Aug 26, 2020

KNOW THE SCORE: Digital Transformation – A Must-Have for a Sports Club

KNOW THE SCORE: Digital Transformation – A Must-Have for a Sports Club

KNOW THE SCORE is a series of talks where Mateusz Lentowczyk – CEO and founder of TISA Group – invites interesting guests to talk about the latest trends, challenges and best practices at the intersection of business, sport and technology.

In the first issue, Mateusz caught up with Olivier Jarosz to discuss the sports clubs’ transitioning from the traditional to the modern operating model. Olivier is a leading practitioner in football club strategies, specializing in club football insights and supporting clubs and leagues in their dynamic development. He has over 10 years of experience of R&D projects at the European Club Association (ECA), masterminding several innovative and industry-leading publications related to Club Management, Youth Academies & Women’s Football. Currently, he’s a Managing Partner at Club Affairs.

The exchange of views between Mateusz and Olivier on the business functioning of the sports industry led to some interesting conclusions:

How to keep up with your fans’ expectations in times of technological change?
What are the best ways of navigating the increasingly complex and challenging sports business landscape?
What is the role of digital transformation in sports clubs?

Read this interview and grasp some of the business know-how!

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Mateusz Lentowczyk: We are currently hearing a lot about sports clubs switching from the traditional to the modern operating model, but it’s not always entirely clear what that means. How have the clubs been operating so far and what’s changing?

Olivier Jarosz: At the moment, except for the top clubs that have transitioned their business to become entertainment companies, many clubs still rely largely on transfers and match day revenues. This is especially true in mid-sized leagues such as Scotland and Switzerland, where these figures for the latter reach up to 40% of the total yearly budget. Even though figures showed that year on year until 2018 there was a 10% growth in gate receipts, this growth was limited to a small number of clubs (around 30).

The classic source of revenue seems to still be the panacea for many clubs while digital is a great equaliser allowing smaller sized clubs to playing catch-up. To make a comparison to Youth football, on the one hand, club owners indicate that the academy and the sale of young players are of great importance for them in terms of long-term profits, but on the other hand, it’s not always associated with appropriate investments of sports clubs in this area.

According to the study we did, 60% of clubs claim that they have the highest profit margin from the academy. Yet what we see is that they rarely make strategic moves to increase it even more in the long-term perspective counting to less than 6% of their budget.

Therefore, we see that the transition from the traditional operating model to the modern one must be primarily related to a better budget balancing. One of the essential issues here lies in understanding the needs of modern fans. Their needs are significantly different from what supporters were expecting even going back a few years ago.

Mateusz Lentowczyk: So what do modern fans expect apart from winning / good results? Do you think the way people experience emotions while watching sports has already changed?

Olivier Jarosz: Recent studies indicate that a modern supporter, while watching the match on TV, usually uses a phone or a tablet to constantly look for new information. A club that wants to meet their fans’ expectations must give them access to exclusive details that happen around the game. That’s when digital transformation (if properly implemented) may make a tremendous difference.

Besides, while analysing discussion with the “new generation” they point out that a football match is taking too long and the competitions are too spread out in the calendar. They want “everything right now”. In sports, this “everything” refers mostly to emotions.

In a football match, unlike other sports such as an NBA game where the last quarter matter the most, it’s difficult to predict when the excitement will be the greatest because no one knows when a goal will be scored. That’s why the ability to create additional emotions around the match will be so important for clubs that want to attract modern fans.

I believe that in the future there may appear a concept of a premium offer for fans coming to the stadium. Why? Because fans will only be interested in watching games live if they can view it as a superior, top-quality experience.

Mateusz Lentowczyk: What do you mean by the idea of a premium offer?

Olivier Jarosz: This premium offer means almost a dedicated concierge service approach to all, for example that before you reach the stadium, you will already know how long you will be in traffic jams, the security and hygienic protocols on site, where you will buy food, when the children will get attention, where the premium plus offer you could go further where you meet the reserves players and talk to them etc in a word a “tailor-made” approach.

Sports clubs have already implemented some of these concepts. AFC Ajax or Olympique Lyon introduced the possibility for fans to order food and club clothing to their seat in the stadium during the match. By spreading it over the entire match, you could get much more profit from selling products. Legia Warsaw regularly organises meetings with injured and reserve players in the family sectors and announces them in advance in social media.

Mateusz Lentowczyk: Do you think it’s possible to earn money on sports club digital transformation?

Olivier Jarosz: When it comes to digital transformation, the fight is to get the largest piece of the cake in the future. A quick ROI is rare, but you can see that those who invested in this change early enough are now in a winning position because despite some mistakes early on they were able to adapt and improve.

Mateusz Lentowczyk: What are the best examples of clubs taking advantage of the digital transformation? Do you see any other organisations that haven’t gone through it yet but have the potential to leverage it the right way?

Olivier Jarosz: There are a few success stories of big brands that paved the way for other clubs. But again, I like to provide applicable cases and one of the good practices is certainly AZ Alkmaar, as they realised that without a long-term overall strategy nothing can be successful, even good digitalisation. They stimulated their business partner to motivate their fans to come to the stadium. This made more people attend their games, which the club eventually managed to translate into a greater amount of information in the database. Ultimately, this obviously resulted in higher revenues.

I have already mentioned examples of victories of clubs such as Olympique Lyonnais, which proved that catering could be made more efficient with the use of digital tools but interestingly the whole concept of OL Parc where the entertainment is integrated with a set of services and also linked with other sports and new activities such as linking with Tony Parker’s Asvel to build visibility on new markets.

Another way to do it is Manchester United F.C. They were always the club entering last, after carefully studying and observing their rivals. They were the last of the Premier League club to launch a twitter account, but once they did, they immediately got a record following. They are smart enough to copy their main opponents and only do things after carefully monitoring what the others do, because they can afford it. However, at the same time, because of the fact that they are a strong analytical organisation, they quickly understood that by creating their own digital channels, they could have greater access to fans, control the output that reaches them, and, additionally, make revenue on it. They implemented elements of gamification, created their information medium [MUTV], started building history with the help of experts. A real success story.

You have also alternative path the likes of FC Bayern Digital & Media Lab founded in 2018 with other partners, including FC Basel 1893 or FK Austria Vienna mutualising efforts.

When it comes to the ideas where sports clubs digitalisation could bring effects on a larger scale, recently we were talking to a Polish women’s team – Medyk Konin. A couple of times they were a trending topic because they achieved outstanding results in European competitions and their players won respected individual awards. With the use of digital solutions, this team could go much further promoting the region and reach more people all over Poland.

We should remember that digital transformation is also an excellent method of spreading income funds without having to rely too much on the match day or transfers. It seems that alongside investment in youth development, digitalisation is the trending proven way to achieve it.

Mateusz Lentowczyk: How much of your yearly income would you spend on digital transformation as a mid-size European club then?

Olivier Jarosz: A sound investment should be around 3% of the club budget. It can be up to 10%, but only if the club owns the stadium and has an overall club strategy. But clearly it also depends on the characteristics of the club. It’s better to have 2 or 3 high-quality digital channels than 20 weak ones.

Digital marketing is starting to conquer the market. According to Forrester Research it will account for 45% of all marketing expenses in 2020. Currently, the trendsetters of digitalisation are medium-sized clubs. They have already discovered that they need to look for other ways to win the market in the future. Again, this is a great equaliser.

The pandemic is also a great lesson. Even before the COVID-19 outbreak, we saw that the number of people from younger generations coming to the stadium significantly decreased. And experts point out that the pandemic will make it even worse. With the reduction of your revenues, you have to look for additional sources of income.

Mateusz Lentowczyk: Absolutely! So how can COVID-19 affect the changes in the functioning of sports clubs? Would you agree with me that it will accelerate the digital revolution in many places?

Olivier Jarosz: On the one hand, more people will wonder whether it’s worth going to the stadium (if it is not too restricted). For many fans, it might be an additional risk not worth to consider. They will also experience the convenience of watching matches from home and might be willing to stay that way.

On the other hand, the COVID-19 pandemic has highlighted the essence of sports organisations – fan loyalty. A football club is much more than just a “company selling emotions” because fans are more attached to their team than to any other brand. Through digital transformation, you can get even closer to the supporters, especially to the young fans, who will be crucial in a few years when the average age of season ticket holders in many countries is steadily getting higher.  LTT Sports COVID-19 Issue 5 on resilience and impact on Community: “Is football without fans really nothing?” goes deeper in the subject if you want further thoughts.

Digitalisation has also proven that it can play a crucial role in “extinguishing fires”. Your supporter cannot go to the stadium due to COVID-19 despite having a ticket? We have a notification for him right away about the club shop discount or any other form of compensation. In this way, you can make your fans feel appreciated.

COVID-19 has opened the eyes in the industry for the need for digital transformation approach along a proper strategy. On the other side we are still an industry when in the last few years we were still using the fax… and with the Covid-19 we are discovering the need for digital office and new working practices will be a key aspect of digitalisation. For many organisations, working remotely has never been practiced. We will be treating in one of our next issues but ultimately from an executive point of view for us digital is not an end, it’s a means.

Mateusz Lentowczyk: Then, after all we’ve said, there’s one crucial question. What should the digital transformation process look like?

Olivier Jarosz: In my view you should develop three digitalisation stages.

#1 Tools

First of all, you need to have digital inventory channels. There are four ways in which fans consume information in the modern digital world. You need to cover these four dimensions. It means you should create a great website, engaging social media channels, absorbing OTT-like information with medium and top-quality mobile native applications.

#2 Commercial Partnerships

Once you have it, you should use your digital inventory channels to activate your commercial partners. Sign or renew your partnership agreements with sponsors, clubs and other companies. Find new ways to make your brand attractive for new supporters and for new funders. Think outside the box about the ways to monetise your club’s image. Digital revolution lets you bring your fan engagement to a new, previously unattainable level.

#3 Building new solutions

The final stage is where technology directly supports sports. Digital transformation gives you new opportunities to build up the match day, OTT delivery creates a new information medium, and social media allows you to engage fans in the club’s everyday life.

But we must remember that the decision to carry out a digital transformation means a revolution in the functioning of the whole club. To make it effective one must involve many changes around it including the mindset. This is where you need support to have a 360° view.

Mateusz Lentowczyk: You mentioned a crucial thing for starting the digitalisation process – the mental preparation of the entire organisation. So what does it take for digital transformation to be effective?

Olivier Jarosz: The digital transformation should be connected with the commercialisation of the club and the activation of the community around it. It needs to concern both younger and older supporters.

To carry out digital transformation effectively, you need to have the right people in your organisation who will be able to cope with new challenges and this is where we help also organisations to have the right basics first. Very often, an important aspect is to start the preparation process a long time before the digital transformation takes place. Only then will your employees be able to adjust to your new expectations and needs.

You need to have several ideas on how to implement various digital tools such as OTT and not be afraid to fail in some of your projects. It’s all about adopting a “long-term mentality” where you treat all your actions as an investment in your brand and community that will bring great results in the future.

Mateusz Lentowczyk: Alright, I guess we’ve covered the complete game plan for digital transformation. Thanks, it’s been a good talk.

Olivier Jarosz: Yes, in a nutshell a plan for forward-thinking sports organisations. My pleasure, thanks for the discussion.

 

KNOW THE SCORE is TISA’s series of talks between Mateusz Lentowczyk and his guests about the latest trends, challenges and best practices at the intersection of business, sport and technology