Professor James Skinner, Director of the Institute for Sport Business at our university partner, Loughborough University in London, describes the evolution of the sports business environment in recent years and identifies the important trends and behaviours to note and emulate where possible.
It is estimated that the business of sport in the UK generates £20 billion a year and support 450,000 jobs. The London Olympics will have contributed approximately £16.5bn to Britain’s gross domestic product by 2017. Cycling now brings in £3bn annually to the UK economy and the Rugby World Cup delivered nearly £1bn of benefits to the UK economy. These figures clearly highlight that sport is a rapidly growing business and sports organisations need to be constantly reviewing their business strategies to be able to compete. To do this, innovation and change need to be at the core of a sport organisation’s culture.
Vanessa Ratten in her article on Sport-Based Entrepreneurship notes that innovation in sport occurs in numerous ways. She suggests it occurs through sports teams, sports organisations and by sports players. Sports teams often develop new strategies to increase their performance. The major innovations during the past decade have been the use of computer statistics to help with better team performance and the internationalisation of sports leagues. Professional sports leagues such as the National Football League in America created the World League of American Football. This involved granting franchises to teams in the Canada, Great Britain, Germany, Spain and the United States Changes in technology have driven much of the innovation in sport. The advances in technology in terms of engineering and new materials have led to increased sporting achievements. Web-based sports betting, sports blogs and sports club webpages have changed the way sport is viewed and utilised. New technologies such as sport video games have innovated sport. Technological innovations have also been spurred by sport games such as signature style animation in the National Basketball Association. Innovations in equipment and technology has lead to new sports such as extreme sports being developed such as bungee jumping, paragliding, mountaineering, rafting, rock climbing, scuba diving, storm chasing, surfing and whitewater kayaking. Sport has encouraged innovation in promotional approaches such as web-sales and packages. Moreover, the internet has provided for new ways in which people can play sport such as online basketball. Innovation has also occurred through fashion with sports companies such as adidas paving the way for new materials and types of clothes worn by sportspeople.
These innovations in sports technology continue at ever increasing rates. With this growth however, comes greater competition and new challenges for sports organisations to maintain their competitive advantage over the new market entrants. To compete in this growing competitive market place sports business professionals need to foster a culture of innovation. Leadership is a critical element in fostering organisational innovation. Leaders in an organisation offer support and guidance to develop innovations, create an environment that is conducive to implementing innovations, and establish systems that do not punish failure. Sport organisations must develop an innovative leadership culture, a climate that promotes and acknowledges the innovative process.
Victor Hwang in his article the 'Secret Weapon in Business: Culture' makes reference to his colleague Bill Tobin from the Silicon Valley based Strayer Group. To begin, Tobin suggests organisations need to change their organisational practices. They need to understand that practices need to be developed to allow people to develop new ideas, and take the risk. In turn the organisations will achieve a competitive edge. Tobin points out that the notion of innovation has evolved and understanding this evolution and its implications for business success is essential. Two decades ago the word technical innovation was the new game in town. For example, Tobin talks about innovations in computers, electronics and software over the years. Better toys meant better profits. About a decade ago, Tobin suggests, the game shifted to a business model of innovation. The lean startup movement was a manifestation of that philosophy. The proliferation of subscription services, loyalty programmes and online community platforms are good examples of innovative thinking around business models and customer engagement. Today, Tobin believes the organisational battleground is cultural innovation. Tobin argues that innovative cultures give rise, on a sustainable basis, to the best technologies and business models. Competitors may copy your technology and organisational practices but a sports organisation with an innovative culture has already evolved to another level.
Sports organisations do take risks through their business strategy and innovation practices. Ratten points to a recent innovative risk taking activity that has occurred in cricket with the Indian Premier League being formed, which is forecasted to generate revenues over $1 billion (US) over a 5 to 10 year period. By innovating the way that cricket is watched and played around the world, the Indian Premier League has assumed some risk in terms of the amount of money invested in establishing the new league. Beyond this strategy sports organisations should learn from innovative organisations that have achieved long-term sustainable competitive advantage through cultural innovation. Organisations such as Apple, Google, Netflix, ZAPPOS and Microsoft have all developed innovative cultures and business models that have driven their success. Sports organisations such as NIKE, Under Armour and Decathlon have created cultures of innovation. These are organisations that we should be studying to understand how cultures of innovation can be fostered and sustained.
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