or renewal - pcma paper_final1.pdf · armageddon or renewal ... and survival and evolution to new...

2013 PCMA, LLC All Rights Reserved

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1The Private Club Dilemma An Industry White Paper

By

Robert Borsch

Rick Coyne, C.E.O. Professional Club Marketing Association

ArmAgeddon or

renewAl

January 2013


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www.askpcma.org

The Sustainability of Country Clubs - IntroductionThis white paper is dedicated to analyzing the fate of country clubs and golf course centered real estate communities in America. It will chronicle death for some, adaptation for others, and survival and evolution to new relevance by, we hope, the majority. The authors, for decades, have been deeply engrossed in assisting clubs and communities improve their performance or dig their way out of problems caused by changing circumstances. Mr. Borsch has also worked across a variety of industries as a management consultant partner with PricewaterhouseCoopers, and has seen whole industries disappear and new companies appear and evolve, some to greatness. Others have faded. Together, the authors have researched and concluded that the current country club and club within a golf community offering may be arriving at a life cycle decline and perhaps conclusion, at least in its current version.

Stakeholders: Who should care about this? The homeowners and members for one, because they have at stake their social lives, the source of highly valued life experiences and, in some cases, the value of their homes. Clearly golf institutions such as the USGA, CMAA and PGA care very much, because it is their mission to further the enjoyment of golf and clubs across the country and for many generations of players. Millions of employees of these golf communities and countless service providers and product vendors owe their livelihood to this industry. And most important are the future generations of community and club members who could enjoy the benefits of these wonderful communities.

Premise: So why do we believe that the cycle for clubs and golf centered real estate communities could be drawing to a close, insofar as we have known them for several decades? What is their fate and that of all to whom they matter? What and how will these clubs and communities, if they survive, evolve as the next life cycle takes hold? What will the landscape for these clubs look like in the next generation? And finally, how will resilient private clubs and golf communities make the transition by being relevant, competitive and financially sustainable? This is the focus of this paper.

Assertions about trouble in the industry are not new. Others have exhaustively chronicled statistics about consistently falling golf participation, plummeting home prices and the difficulty of maintaining the membership portfolio. But some have maintained (and made decisions) on the premise that things will go back to normal when the economy improves. We believe there is one glaring omission with this statement: There is no back to anything. The future is not going to look anything like the past for most private clubs and golf communities.

What is distinctive about this white paper is a willingness to address the likely actual future of the clubs in this industry. While many have pointed out the challenges, there has been little about specifics of what the future for the industry may look like, and what should be done to make that future brighter. This paper addresses these points with specifics.

The authors have the advantage of both extensive experiences in helping golf communities and clubs adapt, and witnessing how other industries have experienced their life cycles and evolutions. There are some useful parallels, patterns and commonalities from these industries that can be applied to the club industry, as we hope this paper will illustrate.


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The white paper will of course, from the authors points of view, trace the history of the country Club and its evolution into the golf course communities we have today. It is important to set the perspectives and context to properly understand the forces that have shaped this industry resulting in where we are today. Further insights are provided into the market and environment shifts that have set these communities on the path of decline and/or change.

While the authors opinions suggest that a life cycle decline for golf is underway, this white paper is in no way suggesting that golf will go away. It simply recognizes the market signals and suggests that it is time for clubs and real estate golf communities to accept the reality of life cycle decline and re-engineer themselves to remain relevant to an every changing market.

In presenting their case, the authors employ some easy-to-grasp analytical tools not commonly applied to this industry, but used more frequently in other complex businesses. These will give some insights that will help make tangible points and give better depth to the suggested solutions.

So if you are in club or golf real estate community management, a club or HOA board member, or a prospective buyer trying to understand how to pick a community and club with a future, we invite you to please read on.

Table of Contents


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27

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The Sustainability of Country Clubs - Introduction

Chapter one - The History and evolution of the Club Industry

Chapter Two - death, Survival, and renewal: the landscape Ahead

Chapter Three - Understanding a Clubs Position and options

Chapter Four - roadmap to renewal Concept 360

Conclusion

About the Authors

Product life Cycle 9life Cycle Conclusion 11Industry Shake out 11Fitting a Club Into the grid 13Summary 16

looking at a Clubs Strategic Footprint 17evaluating Core Assets and Capabilities 20Some Interesting options 24Current Club model Plus Broader View (oPC) 25Programming 26Conclusion 26

Business Systems 28roadmap to Sustainability 30

Chapter oneThe History and Evolution of the Club IndustryBy definition, Armageddon can be the end of the world or a day of reckoning. In either case, the term may underscore the severity of issues facing a large percentage of clubs within the private club industry. In terms of course closures the industry is now in the most difficult period since the Great Depression and World War II, a period in which nearly one-third of the private clubs in America closed their doors.

While many industry hopefuls steadfastly await an auto-correction and resumption of normal, like all industries, the life cycle for some private clubs may be at or near exhaustion. Once exhausted, an industry is doomed to mediocrity and survival of the fittest, or is resurrected by reinvention and relevance.

The current recession, real estate decline and the general economic uncertainty has created a near perfect storm affecting nearly every club in the country, and some more than others.

Overbuilding, aging demographics, the changing cultural needs of todays consumers, lack of leisure time, and a major financial downturn have all contributed to todays state of the industry. Todays club consumer also has a great deal more savvy than those of previous generations. Press coverage of the myths of equity re-fundability, the heavy discounting of memberships taking place all over America, and the alarming rate of club and golf facility closures all contribute to a new breed of potential member. To understand the nature of this current decline, we must first understand the nature of the growth that preceded it.

Over the decades, the private club industry has ebbed and flowed on the basis of many factors. The earliest boom days of golf in the 1930s was predicated on wealth and exclusivity. The next boom, beginning after WWII and extending to the 1970s and 80s, was an opening to the masses and the advent of the golf course real estate development. In the 1990s, growth was predicated upon anticipated demand reaching well beyond the supply at the time. So each boom period was brought about by differing reasons.

Public access to golf increased slowly after WWII, peaking in 2000, and wealth and exclusivity were replaced largely by simple supply and demand. Simultaneously, other societal changes also become major game changers in how the private club was perceived by potential new members. Todays membership decision maker is generally a female between the ages of 35 and 65. While golf may be germane to the decision to join, the clubs entire amenity package and activity programming will be considered carefully before considering which club to join.

As philosopher and author, Eric Hoffer once said, In times of change the learners inherit the Earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists.

While not a necessarily popular opinion, golf has fallen in favor as the top reason why members join a private club, as well as the reason for staying. This does not necessarily mean a diminishment of resource allocation to golf, but it does point out that a re-engineering of how we position ourselves may well be required.


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Here are some of the contributing issues to the current industry position.

growth of golf Facilities oversupply: According to the National Golf Foundation nearly 3,000 daily fee courses were added to the golf landscape in less than twelve years between 1988 and 2000. Even as golf participants swelled to over 30 million, unrestrained growth created serious supply side issues, as access to quality golf was no longer the exclusive domain of the private club or resort. The chart below, from National Golf Foundations 2012 Golf Facilities in the U.S. illustrates the comparable growth of public to private facilities.

Even as the industry posts record high numbers of course closings, (157.5 in 2011), thereby reducing supply, membership numbers at most clubs remain static at best, unless temporarily boosted by reductions in price or other similar member incentives.

The following chart illustrates the new and closed golf courses since 2001, indicative of the market correction now taking place in the golf arena.

DAILY FEE

10,000

1930 1950 1980 1970 1980 1990 2000

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,0000

PRIVATE

MUNICIPAL

COURSE OPENS & CLOSURES

NEW

CLOSURES

30025020015010050

02001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011


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Tax reforms: Internal Revenue Code Section 274 has been modified several times over the years, most obviously affecting private clubs in 1993 when meals and entertainment expenses were reduced to a 50 percent deduction. This section (in 1993) also introduced the disallowance of membership dues in clubs organized for business, pleasure, recreation or other social purpose. This essentially marked the death knell for many city clubs and forced corporations to rethink their strategy relative to reimbursing employees club costs and expenses.

generational Shifting: Considerable research is available to conclude that generational differences are real and affect buying habits and needs. In the past many believed that as each generation aged, it would become a clone of the previous generation. Baby boomers have proven that belief to be incorrect. To the contrary, each generation now takes their buying habits and needs throughout their entire lives.

The result is that clubs are no longer the homogeneous enclaves they once were and likely have members from at least three different generational phases. This obviously creates new and different challenges for clubs.

gender-Bias: For many clubs, good old boy networks have evolved culturally to gender neutrality and family orientation. For some, change occurred only after court challenges, generally pitting member against member over equal access. For others, particularly mens only environments, change may come only as market conditions in support the venue force such change.

As previously stated, 85 percent of discretionary purchase decisions are currently being made by the female within the household. Women control the majority of the wealth in the country. Augustas announcement this past year to allow females into membership may be clear recognition of a time-honored tradition having reached its point of antiquity.

golf Participation: According to the National Golf Foundation, 2012 Golf Participation in the U.S., The number of golfers remained essentially steady in 2011 at 25.7 million. For research purposes, a golfer is defined as a person age 6 or above who played at least one round of golf in a given year.

While the estimated number of occasional golfers (age 6+, one to seven rounds a year) remained unchanged at 11.3 million, we saw a slight decrease in the core golfer category. Core golfers (age 6+, eight or more rounds a year) fell 2.7 percent, from 14.8 million to 14.4 million.

In 2011, 3.5 million golfers were either first-time beginners (1.5 million) or those who returned after not having played in over a year (2.0 million). Conversely, there were 3.9 million individuals who had played in 2010 but did not in 2011.

The number of rounds of golf fell 2.5 percent during the past year, from 475 million in 2010 to 463 million in 2011.


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The following chart illustrates the decline in core golfers, those playing over eight rounds per year, which would be the most corresponding level of golfer potentially engaged in the private club environment. (Source: NGF 2012 Golf Participation in the U.S.)

economy: While industry insiders, glum from recent downturns, look at the modest increase in 2012 rounds as a harbinger of good tidings, the 2008 economic downturn, loss of jobs and restlessness over the future has clearly impacted private clubs and golf industry in general.

According to ClubCorps Chief Executive Officer Eric Affeldt, the Dallas-based company sold the most memberships last year since 2005 and, People are feeling more comfortable spending money again because things arent getting any worse.1

Although many operators are similarly optimistic relative to the economic future in the U.S., economy remains only one of many driving factors that can affect significant recovery within this market segment.

leisure Time/Family Centricity: With the increase in professional women, the days of mom staying home and tending to the kids while dad played 18 holes has forever changed. Expectations of equal opportunity leisure time and activity are a factor in estimates of 85 percent of discretionary decisions being made by the female.

With children in the household, the equation simply gets more complicated; time more scarce and the need for total household relevance in the offering of the club more important. Family time has become a priority and leisure time a commodity. The evolution: While levels of golf participation are down on several fronts, we remain positive that golf will continue to retain a reasonable level of popularity. The point of this report is to examine its relationship and importance in the long-term sustainability of the private club. Recognizing that several organizations have and continue to foster activities and programs to increase golf participation on the national level, this report likewise recognizes the importance of such programs being aggressively initiated on the grass roots, club level.

GOLF PARTICIPATION - CORE GOLFERS25

20

15

10

5

02011 1990 1995 2000 2005 2010 2011

In M

illio

ns

(000

s)

1Source: National Golf Foundation


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No matter where golfs participation and popularity may ultimately settle, the current singularity of emphasis in club offerings may have driven clubs to the brink of life cycle stagnation. As an industry, we may also have ceased the necessary evolutionary process to make clubs relevant and necessary to members and potential members lifestyles.

There are simply too many differences in todays member pool, including lack of leisure time, cultural differentiation, family centricity and the general need for a total lifestyle experience for the future to look much like the past. Obviously, there are exceptions, but for the majority of clubs today the paradigm must shift and a new emphasis be placed on relevance to the clubs very finite and definable marketplace.

While price will always be a factor, value and relevance to lifestyle is the new barometer for a members willingness to stay and a potential members willingness to join. If clubs dont offer what consumers want, they simply wont buy it, no matter what the cost.

Clubs must begin to recognize and respond on the 360-degree nature of what constitutes the complete private club. Most clubs offer a spectrum of assets and amenities, but fail to emphasize them uniformly across their 360-degree demographic range of members and lifestyle needs. As a consequence, resources are concentrated into areas that may no longer be relevant, hence effecting membership growth and retention.

As an industry we have essentially failed to adequately recognize changing market realities and adapt our clubs into relevant lifestyle environmentsa failure that falls not only on the clubs leadership, but on industry leaders and consultants as well.

As nearly every objective, business consulting professional has observed, the golf industry is in the mature stage of development. This translates into the necessity for change within the private club industry.


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Chapter TwoDeath, Survival, and Renewal: the Landscape AheadIn the previous chapter we traced the evolution and trajectory of the industry over its history and relevant life cycles. We have also reviewed the emerging forces that are damaging the industrys sustainability and making membership increasingly irrelevant to todays potential customers.

In this section we apply some analytical concepts to the club industry that will make the issues easier and simpler to understand, so that we can later discuss some coping strategies clubs can consider. Below we apply an analysis tool, Product Life Cycle Analysis, which can be used to highlight our club industry problem. Using product life cycle analysis puts our country club and real estate golf community (REGC) issues into some more relevant and revealing perspective.

Product Life Cycle

As a refresher we have re-produced the well-known product life cycle chart below. It shows how products go through the phases of Introduction, Growth, Maturity and Decline. Some charts include the concept of Renewal, but more about that later. Business experts agree this is a firm reality for all products and applies very well to whole industries as well. The timing of a product life cycle can vary considerably, but the stages remain the same. As to timing, a cell phone may last a year, some clubs (not many), have survived for many decades. But the stages and the shake out consequences we describe below will to be the same.

By way of illustration we have reproduced the product life cycle for Apple, and that companys three most recent products including the iPod, iPhone and iPad. Apple is a particularly useful example of a familiar contemporary and successful company that thrives on re-engineering, innovation and new product introductions. This makes their product life cycle easy to follow.

PRODUCT LIFE CYCLE

Sal

es a

nd

Pro

fit

Maturity

Growth Decline

Intro

TIME


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Notably as the chart below shows, Apples more recent products, the iPhone and iPad are in their growth phase, which partially accounts for their incredible run of prosperity. One of their older products, the iPod is still doing well but has peaked and beginning to decline. Having multiple new growth stage products puts Apple strongly in the renewal stage as a company. This analogy can be applied to the club industry as well.

Building on this analytic concept, we can model the three business or product life cycles the country club and real estate golf community (REGC) have undergone. The chart below shows the three life cycles discussed in Chapter 1. The first was the elite social-based private country club, the second was the enormous expansion of public courses serving an emerging more prosperous middle class, and the third was the emergence of the baby boomer promotion of golf coupled with a marriage of real estate development.

As depicted in the chart these three golf life cycles overlapped in time but were distinctly driven by different social and economic forces. Also notable is that while each life cycle participated in growing the total activity, all of them topped out at some point in the past. Today, all of these products are declining together, which is what is highly alarming to many of us. This is why we believe the industry has now moved into a decline phase.

APPLE PRODUCT LIFE CYCLES (000s)

IPod

IPhone

IPad

70000600005000040000300002000010000

02002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Un

its

GOLF FACILITY PHASES BY COURSE TYPE

Private

Municipal

Daily Fee

1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2012 Projected

ElitePhase

Public AccessPhase

Baby BoomerDevelopment Phase


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Life Cycle ConclusionAll three of the principle product life cycles of the golf industry are in decline. This is the macro trend that signals declines in every industry as the relevance of its offering to its customers begins to fade. That is where we believe the golf industry is heading right now. Life cycle analysis shows that the problems written about the industry today are not temporary. The industry is in the grip of forces that are at last taking it down the last life cycle stage: decline. This is baked into the future of clubs.

Take heart however. There is potentially another stage called renewal. We will get to that shortly. But first, lets explore what lies ahead for any industry in the decline stage of its life cycle.

Industry Shake OutWhat happens to products and businesses when they enter the decline phase as the country clubs and REGC are now doing? Well, a lot of things can happen, but for discussion purposes we can usefully describe four separate paths: Failure, occupying a niche, maintain, and renewal.

These are some of the outcomes that typically occur for companies in declining industries and for all products eventually. For illustration purposes we have extended our life cycle chart to show the potential paths of clubs taking one of these directions. Obviously, it is our opinion that those clubs seeking the path of renewal have the greatest opportunity for sustainability.

When products and industries go into the decline phase of their product life cycle, they inevitably encounter whats characterized as an industry shake out. The shake out historically leads companies, or in our case clubs, down some fairly predictable paths. What are these paths and where do they lead?

Failure: This is the inability to financially sustain the cub or REGC product or business. It may mean bankruptcy - something were seeing quite a lot of these days, liquidation, or sale to another party. In any case, it is pretty much game over for the current stakeholders: members, owners, employees and vendors.

1930 1970 1990

RENEWAL

NICHE

MAINTAIN

FAILURE

The Future Industry Shake Out Paths

The Past 3 Life Cycles


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Bankruptcy and reorganization is particularly common now in the early stage REGCs that did not have enough of a member base when the real estate merry-go-round stopped. By definition, failure means that the proposition of the club is not economically sustainable and/or aligned with their market. In our view, there are many unsustainable clubs out there right now that will be inevitably facing that fact in due course.

maintain: This is the attempt to keep calm and carry on, holding onto the status quo and trying to stay the course dictated by the clubs traditions. Some clubs are solidly enough established or in the right market, and can do this for a long period of time, maybe forever. However, many are not going to be able to stay in a maintain status indefinitely.

One life-extending strategy in this category that some clubs have tried is to outsource the management of the club to a club management company. This removes the necessity of volunteer leadership to direct all the hard choices such as reducing people and other costs, and also allows enhanced purchasing scale to lower the costs of agronomy, food, golf carts and other large ticket items. The outsourcer also takes away the management burden from the members, which in tough times can be a relief. This approach may be a good option for some clubs, especially those on the brink.

But there is a downside. Loss of meaningful governance and decision control is one of them. And, while lowering the cost base may extend the clubs life, we question whether this is truly sustainable in the long run. Re-pricing the membership, cutting costs, reducing services, all can help a club maintain its existence for a period. But the lack of capital formation and the eventual decay of the membership portfolio caused by such actions may actually sink many clubs in the long run. For many clubs, maintain is simply a delay of the inevitable failure.

niche: This refers to a highly specialized club, focused on a smaller specific market, and serving up a limited offering of experiences to its members. A golf-only mens club comes to mind, and probably one without a full service restaurant and other amenities. This also includes smaller highly specialized clubs, often in underserved markets where choices are limited. A wilderness ranch club, or remote golf Mecca club with top rated courses are additional examples. Niche clubs work well when the club is highly relevant to its specific limited market and keeps a tight focus on its resource usage. But this path can turn deadly if their specialized market changes and/or the club fail to replenish lost members in pace with attrition.

renewal: This is the act of innovating and repositioning to become relevant again to a target and available market, and is characterized by a fresh growth period and long-term expansion. It can also be envisioned as re-engineering how the club presents itself, and appeals to a broader market. As an example, a golf focused club sitting in a development with over 2,000 families within a 15-minute drive that directed its resources and attention to creating a great family experience, turned around its fortunes by becoming more relevant to the market it could serve but had previously ignored.

Clubs better positioned for renewal tend to be larger more diverse clubs that have the attributes of member and operational scale, a larger market footprint and a broader range of amenities that can drive more comprehensive member experiences. This positions them with more options to get to the growth stage of their next product life cycle. There is no guarantee of course, as they are still operating under the same social and economic forces as everyone else. Agile smaller clubs can also get into the renewal stage if


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they are willing to and can afford to make the necessary adjustments and offer more in the way of diverse programming, as will be discussed in the following chapter.

mergers and Combinations: We do not include mergers and combinations as a primary path in the club industry. Why? In many larger industries in decline the strong eat the weak as part of the shake out and the number of players declines. Fewer, stronger players can fight better and survive on a declining products diminishing revenue base. We do see some amount of this showing up in the club industry, but it is unlikely that it will be a major option for most clubs.

There are several reasons that substantial merger activity is less likely in the club industry than in larger ones. First, many clubs are a small business serving a local market within some short driving distance, making mergers impractical. Secondly, clubs as social clubs usually have very strong social or ethnicity cultures and are often very resistant to the idea of a merger, sale or purchase involving a club with a dissimilar culture.

Finally, in denser markets like South Florida, Scottsdale, Arizona and Palm Desert, California, where there are a lot of clubs near each other, they mostly offer similar products. Merging with another club may add little to the existing memberships current offering, except perhaps some membership scale and cost efficiencies. Some management companies offer reciprocal play opportunities to members of their managed or owned clubs, which would be the exception to how a merger might be advantageous.

Another exception to this may be the REGC where there is still substantial developable property. Some of these failed communities, Reynolds Plantation is a recent public example, are still attractive to developers who get them at bargain prices and can monetize on future real estate development.

Why all this discussion about which category a club is in? Because understanding where a club falls in these categories clarifies to a clubs leadership what they are up against and what options are realistically available. We frequently see leadership in troubled clubs that do not appreciate how much trouble they are in. Lacking a clear view of their situation and what realistic options they have, they make poor decisions and waste resources with little or no positive impact on the outcome. Or worse, they may be in denial, or too uncertain to take action.

In summary, this tour down the paths that companies and industries that are in the decline stage of their life cycle gives us a glimpse of what is in store for the club industry. How fast these conditions will evolve is difficult to forecast, but happen they will.

Fitting a Club Into the GridIn this next example we show how the potential shake out paths triggered by life cycle decline can be viewed in a way that clarifies a clubs risks and options. And knowing that, they may want to direct their attention to getting off that path and on to another. We will discuss more about that in the next chapter.

The chart below arranges the four categories of failure, maintain, niche and renewal into a diagram or grid that fits them into their relative attractiveness and sustainability. The left axis plots the level of


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attractiveness to their available market from low at the bottom to high at the top. The bottom axis plots the sustainability of the club from low at the left to high on the right. We then show in four quadrants the territory a club may fall in depending on their attractiveness and sustainability.

The upper right green quadrant therefore would contain clubs that are highly attractive to their available markets, and are very sustainable having solid economic long term prospects. The blue zone niche clubs are highly attractive to their specialized relevant market but more economically at risk if that specialized market changes. The yellow zone contains clubs that may have a solid sustainable business, but are losing relevance to their market. The red zone is for clubs that have lost their market relevance and are in economic distress.

We have characterized each quadrant by associating the appropriate potential shake out path to the quadrants.

Failure clubs nearing the end of their life cycle tend to be unattractive to their members and markets, have little value and are no longer sustainable. They are red (urgent) zone clubs.

maintain clubs are coasting on their momentum and reputation or formerly solid brand and market position, and may be more sustainable, at least in the short run. But many will continue to lose relevance and may ultimately slide to the left into the red Zone. They are positioned in the Yellow (danger) zone.

niche clubs are by definition quite attractive and relevant to their small, devoted market, making them sustainable as long as their market holds up. However they are more vulnerable to market shifts, because of their narrow offering and lack of recovery options. Therefore sustainability is a significant potential issue, but only if their niche market changes. We show them in the blue (stable) zone.

renewal clubs are often characterized by a broader range of amenities and frequently have more scale. This provides them broader market appeal and economic staying power giving them better options for staying relevant and prosperous. They also may have the scale and resources to make investments in new, more market attractive amenities and activities. Attractive, agile smaller clubs also can fit this category if they have the economic horsepower and leadership to undertake a transformation to reposition themselves. They are in the green (safety) zone.

PLACING CLUBS IN THEIR PATH POSITION

High

High

Attractiveness

Sustainability

Low

Low

NICHE RENEWAL

MAINTAININGFAILING

Small Niche ClubLoyal Speciality Membership

Large New Amenity Rich ClubSubstantial Unsold Real Estate

Medium Sized ClubLittle Capital in Crowded Market

Small Traditional Older ClubAging Amenities and Membership

Small Niche ClubLosing Member Relevance

Large Mature Amenity Rich ClubSold Out Real Estate

Medium Size Strong Brand ClubLarge Wealthy Market Members


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The chart can be used as guideline to help sort out strengths and weaknesses of a club. A clubs position on the chart is determined by the clubs actual specific attributes and relevant market conditions. Below are several examples and we have placed them on the chart above as an illustration.

Renewal Clubs - Green Quadrant Safety Zone We show two clubs in the safety zone. The one in green is a large amenity, rich, modern club with attractive and relevant offerings to a local and national market. However, the club was caught in the real estate downturn before it sold sufficient memberships to be fully sustainable and has some significant financial challenges, placing it to the left on the sustainability axis. The cub in light blue is also large with a substantial but slightly less up-to-date amenity base. However, the real estate is sold out and the club has substantial membership scale with strong long-term financial prospects and has the capital to upgrade and expand. Its sustainability is therefore, very strong.

Niche Clubs - Blue Quadrant Stable Zone The club depicted in dark blue is a small mens club with one attractive highly regarded golf course and a small, but fiercely loyal membership. The other is a smaller remotely located golf club with aging and less attractive facilities but with a long time loyal and highly cohesive membership and strong legacy features that raise its sustainability rating.

Maintain Clubs -Yellow Quadrant Danger Zone The club depicted in purple is a revered fifth generation elite club with many wealthy members in a large market location. Despite its uncompetitive, aging and limited facilities there is always a waiting list and sustainability is not an issue. The club depicted in white is also in an aging facility with limited offerings, but is struggling somewhat to maintain memberships, and has insufficient capital to upgrade substantially. Therefore its sustainability rating is lower.

Failure Club - Red Quadrant Urgent ZoneWe show one club in this quadrant with the classic symptoms of failure - a small single course golf club with aging facilities and declining membership, situated in a market crowded with stronger upscale clubs offering fresher amenities. The club does not have the capital for renewal and has nothing distinctive to offer the market. With faded relevance and little money, it is not likely to survive.

The strategic position grid is useful for visualizing where any club stands in its risk profile. It is not intended to be overly scientific, but provides a good directional indicator to evaluate where a club stands and what some more attractive positions might be.

There is never assurance that a specific club will capitalize on its opportunity to renew even though it may be favorably positioned in the green quadrant to do so. Nor is it assured that a club in the red zone will surely fail. But if a club is evaluating its likely path during the shake out, this is a pretty good start for evaluating their prospects.


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In the next chapters we will focus on how to more specifically evaluate a clubs situation, and how to consider its options.

Summary In this chapter on death, survival and renewal we have put the state of the club industry into a context of classic business analysis to highlight what is happening in an otherwise muddled picture. The proven concept of life cycle analysis when applied to the club industry leads to an inescapable conclusion: this indicator shows all of the product offerings of the golf industry in decline. Product declines such as these are seldom reversed. Getting started on a new product life cycle is highly recommended.

We also walked through the inevitable consequences of such declines, namely the golf industry correction and shake out, which is now underway. We defined the classic paths that companies, and in our case clubs, are likely to take, and described what they will look like. Failure, maintain, niche and renewal are the most likely outcomes, and clubs will face harsh choices to travel these paths and cope.

Finally we used a simple analysis grid to illustrate where a club would likely fall on the analysis scale, depending on its attractiveness to its markets and sustainability. Looked at this way it is clearer where safety may lie and where urgent danger is lurking.

With these lessons in mind, we proceed in the next chapter to address how to analyze any specific clubs situation and evaluate its realistic options. We address these questions: Which clubs will travel or be driven down which path? How can you evaluate that for a specific club? How can you determine where to place your bets to improve your chances?


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Chapter ThreeUnderstanding a Clubs Position and OptionsThis section addresses how to apply to a specific club what we have reviewed about the club industrys problems and issues. While it may not be universally true, most clubs are a pretty good reflection of the industry they inhabit, and therefore subjected to the same forces and problems, including the decline we have been talking about.

But how can a club determine which of the paths theyre on: failure, maintain, niche or renewal? How can they change where they are headed if they dont like the answer? And what options are at their disposal to cope with their potential plight?

First, to address these points we will discuss how to create a high level or strategic view of a club that will tell us more about where the club stands. Then, with that framework in mind, we will analyze the club by looking at its core assets and capabilities, and how well it is aligned to its market - now, in todays world. Then through examples we will look at some generic options available to clubs to change an unfavorable trajectory toward one that is more optimistic.

Looking at a Clubs Strategic FootprintWe have found that one of the simplest and most effective ways of looking at how any business is positioned to compete and prosper is the framework of Blue Ocean Strategy. This concept is well described in the book of the same name, released in 2005, which became an international best seller in the business world.

In short it points out that most businesses fight fiercely for market share in a red ocean of shrinking markets, while leading ones succeed by creating blue oceans of uncontested and expanding market space. The book is replete with examples of leading companies like Southwest Airlines and Cirque du Soleil that have changed the competitive landscape and created a blue ocean of new customers with creative offerings, leaving the competition behind, i.e. what Apple has done by rapidly creating whole new categories of products, while their competition scrambles.

What we like most about the Blue Ocean concept is the very simple but eloquent Strategy Canvas that, at a glance, makes it easily apparent how a company has set it self up to compete, and how that contrasts with the industry or other competitors. Below we provide the Southwest Airlines Strategy Canvas shown in the book, as an illustration on how the canvas works. We then place the club industry on the canvas and provide some illustrations on how any club that wants to understand its strategic position can do the same.


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Along the bottom horizontal axis are the principle attributes any airline competes on and invests in. Along the vertical axis is the buyer offering level, low to high, and investment focus of the players on the canvas. The average airline as shown in red below competes on a fairly high price and the other attributes like meals, lounges, seating class on so on. By connecting the red dots a value curve is created, and across the map we can see a simple picture of how all the airlines compete in the airline industry by offering the same things to their customers.

Notice that Southwest, unlike the average airline, shown on a separate blue value curve, has a very low price to customers and ignores many of the traditional areas emphasized by the others such as meals, lounges, seating classes, hubs and the like. Instead Southwest focuses on friendly service, speed and frequent point-to-point departures. This makes them appear very distinctive from the other airlines on the strategy canvas.

As we now know, the things Southwest chooses to emphasize - low fares, friendly service, speed and frequent flights have created a blue ocean of market space with which the other carriers cannot easily compete. When car transportation shown in green, is plotted on this map it becomes apparent Southwest is ignoring the other competing airlines (red ocean) and instead is competing with car transport with its three areas of focus, creating a blue ocean of new customers eager to fly instead of drive.

The point we are making is not about Southwest, but the simple clarity of using the strategy canvas to understand how any business is competing.

On a best practices tour of top clubs several years ago we plotted the strategy canvases of a number of those clubs, to help us compare and contrast how they competed and where they focused their offerings and investment. From that work we generated a value curve that we believe was at that time roughly representative of the high-end real estate based club. This is very instructive as it captures the primary attributes these clubs offer and ranks the level of member focus and investment generally engaged in by them.

SOUTHWEST AIRLINES STRATEGY CANVAS

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Notice on this chart that prices are high, and the main attributes of focus are expensive real estate, the golf experience, exclusivity, gated secure environment and good service. This is fairly typical of many REGCs and is a composite; each club may emphasize slightly different things. We are not suggesting the curve is good or bad, just that it exists and can be visualized well on the canvas. Clearly this model worked well for many developers for a time, but its obviously not doing as well now.

That raises a good point. If this is the current model and represents a strategic approach that is doing poorly now, and the industry life cycle is really in decline, how would one feel if their club fits this curve?

The value curve of combined clubs becomes a good benchmark to compare and contrast with any other specific club. This is what we are driving at, understanding a specific clubs focus on attributes and offerings, how well the club is doing with it and how it relates to others in the industry.

To illustrate, the canvas below shows another single club example plotted next to the industry curve. Now it is easy to see at a glance how any club is competing with another or with the industry norm. In this case the example club compared to the industry has a lower initiation price, higher amenity diversity, is more self contained with better home related services, and has room to expand its experience offering and real estate.

It is easy to see that each club competes on different attributes. Some clubs, like a niche club, compete on only a few attributes like very good golf and a single gender experience, and make no material investments in anything else. A large real estate based club, however, may compete more broadly with a lot of buyer offerings. Similarly, by carefully examining the attributes and the rankings, it begins to become obvious how any club is positioned strategically. A club serious about getting off the failure path and onto renewal would benefit greatly from this self-examination.

HIGH END REAL ESTATE GOLF COMMUNITY(REGC) STRATEGY CANVAS

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Blue Ocean ConclusionWe have briefly described a simple approach to help a club evaluate where its stands in the market, within the industry and compared with other clubs. We call this the Strategic Footprint because every club has its own brand and presence in its marketplace. Whether planned or not, the choices the club has made created this distinctive footprint and market position. This analysis approach helps the club understand what the footprint looks like and begin to consider the implications.

We appreciate this can get a little complex for some and requires effort. But every club has finite resources and understanding where to make their investments is critical. Some clubs have failed because they invested in the wrong things. Most cannot afford to make a material misstep. This insight will help a club define, as we have discussed, what path it will or must be on in the future.

The main point is that clubs must choose what to emphasize and where to invest. How do you get an edge on the local competition for members? Which investments will push the club up the Blue Ocean Strategy chart and distinguish the club from the others? For more in depth insight on the Blue Ocean concepts, read the book available in print or on line.

Evaluating Core Assets and CapabilitiesConducting the analysis just discussed should, for any club management team, raise the question: What are the core assets of the club and how can they best be used to compete, attract new members, retain those that they have, as well as drive increased usage and satisfaction? Please note this is a two-part question. Having assets does not mean they are achieving maximum value for the club and members. Nor does it mean that they are aligned to capture new members.

We suggest a two-part approach to answering this question. The asset analysis chart below is a good starting point for the first step Identifying assets and defining how they are being used. This illustration is an example club with a common range of amenities. It is the 360-degree offering that most clubs can develop easily by exploiting their assets and programming to drive membership growth, enhanced retention and increased usage and satisfaction.

COMPARISON STRATEGY CANVAS

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Obviously, myriad possibilities exist for using these assets, but in the illustration below, we have demonstrated the current trends of emphasis on the offering by the size of the shape. While the weighting may be justified in some circumstances, changes in the complexity of the consumer suggest that often times clubs are not realizing the full potential of their assets to maximize participation.

GOLF

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Once the club completes an asset and usage analysis it gets interesting. Is the club properly approaching leveraging its assets to get new members? It stands to reason if the club has made significant investments in its assets, then using them to add value to the club by attracting new members would be a natural goal. This should be especially true today in our climate of golf decline. But how many clubs have plenty of afternoon tee times, empty tennis courts, restaurants open only part of the time, often vacant fitness centers and nobody in the pool or spa?

Approaching the issue from another direction, the cost of operation for any of these assets is pretty much the same whether its 2 oclock on Wednesday afternoon or Saturday morning at 8. The investment has already been made and the issue becomes getting the most impact and value from that investment.

Below is a diagram that illustrates the matching of a clubs market to its available assets. On the left is the local demand or value to the available market today for services that a club may actually have the assets to offer. On the right is the asset portfolio showing the excess unused capacity, which in most clubs is substantial. What is preventing the club from matching up this asset availability to the available markets needs?

Market Needs Must Match Assets

Proximity

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Looking at the next diagram, we have added a connection point in the middle called the Potential Membership Category. This lists some types of membership products that potentially could be made available to the customers in the currently available market. Does the current category of offerings in most clubs match up with what their asset base could actually support? In the majority of cases our experience says: Absolutely not!

The diagram highlights that the attributes of the local market are very definable, the amount of available asset capacity is also definable, and the proper categories of memberships potentially connecting them can be conceived, as well as the programming that makes the club more attractive. The massive mismatch of the market for potential members with the available assets of the club is solvable by addressing a very controllable factor: Creating the type of membership offerings and programs that new members will buy and that the club has the ability to serve. Thats it.

Is it the case that some clubs no longer have much to offer their local market? Worse, do they have something to offer but are failing to recognize this reality? Sadly yes, and we know where that path will lead. Clubs have a choice right to the bitter end.

To hammer home the point: Carefully examine the available market, evaluate the available and underused assets and engineer the membership categories and programs to align them.

Proximity

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Competitive Usage Profile

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Yes, there are the objections. Some of the current members who pay the bills wont like it. They also dont like their dues going up, but if there is no one to share them, go up they will. We have heard all the arguments, and there are plenty of them, otherwise we wouldnt have this problem of deciding on the right course of action. But given what has been presented in the first two chapters of this paper, if a club wants to shed this crippling paradigm, now would be a good time.

One more point...This is the heart of the matter for many clubs of all types. It can be complicated. There are consequences some members wont like. There are some traps along the way that might play out in unexpected ways. There are interactions between membership and usage categories that have to be understood, and cultural discomfort may be one of the consequences, along with others.

Well acknowledge that as we have pretty much seen it happen. But this problem can and must be solved for most clubs and we believe many are running out of runway.

Some Interesting OptionsThere are many clubs that have the capability, assets and market position to embrace a better path and make the adjustments they need to be sustainable. Whether they have the will, skills and leadership to do that is another question.

There are however, others who just dont have the assets or capital formation capability to make it with what they have now. For them we have some thoughts about creative options they might consider.

There are two silver bullets that this type of club can consider. We call the first OPC or Other Peoples Capital. The second, which works for all clubs, is programming and usually goes with the former as well. What does a club do if it doesnt have the physical (i.e. insufficient assets or no room) or financial capability to do something themselves?

Look at the diagram below. Its similar in some ways to the asset chart used earlier to look at the available assets of a club. This one has been enhanced substantially with OPC. It rides on the notion that you dont have to own it to make it part of your club experience.

The diagram on the left depicts the current actual assets of the club. Next to that are four other boxes showing a homeowners association (HOA), a Foundation, Business Partners who have skills and assets that can be leveraged, and Virtual Partners who are non-affiliated but can provide experiences to the members of the club. We have seen all of them work in a club environment.


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Again, the point is, you dont have to own it to have it as part of the member experience.

HoA - In REGC, the HOA can be seen as a valuable partner. Their common areas can often be used to create dog parks, hiking and walking trails and services support to the homeowners. These are powerful attractions to prospective owners and members.

Community Foundations - IIt is relatively easy to create a non-affiliated foundation in the community that can collect tax-deductible donations and create charitable programs. These foundations can also legitimately support qualified amenities such as medical services, art centers, dog parks, and the like. Care needs to be taken to comply with tax rules, and some professional advice is advisable. We have had experience doing this and have observed this as a best practice in several high-end golf communities.

Business Partners - If there is vacant land, or other assets in the club, working with developer partners can afford an opportunity to add to the valuable asset base using their skills, assets and capital. Does your REGC have lower price point housing for better access to new members? How about a home downsizing and elder care option for your older member population?

Virtual Partners- There are many member experiences that can be obtained by new and current members alike without the club making the investment. If a club wants a stay and play program to attract new members do you need an onsite hotel? An onsite managed rental program and partnership with a nearby hotel will work very well. Outdoor pursuits such as hiking, biking, water sports, adventure trips, kids camps all can be available without the clubs investment.

The point we are making is that a club that has the will but not the means can still create partnerships and an environment to play a lot bigger and be more exciting than their core assets would otherwise support.

CURRENT CLUB MODEL PLUS BROADER VIEW (OPC)

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ProgrammingThe last point we want to make in this section is about the silver bullet of programming. There is basic truth in the club business: if the club doesnt create the programs, your assets will never be used to their potential.

Best use of the assets occurs when member spending and increasing usage and satisfaction is created, something every club needs to stay vital. Would a club run the golf facility without a pro shop staff, head pro and their assistants, golf instructors and agronomy team? Why do many of the assets of a club sit idle, when they could be attracting new members and getting the current members more involved? If you place no emphasis on the asset through programming, they will likely be underutilized.

Club assets are like a smart phone. The phone is worthless without its mobile operating system making it all work. And the apps are what cause you to use the smart phone a lot and have most of us spending money shopping on the Internet. The assets of the club are like the smart phone, the clubs staff is like the operating system and the programming is like the apps. The programming is what puts the assets to work. Without investing in the operating system and apps, i.e. the staff and programming, the value of the asset investment is not realized.

Without the club organization and the programs they create, the assets themselves are meaningless. We make this point because the options we have suggested are not going to work without someone designated to drive them. Managing an experience offering with virtual partners for example would require a social director dedicated to creating the events and recruiting the members. Our point of view: play bigger be more relevant to a wider market - get new members!

ConclusionIn Chapter Two we challenged clubs to really understand the decline of the industry and the likely paths they will travel during the industry shake out that is now underway. In this section on understanding a clubs situation and options, there are specifics on how a club can determine its strategic footprint or position to gain clarity on how the club stands in its industry and its market. Then, appreciating that, we have walked through the steps needed to do an assessment of the assets they have to compete and cope. We focused attention on matching a clubs available market and the clubs assets, and then on how to create suitable offerings that the market wants and the club can effectively offer. Finally, we offered up some proven ideas and options a challenged club can consider to play bigger and compete better.

All of this is our way of suggesting that there are many things a club can do to get more competitive, become more attractive and be sustainable. Given the life cycle stage that golf has entered, and the potential paths precipitated by the inevitable shake out, strong action by every challenged club is highly recommended.

In the last section we address the topic of Roadmap to Renewal, in other words: How does a club get on the right path and make the transition?


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Chapter FourRoadmap to Renewal Concept 360A country club is, at its core, a venue for people to socialize together with like-minded people they enjoy being with. Golf has historically been at the heart of that socialization. Presently, all indicators show golf participation is weakening, placing the responsibility on clubs to re-engineer their strategy and operations to regain their attractiveness and viability to their market.

While the club as a business is a relatively new reality for some, the current state of the industry suggests that strategy and process must become fundamental to those clubs seeking to sustain and refresh. After considerable research and beta testing of the business model we will present in this chapter, it is our unqualified opinion that any club can positively alter its course through market positioning, strategy and cohesive and collaborative governance. However, to get to that point the business model must also reflect accurate and objective market diagnostics.

The market conditions and issues creating the necessity for clubs to re-engineer the clubs position and strategy are reiterated from Chapter One:

Oversupplyofgolfprovidingeasy,economicalaccess Increasingfemaledominationofdiscretionaryspends Nationwidedeclineinmembershipsales Timeconstraints Economicconstraints Lackofrelevanceintheclubsoffering Devaluationofjoining/initiationfees Decliningcapitalfornormalrepair AssessmentsrequiredforrenovationForcingmoreattrition Decliningattractivenessasbudgetscontinuetobecutandserviceslost Decreasedgolfparticipation Clubsnolongerhomogenous,withthreetofourgenerationsofdifferingneeds Culturalshiftinginbuyerdemographics Familycentricnatureoftodaysyoungernesters Thelistsimplygoeson

So it is that we have been making the case that the best strategic path and position for a club and REGC is in re-engineering themselves on the path to renewal. A business or industry on the renewal path gets a do-over opportunity - a shot at getting back on the front of the life cycle curve. Doing so puts them back in the growth mode and greatly improves their chances of long-term sustainability.

Traditionally when a club and REGC started having difficulties, they could focus on the specific problem and muster up the energy and financial commitment to fix it. This is particularly true when the source and solution to a problem has been largely internal to the business. Redoing the greens, upgrading the kitchen or building a new locker room might have formerly restored order and prosperity to clubs.


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Unfortunately, that is not the case this time. When social and economic forces, such as we have described, kick in, the entire proposition of the club is called into question. This means the problem is now systemic, that is, the business of the club is becoming less relevant to the new member market and to a greater and evolving degree the current members. Simply put, the business model no longer works as it once did and clubs are therefore of less interest.

Fixing a failing business model is much tougher and more complex than most club management and leaderships have normally faced. What does a club do when new member acquisition stalls, the club offering loses relevance, its cost base is too high, and capital formation capability deteriorates, all at the same time?

That is what we address in this chapter. We have been building our case in the previous chapters to make this point: This time is different. And because it is different, the measures taken must be different to successfully cope. Our strong point of view is the business model for many clubs is breaking down, and the damage is manifesting itself in widespread stress inside many clubs, and to the industry.

We have two parts to this chapter. The first is an illustration of what we mean by business model, which we also call the business system of a company. The second is a section on the methodology that is necessary to fix a broken business system. The methodology is the process that needs to be applied to deal with business systems in failure.

Think of it like this. If someone cuts their finger, they might go to a doc in a box and get a stitch or two and a Band-Aid, then go back to what they were doing. If someone has a near-fatal auto accident they will go to an emergency room, be carefully examined and diagnosed by trauma experts and treated for a host of injuries simultaneously. Then there will be a series of wide-ranging treatments to nurse them back to health. Thats a methodology in our terms.

It is our point of view that without a sound, comprehensive methodology, properly applied, the patient is not going to make to a full recovery, if at all.

But the methodology we cover is, of course, about diagnosing and treating a broken business model or system. First however we will illustrate how a business system can be depicted and understood.

Business Systems

A simple way to view a business system is to pick out what processes are in a business and identify how they interact. If someone orders an iPad from Apple, the ordering may be done on a web site where Apple can process and record the order.

The ordering system connects to a credit card system to charge the customers account, and to the fulfillment center that packs and ships the order. Therefore each part of the system has its own specific functions to perform, and connects to another part of the system that does a different function. When they work properly together, a happy customer gets their iPAD. If any part of the system breaks down, the customer is not going to be happy and eventually the business will be in trouble.


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It doesnt take much of a stretch to apply this model to a club. If a club is supposed to deliver a special cultural environment and member experience, there are a lot of places in the system where that can go awry and disappoint a member or guest. Lets take a more comprehensive look at a fairly well known business system to help illustrate the systems point.

We again point to Southwest Airlines. Remember, we showed earlier on our Blue Ocean Strategy map how Southwest competes in the airline industry and does it better. The chart below is a diagram of their business model or system, which gives some insight into why they are so effective. In this model we arrange the business system of Southwest in a circle to show how all the parts are arranged and interact.

This diagram is shown at a little higher level than the transaction level we discussed in the iPad example. It shows the major elements of the business at a strategic level. Viewed this way it becomes clearer that Southwest model focuses on low costs, simple processes that support low costs, convenience and fun. Wasnt that what we saw in the Blue Ocean chart as well?

The reason this business system works well is shown in the center: Emphasis on simplicity, components of the system are harmonious with each other, and things work seamlessly together.

online Ticketing: Fun, easy-to-use website for customers, driving 80 percent Internet usage for ticket purchases, so that call center costs are low.

Single Aircraft Type: Southwest uses mid-size reliable aircraft all of one type so training and maintenance is easier and simpler. There are fewer parts to carry and fewer maintenance facilities needed for the single type of aircraft.

SOUTHWEST AIRLINES BUSINESS MODELSimple Easy Use

80% Customer PenetrationLow Cost Services

Enjoyable CustomerExperience

Independent OperationsFaster TurnaroundLower Asset Base

Faster LoadingSimpler Ticketing

Customer ConvenienceCustomer Accessibility

Competes with DrivingNew Customer SegmentsOverwhelms CompetitionSimple (No Bag Charges)

High Market ShareCustomer Access

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Close in Airports: This shortens customer drive times, provides easier parking and access and lowers costs for gates and landing fees.

low Fares: Provides easily accessible alternative to auto travel, gaining a new customer segment not served by other airlines.

Frequent Flights: Makes going anywhere as convenient as leaving on ones own schedule in an automobile.

open Seating: Easier to book, easier and faster to load the planes, enabling more frequent flights with fewer aircraft.

no Airline Transfers for People or Baggage: Simpler and faster, not tied to other airlines slower more complex operations.

Fun Friendly Service: Increases the fun factor and make flights enjoyable again.

Note how the words easy, simple, fast, enjoyable appear in many of the parts of the Southwest system. The parts work together well and make the whole system very effective and resilient. Also consider, how if any one piece is drastically changed, it could have significant consequences across the whole system. The ramifications of a change in a business system part can reverberate throughout the whole. Many airlines have tried to borrow pieces of Southwests approach, but none has been successful in making it work, since the result is an inconsistent business model.

As we have said earlier, we are not attempting to judge or emulate the Southwest business system. We want to make the point that all businesses, including clubs have similarly definable business systems. It is our contention that in todays environment these club business systems are under attack and in many cases failing across many components.

Appreciating how complex, interrelated and interdependent these systems are, drives home the point that fixing them is a very difficult and challenging. That task, like the major trauma illustration, requires a well thought out and systematic methodology to reliably accomplish.

Roadmap to Sustainability

We encourage the reader to stick with us at this point, because this section is the punch line if one is serious about re-engineering to the next life cycle for growth and sustainability of their club.

We have spent many years working with REGC and clubs, as well as other complex businesses. This methodology for addressing the full business system problem is the distillation of our experience from that work.


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The methodology, or roadmap as we like to call it, is shown in a high level diagram below. It is no accident that it appears to closely resemble the business systems wheel diagram we have just reviewed. The methodology itself is a system, one designed to be simple to understand and comprehensive enough to attack the problems we have discussed.

We like to think of the roadmap as a logical sequence of connected events that when properly performed in the right order, truly becomes a roadmap to fixing the broken business systems that are many of todays clubs. Heres an overview, and description of each component around the wheel.

Overview

The diagram has eight components we believe must be executed to properly solve a systemic failure in a clubs business model. Below, we will take you through each one of those steps in the chronology, clockwise from the top, as they are illustrated in the chart.

A quick trip around the wheel or roadmap shows the process starting with the simple, but absolutely essential sequence of diagnostics, synthesis of the data, and designing new concepts that must be then implemented, as noted in the bottom segment. One of the notable characteristics of implementation is that the business model for membership growth and sustainability has been re-engineered to hold each stakeholder accountable, each department engaged and everyone on the absolute same vision and direction.

THE PRIVATE CLUB ROADMAP TO SUSTAINABILITYCapabilities Analysis

Capabilities, systems, skills, programming and assets

Member EvaluationSurvey, focus groups,

interviews Competitive PositioningStrategy model

Member Demographic AnalysisDefining the Clubs

marketplace

Realigning sales, marketing and accountability of each department to the marketing programs

and communications systemsTeam development and

training to maximize systemsand process delivery

Converting concept to a detailed design, development and roll-out process

Trend & Profile AnalysisClub performance trendsand membership profile

Board and Committee alignment with the vision Aligning Management Team Driving Understanding and commitment with all stakeholders. Creating a new mission!

Market Positioning General Strategy Programming Skills & Capabilities Systems Facilities

Management Volunteer Leadership Department Heads

Strategy: Brand Relevance/Need Membership Growth Enhance Retention Increase Usage/Satisfaction Traffic Generation

Applying Learned Best Practices Consistent, Data Driven Decision Making Process Membership Stabilization

Focusing on the Foundations Strategic Planning Update Allowing Data to Drive Decisions Relevancy in Positioning

Annual Board Retreats Strategic Updates Maintaining Consensus Driving Accountability

SIMPLEHARMONIOUSCONGRUENTCONSISTENTSEAMLESS

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Then upon implementing the redesign changes, some more complex issues come on the table: Creating a communications strategy, realigning the governance process as necessary and establishing management accountability to assure the improvements stay on track.

Component Descriptions diagnostics & discovery: Good problem solving always starts with the first step of a diagnostic and discovery phase. Again using a medical analogy, no good medical practitioner would begin treatment without solid diagnosis of the problems and issues that need attention. This is where we always begin, so that we know what problems need and deserve to be solved. We show five elements in the chart, ones that we usually cover in the diagnostic work.

diagnostic Synthesis and discussion: In discovery, we illustrated a five-part diagnostic (items in red) where we can pinpoint appropriate market and historical trends, performance gaps and market dislocations. Selecting the right data for analysis and then synthesizing it into the direction of the club is essential to determining which problems make it onto the radar screen. Then a thorough and collaborative discussion process can take place with the stakeholders that keep them focused on reality, the right topics and necessarily, the right objectives.

Conversion to Concept design: Armed with solid analysis of the right problem definitions and a consensus among the team, it is easier to create a model of what the clubs team wants or needs the club to look like in the future. Note however, that future design includes a comprehensive addressing of that future: Market positioning, general business strategy, programming, skills, systems and facilities. This is not a trivial undertaking, to design all of these elements and to develop them so that they work in concertbut its importance cannot be underestimated.

Consensus and Approval: Great ideas, unsold to the stakeholders, are going nowhere. So it is important to build understanding in the entire stakeholder base. The governance and management team will participate in educational and consensus building workshops in this step, so that they can speak with one voice, with conviction. The members are also treated to an extensive education and listened to, using a variety of tools to reach and engage them. The input gleaned here will play into the refinement of the concept design improvements.

Implementation: Getting this far in the process will by now have created a very clear picture of what changes need to be made to drive the clubs long term sustainability. This is where the improvement team drives the concept design into a detailed blueprint and executes the work to get the changes made with a clear-cut matrix of responsibility and accountability. Communications Strategy: In this step we are not talking about the communications around the project work. Instead we mean that a better communications model is created in the club, employing a wider range of updated tools and systems. The communications focus is on reaching your collective marketplace, members, staff, potential members with the right message, recruiting and engaging new members and


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energizing the existing membership toward better participation in the re-engineered club. governance, Alignment and Continuity: This step focuses on creating an environment that will assure that the clubs governors and managers will drive and sustain the new business model with faithfulness and enthusiasm. The methodology wheel is actually the basis for a solid strategic plan, which is critical so that the leadership agrees on a consistent basis for actions and important decisions. A major part of re-engineering governance is the development of a responsibility and accountability matrix for board, committee, general manager and department heads. Annual board retreats play an integral role in assessing progress on the model, setting goals and objectives and keeping the plan and process on a consistent plane. maintenance and Accountability: At this point, practices have been established which assure that the re-engineered business model does not drift from its foundations. Tools are implemented to guide, measure, track and report results so that leadership can monitor the clubs performance, learn from each new experience and conform to the new model. The cycle then begins againDiagnostics, Synthesis, Conversion to Plan, Consensus, Implementation, Communication, Alignment and Continuity.

This quick walk around our methodology wheel is designed to address the realities of where we are today, solutions, implementation and strategy. In a more comprehensive view, it is also designed to improve a clubs failing business model. It may look intimidating to embark on a comprehensive program like this, but it is employed to improve substantively the performance, competitiveness and sustainability of a club, not to address minor problems. Of particular note in the methodology wheel is the five-part diagnostic and discovery process. For those interested, an in-depth overview of each section of Discovery it can be accessed at www.askpcma.org/club360diagnostics.

The principle point of the creating the model we have illustrated is to craft a methodology that:

1. Creates a comprehensive and objective overview of the clubs core issues, finite market, historical trending, capabilities and systems, competition and member/market needs.

2. Creates a collaborative team synthesis of the data and what it means relative to how the club should address its market position/perception to its members and the marketplace.

3. Develops a narrowed path in developing internal and external programming and membership strategies and processes.

4. Develops an intellectually sound and orchestrated educational and consensus building process. 5. Drives accountability across all stakeholders for delivering each program and initiative as part of an

over-all need, strategy and delivery system. 6. Makes communications important, planned and part of the overall strategy to increase membership,

enhance retention and increase usage and satisfaction. 7. Drives consistent, intellectually sound governance throughout the organization through vision and

strategy, supported by regularly updated data and research. 8. Creates a system and business model that endures through each change in leadership, and

provides uniformity and consistency in the clubs strategic planning.


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Because one size no longer fits all and because all clubs are just a little bit different, the outcomes of following this model may take you in many different directions. Our point in creating the model is to allow the realities of objective research guide your strategy and re-engineering. The final component of success is in the engagement of all stakeholders in the consistent adherence to the strategy in everything that the club does.

In our research, we found several things common to successful renewal including the following:

Positioningyourclubinthepathofitsmarket.Notjustfortheexistingmembers,butalsothemembers that must be recruited to replace those lost through attrition.

Beingculturallyrelevanttothemanygenerationswithinyourclubandspecificallythegenerationthatprevails as your new market.

Familycentricityisessentialintodayssocietyandnomatteryourmembersages,developingprogramming around this reality is now a requirement.

Membersavailabletimeisanissueandclubsaccommodatethisintheirprogrammingofallareasofthe club and for each type of member.

Femalesplayanenormousroleinthedecisiontojoinandclubs,andoutsideofnicheclubsasdescribed earlier, providing increased opportunities for engagement with her as well as her children is essential.

Governancecanrangefromtotalharmonytototaldysfunction.Clubsthathaveormustsuccessfullyrenew must move toward harmony by developing clear functional responsibility and accountability.

Noteveryoneinaclubundergoingrenewalwillbehappywiththechanges.Thesuccessfulclubslitmus test for success is the well being the changes and improvements provide to the membership overall, not just to the most vocal.

The point is that outcomes may be different for different clubs, but whatever evolves, by using this template, they will have emanated from a business model predicated upon factual market conditions and core evaluations objective and defendable.

And another point: This roadmap is primarily engaged with the marketing, positioning and revenue production side of the equation. There is an equal 360-degree of complexity in looking at the expense side of the business, without jeopardizing attractiveness or positive perception. Many new challenges will arise this year including the effects of Obamacare and a government agenda eager to find ways in which to drive its spending agenda. Whil

or renewal - pcma paper_final1.pdf · armageddon or renewal ... and survival and evolution to new...

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