It might be coincidence that Robert Kraft (MBA 1965) purchased the New England Patriots the same year the NFL instituted a salary cap. It is certainly no coincidence that the Patriots have won more Super Bowls than any other team in the National Football League since that time.
It’s also no coincidence that all those victories started coming once Kraft hired Bill Belichick. Kraft needed a head coach that shared his vision of sustainable success on the gridiron, and Belichick needed an owner trusting enough to give him control of the team’s football operations and allow him to put a developmental process in place and see it through. Say what you will about Tom Brady’s prodigious talents; in Harvard Business School professor John Wells’s view, it is the Kraft/Belichick pairing, first and foremost, that has enabled the Patriots’ unprecedented run of postseason excellence. And it is that relationship, and how it allowed the Patriots to pull away from the league under the newly-instituted salary cap in the early 2000s, that first caught his attention.
“Some would say Bill Belichick led a good Browns team to some of their worst performances, with losing records in four of the five years he was there,” Wells says. “And then he takes a middling team in the Patriots and wins three Super Bowls in five years. To me, that was fascinating, and I wanted to describe his time with both teams against the backdrop of the changing economics of the game.”
“I WANTED TO DESCRIBE HIS TIME WITH BOTH TEAMS AGAINST THE BACKDROP OF THE CHANGING ECONOMICS OF THE GAME.”
Wells teaches the second-year MBA elective course Strategic IQ, which focuses on formulating and implementing strategy in fast-changing environments. It is organized around pairs of companies in similar industries where both are doing well, then one suddenly fails while the other maintains its success. Wells pushes his students to identify the factors that make the difference. Belichick’s tenures as coach of the Cleveland Browns and the New England Patriots fit the course model perfectly and prompted Wells to write cases on them in 2005. More than ten years later, the cases have only become more illustrative as the Patriots keep piling up Super Bowl appearances.
“I want students to see the difference between measures of might and measures of agility,” Wells says. “The Patriots aren’t necessarily the best as individuals—most of them are not standout, elite-level players. But they score incredibly high on adaptability. And in a fast-moving game like football, as in business, when the environment is changing very quickly, it’s not the mighty that win. It’s the agile.”
Belichick and the Cleveland Browns
Bill Belichick grew up with football. His father was a former NFL fullback and a college coach, and young Bill gleaned a lot about the game from him—so much so that he was fluent in play-calling by the age of seven. What eventually set young Belichick apart from many of his coaching peers was the depth of his intellect outside of the game. After graduating from Phillips Academy Andover, he majored in economics at Wesleyan University in the early 1970s and was set to begin an MBA at North Carolina State while serving as a graduate assistant coach for the football team. But that plan faltered when NC State cut back funding for the team. Instead, he became an assistant coach with the Baltimore Colts.
Belichick worked his way up the coaching ranks, eventually earning his first NFL head coaching job with the Cleveland Browns in 1991. He was known as detail-oriented and dedicated, often working from 5 in the morning to 11 at night, sleeping in his office in between. He was also known for his lack of tact—gruff with the media and profane with his players. Despite his brilliance and work ethic, that gruffness worked against him, especially when he released Cleveland’s beloved quarterback, Bernie Kosar, in 1993.
“Studying Belichick’s time with the Browns was hugely insightful for me,” Wells says. “The owner, Art Modell, was paying ridiculous amounts for players, and Belichick could see that. He understood the economics—that he couldn’t afford to keep those players in the long run and had to start developing new talent within the organization instead. Unfortunately, I don’t think his boss ever did.”
“HE UNDERSTOOD THE ECONOMICS—THAT HE...HAD TO START DEVELOPING NEW TALENT WITHIN THE ORGANIZATION.”
After releasing Kosar, the Browns went 2-6 and Modell and Belichick’s relationship deteriorated. Continued poor performances and more bad contracts to star players, coupled with Belichick’s brusque attitude with the media, led to his eventual firing in 1995, when Modell moved the franchise to Baltimore. That firing is illustrative for Wells in discussing leadership with his students.
“I want my students to feel motivated about leadership,” Wells says. “Belichick was hurt by how he conducted himself with the Browns. He didn’t understand some of the finer points of managing a team, a fan base, and the media at the same time. I use that example to stress how crucial it is to make sure you understand how you’re perceived as a leader, and how by tailoring that perception to your team and your situation, whether it’s in sports or in the office, you can develop a team that will die for each other and for you.”
The Start of the Patriots Era
If the Browns case is a clear example of how things can go wrong, Wells’s Patriots case is the perfect counterpoint.
Patriots ownership began shopping the team in the late 1980s to various interested parties, including Donald Trump, and sold them to Robert Kraft in 1994 for a then-record $172 million. It was the same year the NFL’s newly-negotiated salary cap, which limited the amount of money a team could spend on players’ salaries (thus inhibiting their ability to stockpile and retain star players), first went into effect. After years of subsequent negotiations, Kraft agreed to build a new $325 million stadium for the Patriots in Foxboro, Mass. While the team’s location was finally settled, its coaching situation was not. The Patriots enjoyed a few strong years under Bill Parcells’s leadership, only to see him leave when his relationship with Kraft soured over personnel decisions and the team failed to meet Parcells’s Super Bowl aspirations.
“Most football coaches aren’t very good at economics,” Wells says. “When you’re trying to win a single Super Bowl, playing for just that season, as Parcells was, you don’t care about things like the salary cap. That didn’t work for Kraft, who could only hand over full control to a coach he knew cared about the long term.”
“MOST FOOTBALL COACHES AREN'T VERY GOOD AT ECONOMICS.”
So in 2000, Kraft hired Bill Belichick away from the New York Jets. Many questioned the move, given Belichick’s struggles in Cleveland and his lack of grace in handling the media-relations duties of a head coach. But in short order, the move would prove fortuitous. In Cleveland, Belichick was handed a roster with highly paid star players but little talent development and an owner that wanted to win a Super Bowl quickly. In New England, he found the opposite—a patient owner who would serve as mentor and who trusted his vision.
“In New England, Belichick had someone in Robert Kraft who understood the game the way he did, understood the economics the way he did, and was helping him become a better leader,” Wells says. “They both understood the player cap, where the context of the entire league and running a team had fundamentally changed. They understood that you could win a Super Bowl with a team of average players as long as that team was all of one accord.”
Building a Winner for the Long-Term
Belichick has said he considers the relationship between the head coach and the owner to be the most important and fundamental to a franchise’s success. Kraft’s trust in him enabled him to implement all the things he couldn’t in Cleveland—the kind of things Wells likes to teach in his course—a long-term vision, careful team-building to match, and an unwavering commitment to excellence.
The Patriots were $10 million over the NFL salary cap before Belichick’s arrival, and he quickly went about recruiting more affordable players that fit his system and philosophy. The result was a team that prioritized certain characteristics (toughness, intelligence, work ethic, ability to take coaching, and a team-first mentality), fit within the constraints of the salary cap, and allowed Belichick to develop a unique game plan for every opponent, and adapt on the fly.
“Whereas most people play the game, Belichick plays the opposition,” Wells says. “He adapts to the competition in order to beat them. It’s why he can win a Super Bowl with a largely mediocre roster—his players are adaptable. They play for each other and play for him, and they’ll do whatever they’re told to do to the best of their ability because of it. It goes to show what leadership and proper motivation can do.”
What leadership and motivation did in the Patriots case was propel them to three Super Bowl championships in the first five years of Belichick’s tenure. More importantly, it laid the groundwork for a perennial contender.
“Just like in business, a quick win is all very fine,” Wells says. “You can borrow from the balance sheet. You can hand out big contracts and bonuses to attract star players. But you mortgage the future. Bill Belichick and Robert Kraft don’t want to win once. They want to win over and over again. They know that’s how you build a fan base, that’s how you build a legacy, and that’s ultimately how you make money.”
The NFL is Big Business
In his course, Wells pans out from the Patriots to the wider NFL. It is one of the only leagues in the world, in his opinion, that’s fit for the discussion.
“The NFL struck me as particularly interesting because it is one of the richest leagues in the world, but it’s got the intelligence of the player salary cap,” Wells says. “If you don’t have a cap, the players extract all the profits of the business. And wealthy owners can just go out and buy a winner. But as soon as the cap arrives, it changes the economics of managing a team and makes for a lot more parity and, ultimately, a better product.”
Though it may seem counterintuitive, Wells says the best thing to maintain fans’ interest is to have their teams lose on occasion. The NFL has found a way to keep even the strongest and savviest teams like the Patriots from winning the Super Bowl every year through careful regulation. The salary cap suppresses big-market teams’ ability to outspend their rivals, and the draft allows smaller-market or underperforming teams to restock and develop strong talent pipelines so they can compete again in the near future. In sum, the NFL has engineered a spectacle to attract the maximum number of fans. Given that the league took in more than $13 billion in revenue in 2016, already more than halfway to its goal of $25 billion by 2027 and up more than 50 percent from 2010 according to Forbes, the plan is working perfectly.
“In the NFL, we’ve got an example of how regulation in sports helps to create a more efficient, more competitive market,” Wells says. “If you allow the free market to operate, it will destroy the league, with the big market teams constantly dominating—in the same way that if you allow the free market to operate in vacation real estate, everyone builds hotels in the most attractive areas until they’re not attractive anymore. You need regulation, but the right form of regulation. The NFL makes for the perfect way to talk about the efficiency of markets, and what’s really needed in the long run to make things sustainable and competitive.”