated to find an innovative way to do it. So when Gary Shapiro, president and CEO of the Consumer Electronics Association, launched its Innovation Movement campaign last year, he spearheaded the usual online promotion, and he put his ideas into an old-fashioned book, The Comeback: How Innovation Will Restore the American Dream. But when he hands over what looks like an ordinary greeting card at CEA's Arlington, Virginia, offices, he's smiling as if to say, "This is the cool thing."

It is: Embedded in the card is a mini video screen that plays five presentations by Shapiro with sharp resolution and better sound than your typical singing birthday card. As for the content, the videos and the book are also crystal clear: Shapiro is a fierce critic of the current presidential administration, and he's not shy in using every opportunity—including CEA's massive tradeshow, the International CES—to express his views. But aside from national politics, Shapiro is also a strong advocate for association innovation, and he urges associations to rethink their board structures, better engage staff and members, and create an internal culture of innovation that better supports their industries. He spoke with Associations Now about why internal dysfunction happens, and what it takes to fix it.

Associations Now: Do you think associations are doing enough to focus on innovation?

Shapiro: I think associations are often complacent. I think there's a challenge in the governance structure of many, if not most, associations where the leadership is not trained for leadership. They're in it for more egotistical reasons, perhaps, and self-centered reasons, and there's not a culture which is measuring itself.

The for-profit world has an advantage over associations in that there are clear measures of performance. The association world does not have clear measures of performance, and that's very harmful. I think sometimes there's an easy way out there for them, and the decisions are made poorly. I say that over and over again in terms of how associations hire CEOs, how they focus their money, the decisions they make about where to have meetings, how to have meetings, how to compete, and what to do.

Oftentimes for-profit ventures outcompete associations because they're more nimble. They seize business opportunities where associations do not. I've been on a bunch of association and nonprofit boards, and my experience has been the board is really the most essential element. If you don't have the right corporate culture for a board, get the right people for the right reasons there, have them put their personal interests at the door, and become a group representing what's best for that specific profession or industry, they're missing the boat.

I can't tell you how many association leaders I've spoken to about their financial situation and, frankly, their inability to make a change early rather than late. More often than not, those associations have crumbled.

What causes that failure?

It's because you have a staff and a board that were both inappropriate for the task. The job of an association CEO and board is not to focus on the FedEx going out today. It's to focus on what happens three to five years from now, and be planning for that. The closer you are to the day-to-day efforts, the lower you are in terms of your thinking. I think it's up to the CEO and up to board to have really meaningful dialogue that focuses on the future.

In The Comeback, you write that "innovation by its very definition undermines the status quo. It can destroy jobs, markets, and entire industries." That can be very threatening for a lot of associations—it's pushing them to rethink their industries. How do you get past that fear?

I think that's one of the most difficult challenges I've faced in my career. [At CEA] we have defined consumer electronics increasingly broadly, to include automobiles, medical devices, and other things. It has been a challenge as technology has come along and threatened industry segments.

We went out there five years ago and said, "Look, there's small screen [laptops], and a large screen [desktops] but there's a huge [opportunity] for a middle screen, and here's why." We laid it out, and Apple was listening. Now there's the iPad, a phenomenal category which is by far the runaway hit of the holiday selling season.

I'm not saying we caused it. All we did was talk about it: We tried to explain every chance we had that there's a middle-screen opportunity. The job of an association CEO is to point out opportunities for expansion. We don't run our tradeshow for the existing companies. We run it for the new companies and for the retailers and buyers and people in business who want to see trends and new opportunities.

How do your members and staff generate and communicate new ideas?

One of the guidelines for our organization is that anyone can talk to anybody. There definitely is a reporting structure on paper, but I feel very comfortable talking to any employee in the organization, and I would bet most of them feel comfortable talking to me. The same is true with board members and other members of leadership.

We also have a structure of membership that has a common cultural theme of growing the industry. We formed a couple of committees that cross standard lines, so the committees are talking to each other, both at the staff level and at the member level. What we're doing is we're encouraging a tremendous amount of communication.

We measure our member satisfaction a lot. We ask, "How do we focus on innovation in terms of a culture?" We try to say it's OK to fail. If you haven't failed, you haven't tried. We also try to do things different every year in some way. We have a set of very measurable goals, and every employee in the organization has a chance to comment on those goals. Those goals define our success for 2012. They define incentive compensation. And they're always different than the prior year, by some significant amount.

Our tradeshows also run with a philosophy that we have to do things differently every year. Otherwise people won't come. I do try to keep our employees paranoid. What do you own when you own an association or your tradeshow? You own nothing tangible except a name, maybe a mailing list, maybe some hotel contracts. You don't really own much, so you have to be paranoid. We always point out others' failures to say we can't be complacent.

How do you foster innovation in the board? Is it a matter of who you select, how you select them, the board size?

I am not shy about saying I am engaged in a nominating committee process. I said, "This is where we should be going. We should be getting the top thinkers in the industry, the most aggressive people that may challenge us and push back." And we agreed on a set of criteria for board members. We score each candidate along 10 criteria on a 100-point scale. Criterion number one is diversity, as defined by the Equal Employment Opportunity Commission.

But we have other categories of diversity. Are you a small business? Are you in a category that's not represented? You get points for that. Another criterion is, can you make your own travel decisions, or do you have a boss that's going to tell you where to travel?

When I hear someone say, "Oh, he's a good guy" or "He's a friend of mine," I jump up and interrupt, and say, "That's not in our criteria." I don't want good guys or friends. We have criteria, and we want who's going to make a difference—not advocate for their company, but advocate for this association and this industry, and make us better.

Occasionally we get someone who meets a lot of the criteria and they're on the board for a year or two and you can tell it's all about them and their company. Those people are not put back on our board. So we have some really small company people and some really big company people. And not everyone's a CEO.

We're very clear that we run it like a publicly traded corporation board. There's only three meetings a year. Those meetings are substantive meetings. They're focused on the big picture, and [board members] know they're making a difference.

Do you use a strategic plan?

Yes and no, off and on. I find that strategic plans get put on the shelf. But if you have three or four "smart" goals—specific, measurable, attainable, realistic, with a timetable—then you can do very well. I'm not saying I'm off the process totally. It's just not something I've done in two or three years, because we have a pretty clear vision of where we're going based on our Innovation Movement.

In the book you discuss how various forces, including government, are creating an environment of uncertainty for businesses to innovate. But innovating always involves some sort of risk. So what is the appropriate level of uncertainty?

There are two different types of uncertainty. There's marketplace uncertainty, which is fine. Will customers buy your product or service or software or app or whatever it is you're producing? That's healthy uncertainty, and that's where competition weeds out winners and losers. That's what we want.

But government has created more uncertainty. I suspect that associations now are paying higher legal expenses to simply monitor and deal with new proposals coming out of government that affect them. It's unprecedented. And the reason the DC legal community has done so well is because of this unprecedented government effort to regulate almost everything out there.

How open should associations be to building partnerships with their counterparts overseas?

Partnerships are one of the great things to do if expectations are reasonably set. I also have mixed feelings. It's very dilutive of executive time and staff resources, disproportionate to the gains you'll probably get for several years.

What's difficult to measure is the amount of time you have to put in, especially at the senior level, because at the senior level your time is your most important commodity. If you're always traipsing around the world, it might be fun. But it definitely could hurt other, more significant efforts. Plus, I've learned, through repeated mistakes that I've made, that going in with a U.S. mindset to another country and somehow thinking you're going succeed is probably not the smartest thing in the world.

What are your concerns about associations coming out of the recession?

I don't see thought leadership coming from the association world on meaningful societal problems, other than what's in their specific area. Maybe their job is to advocate just for their specific area, but I find it very disappointing. For example, in healthcare, where were the associations advocating for solutions? Instead, they were advocating for their specific solution to the problem. Frankly, they all lost in my view. But there's a problem there, and I think the role of government is to challenge industries and say, "Here's a problem in your industry. Give us your best solution. And let's agree on the facts." I look at other industries, and I look at the association leadership, and I think there's a lot of focus on trees and very little focus on forest.

Mark Athitakis is a senior editor at Associations Now. Email: [email protected]

Extended Q&A: More From Gary Shapiro

Associations Now: What motivated you to focus on innovation, both in The Comeback and at

Shapiro: At one [board] meeting a few years ago, I said, "Putting aside the agenda for a second and the budgets and annual goals, let's talk five or 10 years down the line." I said, "How do you think our industry's going to do in the United States?" And everyone around the table said "poorly." And so the question was, "Why?" And they said, "Because the U.S. economy will not be doing well." "Why won't the US economy be doing well?" "Because the government is making a huge number of mistakes."

So out of that there was a discussion, and a lot of it was focused on the deficit. We took the position that when you're in major financial trouble, you have three choices. You can cut government spending, which is very difficult to do. You can raise taxes, which is very difficult to do, and/or you can grow the economy. Growth only comes from innovation. Innovation is who we are.

One thing that you talk about throughout The Comeback is about creating the right environment for innovation. What role do associations play to create an environment that can inspire innovation?

It goes back to some of the things that Alexis de Tocqueville wrote about. He observed that Americans are joiners, and in joining you find a common interest. But, ironically, the thing that makes us so strong is not necessarily the association. We're an incredibly diverse society.

I think ultimately there's good results as people push back against the status quo within the confines of the law, which is what we do here in Washington. And I think it's very positive that anyone could join anything and find like-mind individuals and join a group and advocate for a cause. Right now a lot of people view that as a weakness in our society, and I view it as a strength. I think associations are a great thing, frankly. But I think that, obviously, right now it's very popular to be anti-lobbyist, anti-association.

What do you do with International CES to make sure that it stays fresh every year?

Certainly we change the speakers, because the speakers help define the show. When COMDEX was killing us, we were going after the personal computer market, so we had Bill Gates come every year and speak, and we had Michael Dell, and others. We defined ourselves as being an "in" marketplace for computers.

Later, we wanted to make it clear we were going to automobiles. We've had Al Mulally, the CEO of Ford. We have six of the 10 largest auto companies now exhibiting in our show, so we've defined our show to include medical and to include auto electronics. We're doing the same thing with medical electronics.

So you define your show by your speakers, even though the people actually may physically listen to the speakers is less than 5 percent of the people who attend their show. In terms of how do we keep the innovation mindset, it's a corporate culture. I remember when we were saying we're going overseas to recruit companies to our tradeshow, and someone said, "I don't want you to go get competition for me." Everyone else said, "That's not what's best for this organization or for the industry. We need the competition."

Sidebar: CEA's Board Builder

As part of the Consumer Electronics Association's board nomination process, members of the nomination committee rate potential board members on 10 criteria, on a ranking from one to 10.

  1. Demographic diversity
  2. Corporate diversity
  3. Strategic thinker
  4. Experience
  5. Association mindset
  6. CEA engagement
  7. CES participation
  8. Commitment
  9. Travel flexibility
  10. Enhances CEA reputation

Interview by Mark Athitakis

Mark Athitakis is a contributing editor to Associations Now.