Value Creation and Sport Management

Citation

Reynoso, J. (2011), "Value Creation and Sport Management", Journal of Service Management, Vol. 22 No. 3, pp. 431-434. https://doi.org/10.1108/09564231111136908

I particularly enjoyed reading and reviewing this book for a number of reasons. First, I am the son of a professional football player myself. I grew up kicking the ball with other children some of whom became professional players during the 1970s. I never thought 40 years later I was going to review a service publication related to sports, particularly football. Second, I have enjoyed the friendship of one of the authors, Kimio, for almost 20 years, who I met when both were doing the PhD at Manchester Business School during the early 1990s. Third, I have been teaching service management in Madrid as visiting faculty for the last ten years, where I have experienced the passion of Santiago Bernabeu Stadium, became Real Madrid fan and learned to enjoy football even more than before.

Considering the top position different Spanish sports players and teams have achieved in recent years in the global arena, including for instance, Fernando Alonso in Formula 1; Rafael Nadal in Tennis; Real Madrid and FC Barcelona in Football; and last year, of course, Spain becoming the champion team in the World Cup in South Africa (anticipated even by Paul the octopus), is not a surprise that this book is written by three professors from IESE, one of the top business schools in the Spanish speaking world. This is the result of their continuous research effort for exploring, understanding and creating knowledge about sport management. The content which has a particular focus on football is structured in six chapters and contains also an introduction and three appendices. The publication emphasizes the growing importance of the sport business in society, characterized by an increasing production of profits, great commercialization and media coverage of sports events, TV transmission in particular. Authors offer a new conceptual model, combining theory and practice for the benefit of both researchers and practitioners of sport organizations, using value creation as the common element throughout the chapters. They also emphasize the role of different important factors in the value creation process, including, of course, the ultimate customer of any sport: the fans.

Chapter one presents the virtuous circle of value creation in the sports industry, an interesting and useful concept. Before going into each of its components, the very interesting combination between rivalry and competition is explored, as a difference with other industries. Entertaining and involvement are essential factors in sports. In this respect, competition is needed for sport organizations to exist (without a rival, there is no game and no business either), and three main ingredients are vital in fostering such competition: interest, uncertainty and passionate involvement. In building the value creation cycle, two main types of sports organizations are identified: sports governance (e.g. those getting funds, defining rules, organizing events, etc) and sports clubs (e.g. the “suppliers” of the activity). They argue there is a need to professionalize such organizations, moving from being sport clubs to sport companies. Cities and countries are also part of this cycle, given the social and economic relevance of sports for citizens and communities. The media, including TV, radio and press, is known to be a key and sometimes, controversial player in the sport business. Sports clubs and high‐profile sports events are very effective ways for publicity and sponsorship, offering the opportunity for companies to conduct their advertising by financing clubs and supporting the organization of sports events as well. This strategic alliance between sport organizations and companies is another important component of the value creation cycle. Fostering the values of sports could be seen as the integrative element of all these cycle components, always looking for the benefit of people and society. This chapter ends with the illustration of the value creation virtuous cycle of the city of Valencia in Spain.

The value creation and performance criteria for sport entities are then analyzed. Another good and interesting contribution is presented in the second chapter. Using football as the sport in reference, authors establish the creation of value based on four different dimensions, these being: economic, sport, social and communication; which in turn produce economic, historic, social and media capital, respectively. On the other hand, the evolution of performance criteria along three generations is discussed. The first refers to sport as the only relevant result considered by organizations. Then, sports and finance performance conform the second generation, and lastly, third generation includes sports, finance and value creation for stakeholders. The evolution of sport entities towards this latest type of business model is illustrated using the case of Real Madrid Football Club from Spain. It explains the successful management of its different stakeholders as the key for evolving towards the third generation business model. In this regard, a central part of the chapter is the analysis of the value creation process of the organization, emphasizing the role of the four capitals discussed earlier (historic, economic, social or media) in different ways. In turn, such alternatives are related to performance of the company emphasizing either sports or business results. The possibility to create value in different ways, through different virtuous cycles is illustrated with different sports organizations as well as high‐profile events like the America's cup and the Football World Cup in Germany 2006.

Chapter three is dedicated to analyze the prevalence of the national context in the profit strategy of sports entities. An interesting and provocative comparison with the automotive industry is presented. For those service researchers interested in the emerging area of services in manufacturing, this part of the chapter would come as a surprising bonus in reading this book. Very few readers would anticipate the use of the experience of Japanese and US automotive industries to help us understand better what is happening in sports today in terms of territorial strategies. The authors argue about the existence of some parallelisms among both industries for the basis of their profit strategies in relation to their national context. To elaborate further on this issue, the American and European approaches of sport business are compared to conclude that both depend on their national contexts as the basis for success. Results from a Pan European football study are then presented and discussed to further emphasize the prevalence of the national context upon the design of profit strategies in sport organizations. Three different dependencies are identified, related to match day (i.e. selling tickets to fill the stadium), commercial and broadcasting, providing interesting examples of these approaches. The chapter then goes on exploring the challenges sport entities face when becoming international. It describes the influence of the entertainment business over some of the most successful football clubs, including Real Madrid, Manchester United and FC Barcelona, highlighting the importance of keeping the approval of fans and “socios” when exploring strategies to go abroad. Also, possibilities for regional expansion are discussed, on the assumption clubs consider that fans could support different clubs under different circumstances (i.e. locally, regionally, nationally, etc.). Finally, this chapter ends highlighting the role of successful players in the internationalization of the clubs. These players are followed in other countries, influencing the increase of television rights and also the creation of international tours. With internet and mobile communications, this situation is going to chance in the future, authors argue, by reducing the negotiation power of sports organizations with these new media players.

Those service researchers, who are also football fans, would find chapter four very interesting and illustrative. Here, the publication goes on to discuss the value creation models of Real Madrid and FC Barcelona, two of the most prestigious Spanish football clubs. Authors present an in‐depth analysis, assessing their results and comparing them with other European clubs. The discussion is centered on three main aspects: their financial strategy, including profit and loss; their sports strategy, including sports managers; composition of teams; player's participation (in the season) and results. The consequences of both models are discussed, providing a number of interesting statistics (shown as appendices) and charts with different sets of variables on the topic. A valuable contribution out of this chapter is the sport/business matrix presented, which is useful to interpret the strategic position of each of the clubs according to the conclusions of the analysis presented here.

The above analysis lead us to reflect upon this question: why sport organizations succeed? It is argued that football is a billionaire industry in Spain and yet, very little attention has been paid to understand the phenomenon from the business management perspective. Based on some previous research findings obtained by one of the authors on leaders from some top Japanese companies in other industries, chapter five provides what is called the “proto‐image” of Real Madrid to discuss its underlying success factors along with marketing and management implications. The proto‐image of the firm is defined here basically as the image of the company, built over the years based on a long‐term strategy, different from those companies interested mainly in obtaining short‐term cash flows. It is argued that the proto‐image and the brand are the two pillars of Real Madrid's successful strategy, particularly, during the period of 2000‐2005, when Mr Floretino Perez was President of the club. The chapter is centered on the discussion and analysis of its business approach. To do this, a brief discussion on the great image, prestige (“señorío”) and branding of the club is included, and then, using primary and secondary data, the “4Ms” of Real Madrid in its modus operandi are presented and discussed, as follows: Manning (people), Marketing, Manoeuvre (implementation process and structure) and Money.

The final chapter refers to the value creation from the organizational structure of entities dedicated to the development and promotion of sports. To do this, three main types of sports organizations are identified: sports governance organisms (e.g. associations, federations, committees, etc.); private organizations for physical activity (e.g. clubs, centers, educational institutions, etc.) and, sports events producers (e.g. leagues, circuits, tours, etc.). The main argument here is how the evolution of professionalization and commercialization of sports has had an impact on the structure of these types of organizations. Again, professional football in Spain is included as the reference to illustrate and discuss the impact of these two factors. In particular, organizational structure issues of elite football clubs are discussed, identifying those management areas which have been emerging in recent years. Sports, financial, communication, sales, marketing departments, among others, are included in the analysis, as a result of the increasing complexity created by the current trend of transforming sports clubs into complete business companies.

The contents of the book is added with interesting appendices referring to the importance of NGOs in sporting events; to the evaluation of sponsorship and patronage, and to academic issues on structural characteristics of sports organizations. These three additional parts enrich further the contents of its six chapters.

Clearly, for increasing our understanding and knowledge of service management, it is not sufficient to learn from those traditional service sectors, like for instance, banking, retailing, hospitality or transport. Those services with an increasing intangible component in their value creation process are becoming particularly relevant in our service research agenda, as they are already playing a key role in today's society. In this vein, the complex combination of rivalry and competition in sports events and their implications in terms of strategy and management are crucial to our understanding of this complex phenomenon called sports. Learning from these different types of organizations will definitively help us to expand our knowledge on service. All in all, this book makes a number of valuable contributions to those service researchers who want to think out of the traditional service‐type box, and would like to start identifying new settings, new forms of competition, new sets of multiple customers (stakeholders), new types of results, and ultimately, new ways for value creation. The management of sports is helping us to realize and learn that we should not generalize about successful strategies and results. This valuable message could be definitively very useful when doing research in other service activities. There is no one single successful model to compete in this new era of complex service systems which involve different stakeholders, who need each other to succeed in their own business. This is a very good insight for further thinking on service sustainability issues in the years to come.

Are you ready to play the match of value creation in your own sport? Hope you can score many goals after reading this book.