- Strategy and entrepreneurship
The worlds of business and sport are more closely related than ever before. Georgina Peters explores the mutual attractions.
If you want a potent symbol of the world of sport circa 2012 consider the Yas Formula 1 circuit in Abu Dhabi. It was opened in November 2009 when some 600 million viewers tuned in to see the first Abu Dhabi Grand Prix. It was the first ever day and night F1 race. In the hotels and streets of Abu Dhabi in the days leading up to the race, the buzz was audible — and infectious. The Emirates Palace Hotel, a seven-star showcase for Abu Dhabi’s tourism, was temporarily transformed into an F1 museum – with racing cars through the ages on display on loan from F1 supremo, Bernie Ecclestone’s, own private collection. The F1 glitterati hosted events for days at the city’s swankiest hotels and night spots.
Visiting the Yas Marina Circuit just a few days before the grand prix, the contractors were still adding the final touches. With 68 different contractors and 47,500 workers involved, the project required logistical organisation of military precision. Even the sumptuous Yas Hotel was strewn with paint pots and ladders as every last detail was attended to.
Little wonder. The brand new as Island race circuit was built in just 30 months. A barren island was transformed into a world-class motor racing venue with more than 40 kilometers of roads and infrastructure, ready to receive the F1 circus and 50,000 spectators. Only at the Yas circuit can guests watch the action from their yachts moored in an exclusive state-of-the-art marina. Visually, too, it is spectacular – fusing modern architecture and materials with the traditional desert and ocean landscape, with the curvaceously opulent Yas Hotel (one of eight hotels), and a 10,000-seat concert venue inaugurated by Beyonce two days before the race. The race circuit is one part of a sporting, retail, residential and leisure development including Ferrari World Abu Dhabi, the world’s first Ferrari theme park.
Contemporary in its conception, large in scale, fast in execution, and global in its reach, Yas Island is a tangible example of the realities of modern sport. Yas is a statement and sport offers a rich seam of such statements. Think of the infrastructural largesse of the Beijing Olympic Games in 2008 and the steady stream of oligarchs taking over football clubs, billionaires renaming stadiums after their own businesses, small nations pouring vast amounts into sporting events and much more. Money, power and success are moths attracted to the sporting flames. But why?
The lure of sport
Sport is global and dramatic; people identify passionately with the participants; there are winners and losers. It is a source of constant fascination for all in the business world for two other fundamental reasons. First, over the last fifty years sport has become a huge, global business, employing some of the brightest and best people. The commercial numbers are impressive and growing. In the sporting world, brands can be created from next to nothing – witness the astonishing success of the cricket’s Indian Premier League where few eyebrows are raised when a lesser club such as the Rajasthan Royals is valued at some $33 million.
Second, excellence in sport has close and obvious parallels to excellence in business. The greatest sportsmen and women share the same focused, dedicated and passionate beliefs seen in those who are successful in the business world. Finance and performance are an irresistible combination.
The commercialisation of sport is a relatively recent phenomenon. It hasn’t always been like this. Formula 1 drivers and cars are now festooned with the logos of their backers. But, commercial sponsorship was only introduced in 1968. In the mid-1960s Formula 1 cars carried national colours rather than a thousand brand names. Equally, shirt sponsorship on football shirts was not introduced in the English league until 1978.
If you wish to identify the moment when business and sport became inextricably intertwined as good a moment as any is the 86th Session of the International Olympic Committee in New Delhi in 1983. Horst Dassler of Adidas made a presentation to the 78 IOC members in attendance. “You, the IOC, own the most valuable and sought after property in the world. Yet the Olympic rings are the most unexploited trademark in existence. No major corporation in the world would tolerate such a situation.”
Dassler’s pointed observations set the IOC down a more commercial route. Soon after, it began bundling Olympic rights together into four-year exclusive marketing packages. This offered companies one-stop shopping for their global Olympic involvement.
The first four-year period with the Olympic Partners (TOP) programme operational covered the Calgary Winter Games and the Seoul Summer Games between 1985 and 1988. It involved nine partners and generated $96 million. The programme has gone from strength to strength ever since. Covering the Torino and Beijing Games, TOP generated $866 million for the Olympic Movement between 2005 and 2008 (up from $663 million during the previous four year period). From being on the brink of bankruptcy after the Moscow Games in 1980, the Olympic was re-invented as the ultimate sporting brand.
The balancing act
“From a marketing point of view, the Olympic Games are beyond value. No wonder, then, that companies are prepared to go to enormous lengths to be associated with the Olympic rings. For the official sponsors and the TV companies that possess the broadcast rights to the Games, the rewards can be spectacular,” says WPP CEO Sir Martin Sorrell. “But it is because they remain true to the Olympic ideal that the rings retain their magical aura. The Olympic brand, in all its associations, has to strike a delicate balance between financial stability and selling out to the god of mammon. That it has managed to do so is testament to the way the brand has been developed, nurtured and protected over the past two decades.”
As Sir Martin Sorrell points out, the relationship between sport and finance is a delicate one. The growth of the Indian Premier League in cricket has been accompanied by an explosion in betting. Three Pakistani cricketers were jailed in 2011 for a betting-related incident. In this and other ways commerce can be seen as a pernicious influence. In a number of sports the demands for more product to put on the world’s television screens is drowning out the athletic realities that sports people on the line for the sake of ratings.
The Olympic Games remains the benchmark. It appears to have blended modern-day commercialism with abiding core values. Olympic stadia remain free of advertising for example. But the balance is always difficult and will become ever more so as sport and finance become more truly global.
The financial side of sport is one thing, quite another is the practicality of making sport happen and the nature of great sport.
For those in business, the event is an impressive feat of logistics. Organising an Olympic Games or any large scale sporting event is a massive undertaking. They offer compelling lessons in project management, supply chain management and logistics. The opening ceremony of the Olympic Games cannot be delayed by a week or two. It has to happen on time – though, it must be said, not always on budget.
In an interview with Business Strategy Review, Lord Sebastian Coe, one of the leaders of the London Olympic Games, gave some idea of what is involved in winning the Games in the first place and then delivering them: “A successful bid is, essentially, a successful communication programme. You need to be able to explain exactly how you are going to deliver, in the space of 28 days, 26 simultaneous world championships — and then do pretty much the same with 20 Paralympic world championships. The host city has to cater to 10,500 athletes, 4,500 Paralympians, 800,000 visitors and 22,000 journalists. As part of doing that, I believed that we had to answer the question: Why are we doing this? And it wasn’t until we started to articulate, internally as an organisation, that it was about using the games to inspire young people to participate in sports that we each understood what we had to do.
“Of course, a bid is very different from the delivery stage. For the delivery, you start out with the bid team and then you build on that. You determine the skills sets you need to manage: the siting and building of the venues, the marketing of the games, ensuring the infrastructure needed for moving people around — and the people with those skills tend to come from outside of the world of sports. My chief executive was chief operating officer at Goldman Sachs for many years. My human resources director ran HR at the BBC. My communications director was, essentially, doing pretty much that job at the Sydney Games. Our commercial director was one of the founding fathers of Sky Television. And we have a Paralympic director of integration who has won more medals than any other Paralympian in history. We’ve brought the best of the best to the table.”
Leading by example
As Sebastian Coe powerfully illustrates, the human side of sporting performance is the other abiding fascination of those in the business world. Teamwork, the need for excellence, the relationship between the individual and the team, leadership and motivation are among the constant themes of both business and sport.
Sporting leadership has become more complex and subtle. Players are rewarded as never before and under constant media scrutiny. Faced with an under-performing group of multimillionaires, the old ways of leading and motivating no longer work.
In their book, Why Should Anyone Be Led By You?, Rob Goffee and Gareth Jones tell the story of an incident when Glenn Hoddle was the coach of the England soccer team. David Beckham was practising a particular skill. Despite trying it repeatedly he couldn’t master it. Hoddle, once a great player himself, took the ball and perfectly demonstrated what was needed. Great leadership? In some situations the fact that the leader could actually practice what he preached would be seen as a good thing. Not so in the eyes of the English team. They regarded Hoddle’s behaviour as a personal insult to Beckham. He had shown Beckham up in front of his team mates. This confirmed their view that the coach was full of self importance.
Of course, the case for subtle forms of leadership may be overstated. In the football world, research by Deloitte proves that the higher a team’s wage bill, the more likely it is to be successful.
Whatever happens at the 2012 London Olympic Games, drama and personal achievement can be guaranteed, but so, too, can unprecedented logistical, financial, marketing, organisational and human resource achievements.