Future sports technology & next generation business insights
Esports & Digital Sport, Multiple sports, Global
The world in 2022 - part one: Future-proofing your business
In his latest four-part series exclusively for SportsPro, senior contributor Matt Rogan looks at how sporting leaders can play the long game by starting today to position their businesses for 2022, and the issues they will need to take into account to do this successfully. First up, he explains why it’s time to forget the D word and start thinking holistically.
by Matt Rogan
In my last article for SportsPro, ‘Being Brave in a New World’, I looked at the Brilliant Basics leaders in sport can employ to weather the uniquely challenging storm caused by the Covid-19 pandemic. I then looked at how the best businesses are bravely pushing themselves to rebuild for the longer term. The challenge, I explained, is to simultaneously ‘survive 2020, while at the same time trying to understand where their proposition fits into 2022. Next year, in the best post-pandemic case, is a bridging year to move from one to the other.’
Of all the feedback from readers I’ve had on the path I set out, trying to clearly think through what 2022 might look like seemed to be particularly challenging to them. ‘When our world has turned upside down in the last six months,’ they asked me, ‘how on earth am I meant to predict what the world might look like in 18 months’ time?’
The best summary I’ve heard was provided in Harvard Business Review by McKinsey’s global managing partner Kevin Sneader. ‘It’s very hard to balance the here and now versus the future,’ he said. ‘Many CEOs are trying to do both things, and if you put a microscope up to one eye and a telescope up to the other, then you just get a headache.’
The problem is, as a leader, you still must do it. Sneader advocates setting up ’a separate team dealing with what’s going to happen a year or two from now and considering the ‘what if’ questions’. That’s all very well for a corporate business with tens of thousands of employees, of course, but less realistic for all but the very biggest sports businesses.
With that in mind, this article is intended to do some of the future-gazing for you and shed some light on what the world in 2022 might hold. Hopefully that’s a useful start as you begin to ask your own ‘what if’ questions – because now is the time to be asking them.
Unless you can clearly explain how any acronym will impact your balance sheet, your team engagement and your customer margins, it’s just noise.
Love trends, hate planning
I’m sure a few people are thinking: ‘But sport ‘does the future’ really well. We’re a hotbed of innovation for industries of all types. In the last few years, we’ve been all over the future - CRM to VR to OTT to AI, we’ve been there and got the t-shirt’.
Those are all important areas, for sure. The most salient of them have become core enablers to many businesses already, including Two Circles, the data driven sports agency I co-founded. However, being on top of industry trends and indulging in some trend spotting is not remotely the same thing as building a robust, future-facing business plan.
Unless you can clearly explain how any acronym will impact your balance sheet, your team engagement and your customer margins, then it’s just noise.
Perhaps the awkward truth is that long range planning doesn’t always suit sport. Maybe we’re just more comfortable firefighting and living in the moment. I’ve tried to help lots of businesses in sport see the wood for the trees in the last six months, and when I asked to see their pre-Covid plan, very few were able to send me much more than a vision statement, a P&L forecast and a sales funnel. That’s it. Covid or no Covid, they were set up to fail.
One private equity investor actively pursuing prospective acquisition opportunities in sport told me: ‘It amazes me how few of the organisations I meet have thought properly about the future. I’m the one telling them about how the post-Covid economic, political and demographic reality will influence their sport. That’s just nuts, it should be the other way around. Sport needs to get out more. We understand the world is tough to predict, but that’s no excuse to put your head in the sand.’
With both eyes to the telescope, then, this article kicks off by investigating what 2022 might hold in general, and then outlines four key tectonic shifts that any credible plan needs to have worked through.
Our world in 2022
The further away you plan, the more important it is to think outside your own organisation and consider the trends coming back the other way to meet you.
So what will 2022 look like? Well, firstly, geographic power shifts will continue. In 2022, India should become the most populous country on the planet. The previous holder of the title, China, will complete its first space station as it hosts the Winter Olympics in Beijing.
Climate change will loom large for all of us as both threat and significant priority. Whatever the US president election result in late 2020, it’s implausible to think that in November 2022 America will elect a government with the same approach to climate change as the current Trump administration.
Qatar will hold the Fifa World Cup in the desert and become the first Arab nation to do so. At a similar time, planes that use sunlight for fuel will start their journey to commercialisation. England will host Uefa Women’s Euro 2022 at the same time British consumers should hit around UK£500 per person average spend on wellness, according to GlobalData. That’s if they can pull themselves out of deep recession, of course.
Mobile payments will have grown to US$3 trillion by 2022 – a 200-fold increase from 2013.
Governments globally will struggle with public debt levels and the growing dependency of the stuttering corporate sector, not least with working populations aging; the US Bureau of Labor Statistics (BLS) forecasts that, by 2022, more than a quarter of the American labour force will be in the 55-plus age category, compared with roughly one-fifth in 2012.
The evolution of technology will press on regardless. Mobile payments will have grown to US$3 trillion by 2022 – a 200-fold increase from 2013. Denmark may even be moving entirely cash free by the point they host the FEI World Equestrian Championships that year. Smart TVs will offer a large-scale device for streaming media of all types – the ‘traditional’ TV will be signing off for good.
While these are all very macro trends, they do start to paint a picture of what lies ahead. Macro-economics, generational shift, technological change and media fragmentation will all play pivotal roles in the future direction of all businesses. Sport needs to pay more attention to them than might have previously been required. The key is to understand how to plan in a way that can work with these irresistible forces, rather than rail against them.
The first of these forces is reaching a new end game in the digitisation of our economy.
What you do: Physical and digital fusion
Once upon a time, probably as recently as three or four years ago, there was a nice convenient divide between ‘digital teams’ and ‘everyone else’. Digital experts had ‘digital’ in their job titles, and found their doors knocked on by colleagues looking for specialist advice.
But times are changing. The World Economic Forum projects that, by 2025, ‘the line between physical space and virtual will forever be blurred’. This isn’t just about digital becoming omnipresent in everything we do, it’s a recognition of the fact that digital isn’t part of anyone’s offer, it just is the offer.
I subscribe to Sky Sports, and I don’t think of their portable product Sky Go as being an add-on. In fact, it’s the core mechanic accessible to me with life on the run and a 13-year old Fortnite fan on the family smart TV. As Paul Rogers, the chief strategy officer of AS Roma, told the Leaders podcast: “I’ve dismissed the idea of such a thing as a digital strategy. I believe it’s now a club strategy.”
In short, it’s time to forget the D word.
While we tend to think about this as a gradual evolution of physical events into the digital realm, by 2022 we’ll also be well accustomed to what started as digital entities taking on physical dimensions, too. Amazon, for example, continues to innovate and is trialling physical stores of various types around the world. This helps develop its credibility in new segments, such as clothing and groceries, reduces delivery costs, and enables the company to start to qualitatively observe how customers behave and consider their product lines. The strategy is not to create a new ‘physical stores’ revenue line, it’s to make the whole offer better.
It’s strange to think of Amazon as part of the status quo now, but in truth younger businesses than Amazon have always blended the two, and this total fusion of the physical and digital worlds is just business as usual for them.
In the US, the five-year-old Drone Racing League (DRL) is a case in point, having built its Academy (kids education), Simulator (gaming), and live event businesses concurrently. As their president Rachel Jacobson told the SportsPro Insider Series: “This gives us the ability to pivot very easily – so for example during the pandemic period we were able to show our pilots playing the Simulator product on NBC, which generated great ratings.”
As well as staging live events, the Drone Racing League has built Academy and Simulator businesses that support its broader elite racing ecosystem
By 2022, every sports business will recognise the opportunities that come from this interplay - and more organisations will blur the physical and digital worlds. Online cycling platform Zwift, for example, has spent the last two years building out a physical, co-located competition offer to complement its platform business, and, just like the DRL, has put a specific focus on elite competition.
Last year, Zwift signed an agreement with the UCI for the very first Cycling Esports World Championships. As then-chief executive of Zwift Esports, Craig Edmondson, told the BBC: “We crowned a British national champion in 2019 for both the men and women…and had a longstanding relationship with the UCI to build virtual courses to replicate the Road World Championships. We are creating a new discipline, completely standalone within the UCI constitution. That allows a new approach and new opportunities.”
This is a huge step forward for an organisation like Zwift, enabling the new platform to rub shoulders with traditional competition formats. As Edmondson added: “The beauty of creating a new cycling discipline is that we have a blank slate and no limitations.”
Zwift’s summer of racing in 2020 has included a Virtual Tour de France, which was run in late June and early July, at the same time as the road race should have taken place. In order to enable races like this to be taken seriously by media and racers alike, Edmondson and the team at Zwift have spent significant time over the last two years ensuring that the competitive field is robust. The use of certified hardware (to ensure accurate data and calibrated competition), and the use of AI and machine learning (to identify suspicious data like how the financial services sector identifies fraud), have become key components of ensuring a robust elite competitive space.
There's an awful lot digital businesses can deliver online, but they need to marry their efforts with in-real-life events to operate with credibility and integrity at the highest level.
This is all progress to a point, but it also highlights a broader integrity issue esports has been addressing for the last decade or so. It has led many leading organisations to use physical venues for their championship events, which bring the advantages of on-site servers (to manage cyber risks and latency), hardware calibration, and the upside of physical venues. Physical spaces also enable a whole new world of production, storytelling, fan engagement and commercial opportunities.
As Edmondson commented during an early trial exhibition event at the 2019 World Championships in Yorkshire: “For the audience to be able to get that close to elite riders side by side and see the effort they put in was unprecedented. The entertainment around the event put cycling into a whole different category.”
While Zwift has taken a more cautious initial step on the back of the Covid-19 pandemic, setting an initial date for the UCI Cycling ESports World Championships in December 2020 based on cyclists competing from their homes, Super League Triathlon managed an extremely successful co-located event at the end of August, when it launched its SLT Arena Games, where athletes were able to swim, bike (using the Zwift platform) and run in a single arena.
Edmondson, now working on a portfolio of tech and commercial related ventures within this converging world, reflects on the changes he sees in the maturation of the elite level of esports.
“There's an awful lot digital businesses can deliver online, but they need to marry their efforts with in-real-life events to operate with credibility and integrity at the highest level, as Zwift are planning,” he says. “For example, the League of Legends Championships took place in Accor Hotels Arena in Paris and the Fortnite World Cup took place at Flushing Meadows [in New York].
“The fusion of the physical world into digitally-led businesses is hugely exciting – this is merely the end of the first phase.”
Zwift, whose gaming-inspired platform enables cyclists and runners to train and compete in virtual worlds, has ventured into the realm of physical events
Just like the role that physical shops play for Amazon, the creation of a curated experience at the very top level changes perceptions for Zwift among potential new customer groups and highlights what the higher margin platform has to offer. While it is entirely possible to build a subscription platform business like Zwift without physical events, that would risk missing a stamp of top-end credibility and emotional attachment, which in turn increases platform loyalty.
After all, as a passionate amateur, it’s not every day you can ride the Tour de France course. Imitation is often the best source of flattery, so it was unsurprising to see one of Zwift’s competitors, Rouvy, follow suit by signing a deal with Ironman this August.
Of course, Zwift is not the only subscription offering to look to elite competitive sport to drive margin in its core offer - in the UK, broadcasters Sky and BT have been doing that for years in their battle for the screens, phone lines and broadband connections of Britain. But Zwift’s advantage is to own a good deal of its supply chain. The company is not merely using physical esports as a marketing activation; this is a conscious and calculated attempt to broaden its operations. As Edmondson told the BBC: “We’re building this to stand on its own two feet.”
While it is early days in what will be a multi-stage race, Zwift has made a very fast start. With David Lappartient, the UCI president, heading up the esports and gaming liaison group set up by the International Olympic Committee (IOC) - whose president, Thomas Bach, has publicly stated that simulation games will be considered for the Olympic Games in future - the best is very likely still to come.
But already, the Covid-19 pandemic has shone a light on the importance of this fusion of the digital and physical realms. This is no time for hanging around: in the height of the pandemic, bricks and mortar clothing brand Lululemon notably snapped up fitness platform Mirror for a cool US$500 million.
“The pandemic brought the future closer to the present,” noted the company’s chief executive, Calvin McDonald. “This is about strengthening our community and our loyalty and our relationship with our guests and memberships, and it’s going to be its own revenue stream model, which we’re excited about.”
It’s easy to demonise the impact of this on traditional sport but, as my last article showed, the fashion industry has also had to repurpose its offer as a result not only of Covid-19, but also the digitisation of retail in general.
In reality, fashion has had no option but to change or collapse. Fashion weeks have gone online, personal shoppers likewise. During July’s Paris Fashion Week, Dior released a 15-minute feature-quality film as a digital representation of all they stood for, while Hermes’ new men’s collection was streamed live, providing a sense of what a fashion week looks like behind the scenes. The whole experience brought into question whether live fashion shows should, or even can, go back to their pre-Covid format.
‘It’s about time,’ Lauren Indvink wrote in the Financial Times. ‘Fashion shows are no longer private events but public-facing ones. Digital, and not live, audiences should be the priority. It is a challenge with inherent risks. But as Hermes showed, when it’s done right the results can be fantastic.’
Sports teams and leagues have always been a hybrid of interplay between different business models; they are concurrently merchandising, ticketing, publishing and talent development businesses. Perhaps because of this, digital has been a relatively passive service provider rather than a key differentiator.
By 2022, however, having physical and digital siloes will be indefensible. Leading-edge businesses have already made the leap. As Jacobson explained: “Children are growing up in a world that we didn’t know. I didn’t have a cell phone until college. Screens for our kids are primary ways to consume schooling and the sports they love.
“If you learn to use our Simulator, you can then go straight outside and successfully fly a real drone – it’s so similar, whereas you can’t play NBA 2K and then go outside and immediately have turned into LeBron James. That flexibility is so refreshing to work with, it lets us open new fields of play for our partners. They can focus on the esports Simulator or live events as they wish, or mix the two.”
That agility has been at the heart of growth during the pandemic period for the DRL. “We threw together an event called the Simulator Cup in a couple of weeks for NBC to help them fill their TV schedule,” Jacobson added. “That reached over four million people, many of whom hadn’t seen our sport before.”
By 2022, all businesses will need to be a fusion of the digital and the physical, just like the DRL. The emphasis will be different between both realms, but the principle is fundamental. It’s for that reason Zwift has developed pro esports and Amazon has physical stores.
The challenge leaders face in the next two years is to work out how their business models need to evolve to cope with this fusion.That’s where we’re headed next month.
Matt Rogan has spent his career creating and scaling businesses in the sports and entertainment arena. He is a co-founder of Two Circles having previously led the business as chief executive and then executive chairman, a non-executive director of the English Institute of Sport, and joined the SportsPro team as a senior contributor in June. He is currently also writing his second book. www.mattrogansport.com.