strategic digital transformation in soccer

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Strategic Digital Transformation in Soccer Understanding industry’s business and history to shape its digital future Francisco Hernández-Marcos Cambridge (MA) March 24th, 2015 This document has been produced by 11 Goals & Associates. It is not complete unless supported by the underlying detailed analyses and oral presentation.

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Strategic Digital Transformation in Soccer Understanding industry’s business and history to shape its digital future

Francisco Hernández-Marcos Cambridge (MA) March 24th, 2015

This document has been produced by 11 Goals & Associates. It is not complete unless supported by the underlying detailed analyses and oral presentation.

About me SHAMELESS SELF-PROMOTION

Education: Universidad Politécnica de Madrid, UNED,

London Business School, University of Chicago – Fundaciò

“laCaixa” & Fundación Rafael del Pino scholarships.

Firms worked for: Abengoa, McKinsey&Co, ABN AMRO,

Real Madrid C.F.

Entrepreneurship: Crisalia

Social Media & Internet consulting: 11goals.com

Lectures & Speaker in 4 continents: The Wall Street Journal, UP Madrid, London

Business School, Cornell, Politecnico Milano, CEIBS (Shanghai), Kungliga Tekniska

högskolan, The Business Factory, Fulbright Spain, ESCP Europe, UIMP, Harvard,

Moscow SU, and several private companies.

Full profile: linkedin.com/in/franciscohm

2 2

Views are our own. All information and insights contained in this presentation are

either public or common knowledge

Disclaimer

Agenda

Soccer as a business

Is the current model exhausted?

Key Qs for Digital Transformation

4 4

About Soccer

Source: Wikipedia; FanPageList; UEFA; Reuters; IBT

First played in England in 1863, Soccer had had its roots in several ball games played in different parts of Europe for centuries.

World’s most popular sport: 250 mill. players in 200 countries.

FIFA has more member countries than the United Nations.

Some players are among the most respected celebrities in their countries, and Worldwide.

‐ Didier Drogba is credited with brokering a Cease-Fire in Ivory Coast that ended a 5-year civil war.

‐ Cristiano Ronaldo is the most followed person in Social Media (141 mill. in FB+TW).

Global TV audience (mill. people):

‐ European Champions League final: 380

‐ “El Clásico” (Real Madrid-Barcelona): 200~400

‐ Super Bowl: 160

5 5

Soccer lifts the spirit…

Source: Soccernomics

World Cup -> Less suicides not only in June, but for the whole year

…and saves lives!

6 6

Revenue ranking by sport leagues

Source: Wikipedia

6.600

5.867

3.667

3.200

2.971

2.000

1.900

1.700

1.300

980

919

896

551

National Football League

Major League Baseball

National Basketball Association

Premier League

National Hockey League

Bundesliga

La Liga

Serie A

Ligue 1

Nippon Professional Baseball

Campeonato Brasileiro Série A

Russian Premier League

Süper Lig

Revenue EUR mill.

Combined, soccer is probably the highest revenue-generating professional sport in

the World

206,3

195,6

122,2

160,0

99

111,1

95

85

65

81,7

45,9

56

30,6

Soccer leagues

Revenue per team

7 7

Most valuable sport clubs

Source: The World's 50 Most Valuable Sports Teams 2014 (Forbes)

3,44

3,20

2,81

2,50

2,30

2,00

1,85

1,80

1,70

1,55

1,50

1,45

1,40

1,38

1,35

1,33

1,31

1,25

1,23

1,22

1,20

1,20

Real Madrid

FC Barcelona

Manchester United

New York Yankees

Dallas Cowboys

Los Angeles Dodgers

Bayern Munich

New England Patriots

Washington Redskins

New York Giants

Boston Red Sox

Houston Texans

New York Knicks

New York Jets

Los Angeles Lakers

Arsenal

Philadelphia Eagles

Chicago Bears

Baltimore Ravens

San Francisco 49ers

Chicago Cubs

Ferrari F1

Team value USD bill.

4,2%

Soccer clubs

1-Year growth

23,1%

-11,2%

8,7%

9,5%

23,8%

41,3%

10,1%

6,3%

5,6%

14,3%

27,3%

11,1%

7,5%

35,0%

0,3%

4,0%

5,0%

6,3%

3,8%

20,0%

4,3%

8 8

Soccer clubs revenue ranking

Source: Deloitte Football Money League (2015); UEFA (2012)

550

518

488

485

474

414

388

359

306

279

262

250

216

214

170

165

164

162

155

144

Real Madrid

Manchester United

Bayern Munich

FC Barcelona

Paris Saint-Germain

Manchester City

Chelsea

Arsenal

Liverpool

Juventus

Borussia Dortmund

AC Milan

Tottenham Hotspur

Schalke 04

Atlético de Madrid

Napoli

Internazionale

Galatasaray

Newcastle United

Everton

Revenue (13/14) EUR mill.

First 56%

Second 21%

Third 8%

Other 15%

Revenue matters. Securing a significant amount of recurring revenue is very likely the most important factor for succeeding in the pitch

Finishing position of highest-spending club in players wages

(UEFA domestic leagues)

9 9

Some research shows that league position is strongly correlated (R2=89%) with wage expenditure

Source: Soccernomics

BACK-UP

…but same research tells us that correlation with transfer spending is low (R2=16%)

Are wealthier clubs profiting from the non-existence of superior options for over-

performing players?

10 10

Sources of revenues Top 20 teams in 2013/14 season

Source: Deloitte Football Money League; own analysis

Commercial is king: larger and growing faster

Matchday 19,8%

Broadcast 39,1%

Commercial 41,1%

5yr-CAGR: 7,9%

5yr-CAGR: 14,7%

5yr-CAGR: 3,6%

11 11

Revenue breakdown and key drivers

Source: Various

Revenue

Matchday

Broadcast

Commercial

Domestic

International (Champions League,

Europa League)

Drivers • Stadium ownership • Stadium size • Income per capita •VIP facilities •Dynamic pricing (when possible)

Actionable by the club

Drivers • Lobbying & bargaining to the league • Team performance • League salesforce skills

Drivers • Team performance • League salesforce skills

Drivers •Historical Team Performance •Brand positioning • Fan base •Big Ticket contracts bargaining • Long-tail contracts salesforce • Loyalty card • Summer tours

12 12

Matchday revenue drivers BACK-UP

15%

25%

40%

Standard VIP (2015)

Top VIP (2015)

New generation

99.786

85.000

84.412

81.044

80.667

80.093

80.018

80.000

78.838

78.360

76.092

75.731

75.000

60.338

60.234

54.907

47.805

45.276

41.798

Camp Nou (FC Barcelona)

Stade 5 Juillet 1962 (MC Alger)

Azadi Stadium (Esteghlal FC, Persepolis FC)

Santiago Bernabéu (Real Madrid)

Signal Iduna Park (Borussia Dortmund)

Monumental "U" (Universitario de …

San Siro (AC Milan, Internazionale)

Stade des Martyrs (Vita Club)

Maracaná (CR Flamengo, Fluminense FC, …

Luzhniki Stadium

Atatürk (İstanbul Büyükşehir Belediyespor)

Old Trafford (Manchester United)

Allianz Arena (Bayern Munich, TSV 1860 …

Emirates Stadium (Arsenal)

Stadio San Paolo (Napoli)

Vicente Calderón (Atlético de Madrid)

City of Manchester (Manchester City)

Anfield (Liverpool)

Stamford Bridge (Chelsea)

Capacity Seats

Source: Wikipedia; Deloitte Football Money League; own analysis

Annual Matchday revenue per seat EUR/seat/yr (13/14)

1.171€

1.404€

695€

311€

1.707€

1.173€

1.985€

347€

592€

1.188€

1.347€

2.031€

235€

VIP Matchday revenue % of total Matchday revenues

No Ownership

Affluent fans

VIP capacity

13 13

Broadcast revenue distribution BACK-UP

La Liga

Source: Roberto Bayón; UEFA; other

Premier League Champions League

140

140

48

42

32

32

32

30

28

25

25

25

22

22

22

18

18

18

18

18

Real Madrid

FC Barcelona

Valencia

Atlético de …

Sevilla FC

Athletic Bilbao

Villarreal

Real Betis

RCD Español

Real Sociedad

Málaga

Getafe

CA Osasuna

RC Celta de …

Levante

Granada CF

Elche CF

Real …

Rayo …

UD Almería

•Negotiated deal. Static over the contract’s term

•Unequal distribution (Gini: 0,365) •Short term win, long term loss?

•Dynamic. Moderately depends on team’s performance

•Equal distribution (Gini: 0,083) •Ensures regular income to small teams

•Dynamic and aggressively dependant on team’s performance

•Unequal distribution (Gini: 0,274) •Performance bonus. Invest it wisely

EUR Mill.; 2013/14 season

117

116

113

111

108

107

102

93

92

91

89

88

88

87

86

80

79

77

76

74

Liverpool

ManCity

Chelsea

Arsenal

Tottenham

ManUnited

Everton

Newcastle

Southampton

Stoke

Swansea

West Ham

Crystal Palace

Aston Villa

Sunderland

Hull

West …

Norwich

Fulham

Cardiff Total: 755 Total: 1.875 Total: 905

57 54

50 45 45 43 43 42

39 38

35 35

32 27 27 26

24 22 21 21

19 18 17

15 15 15 14 14 13 13 12 11

Real Madrid PSG

Atlético Madrid ManUnited

Bayern Munich Chelsea

Juventus FC Barcelona

Napoli AC Milan ManCity Borussia

O. Marseille Olimpiakos

Arsenal B. Leverkusen

Shalke04 Kovenhaun

Ajax Galatasaray

FC Zenit Celtic

Real Sociedad Benfica

CSKA Moskva Steaua

Porto S. Donetsk

Basel Wien

Anderlecht Viktoria Plzen

7,8x 1,6x 5,2x

14 14

Soccer big-ticket sponsorships

Shirt

Source: Forbes; The Economist; other

Note: Stadium ranking is not exhaustive

BACK-UP

80

45

40

39

31

Manchester United (Chevrolet)

FC Barcelona (Qatar Airways)

Bayern Munich (Deutsche Telekom)

Real Madrid (Fly Emirates)

Liverpool (Standard Chartered)

Kit

41

39

38

38

37 88

Real Madrid (Adidas)

Liverpool (Warrior)

FC Barcelona (Nike)

Bayern Munich (Adidas)

Manchester United (Nike)

Signed Adidas for

USD 88 mill. for 13

seasons beginning

15/16

•Manchester United -and other English teams- are pushing hard by signing very profitable big-ticket contracts. The reason behind why they sell at higher price might be that the English Premier League has more TV eyeballs. •We may infer that RM, FCB and BM must be very good at the rest of the Comercial revenue drivers: long-tail contracts, loyalty

cards, summer tournaments, etc. or that part of the revenues of the players are invoiced through the club. •Stadium’s naming rights deals are a great potential source of new revenues in the future. However clubs are reluctant to hear

offers that are not large and long enough (Real Option framework).

Yokohama just signed with

Chelsea for USD 61 mill.

beginning 15/16

Stadium

8,8

5,5

Emirates (Arsenal)

Etihad (ManCity)

EPIC (Real Madrid)

Allianz (Bayern Munich)

Veltins (Shalke 04)

USD mill./year

Real Madrid signed pre-

deal with IPIC (terms not disclosed)

Joint deal with Shirt

?

?

?

15 15

Stadium Naming Rights in the USA as of 2013

Source: New York Times

BACK-UP

•75% of US clubs have sold stadium naming rights. •Business much more developed than in Europe. Perhaps because sponsors have developed a better ROI framework. •Best deals in recent years. •European Soccer teams can and should be able to reach similar deals for their global audience.

Interactive chart (NYT)

16 16

Top Soccer clubs revenue breakdown 2013/14; EUR mill.

0 €

100 €

200 €

300 €

400 €

500 €

600 €

Commercial Broadcast Matchday

Source: Deloitte Football Money League, 11 Goals & Associates

Arsenal stadium (Emirates) is considered as the most VIP facility,

with high Matchday revenue

~50% of home broadcast revenues in Spain go to Real

Madrid and FC Barcelona

Being UEFA CL finalist made Atlético to increase Broadcast

revenue by 86% in 1 year

PL’s large broadcast contract, and its flat distribution, secure smaller teams with

enough income

RM’s and ManU’s international focus

and strong salesforce pays-off

Milan teams do not own the stadium

PSG huge commercial inflow

since Qatar Investments Office

took over

Income per capita drives Matchday revenue. Chelsea Vs Napoli

Bayern Munich big-ticket sponsors are strong, and

shareholders of the club…

17 17

Cost drivers

Source: own analysis based on Annual Statements (2013/14); UEFA (2012)

ILLUSTRATIVE EXAMPLES

Ratios to revenue

44% 48%

74% 69% 69% 69% 61% 51%

65%

17% 12%

Real Madrid

FC Barcelona

Average Turkey

Average Italy

Average England

Average Russia

Average Spain

Average Germany

Average UEFA

Other Amortization Wages

•Team wages account for the most part of an average club costs •There are significant differences in cost management among clubs (e.g. wage steps) •57% of UEFA member clubs are loss-making •Cost is the main driver of a Club’s profitability. Most Clubs are loss-making because they are not enough diligent on the cost base •UEFA is concern about these issues and is implementing “Financial Fair Game” policies

0% -8% -11% 2% -8%

Net profit to revenue ratio

EBITDA: 164 M.€

EBITDA: 134 M.€

-9% -22%

18 18

Source: Transfer Markt; own analysis

Note: Some transfers data are estimations

Player transfers of selected clubs

-200

-100

0

100

200

300

Profile 1: Super-Investors Ronaldo;

Kaká; Alonso;

Benzema

Departures income (GBP mill.)

Arrivals expenditure (GBP mill.)

Net income (GBP mill.)

Real Madrid CF

05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 Season

473

998

-525

-200

-100

0

100

200

300

FC Barcelona

281

640

-359

Total 05/06 to 13/14

Ramos; Robinho

Diarra; Gago

Robben; Pepe;

Sneijder Huntelar

DiMAría; Özil;

Khedira

Coentrão

Modric

Bale; Isco James;

Kroos

Suárez

14/15

Henry; Milito

Alves

Ronaldinho Ibrahimovic

Villa; Masch.

Fábregas; Sánchez

Neymar

19 19

Source: Transfer Markt; own analysis

Note: Some transfers data are estimations

-50

0

50

100

150

Profile 2: Net investors profiting from opportunistic sales

Departures income (GBP mill.)

Arrivals expenditure (GBP mill.)

Net income (GBP mill.)

Atlético Madrid

Season

336 426

-90

-50

0

50

100

150

Valencia CF

280 291

-11

Total 05/06 to 13/14 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15

Agüero

Forlán; Simão

Torres Falcao

Costa

Villa

Joaquín

Albiol

Mata

Soldado

Mathieu

Player transfers of selected clubs

20 20

Source: Transfer Markt; own analysis

Note: Some transfers data are estimations

-20

-10

0

10

20

30

40

Profile 3: Capital generators (concentrated in few players)

Departures income (GBP mill.)

Arrivals expenditure (GBP mill.)

Net income (GBP mill.)

Real Sociedad

Season

77

46

31

-20

-10

0

10

20

30

40

Athletic Bilbao

84

49

35

Total 05/06 to 13/14 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15

Griezmann; Bravo

Illarramendi

Del Horno

Aduritz

Martínez Herrera

Player transfers of selected clubs

21 21

Soccer business models

• Large, well-established teams with a long track record on the pitch and a large fanbase all over the world.

• Revenues, large and stable, finance the team. • Key to profitability is being able to restrain the payroll cost

of the players. • Usually have successful junior academies, but it is difficult

for a player to walk all the steps onto the first team.

Description

• Real Madrid • Manchester United • Bayern Munich • FC Barcelona • Manchester City • Paris Saint-Germain • Chelsea

Examples

• Mid-sized teams with strong junior academies or a key long-term investor, working to build a Commercial stream and an international brand.

• Transfer fees come not only from the junior academy, but from trading players who become stars in 2-3 years.

• From time to time succeed in Europe and get significant revenues. Money buys time to build-up Commercial.

• Revenues are volatile and cash must be watched.

• Atlético de Madrid • Shalke 04 • Valencia CF • Fiorentina • Ajax • Monaco

• Small local teams with little chances to build-up a Comercial revenue stream.

• Best source of revenue are transfer fees from players coming from their junior school.

• Teams that do not succeed in developing talent are usually money-losing clubs.

• Real Sociedad • Villareal CF • Elche CF • Stade Rennais • Atalanta B.C. • FC Sochaux-Montbéliard • Many Latam clubs

Factory of players

“Lucky striker” (prizes, trades, or

key investor)

Commercial funds team

(wages & capex)

• Very small and small clubs that live almost exclusively on tickets. Adapt budget to revenues (Cash In=Cash Out).

• Usually no formal business plan Survival mode

Top ~1%

Next ~5%

Next ~20%

Source: 11 Goals & Associates; UEFA (2012)

Most clubs

Organizational development of soccer clubs

22

Sport Stadium Commercial

• Late 19th and early 20th • Late 1940s • 1990s

Years

• English teams • Real Madrid • Manchester United

Pioneer(s)

• Spain’s La Liga1 • Arsenal • Real Madrid

Current leader(s)

•Every time a soccer club adds a new organizational structure there is some degree of conflict, specially with the previously dominant one. •Leadership (new organization) usually comes from the club’s chairperson (examples: Santiago Bernabéu with Real Madrid stadium, Florentino Pérez with commercial department at Real Madrid, etc.). •Broadcast is irrelevant in terms of organization. It’s a contract with few people managing it.

1 IFFHS

Typical organizational chart of a large Soccer Club

23

Chairperson (some executive role)

CEO

BU Sport

BU Operations

(Stadium)

BU Commercial

(incl. Broadcasting)

Board of directors (some executive role)

ILLUSTRATIVE

Staff departments (Comm, Legal, HR, IT, PR,

Finance, etc.)

In real life, line departments work so independently that they rather be considered Business Units (BU), specially in larger clubs.

‐ Transversal communication is small ‐ Some activities are replicated across

BUs (e.g. Marketing) ‐ Difficult to implement horizontal

projects. ‐ Metrics and KPIs pretty much based on

the BU space

• Some clubs formally assign the chairperson, or even the board members, some executive role (e.g. FC Barcelona)

• Anyhow, with rare exceptions, the Chairperson/Board always plays some executive role, like hiring/firing coaches

BU output

BU P&L?

Agenda

Soccer as a business

Is the current model exhausted?

Key Qs for Digital Transformation

Is the soccer industry about to be disrupted?

25

Today

Source: https://www.techdirt.com/articles/20120916/14454920395/newspaper-ad-revenue-fell-off-quite-cliff-now-par-with-1950-revenue.shtml

Soft change? Hard change like newspapers?

26 26

Is the current model mature enough? Exhausted? YoY growth rate by revenue source; World’s top soccer 20 teams of each year

-5%

0%

5%

10%

15%

20%

25%

30%

35%

2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

Matchday Broadcast Commercial Total

•Revenues growth rates are not only not maturing, but accelerating •Growth is specially driven by Commercial •Matchday is maturing •The marginally decreasing rates until 08/09 are explained by the crisis

23,8%

14,2%

11,6%

3,6%

Source: Deloitte Football Money League; own analysis

27 27

YoY growth rate by revenue source; World’s top 4 teams (RM, MU, BM and FCB)

-5%

0%

5%

10%

15%

20%

25%

30%

35%

2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

Matchday Broadcast Commercial Total

•Taking only the 4 most “advanced” teams we see no pattern of exhaustion •Total revenues grow strong again after the crisis, driven specially by Commercial •Matchday is maturing

-0,7%

9,0%

9,9%

16,4%

Source: Deloitte Football Money League; own analysis

Is the current model mature enough? Exhausted?

28 28

EUR -> GBP exchange rate

Source: Google Finance

GPB depreciated significantly against EUR in 2007-9

BACK-UP

•Currency distortion around 2008 for British teams, especially in regard to local income such as Matchday or domestic Broadcast rights

29 29

Soccer in McKinsey’s Digital Transformation curve

Source: McKinsey&Co (framework); 11 Goals & Associates

•Soccer’s industry is at a point where digital innovations could be done, but not close to the tipping point, thanks to commercial strength and growth •However a club could trigger and accelerate an industry digital transformation, specially if new revenues are generated (impact on sport performance) •Digital newcomers are unlike to appear due to the sports’ nature and historical leverage, but some incumbents are very committed to their digital operations (e.g. ManCity)

CONCEPTUAL

30 30

Wrapping-up

¶ Although Commercial revenue seems to have a bright future ahead, and the industry is resilient to non-digitalization, a digital first-mover could enjoy extra revenues to continue investing on the team and ensuring its success.

¶ A successful first-mover could trigger and accelerate the digital transformation of the industry.

¶ Is it possible to significantly create value from digital without a strong Comercial Business Model? What’s the difference between using digital for “business as usual” and creating a digitally-based business model?

Agenda

Soccer as a Business

Is the current model exhausted?

Key Qs for Digital Transformation

32 32

#1 What kind of Digital Transformation?

• Same Business Model, different processes • Incremental innovation • Seeking efficiency, but not always • Low risk, medium return • Suboptimal strategy, but creates value • Ex.: Most large commercial banks such as BBVA or Grupo

Santander

Performance DT

Strategic DT

Soccer clubs have much more to win from Strategic DT , but only if conditions for a good execution are set, specially

Chairperson/Board leadership and commitment

• New Business Model • Disruptive innovation, but it does not have to affect the core

business if execution plan is well shaped • Seeking revenue growth • High risk, high return • Optimal strategy, but not easy to execute • Ex.: Netflix, Coursera (~Stanford), edX (MIT, Harvard)

33 33

Strategic DT on the innovation curve(s) Pe

rfo

rman

ce D

T

#1 BACK-UP

Stra

tegi

c D

T

• Strategic DT requires to invest time and cash in developing a Business model before it becomes a better alternative.

• The Chairman and the CDO (Chief Digital Officer) should negotiate and agree what investment and time seems reasonable before beginning to see business returns.

• E.g.: It took Dick Fosbury 5 years to refine his high jump style until it showed better results that the incumbent style.

Same BM

BM 1

BM 2

34 34

#2 What kind of Digital Business Model?

Factory of players

“Lucky striker” (prizes, trades, or

key investor)

Commercial funds team

(wages & capex)

Survival mode

Digitally-enabled Business Model?

D+Factory of players

D+“Lucky striker” (prizes, trades, or

key investor)

D+Commercial funds team

(wages & capex)

D+Survival mode

The question being, how the new BM would

look like?

Strategic DT

Performance DT

35 35

Pioneering a new business model

• Several top teams working on digital Business Models.

• Creating a fan-centric community to increase fan engagement, ticket and commercial expenditure, and TV audience, seems to be the most interesting model.

• Digital enables fan-disintermediation, opening a wide range of business opportunities directly captured and managed by the clubs.

• Runs away from newcomers to “Commercial funds team” BM, and leverages on existing fanbase.

#2

Factory of players

“Lucky striker” (prizes, trades, or

key investor)

Commercial funds team’s

(wages & capex)

Survival mode

Digitally-enabled Business Model?

36 36

#3 Mission of Digital in a Soccer Club

Mission

To create a technologically-enabled fan-community with superior customer experience in order to close any distance (physical, informational, cultural, emotional, commercial, etc.) between the Club and the fan, whoever he/she is. Open new sources of revenues. Improve current revenues directly (e.g: eCommerce) or indirectly (e.g: increase demand).

ILLUSTRATIVE EXAMPLE

Awareness Familiarity Consideration Purchase Loyalty

Active Evaluation

Post-Purchase Experience

Initial Consideration Purchase

Trigger

Brand touchpoints

Brand touchpoints

Purchasing funnel Customer journey (McKinsey)

37 37

Strategic shift #3

Content and Brand provider

Leading relationship

with fans (customers)

E.g.: Nespresso, Apple, Ferrari USA, Tesla Motors, Zara

“Marketing is dead” Harvard Business Review – 9 Aug 2012

Source: http://blogs.hbr.org/cs/2012/08/marketing_is_dead.html

Traditional marketing — including advertising, public relations, branding and corporate communications — is dead. Many people in traditional marketing roles and organizations may not realize they're operating within a dead paradigm. But they are. The evidence is clear.

Buyers are checking out product and service information in their own way, often through the Internet, and often from sources outside the firm such as word-of-mouth or customer reviews.

Actually, we already know in great detail what the new model of marketing will look like. It's already in place in a number of organizations. Here are its critical pieces: Restore community marketing Find your customer influencers Help them build social capital Get your customer advocates involved in the solution you provide.

Most read article in Aug 2012 From Brand to Fan

BACK-UP

#3

Soccer is social

0FFLINE (CIRCULATION)

Marca: 177.866 /day Diario As: 155.443/day Real Madrid: ~0

WEB 1.0 (DAILY REACH %)

WEB 2.0 (FANS/FOLLOWERS)

Facebook/Twitter (mill.) Marca: 0,98/1,49 Diario As: 0,34/0,67 Real Madrid: 82,8/15,0

MD: 67.704 /day Sport: 61.981/day FC Barcelona: ~0

Facebook/Twitter (mill.) MD: 0,28/0,64 Sport: 0,29/0,89 FC Barcelona: 83,4/14,3

Web 2.0 allow football clubs –better than ever before- to be in touch directly with their fanbase

39

Sources: OJD (2014), Alexa.com, Facebook Inc. (5-3-15), Twitter Inc. (5-3-15)

BACK-UP #3

40 40

Soccer should be mobile too, real mobile

Source: The Economist; Ofcom

BACK-UP #3

41 41

Frameworks to design a great community strategy

Football fans

Team Supporters

General public

“Pools” “Web” “Hub”

Web 2.0 and Community Marketing (SlideShare)

Fan segmentation Type of Affiliation Gamification

#3

Role in Ecosystem

Copy

Ignore

Minimum presence

Combat

Complement

Commercial Sport

42

Stadium Digital

• N/A Type of Marketing • Experiential MKT • Brand Management • Relational MKT

• Team Core Asset • Stadium • Brand • Tech

• Industry’s, very strong Culture • Club’s, strong • Sales-oriented • Tech savvy

• Qualitative Skills • Mixed • Qualitative

• Negotiation

• Deal-making

• Quantitative

• Team-working

• Product-building

• #Championships

• Tournaments’ classification

KPIs • Ticket sales • License sales • # fans?

• Fan engagement?

• Digital revenue?

• Team

• Flat

Organizational pattern

• Functional

• Hierarchical

• Product/Geography

• Hierarchical

• Project-based

• Flat

• Short-Term Time horizon • Short/Long-Term • Short-Term • Medium-Term

#4 Where to set Digital in the organizational chart?

• Live & TV fans Client • Local fans • Client brands • Global fans

Often, Digital Transformation is all about Digitanization, or how to shape the organization to tackle the digital challenge. The different nature of the Digital business leads to think of the creation of a Digital BU.

Output

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Organizational implementation of DT #4

Chairperson

CEO

BU Sport

BU Operations

BU Commercial

Board

Staff dep.

Digital

Short-Term

•First, a small Digital unit is created to begin understanding the club dynamics, creating links to other departments, and proposing a Digital Strategy. •Unit depends on the Chairperson, to

protect it from “business as usual”, specially when CEO comes from a strong BU. •Priorities: Strategy and Organizational

changes

•Once the club buys the Digital Strategy, the units grows until create a BU and have a seat in the steering committee.

•Still depending from the Chairperson who provides motivation and leadership, and who helps coordinating with other BUs while readapting internally the BM.

•Priorities: Executing strategy, implementing changes.

•When new BM is implemented, BU processes are well established, and an attribution model is in place (see forthcoming chart), the BU changes dependency, to depend from the CEO.

•Under the new model, CEO sets goals and demands performance to the unit.

•Priorities: Revenues, direct or indirect according to what the attribution model measures.

Chairperson

CEO

Medium-Term

Chairperson

CEO

BU Commercial

Long-Term

BU Digital

… …

A) Strategic DT; large club ILLUSTRATIVE

EXAMPLE

BU Commercial

BU Digital

44 44

•Alternatively we might create a Digital Projects Office and focus on each BU’s performance. •Advantages:

‐ Less “turf battles” with BUs over what is digital or not. ‐ BUs do not have to worry about building up digital competences. ‐ Digital gets some “quick wins” that allow it to consolidate within the organization and win the respect of BUs. ‐ Chairperson does not have to play an active role.

•Disadvantages: ‐ The Digital Projects Office is not a true leadership office. Projects optimize each BU goals, but not the global organization. ‐ Continuity between the Digital Projects Office and the BU Digital is hard due to the different nature of the structures and its

people. It’s harder to change we something is grown-up.

Chairperson

CEO

BU Commercial

Short-Term

Digital Projects Office

#4

B) Performance DT; large/mid-sized club Organizational implementation of DT ILLUSTRATIVE

EXAMPLE

Chairperson

CEO

BU Sport

BU Operations

BU Commercial

Board

Staff dep.

Long-Term (if shifts to Strategic DT)

BU Digital

BU Sport

BU Operations

Board

Staff dep.

45 45

Chairperson

CEO

BU Sport

BU Commercial + Operations + Digital

Board

Staff dep.

Short-Term

•For small and medium-sized clubs where stadium and commercial is managed within the same department, there is the opportunity to integrate all those activities with digital into a team with goals aligned and high aspirations.

•Small teams do not need to “overcomplicate” the fit of Digital into the organization. •The fitness of this model depends not so much in the size of the club, but on the dynamics of the organization, although there is

some correlation.

Chairperson

CEO

BU Sport

BU Operations

BU Commercial

Board

Staff dep.

Long-Term (if significant organizational growth)

BU Digital

#4

C) Strategic + Performance DT; mid-sized/small club Organizational implementation of DT ILLUSTRATIVE

EXAMPLE

“It’s good to be young”

46 46

#5 Measuring value creation dependencies between BUs

BU Sport

Cost center

Championships

BU Stadium

Profit/Inv. center

BU Commercial

Revenue/Profit center

BU Digital

Cost center?

Revenue center?

Fan base and engagement

Revenue

Attribution model Titles -> Revenue

Attribution model Fans -> Revenue

Without an attribution model someone could even argue BU sport is not a revenue generating activity…

When externalities among BUs exist, attribution models (Bayesian, Big Data,

etc.) should serve to understand interrelations and to assign transfer

costs and revenues among BUs (BU’s P&L; cost accounting).

Attribution model Titles ->Fans

Attribution model TV ->Commercial

47 47

#6 What’s the right digital culture? ILLUSTRATIVE

¶ The actual culture to implement depends on the strategic goals and specially on the organizational chart we are implementing.

¶ In general each Club BU has its own culture. At least, BU Sport’s is different from Stadium's or Commercial’s. Culture is “fragmented”.

¶ So we would suggest to engine a specific culture for BU Digital, based on the following premises:

‐Flat, decentralized power.

‐Expert authority (instead of managerial authority)

‐Promote some “cultural tension” (not conflict) with the rest of the organization.

‐Openness, informality, individual initiative, express real feelings in a safe environment, tolerance to failure, etc.

‐Passion for testing and analytical research.

‐Constant search of fresh air: interaction with universities, rotation of professionals, workshops, out-of-office training, etc.

¶ But please, do not think this a high-tech start-up.

#7 What to offer Free, Cheap, or Premium

FREEMIUM = FREE + PREMIUM “Attract audience with free versions of the product, introduce them to paying with affordable versions of the product, and monetize them with premium versions of the product”

FREE

CHEAP (Affordable)

PREMIUM

ILUSTRATIVE

Online business models are usually Freemium. It’s an issue to manage in an industry used to charge for everything.

Agenda

Soccer as a business

Is the current model exhausted?

Key Qs for Digital Transformation

•Strategic consulting services in technology and digital marketing for top executives

•We advise companies on digital transformation

Francisco Hernández

•MBA London Business School. • IEP University of Chicago. •11 years of digital experience. •Ex Director Online Strategy Real

Madrid C.F. •Other companies: ABN Amro,

Abengoa, McKinsey&Company. •Professor at ESCP Europe. • Lecturer in Europe, Latam and

Asia •PWC: 10 e-Business talents in

Spain.

Sonia Fernández

•MBA Stanford. •15 years of digital experience. •Ex CEO Vindico Europe. •Ex CEO Match.com Spain. •Ex CEO MercadoLibre Spain. •Other companies: Fon, Grupo

Prisa, 3i, Lehman Brothers. •Professor at OBS-UB, EOI and MIB • Lecturer at universities and in-

company training •Author of two books on

networking and social networks published in 2004 and 2001

franciscohm

[email protected] | (+34) 605 58 66 55

soniafernandez

[email protected] | (+34) 619 721 781

Thanks very much for your attention and interaction

Francisco Hernández [email protected]

(+34) 605 58 66 55