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SPORT BUSINESS INTELLIGENCE

Hans Westerbeek

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Creating post pandemic share value in higher education and sport: new business models

I was lucky enough to participate in a Harvard Business School alumni webinar earlier this month, where Professor Rebecca Henderson spoke to us about her new book, ‘Reimagining Capitalism in a world on fire’. Her opening statement – that “genuinely free and fair capitalism is one of humanity’s greatest inventions” – was backed up by statistics of how capitalism amongst other things, has contributed to reducing global poverty and increasing wealth and health of billions of people. Various influential authors such as Stephen Pinker, in his book ‘Enlightenment Now’and Hans Rosling in ‘Factfulness’confirm these optimistic and positive pictures (and the quantitative evidence to back this up) about the impact of capitalism (or one might argue: globalisation) on human progress. Irrespective of the many ills that globalisation may also be (partly) blamed for, I am too an optimist and believe that grosso modo, globalisation delivers more ‘good’ than ‘bad’. However, the OECD argues that the pandemic has already triggered the most severe recession in nearly a century, putting the world economy in its most precarious state since the end of World War 2 and the full social and economic impact of the Covid-19 pandemic may not become clear for years to come. What we do know is that both socially and economically, societies, nations, economies and communities will be severely affected by the effects of this global catastrophe. It has confirmed that we now live in a truly disruptive period in history in which we are forced to change the way that we live our daily lives, and at high speed, prepare for how our children and grandchildren can also enjoy the ‘achievements’ of globalised capitalism without these being negated by the negative effects. 

Henderson made very clear that capitalism as we know it actually is neither free nor fair. Brutal pursuit of profit has led to climate change, increasing division between the mega rich and poor (even when they do not live in extreme poverty anymore) and increasing (social and economic) divisions between minority and dominant populations. The latter in particular leads to severe political unrest and populism that is less about democracy and more about narcissistic power monopolies. As a University Professor myself, one whose concentration is on explaining and advancing the world of international sport business in particular, I would like to focus on one particular concept (shared value) that Henderson brought to the fore that would allow us to ‘reimagine capitalism’. In the next few paragraphs I will apply that to my industry of employment – higher education – and then to my area of academic interest and expertise – international sport business. However, before doing so it does pay to paint a more complete picture of what Henderson outlined as the way forward for capitalism in a disrupted world. Beyond ‘shared value’, the concept that I am going to tackle next, Henderson put forward three more steps in the reimagining of capitalism. Leaders and organisations should intensify and renew their ways of cooperating. Global financial systems require significant rewiring. And finally, our institutions ranging from government to global NGOs and the like, need to be rebuilt, some from the ground up. Across all of this is the vital need for a change of (organisational and) ‘human’ culture(s). A cultural change that was best expressed by one of the panel members following the presentation by Professor Henderson – that sustainabilityof societies is not enough anymore, that ‘regeneration’is the key concept that should drive corporations to work towards profitable and value adding contributions to society at large. In other words, liveability on our planet already has reached a critical turning point. To sustain this level of liveability would not be sufficient for future generations. We urgently need to regenerate our natural environment.

So, back to shared value… Let us assume that ‘regeneration’ towards a healthy planet has truly become the dominant cultural context of societies. Shared value, in that regard should then contribute to a planet that offers next generations an environment that amongst other things, provides plentiful opportunities to lead healthy and fulfilling lives. Shared value simplistically has to deliver on two fronts for (international) business – making money AND solve the big problems of our time. Henderson argues that producing shared value, indeed is founded on shared values. Shared values (between firms and between governments anchored in communities) in turn provide a platform for cultural change and for trust and for joint action – across industries and between regions. Big problems can then become inputs that precede the (potentially destructive) competitive nature of capitalism. In other words, if big problems provide the competitive environment in which firms are jointly working to solve those problems, then the problems themselves are not a reason anymore to compete… they provide the competitive opportunity!

In higher education that opportunity remains blatantly clear… to bring knowledge and evidence to all corners of the globe, in the process eradicating ignorance and advancing self-determination, self-confidence, and economic and social wellbeing. What we very quickly (had to) learn(ed) during COVID lockdowns is that education can be truly borderless. With the catastrophic loss of international student enrolments in the Australian higher education sector has come the realisation that it soon will be ‘old school’ thinking to ‘make’ international students travel to foreign destinations. Australian universities in particular have found out the hard way that overreliance on physical presence of international students in their business models has led to a crash of the market that has not been seen before. What in particular has been found out is that the substantive fees received from overseas students have often been invested in what now can be deemed largely unproductive (future) assets – bricks and mortar buildings that could remain empty. In other words, infrastructure rich universities will find it hard to get a short-term return on assets, and will have to be strategic and innovative in making those assets deliver long term return on investment. A most likely development, in my view, is that ‘excess’ infrastructure will be re-purposed into hybrid teaching spaces that will accommodate for global delivery and interaction. In regard to research, there will be a surge in building strong relationships with business, and use infrastructure to outfit innovation hubs, start-up and business acceleration spaces, and create joint ventures to further develop and commercialise research into profitable business applications. 

Beyond connecting more and deeper with business is the obvious opportunity for universities to better collaborate between them rather than compete against each other, in particular in the space of research. In Melbourne, Australia, for example, there are several universities that profess and position themselves to be global leaders in sport education and research. For the sport business and sport science sector, Melbourne in many ways is what strategic management Professor Michael Porter (also from the Harvard Business School) has described as a competitive industry cluster – a geographical location where the concentration of resources and talent can lead to sustainable competitive advantage over other regions. However,… real clustering only happens if talent and resources are combined in cooperative frameworks. In regard to sport science and sport business, this collaboration between universities remains a distant prospect for now. But the pandemic may drive (or even force) decision makers into common sense and put aside differences towards creating greater collective shared value. 

During these pandemic times, the majority of teaching staff have been forced into delivering their courses in full time online mode, and guess what… it works rather well… Although we do not get the face-to-face in-class room interaction and social contact, the virtual classrooms have higher attendance, and even if it proves hard to get up to attend a 10am class, you can always watch it on demand. The new business models of international education, in my humble opinion, will move towards significant partnerships between content rich Universities and those higher education institutions in countries of great need that require content and educational delivery expertise to service their local populations. Rather than higher value – low volumenumbers of students travelling to foreign locations, the new model of creating shared value will be lower value – high volumenumbers of students. Those students will (can) be educated in their home towns and continue to live and immediately add value to their local communities, whilst benefitting from deep content knowledge and educational expertise of leading Universities. The shared value created in a post-pandemic world will be (or should be!) that many millions more will gain access to much cheaper high-quality education. Fewer students from wealthy backgrounds may still travel to cosmopolitan cities and their high-profile universities to enjoy a premium educational experience, but the real opportunity is to deliver quality education to the masses that have not had access to higher education before. The business models of (Australian) universities will therefore have to dramatically change… but those who do this in a reimagined and swift manner, may be better for it! More impact, whilst generating more resources to invest into regenerating a healthier planet and creating shared value.

Now let’s have a further look at my academic field of inquiry and education – international sport business. What is the competitive opportunity delivered by the disruption caused by the pandemic for the global sport industry? The current focus is very much on survival, and let’s be honest, there will be many victims in the short term. This is not because sport as a platform for playing, spectating or even business (sponsoring, marketing) communication will fall out of favour with its various target markets. On the contrary, I believe that sport as a platform will thrive for the simple reason that the pandemic has shown us the importance of being physically active – for physical, mental and social health reasons. The lack of community sport engagement has also further emphasised the social role(s) that sport participation plays in bringing (minority and dominant) communities together. However, as noted, there will be many short-term victims because the business models that underpin pre-pandemic community and professional sport have been over reliant on member registration fees and spectator admission fees. Without the sport activity happening there is no sport business. Stated differently, where sport producing organisations have been able to continue, or redirect their efforts towards providing opportunities to engage in the sport activity, their ability to produce revenues has also continued. One subindustry of accelerated growth therefore has been e-sports where the limitation of physical presence does not exist. Other sports such as running, cycling and even tennis and cricket have done relatively well because of their limited ‘physical contact’ compared to full contact sports. The main challenge for spectator sport remains that business success depends on mass gatherings in stadiums and around the weekend playing fields of amateur competitions.  Playing and spectating opportunities will remain limited, at least until a vaccine will ease pressure on social distancing. 

Like my views on the higher education sector expressed earlier, I believe that sport cannot and should not hope for things to return to how they were before, and rebuild their businesses using the same business models. Again, applying the insights from Rebecca Henderson on a reimagined capitalism to sport, the future of sport business will heavily rely on creating (better) shared value, and will be underpinned by three-way partnerships between (community and elite) sport organisations, government, and business organisations. The big problem that requires a solution is one where access to sport and regular physical activity is broadened to all layers of society and not only to those who can afford the increasing fees that sport organisations will have to start charging if sport is left to its own devices. The social responsibilities of big business extend to the health and wellbeing of their employees but also to the communities that they derive their profits from. Generating better shared value would result from better collaboration with, and to a certain extent resourcing of the operations of community sport organisations. The partnership with local, regional and federal governments could include legislating some of this resource transfer. For example, India became the first country in the world in 2014 with government legislation that requires corporate business to spend 2% of their profits on corporate social responsibility (CSR) projects. Sport has since then been identified as an area of justified CSR spending. It is beyond the scope of this article to assess the overall success of this legislation but it is worth noting that after the legislation came in place, spending on CSR projects significantly increased. For now, the principle applies and offers scope to further define and determine how partnerships between sport, government, and corporations can create business models that make engagement in sport less vulnerable to the effects of major disruptive events such as a pandemic. Similar business models would apply to professional sport, where the major generator of revenue remains the opportunity to distribute professional sport through mass media platforms, increasingly with the availability of sophisticated digital technologies. We may well have the opportunity to go back to times when we crammed 100.000 people into seats of a stadium up close and personal. However, to depend on gate receipts as a (too) significant part of overall revenues, seems folly and should be avoided. I have, together with some of my colleagues, proposed over a decade ago, that digital technology combined with artificial intelligence will allow for the creation of virtual spectator environments where the ‘live’ experience will come increasingly closer to the ‘real’ thing. It may not be perfect (yet), but if the pandemic rules that we cannot go to the stadium, we can bring the stadium home. 

As expertly explained by Rebecca Henderson, shared value in the true sense of the concept can present a solution to many industries struggling with our dominant version of capitalism. I have tried to apply this to the higher education and sport industries in this short opinion piece. Beyond creating shared value, I have advocated that better and deeper collaboration between stakeholders further presents a way forward towards new business models, rather than hoping to return to the ways that things were. The reality is, the good old times are gone, and we need to look forward to creating the better new times. 

 

 

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