American Machine Tool Distributors' Association (AMTDA)

American Machine Tool Distributors' Association (AMTDA)
1445 Research Boulevard
Suite 450
Rockville, MD 20850-3125
301-738-1200
[www.amtda.org]
Contact: Ralph J. Nappi, CAE, President



CEO: Ralph J. Nappi, CAE
Budget: $3-5 Million
Staff Size: 11-20

Plexus Consulting Group, LLC
1620 Eye Street, NW
Suite 210
Washington, DC 20006
Phone:  202-785-8940
Fax:      202-785-8949
Email:   info@plexusconsulting.com

Vital Stats:

The American Machine Tool Distributors' Association (AMTDA), in its 76th year of service, provides members with a dynamic array of educational programs, marketing management data and business services necessary to achieve and maintain a competitive advantage in the machine tool distribution industry. The 300 machine tool distributor members represent the latest in manufacturing technology and machine tools in the international marketplace. These companies encompass over 80 percent of all distribution sales in the United States and serve as a vital link between builders and end-users of machine tools and related products.

The Challenge | The Solution | The Processs | Unintended Consequences | Measurements & Results | Lessons Learned

The Challenge

How to chart the course of e-commerce for the machine tool industry?

When AMTDA developed its first website, AMTDA's members were just beginning to focus on Internet technologies. AMTDA saw an opportunity to position itself as the "pre" commerce leader in the machine tool industry utilizing Internet technologies. In lieu of posting brochure-ware, AMTDA began to explore options for creating a parametric database to maximize research capabilities. (Parametric databases enable web-based searches across a wide variety of parameters to specify and expand the scope of results significantly.)

While this unique offering would help draw members to the site, AMTDA grappled with the challenge of preventing customers from "doing an end run" around its member distributors by going directly to manufacturers for product information. Traditionally, distributors have provided consumers with information on product specifications, availability and prices. How could AMTDA create a parametric research program without dis-intermediating its key members?

The Solution

To implement a leading Internet based lead qualification program that put association members first.

Nick Bloom of Techspex, a Chicago-based Internet company, suggested that AMTDA create a parametric search database for the machine tool industry. In practice, the database would enable customers to locate distributors by state and city.

To ensure that the association and its members would benefit from the partnership, AMTDA negotiated two critical elements into the agreement:

1. AMTDA and Techspex would run a co-branded database
   
2. To prevent customers from bypassing AMTDA's distributors, the association developed a request for quotation (RFQ) program funneled exclusively to its distributors
   

The Process

"How can we make this work?"

Over three years ago, AMTDA entered into a strategic partnership with Techspex. The process began with an idea by Nick Bloom, founder of Techspex, for developing a parametric database for use by the machine tool industry. In May of 1998, the idea led to a brainstorming session with Ralph Nappi, CAE, AMTDA's president. Subsequently, Bloom and Nappi worked together informally to make the database a reality. Having secured approval from the Board to proceed, AMTDA/Techspex prepared and tested a prototype and launched the co-branded database in mid 1998.

Critical success factors included:

• Staff leadership
• Highly entrepreneurial environment
• Credibility with the Board of Directors

AMTDA has disbanded standing committees in favor of ad hoc task forces established to address specific objectives. By creating an entrepreneurial environment that reflects the business style of association members, AMTDA's leadership developed significant credibility with the Board of Directors. As a result, Nappi was in a position to set the agenda for Board meetings. Also, he had established sufficient "board capital" to pursue additional innovative initiatives, such as a B2B program, which more risk-averse board members might otherwise have rejected.

Unintended Consequences

One relationship begets other opportunities.

A losing proposition worth $50,000 in revenues.

After witnessing the successful results of the Techspex collaboration, Equipp.com sought to partner with AMTDA to sell used machine tools online. To log a success story and build its credibility with the venture capital audience, Equipp.com sought a quick deal. The agreement signed in March 2000 specified that in exchange for use of AMTDA's brand name, AMTDA would receive:

• Warrants
• $50,000 cash upon signing
• $100,000 every year thereafter for the duration of the agreement
• A percentage of revenues generated

Early into the agreement, Equipp.com went out of business, one of the early casualties of Dot-com euphoria. When second round funding did not materialize for Equipp.com, AMTDA's warrants became worthless. AMTDA considered purchasing Equipp.com for cents-on-the dollar to salvage the deal. However, before a viable rescue could be structured, the Equipp.com brand had sustained too much damage. AMTDA had requested that Equipp.com:

• Keep its website operational
• Keep staff on the phones
• Avoid publicizing its distress

Unfortunately, the advice was rejected. Although its brand was slightly tarnished by the venture, AMTDA retained the initial $50,000 payment and the experience was unquestionably worthwhile -- members now viewed AMTDA as the industry's e-commerce pioneer.

When Equipp.com went out of business, AMTDA's reputation took a hit. However, AMTDA was able to test the waters at a time when no effective B2B models were available to the industry. Also, although Equipp.com presented no direct threat, it was a potential competitor to Techspex, with which AMTDA sought to protect its relationship. Techspex was brought into the loop from the beginning. While AMTDA communicated that the partnership with Techspex was its top priority, the association was also committed to finding a mutually acceptable solution to partner with Equipp.com.

Measurments and Results

AMTDA's strategic partnership with Techspex has:

• Developed a highly effective site that costs AMTDA nothing (site development and maintenance are included in the deal)
  
• Resulted in 1,500+ exclusive business leads to AMTDA members
  
• Positioned AMTDA as a prominent participant in the industry's e-dialogue

Built AMTDA's reputation with members as the industry's "early warning system"
As a result of this staff-driven initiative, the association's members see AMTDA at the forefront of the e-commerce debate in the machine tool industry. One key member remarked that as a result of AMTDA's foray into cyberspace, he now receives such timely information on market trends that he will "never be taken by surprise." AMTDA's initiative with Techspex and Equipp.com, however "unsuccessful" the latter may have been, elevated the e-commerce discussion within the industry and raised awareness of a phenomenon that is here to stay, regardless of whatever mid-term shake-outs may affect the Dot-com economy.

Lessons Learned

"The common rules of economics are not suspended for Dot-coms."

While B2Bs may begin to reinvent themselves to adapt viable business models, they are here to stay and will continue to have an impact on the business of associations.

Overall, key lessons from AMTDA's B2B experience include:

• Calculated e-commerce risks are valuable
  
• Foster an entrepreneurial spirit within your association
  
• Don't give away your brand -- proactively participate in B2B initiatives
  
• Ensure that the industry and association members are not disintermediated by this new marketing channel
  
• Be wary of rosy Dot-com business plans created to attract venture capital
  
• Communicate early and often with all strategic partners
  
• Get up-front payments in cash for your brand identity because it is leveraged immediately
  
• Define your minimum criteria and partnership expectations
  
• Communicate effectively with your Board of Directors and officers

Unfortunately, associations routinely undervalue their brands. What for-profit organization could convince its customers to pay annual dues for the privilege of buying its products and services? Associations do this every day, but many don't leverage their unique competitive position.

According to Nappi, the problem that associations and their members often face is not "the lack of knowing what to do but the lack of doing it." AMTDA envisions taking its members to the next level by transitioning from a knowledge provider to a partner in successful implementation. By moving from the role of an industry administrator to an industry manager to an industry leader, AMTDA's goal is to deliver not only information (administrative) and knowledge (management), but also wisdom (implementation) to its members.