Monday, April 27, 2015

If sport was run like Amazon…

Amazon is one of the poster children of today’s disruptive technological age. Run by the charismatic founder and CEO, Jeff Bezos, Amazon grew from small beginnings as an e-commerce start-up selling books online to be one of the world biggest e-commerce and technology companies.

Professor Amrit Tiwana from Terry College of Business, at the University of Georgia uses Amazon (amongst others) as an example of a “platform ecosystem” in his book - Platform ecosystems: aligning architecture, governance, and strategy.

Amrit defines the elements of a platform ecosystem to include; (1) shared infrastructure, (2) a platform, (3) interfaces, and (4) Apps that are using by end-users. He also introduces the notion that there are competing ecosystems, and argues that;

  1. Platform ecosystems are replacing traditional models in and beyond the software industry, driven largely by the digitization of products, services, and business processes. They can expand the pie for everyone but require a fundamental shift in strategic mindset.
  2. Survival and prosperity of platform ecosystems require a platform owner to deliberately orchestrate their evolution.
  3. Orchestrating their evolution requires that their architecture and governance interlock and subsequently coevolve, which is biologically inspired business design.

Amrit goes on to say, “The potential power of platform ecosystems comes from leveraging the unique expertise of many, diverse independent app developers driven by market incentives on a scale that is impossible to replicate within a single organization. The platform model essentially outsources to thousands of outside partners innovation that used to be done inhouse, who bear all the cost and risk of innovating and then share the proceeds with the platform owner

If you read my last post you may remember that I mentioned Joe Bailey’s recent white paper “The Global Sport Ecosystem” – ooh there’s that word again “ecosystem”. So what’s all the fuss about “ecosystems” and why does it seem to be the latest must use buzzword.

IBM’s Institute for Business Value outlines why ecosystems are emerging as a new business model in their paper “Digital reinvention - Preparing for a very different tomorrow”. In a nutshell the paper argues that digital technologies – social, mobile, cloud, and analytics – are changing how people, organisations, and government interact and that as a result “Digital technologies will ultimately drive drastic changes in the economy: value chains will fragment, industries will converge and new ecosystems will emerge. As a result, the mechanics of value creation and value allocation will also change.

The paper highlights the change from an Organization-centered economy to an Individual-centered economy, and ultimately, according to IBM, toward an everyone-to-everyone (E2E) economy.
IBM’s paper further comments, “Functional specialization, value chain fragmentation and industry convergence will begin to support formation of ecosystems or value nets. Ecosystems will typically cut across multiple organizations, functions and industries, providing a foundation for new, seamless consumer experiences and camouflaging functional complexity.

So summarising, digital technologies are not just changing the way we engage with consumers, but fundamentally changing the way organisations do business, creating new value networks that are disrupting existing markets. Organisations are often creating a platform ecosystem and using a mixture of governance, strategy, and platform and business architecture to manage the ecosystem.

What the heck does all this have to do with running sport you might ask…

In the paper, “Considering Future Sport Delivery Systems”, Professor David Shilbury from Deakin University outlines some of the issues facing sport delivery and uses Michael Porter’s (1998) concept of value clusters to argue a potential way of solving the issues that sport is facing. His paper illustrates “(1) the concept of sport clusters, and (2) the issues confronting sports as they interact with a plethora of sport and non-sport organisations”.

David concludes that we “need to recognise a broader role for national and state sporting organisations and to leverage financial support from within their cluster to complement existing, but limited government support. The ability to leverage financial resources from within a cluster will also be reliant on revamping inter-organisational networks recognising that a cluster actually becomes the value chain defining supplier and buyer linkages.

Value clusters and inter-organisational networks sound a lot like ecosystems to me …

Sport sector structures are often represented as simple hierarchies – club, state, national, and international levels of a sport. This is a dramatic oversimplification of the structure of the sport sector. The complexity of sport is highlighted by Henry & Lee in their book chapter on Governance and ethics in sport. They use football as an example, and argue there has been a move away from the traditional hierarchical model of the government of football to a systemic governance of football – a web of interactions between stakeholders. They attribute the shift partly to the professionalization and globalisation of sport.

Henry & Lee also explain three types of governance found in sport – systemic governance; corporate, organisational, or good governance; or political governance.

  • systemic governance – “Such environments are characterised by the interaction of organisations and of groups working within and across organisations.” It “is concerned with the competition, cooperation and mutual adjustment between organisations in such systems.
  • corporate, organisational, or good governance – “the accepted norms or values for the just means of allocation of resources, and profits or losses (financial or other) and for the conduct of processes involved in the management and direction of organisations in the sports business
  • political governance – “the processes by which governments or governing bodies seek to steer the sports system to achieve desired outcomes by moral pressure, use of financial or other incentives, or by licensing, regulation and control to influence other parties to act in ways consistent with desired outcomes

To date, the major focus in sport has simply been a concerted effort to improve governance at the organisational level within sport i.e. corporate, organisational, or good governance. This is not surprising as sport is increasingly professionalised and we see the rise of “the business” of sport. Peak bodies, such as the Australian Sports Commission (ASC), have introduce guidance for sport organisations such as ASC’s “Sports Governance Principles” and “Mandatory Sports Governance Principles

There has, however, been little focus on systemic governance within sport systems, outside of seeking strategic alignment within a sport.

In terms of structure of sport systems (dare I say architecture?) there has been numerous research efforts on sport systems, particularly at a national level, including the global study – Sport Policy Factors Leading to International Sporting Success (SPLISS). But few studies look at the interactions or processes between the organisations that make up a sport system. And fewer studies still, look at the impact that digitisation has had on those interactions.

This is at a time when, as outlined in the CSIRO and ASC report “The Future of Australian Sport”, we will see market pressures and new business models – noting “Loosely organised community sports associations are likely to be replaced by organisations with corporate structures and more formal governance systems in light of market pressures.

The report also highlights the importance of digital tools in sport moving forward commenting, “As we become increasingly time poor, sport is being tailored to meet personal needs. This is largely being influenced by the increased use of online tools and applications to individualise sport. Health, rather than competition, is becoming a major driver for participation in sport.

So to summarise, in sport we are already using tools such as strategy and governance to manage sport, however I argue we have not adopted emerging tools such as platform or business architecture, that look at the structures and interactions within a sport system.

I believe sports and sport systems do fit the definition of an ecosystem. Sports looking to manage the fragmentation of sport and the related systemic governance issues, can apply Amrit’s research on platform ecosystems to manage sport systems as a whole, as opposed to looking at sport simply at an organisational level. Importantly platform ecosystems provide a useful model to assist in the digital transformation of sport.

It is also clear that sport cannot escape digital disruption and the shift from an organization-centered economy to an individual-centered economy. Sports have to become fan/athlete/participant centric in everything they do, with a strong focus on creating a great customer experience.

Perhaps one day running a sport will be like running Amazon …

Disclaimer: Views are my own, and not that of my employer.

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