Monday, September 6, 2010

Game Theory

Over the last two decades, professional sport has grown to be one of the biggest and most influential industries in the world.

I’ve long believed that there’s a great deal that managers and business leaders can learn from examining the unique role sport plays in the global economy – and specifically by analyzing what makes certain franchises economically successful. And yet, there’s a real shortage of research on this topic. Few people are thinking and writing about it intelligently.

Enter Sandalio Gómez, Kimio Kase and Ignacio Urrutia. Their new book, Value Creation and Sport Management (Cambridge University Press) proposes an insightful and academically rigorous framework for understanding the growth of the sport industry over the last few decades. I was asked to write the foreword to the book.

As they point out, “twenty years ago Real Madrid football team had a budget of less than €60 million; today, it is €400 million.” Something is going on here, and these three authors do a superb job of getting to the bottom of it.

I say in my introduction that sport “taps into the deepest emotional feelings of the world’s population, regardless of geography age or demographics.” This is territory that today’s business leaders need to be deeply knowledgeable about, especially as it is in the arena of experiences (rather than products) where optimum value is being created. Emotional experiences like the ones provoked by sport that will be at the core of the successful businesses of tomorrow, which is why it is important to study the underlying forces that govern this vibrant, unique industry.

Gómez, Kase and Urrutia have hit upon an important and overlooked research project, and I hope their work sparks a firestorm of academic investigation into the inner workings of sports franchises.