Why a value creation focus is critical for sport business growth

Sport is a passion product. And passion clouds the mind… So many sport organisations and their managers and governors suffer from passion bias. Passion is the Achilles heel of sport but it is also the goose that lays the golden eggs. Passion unites and passion divides. Passion provides focus and passion blurs good judgement. What I am trying to say is that when passion drives sport business decision making, the result often is a misguided focus on ‘pushing the product’ down the consumer’s throat. Because ‘everybody loves our sport, right?’ Although sport organisations are increasingly led by skilled and well-educated business people, even those that spruik their MBA qualification with pride, fall in the trap of letting passion drive their marketing actions. But more than at any time before in history – during the era of digital reach and intrusion – has it become important to carefully consider what it is that creates real value – value for those who are prepared to pay that is.  To answer that question in context of the global sport industry we need to return to what is at the ‘heart’ of all value creation in the sport industry—the sport activity. Without sport activity, there is no sport business. Figure 1 visualises how sport can be divided into three core modes of value creation—playing, spectating and using the sport activity. It further provides the basic characteristics and contexts in which certain sport activities create value. The second layer of value creating activities has examples of sport products and services at the level of playing, spectating and using the sport activity. The outer layer depicts environmental and influencing contexts in which value is created. For example, if playing sport creates a value opportunity, it may be done as (and for) a professional, an amateur or a recreational player. Contextual issues influencing play may include gender equality, diversity or the natural environment (climate). Using sport to create value can occur through education or sponsorship applications and may be influenced by developments in artificial intelligence or advancement in manufacturing sport equipment. Finally, the spectating experience can create value by offering opportunities to watch sporting contests via mobile technology, online or traditional print, radio and television platforms. The wider context of sport spectatorship includes the venue and also developments in immersive media, including virtual or augmented reality viewing experiences. The outer layer provides (non-exhaustive examples of) various contexts where certain conditions or targets enable or obstruct sport value to be created. The Covid-19 pandemic in that regard has shown the world how central the role of sport is in our daily lives, at both the community and the elite end of the spectrum.

Figure 1: the sport activity is central to value creation

In a new book that I co-authored with Adam Karg we expand on the discussion about what is central to value creation in sport. We argue that sport industry operators still fall significantly short when it comes to maximising the value that is extracted from sport. Beyond the many ways in which sport can have (and has) impact as outlined in Figure 1:

the sport activity, as the essential ingredient for value creation in sport business, will continue to grow to realise its economic potential as a participation and engagement platform for individuals and groups of people to achieve positive (physical and mental) health, socially equitable and commercially sustainable outcomes.

Those in charge of sport organisations, and those who are entrepreneurs and innovators of sport, will need to develop a deeper understanding and appreciation of where and how value can be created in the sport business value chain. Governments at the local, regional and national level remain critical in supplying policy and legislative direction, and infrastructure and funding support, but end-user value will be created by those who run and control the sport activity. They need a better and deeper understanding of the motivations of participants, spectators or users of sport as this will be the key to maximum value extraction. Today and in the near future, most value is generated on the platform of sport spectatorship. It can be argued that sport as a platform for achieving social and health outcomes is undervalued, and this is where massive gains can be made in the next few decades. Conceptually, it then is not only important what kind of value is being generated. It is equally important to identify who is willing and able to pay for the value that is being created. For example, there is an increasing body of evidence that (sport) active populations are less sick, more labour productive, happier, and smarter. The various types of value generated on the back of the sport activity are summarised in Figure 2.

Figure 2: The various types of value that sport can deliver

In the next decade, who is willing (and able) to pay for the production of this health, productivity, happiness and intellectual value? With the skyrocketing costs of inactivity, obesity, mental ill health, and decreasing educational performance, it might not be a question who wants to and can pay… Entrepreneurs will sooner rather than later find that there are incredibly profitable business models that can be developed on the back of the desperate needs of our ailing societies!