Monday, October 10, 2011

Why The Chicago Cubs Fail

Disclaimer: This is not a post on why the Cubs didn't make the playoffs this year. Nor a post crunching numbers (UZR, WAR, BABIP, etc). Nor is it a post questioning the leadership of Tom Ricketts. Nay. This is a post about looking at the Chicago Cubs organization failures in aggregate -- as a business. What I present to you in this post is unsubstantiated but I think there is some truth reading between the lines.

The list of failures of the Chicago Cubs organization are endless: fail to consistently develop talent from within, create and nurture innnovative thinking, using advanced analytics to gain a competitive advantage, player over-valuation, lack of effective scouting, organizational leadership, transparency, galvanizing goals. The Cubs have failed at all of these things. This is true. The Cubs ARE terrible and they are bad at everything. But the on-the-field-product (or lack thereof) is a result of something bigger -- something that has been ignored.

When I think of the Cubs organization (and previous ownership), I am reminded of one of my favorite clips from Mad Men. The older business owner thinking in terms of quantity (basically a finite view of his business); while Don Draper (personal hero) explains that the business owner needs to focus on passing value (ownership) onto the customer:


(I luvz me some kinetic typography)


Understanding What Business They Are In
The Cubs organization has failed at [waiiiiit fooorrr iiiit] not understanding what business they are in. Let's call this marketing myopia:
The Myopic culture, [Theodore] Levitt postulated, would pave the way for a business to fail, due to the short-sighted mindset and illusion that a firm is in a so-called 'growth industry'. This belief leads to complacency and a loss of sight of what your customers want.
Yup - this sounds like the Cubs. The Cubs are not in the business of baseball. Baseball is finite. Rather, the Cubs are in the entertainment business. They compete with substitute goods: the other sporting events/teams in town, the theater district, and comedy clubs (to name a few).

To be competitive in their business, they must understand what they're really selling, revenues, and how to create value.

What Are They Selling?
For many decades we have been sold on the "lovable losers" and the "Wrigley Experience" rather than the quality of the product/organization. Thankfully we are starting to see some fan resistance. In July, Jerry Beach wrote:
The Cubs are drawing an average of 2,548 fewer fans per game at Wrigley Field, the seventh-biggest decline in baseball, and are on pace to barely exceed 2.9 million fans, which would be the first time they've welcomed fewer than 3 million fans since 2003 and their lowest figure since 2002.
...
The Cubs opened the season with the third-most expensive average ticket price, according to the Team Marketing Report, but a combination of their lackluster play and the still-stagnant economy has made it difficult for season ticket holders to sell those tickets and seeing the lovable loser Cubs — who haven't won the World Series since 1908 — at historic Wrigley Field is no longer the hook it was a few years ago.
Selling us on the "Wrigley Experience" doesn't result in "good" revenue.

Discerning Revenue
To an accountant, a dollar is a dollar. They do not care if it was good revenue or bad revenue. But a business owner should know the difference between good and bad revenue.
  • Good revenue is customers (fans) that are not price sensitive because the value added is passed from the business to the consumer. These customers keep coming back for more and refer their family, friends, and colleagues. This type of consumer is known as a promoter and they are the best form of advertising.

  • Bad revenue extracts value from the consumer (think: airline fees, hidden cell phone charges, buying tickets to see a losing team). Extracting value from consumers creates detractors, customers that will never purchase your product nor recommend it.
This is why understanding what the Cubs are selling us is so important. Selling us on the wrong things: seeing a game at Wrigley Field and "The Wrigleyville Experience," creates passive customers easily swayed by substitute goods. I would consider myself a detractor. I would not recommend going to a Cubs game unless tickets were free; even then I would have to justify the $30-50 I would spend on food and beverages, the commute time, and dealing with the drunken idiots stumbling around Clark and Addison (my patience for drunkards is thin). That would be a tough sell because I have the interwebs and WGN in the comfort of my own home.

Springer's Will's Final Thought
Will the above changes result in added value across the entire organization? No. But it is a good step in the right direction. Innovative thinking and a commitment to process is what brings change. There needs to be a commitment at all levels of the organization on understanding what business they are in and what they are selling. Cubs management cannot afford to half-ass this approach. Us Cubs fans are growing restless, frustrated, and tired. We want a winner; a team to feel proud of.

People don't buy what you do but why you do it. The reason I'm a newly found Rays fan is because I believe in their competitive model -- NOT their revenues, Tropicana Field (feh), jerseys, nor Evan Longoria.

I follow the Rays because believing in their business model is a belief in myself. The Rays have passed value from the organization to their fans and that is a winning business model.

Being a Cubs fan for 33 years, they haven't figured this out and I'm not sure they ever will. For decades I have watched the Cubs make cosmetic changes like putting lipstick on a pig. And the lipstick business is a bad business to be in...

... just ask Don Draper.

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