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Thursday, December 22, 2011

Harvard Business Review Blog: Business Model Innovation the Red Sox Way

Major league owners are famously reluctant to release franchise-specific financial information. However, Forbes estimates that the value of the Red Sox has climbed from about $500 million in 2002 to $900 million in 2011 — an impressive 7% annual growth.

Companies seeking to revitalize seemingly stagnant businesses can take three lessons from the Red Sox success:

1. Question orthodoxy. Of course you can’t put people on top of the Green Monster. Or host a hockey game in Fenway. Or can you?

2. Systematically evaluate business model options. A business model describes how an organization creates, captures, and delivers value. Consider all of the different levers at your disposal to create growth.

3. Look to the peripheries. Cable broadcasting and fan clubs aren’t obvious places to look for growth. Growth often comes from carefully examining the edges of your current business.

Just because a business is mature doesn’t mean there isn’t room for growth. If the Red Sox can find growth in an almost 100-year-old stadium, surely corporations can find growth in products and services that seem to have leveled off.

Lowry Seasoning Salt Posted: December 22, 2011 at 05:39 AM | 6 comment(s) Login to Bookmark
  Tags: business, history, products, red sox, special topics

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   1. Darren Posted: December 22, 2011 at 01:14 PM (#4021694)
I was just thinking the other day about the 2002-ish debate over getting rid of Fenway or upgrading it. I recall Gammons and other writers writing off the upgrade plans as unrealistic dreams of hopeless romantics. I'm thankful the Sox didn't listen to that and that they didn't try to get a taxpayer-funded megapark.
   2. Jose is El Absurd Pollo Posted: December 22, 2011 at 01:36 PM (#4021697)
I'll freely admit I was in favor of a new park then. They have done excellent work on the upgrade though. I wish the seats could be modernized but it's a small price to pay for staying in the same park with the history it has.
   3. AROM Posted: December 22, 2011 at 01:48 PM (#4021703)
"Major league owners are famously reluctant to release franchise-specific financial information. However, Forbes estimates that the value of the Red Sox has climbed from about $500 million in 2002 to $900 million in 2011 — an impressive 7% annual growth."

Is this actually impressive? Seems par for the course in franchise appreciation. Arte Moreno bought the Angels about the same time and has seen more growth than that on a percentage basis. Though my guess is 900M for the Red Sox current value is a bit low, they would probably fetch 10 digits.

Anyway, bragging about a team's business acumen because of franchise value increases reminds me of the common folk 6-7 years ago who boasted about how smart they were because of their latest house appraisal.
   4. Matt Clement of Alexandria Posted: December 22, 2011 at 01:52 PM (#4021705)
Anyway, bragging about a team's business acumen because of franchise value increases reminds me of the common folk 6-7 years ago who boasted about how smart they were because of their latest house appraisal.
Franchise appreciation doesn't look like a bubble to me - the cartels guarantee profits through revenue sharing and the restriction of competition. It's a great little money-making vehicle, and on top of that it's obviously just gobs of fun - these rich folks love owning ballclubs and there will continue (up until the revolution, o'course) to be rich folks who want to buy your ballclub and get to make a tidy profit while having the time of their lives.

Franchise appreciation looks to me like a classic case of the ultra-wealthy creating the structures to shield themselves from the actual effects of a free market. That's proven itself a sustainable model over the last several decades.
   5. Bob Tufts Posted: December 22, 2011 at 05:40 PM (#4021966)
Typical Harvard bias.

The stadium and business side is being discussed and Larry Lucchino's name (Princeton '67) is left out?
   6. valuearbitrageur Posted: December 22, 2011 at 09:08 PM (#4022182)
The stadium and business side is being discussed and Larry Lucchino's name (Princeton '67) is left out?


This is an article on the GOOD management skills, not EVIL management skills.

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