31 August 2012

The Entrepreneurs of Sport

Ever since I read Moneyball many years ago, I could not help but to seek parallels between the sports world and business.  In Michael Lewis' chronicle of the Oakland A's baseball club,  GM Billy Beane used novel analytics and an outsider approach to build a perennial winner despite having 1/3 of the payroll of teams such as the Yankees.  The compelling tale reads like an entrepreneur's blueprint for success; a cash-strapped upstart completely changes the industry through innovation and creativity.  Are there other examples of game-changing entrepreneurs in the cut-throat world of big sports?

Certainly one of the biggest changes in recent history is the almost instantaneous access to almost any sport thanks to the rise of ESPN.  Similar to other founders, Bill Rasmussen turned his personal desire (Connecticut Sports) into a businesses phenomenon.  Several early moves, such as the negotiations of NCAA basketball rights and launch of SportsCenter, turned the fledgling network into an almost overnight success.  Like other startups, unfortunately, the need for early cash diluted Rasmussen's power and equity forcing him out well before the real money came in.  The rest of the story is pretty well documented as ESPN has become the most influential network in modern day sports.

Due to the strict revenue share rules, it is hard to find innovators in the greatest sports cash machine that is the NFL.  Robert Kraft's unorthodox acquisition and success of the New England Patriots might be the closest thing.  Starting with an option to buy the adjacent land next to the Pats' old stadium, he later acquired the stadium and eventually the team through a decade long series of transactions.  Smart personnel moves (Brady and Bellichek in 2000) and a unique focus on the collective team versus star players (managed like an interchangeable "portfolio of 53 stocks") has led the team to three super bowl titles and the best winning percentage in the league during his ownership.  Oh by the way, it doesn't hurt that the team is worth at least ten times more than Kraft's initial purchase price.

Kraft's story was a bit unusual as the traditional sports franchise ownership story is pretty uninspiring.   A billionaire hobby owner buys the team at a premium using debt, raises ticket prices, and throws alot of cash at the team in hopes for championships.  Sometimes this results in an increase in franchise value (Mavericks, Yankees) and other times they land in bankruptcy (Dodgers, Rangers).  The most recent example of this is Manchester United's IPO where it is still too early to assess whether the Glazer's investment will ultimately pay off.  But in the end, it usually doesn't matter for the billionaire owner who has made their money elsewhere.

Hobby owners aside, from apparel juggernauts we all know such as Nike to the latest social media sport startups, savvy entrepreneurs have channeled their unbridaled passion for sport into thriving businesses throughout the years.  Of course, just as in the business world, there have been some slip ups along the way (remember the USFL?).  As power continues to shift to fewer and fewer hands (don't get me started on the BCS), it will be interesting to see the creative destruction that new startups can create as a counterbalance. Certainly the passion for sport will not dissipate which should keep the business side thriving - let's just hope future Billy Beane's continue to emerge among the clout of billion dollar TV deals.     

03 August 2012

Can Entrepreneurs Multitask Companies ?

Entrepreneurs that have the capacity to change the world are hard to come by.   When they do, the smart money and resources tend to follow them in droves.   Two of my favorite ones that I've tracked for quite some time, Jack Dorsey and Elon Musk, have a good shot at transforming the entire landscape of media, automotive, energy, and financial sectors. While ambitious to say the least, they are both attempting this feat by leading multiple companies at the same time.  Are entrepreneurs in such short supply that we rely on them to take on multiple engagements?  And is it possible for them to effectively do so?

As a cofounder of Paypal, Elon Musk has made enough to spend it all in hopes of bringing space exploration and sustainable energy platforms to the masses.  To do so, he is attempting to build three multi-billion dollar businesses as the head of Tesla Motors, SpaceX, and SolarCity.   He generally splits his day between the companies;  he is notorious for being a stickler for details which makes the task even more daunting.  So how is he doing?  He's had his share of ups and downs but showing some signs of progress.  Earlier this year, he announced a successful rocket launch into space as well as Tesla's completion of significant safety test hurdles for its new electric sedan within days of each other.  Certainly too early to call (all in early stage, pre-profit), but Musk is showing no signs of restraint.  No wonder he was the inspiration for John Favreau's "Iron Man"  in the recent movie.

While no superhero, Jack Dorsey made his name in a big way as co-founder of Twitter.  His latest venture Square is a frontrunner in the white-hot mobile payment space.  Shortly after departing for his new company, Twitter experienced a major management and technological  implosion which almost derailed it.  Now Dorsey is back at the helm, leading both concerns.  In public, he articulates his vision and passion for both in great depth, but some inside think the dual role is taking a toll on the companies (see recent Fortune article  on Square employee frustration). To be sure, the imbedded large players that Twitter and Square both look to unseat have significant money and resources invested in competing with them.  Dorsey will need to successfully thwart the likes of Google, Facebook, Paypal, and Visa all at the same time.

Is there any precedent to Dorsey and Musk's attempt ?  Let's start from the top.  Steve Jobs was very successful in multiple endeavors, but not all at once.  Pixar's big splash occured between Jobs' stints at Apple; the IPOD and IPhone did not come out at the same time given different technologies and market strategies required.  It is debatable, but I don't think he would have been able  upend animation, PC, phone, and the music industry all at the same time.  In looking through all the major industrialists, it is hard to find one that has done so (or even attempted).  Certainly inventors throughout time have created multiple blockbuster innovations, but did not commercialize them into full fledged businesses.

 In today's laser quick internet pace, it is much more plausible than before.  Technology allows for scalability and virtualization and sophisticated investor backing provides management expertise and an earlier way out.  Perhaps the role of these entrepreneurs have changed with the times.  Maybe we don't need them to build huge businesses like Henry Ford did, but rather to incubate new ideas for experienced business management teams to grow.  I  tend to think you lose quite a bit of the cultural DNA when you separate a founder from his or her business (it didn't work for Apple).   Call me old fashioned, but isn't building a space-age travel company enough for one mere mortal?  Apparently not.