I was fortunate enough to attend the Arsenal Supporters evening at The Emirates recently and heard Arsenal CEO Ivan Gazidis talk eloquently in response to questions from supporters. I am an Arsenal fan and share the peculiar mix of hope, confusion and frustration that Arsenal fans have right now as we watch our team not quite win things, lose our best players but bring joyous moments along the way.
However I am also a businessman, having held senior executive positions in a number of major companies and am very familiar with situations where the outside world sees the things you do in a very different way to the way you do. As a fan I went to the meeting confused about the clubs strategy and actions but I decided to listen as an “executive” as well as a fan.
Ivan outlined an ambition, a project (a phrase I normally hear associated with Chelsea or Man City) and a strategy in a way I have not heard before. I share and discuss it below.
The ambition: to be a top 5 club in the World (which really means Europe I guess) and to run that club on a sustainable basis. A club that lives within its means, does not rely on a rich benefactor and is successful on the pitch. This ambition is not something Ivan has created; the Board set this in the Highbury days when Arsenal and Man Utd were head to head every season.
Like all ambitions, measuring the achievement of it is important. Interestingly Arsenal are ranked 6th or 7th in the EUFA coefficients. Would 5th in this ranking mean Arsenal are a top 5 club? Even if they had not won a trophy? Technically, maybe yes but to external commentators, fans (and I believe Gazidis) that would not be sufficient.
This ambition has two parts; success and sustainability. The question remains which has primacy? This is not something Gazidis addressed but his tone and the actions of the club lead me to believe that sustainability has priority so the club will not compromise that in the pursuit of short term success and phrases like “efficiency of spend” trip off the tongue.
Living within your means (hardly a revolutionary idea in business but not how football works at the moment), means an equal focus on increasing revenue and managing costs (again not revolutionary in any other business). The revenue side becomes particularly critical in a market where costs are increasing at an extraordinary rate. Failure to generate more revenue quickly reduces your competitiveness in the transfer market, which reduces your ability to attract and retain top talent, which makes on pitch success less likely and reduces revenue. This is a nasty cycle that all business will recognise and which often leads to a discussion about the need to invest ahead of the curve.
This challenge partly explains the project. The move to The Emirates (a huge success but now taken for granted) was intended to catapult Arsenal into the top revenue earners. It is generating massively more revenue but the world has changed with the introduction of foreign investment in the hundreds of millions – pre Abramovich these kinds of sums would have been unthinkable. The result of this though is that Arsenal’s great leap forward ended up being a step back simply because the competition took a bigger leap forward.
This means that the move to The Emirates is now, with hindsight, seen as simply phase 1. An equally significant leap forward is now required as a phase 2. This phase requires an explosion on commercial revenue through better sponsorship deals, retail growth, global expansion etc. Interestingly this off the pitch activity is one Arsenal are prepared to invest in but the route to success is well trodden and the sums involved are much smaller. But how long will this take?
Which brings us to the strategy which seems to be to adopt a model that Arsenal and Gazidis believe will be the future model for football – ie a sustainable model. And at the heart of that is UEFA’s Financial Fair Play initiative which will, in theory, mean all clubs have to live within their means. Gazidis is strongly of the view that this will work, not least because it is something being demanded by clubs rather than being imposed by UEFA. Fans and other pundits are far more skeptical about this. Will the penalties really be imposed? Will they really make a difference?
As an aside, my own view is that football is in a bubble right now and like all bubbles it will burst but clubs like Chelsea and Man City have actually created their own version of this bubble. I don’t know whether they will suffer or benefit from a general “collapse” but I also don’t know what happens to a club when they lose the richest benefactor in the world. Nothing is forever.
So whether you agree or not with the Arsenal project and strategy it is at least clear and it is being followed through. In a business, if you don’t like a strategy you can leave or take your custom elsewhere. As a fan that option is not available so commentary and supporting the club is all we have open to us.
Whether it is Ivan the Terrible or The Great Gazidis only time will tell but don’t expect a change in strategy any time soon.