Chelsea in action at Yankee Stadium, May 2012. Photo Tim Clayton (Photo by Tim Clayton/Corbis via ... [+]
We are living in a golden age of business model innovation. Look around, business models are disrupting industries everywhere around you: traditional news media are being challenged by subscription newsletters, such as Medium or Substack; cinema theaters upstaged by in-home streaming; fine-dining patrons are being catered to via door-to-door’s delivery’s convenience; Zoom is passing-by traditional academic institutions, and the entire travel ecosystem, as it displaces education on the go with short courses on the side. Effective? You bet! Business models? Yes, in each case, the primary change in customer experience, profound as it may be, is more business model reengineering than the engineering of new technologies.
It was inevitable that professional sports, robbed of so much of their traditional match revenues by the Covid-19 virus, would look to new business models to retain their relevance and restore some semblance of viable cash-flows. This week, JP Morgan Chase and twelve of Europe’s elite football teams launched, and then shut-down, a surprising business model innovation, that was probably dead on arrival; a striking testimony to not only poor business model design, but also inept industry leadership.
The idea being promoted was to create a new, pan-European, football league, with permanent members, as opposed to membership being earned and maintained through continued performance. Its membership would begin with some of Europe’s finest teams, including: the UK’s Arsenal, Liverpool, Manchester City and Manchester United, Chelsea,Tottenham, along with Real Madrid, Football Club Barcelona, and Atlético Madrid from Spain, and the Italian Juventus, Milan’s Internazionale and A.C. Milan. JP Morgan Chase would add $4.2 billion to the mix, to be divided among the teams, as seed money for the effort. The idea was to create a football equivalent of the NBA or NFL, with a season-long focus on these premier, and now even wealthier, teams, all of which would undercut the present Champions’ League annual competition, wh since 1955, going back to the European Cup, has matched national champions in an annual content-wide competition. Instead, each team in the Super League would receive about four times what the Champions League winner typically receives, for which there would no longer be any worries about qualifying, and everyone else would be diminished in visibility, finances and prestige, as collateral losses.
Despite all of this, it is not what is in the business model, however, that is so interesting, but what is not:
Business Models Should Be Outside-in
Business models, and almost every other type of innovative activity, these days, succeed by being explicitly and determinedly, outside-in. Instead, almost everything about the Super League business model is explicitly inside-out. Likely, this display of industry arrogance was based upon the extraordinary brand values of the twelve teams comprising the first entrants into this venture, but one would have expected some type of leadership vision to involve the customers, if no one else. Alas, nothing close to this was in evidence in the launch announcement, which was made just before midnight (CET) on Sunday, April 18th, in concert with the filing of a preemptive motion “to ensure the seamless establishment and operation of the competition in accordance with applicable laws,” and accompanied by seemingly choreographed resignations of team officials from varying governance boards of European football. You can’t get much more inside-out than this in either content or delivery, yet no industry leader called out for a broader sensitivity to the interests of external stakeholders.
Value Propositions Are To Be Articulated In The Customer’s Voice
Clayton Christensen argued persuasively that business model value propositions, the very motor which powers coherent business model logic, should be stated as “jobs to be filled” in the customer’s lives. Granted, this is the most difficult part of creating an effective business model, because we are all hard-wired to tell the customer how good we are, and believe that that’s a decent value propostion, but one would have expected at least some challenge to an implicit lead value proposition which can only be interpreted as “let’s make the owners even richer”?
Value Propositions Should Match The Customer Segment In Mind
The firestorm of reaction to the proposed Super League suggests that this is a business model that almost every customer segment detests. As difficult an achievement as that may seem, the reaction was real, large, immediate and visceral. You would be hard pressed to identify any customer segment what resonates with “make the owners even richer”, unless you include the owners, themselves, as a possible needy customer demographic. Was there no ownership voice in the wilderness asking “what customers are we serving?,” and “why are they asking for this?”
Good Business Models Create A Life-long Love Affair With The Experience Provided
Few business model designers, and certainly not anyone in a professional sports league, is interested in creating a business model for a one-time event, when they can just as easily build a long-term revenue stream out of fan loyalties. Indeed, as NBC soccer commentator Roger Bennet observed, “The clubs are built into their cities, they are not afterthoughts, they are not customers, they are not content.” Fans are people who live and die with the fortunes of their teams, and willingly move a portion of their own fortunes to these teams. Long-term good will, if not passion, is the very fabric of fandom, and yet the architects of this Super League scheme never saw it. To quote Bennet, again, “Their very own fans turning against them, it clearly never crossed their minds.” Football fans, like their baseball and cricket brethren, treasure history and tradition almost as much as they do the games themselves. To remove competition for a chance to play in the biggest matches of the year, or the need to keep on producing in order to avoid relegation to a lower league, is not just a violation of the team’s social contract with its fans, it is heresy. Brooklyn fans still remember O’Malley’s treason, in 1957, when he made the decision to move the beloved Dodger baseball team to America’s West Coast; why would European football fans be any less devastated by a proposed movement of their favorites out of the yearly national championships? In addition, their absence would, by default, diminish everyone else’s accomplishments. Did no leader see this? Did no one speak out?
The Ecosystem of Partners To Be Relied Upon To Deliver The Goods Must Be Sound
Apple’s iTunes music owners, Netflix’s movie producers and even Nespresso’s machine brand-name holders, are all essential partners in making these well-known business models so successful; without them these business models cannot work. The same is true for the television networks who would carry these games, and the luxury goods producers who would sponsor these events, but none were to be seen when the Super League was announced. Incoherent business models are their own early warning signal to a possible fiasco ahead. Yet, where were the sponsors, and media? Did no leader note their absence?
What To Make Of This?
It is not surprising that some business models, flawed as they might be, are still so intoxicating to their principals that they are launched despite omissions. Assumptions are made, numbers are totaled up, riches appear suddenly, as if out of the air, but it is hard to recall such a flawed business model appearing on the worldwide stage in a long time. Can it be simply attributed to oversight? Or, maybe to greed? Perhaps both, but flawed business models and inadequate leadership tend to go hand-in-hand, and in this case they each out did the worst we might have feared from the other. Perhaps European football has been saved for the moment, by the sudden failure of this proposition, but it will never look exactly the same again.
