Business Model Innovation the Red Sox Way - Scott Anthony ...

Scott Anthony

Scott leads Innosight?s Asian operations. His fourth book on innovation, The Little Black Book of Innovation, will be released in early 2012. Follow him on Twitter at @ScottDAnthony.

4:59 AM Wednesday December 21, 2011 ?|?Comments

We entered the EMC Club at Fenway Park on a crisp December evening, about 10 minutes before the scheduled start of Innosight's year-end party. We gaped like little kids at what John Updike memorably called a "lyrical little bandbox of a ballpark" illuminated with wreaths. Then we turned to the scoreboard and saw what seemed a 300-foot-tall sign saying, "Fenway Park welcomes Innosight" (they even had our new logo!).

Why am I writing about Innosight's holiday party? Because Fenway can show us some novel ways to grow a seemingly mature business.

When John Henry and Tom Werner led the purchase of the Red Sox in 2002, pundits believed they had to leave Fenway Park. After all, the tiny stadium built in 1912 lacked many modern amenities and had the second smallest seating capacity in the major leagues. It seemed to constrain the team's ability to generate sufficient revenues to compete against the team's hated rivals, the New York Yankees.

Hosting parties in December is just one example of how the ownership team has found innovative ways to increase the revenues it derives from Fenway. The stadium has hosted entertainers like Neil Diamond and Bruce Springsteen, and events such as the National Hockey League's Winter Classic. The Red Sox have added several new classes of seats, notably seats on top of the iconic 30-foot wall in left field ("the Green Monster"). They received approval from the city of Boston to close Yawkey Way to automobiles on game days, providing increased space for vendors. In dozens of little ways the owners have found ways to squeeze more growth out of the stadium. Of course, a track record of recent success, including two World Series titles (the one in 2004 ending a famous 86-year drought) and six trips to the playoffs in nine years hasn't hurt.

The ownership has introduced other business model innovations. The Red Sox were one of the first teams to invest in the local regional cable sports network, the New England Sports Network (the Red Sox owners control 80 percent of NESN). These networks have turned into significant revenue drivers. The Red Sox also created youth camps to build brand awareness among younger consumers.

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.

Source: http://blogs.hbr.org/anthony/2011/12/business_model_innovation_the.html

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