In 2012 the Boston Red Sox baseball club had its lowest winning percentage since 1965. So it’s no surprise that at the beginning of this season the Vegas odds-makers had the team at 28 to 1 to make it to the World Series. Anyone who took those odds is certainly celebrating now as the Red Sox take on the the St. Louis Cardinals for major league baseballs crown. In this episode we take The Business on the road to historic Fenway Park where Red Sox COO Sam Kennedy talks about the challenges of turning around the storied franchise while under the microscope of a rabid fanbase. Then we head back to Harvard Business School to hear the insights of Professor Stephen Greyser, the father of sports marketing, reflecting on the risks and rewards of the owners’ aggressive business strategy – leveraging the Red Sox brand to expand far beyond baseball.
The Business is a Harvard Business School podcast. Twice a month during the academic year, host Brian Kenny will bring you a new take on the business world through unexpected stories, and conversations with business leaders, entrepreneurs and faculty members. Subscribe on iTunesU.
Brian Kenny: In 2012 the Boston Red Sox baseball club had its lowest winning percentage since 1965. So it’s no surprise that at the beginning of this season the Vegas odds-makers had the team at 28 to 1 to make it to the World Series. Anyone who took those odds is certainly celebrating today as the Red Sox take on the the St. Louis Cardinals for major league baseballs crown. In this episode we take The Business on the road to historic Fenway Park where Red Sox COO Sam Kennedy talks about the challenges of turning around the storied franchise while under the microscope of a rabid fanbase. Then we head back to Harvard Business School to hear the insights of Professor Stephen Greyser, the father of sports marketing, reflecting on the risks and rewards of the owners’ aggressive business strategy – leveraging the Red Sox brand to expand far beyond baseball.
Brian Kenny: So, I'm here with Sam Kennedy. We're standing outside the owner's box at Fenway Park. We're looking out at a beautiful green ball field. It's just kind of a visually stunning place. And Sam, I wonder if you could tell us quickly, what are some of the big changes, some of the enhancements that have happened in the time that you've been here?
Sam Kennedy: Probably the most high-profile changes have been all related to new seating areas for fans, whether it's the green monster seats, the right field roof deck, these club levels here which we're standing on, or the information for fans. We want to lead the league in information, so we have brand new LED video boards, we expanded the out-of-town scoreboard out in left field, and then the third is just widening the concourses, creating more breathing room at Fenway.
BK: Great. Let's go inside and talk some more.
BK: So, they're getting ready to prep this ballpark for the divisional playoffs, which I would imagine if you thought back six months, that might seem kind of unimaginable here.
SK: You know what, Brian? We've seen a lot over the last 12 years here in our time at Fenway Park. Never have we experienced such an exciting turnaround season.
BK: Let's go back to September of 2011.
SK: Do we have to?
BK: We have to go back, yeah. I think that's a good place to start with what will be a happy ending to the story, but—
SK: We hope, we hope.
BK: —2011, just two years ago this time, it probably seemed like the sky was falling on Fenway. Can you tell us a little bit about what the atmosphere was like here at that time?
SK: If anyone ever tries to tell you that sports or momentum associated with sports is not a real phenomenon, I can tell you they're wrong. We simply couldn't win a baseball game, any game. We needed to win one game that would have kept us in the post season. It was like a snowball coming down a mountain and it just kept growing and getting bigger and bigger, and we lost 20 out of 27 games in the month of September. We had a starting pitching staff with an ERA of over seven and a half, I believe; just sort of unheard of statistics. We pulled out the impossible and we were knocked out of the playoffs and from there, proverbial all heck broke loose and we had a manager in Terry Francona—who by all accounts, is one of the best managers in Red Sox history—decide that, as he said, it was time for the team to have a new voice. I think ownership was conflicted of what to do with Terry Francona and the decision was made—I would say collectively, given my recollection—that he should depart. So, that, of course, set of off a series of changes in the on-field operation, and then you had Theo Epstein—who is our general manager in the front office—decide to pursue another opportunity in Chicago with the Cubs. So, basically our baseball leadership, the two most important pivotal management positions were vacated within a period of six or eight weeks.
SK: It was unimaginable that it could get worse than September of '11 but it did. It got a lot worse. We had a year in 2012, which was really, really bad. I think we won 69 games. We hadn't had a year that bad in 50 years. So, it just seemed to be building upon itself and it wasn't until August 26th or 27th of 2012 that we were able to sort of stop the bleeding.
BK: So that sounds like the depths of despair, but before that there were some great years. Years that were so successful with the championships that the ownership group looked at broadening the portfolio. You acquired a NASCAR team, there was the English Premier soccer league, there was the relationship with the NCAA hockey, and all of this fell under the umbrella of the Fenway Sports Group.
Was the Fenway Sports Group kind of overshooting and did you take your eye off the ball—to use a baseball metaphor, which I guess, I have to here—and did that cause some of the tumbling that took place in 2011/2012?
SK: it's sort of a two-part question. I think that the commitment and focus on baseball by the management team has always been there, was there in 2001 when we were established, when our CEO, Larry Lucchino, sort of took the reins. That never changed. The resources that the management team was given increased, the commitment to player payroll, the commitment to renovating and protecting Fenway, the commitment to being active in the community - that never changed. What changed was the winning percentage and when that started to change, people started to focus on these outside activities. So, was there a connection between ownership getting involved with other activities? Maybe. Maybe. It's absolutely fair to point that out. In 2010, for example, is when we acquired Liverpool Football Club, there was a lot of scrutiny on that transaction. We had made some big moves that off-season so there wasn't a lot of negativity. We acquired Carl Crawford and Adrian Gonzalez, and I think people said oh, geez, they are committed. Well, those two acquisitions didn't work out the way we wanted them to. We did not play October baseball in '10 or '11. The strategy, I think, was sound but I do think it is fair to say, you know, was there some distraction? were the Red Sox focused on other things? It's fair to say because our winning went away. We just made some management mistakes. We won the World Series in 2007 which was the very year we acquired Roush Racing and rebranded it Roush Fenway and there was not a lot of attention given to the NASCAR acquisition, and I believe—my personal opinion, I could be wrong—but I believe that was because we had success.
BK: I want to talk a little bit about the interdependency of these two things because it has a huge impact on the economics of your operation. If you're on-the-field product isn't performing the way that you need it to, what's the impact on the rest of the organization at that point?
SK: That’s a great question and you’re absolutely right. The two are absolutely interconnected. You have to put a competitive winning product on the field in any professional sports endeavor. I don't care how good your sales and marketing people are; you need a great product. You need a team that the fans can believe in, that they're proud of, that they want to support night in and night out.
BK: A big part of this too is just the culture shift within the organization. The culture here in 2011/2012 was somewhat toxic based on all the publicized reports. It was pretty clear that it wasn't a functional - high-functioning organization on the field. Just in the way that the business and on-the-field strategies are integrated, if the culture on the field is bad, does that effect the business operation too?
SK: I think the toxicity and the negativity that you heard about and read about, not that it wasn't there, but I think it was definitely confined to the clubhouse area. We've had a ton of stability in management concerning the front office. So, this is a great place to work and a great culture, but when you're not winning, it's not as fun to come to work every day. That's for sure. I mean, this is a competitive group and we're here to win. That is clear.
BK: Each year you guys come up with a different campaign, and this year the tagline was 162 chances to restore the faith, and that says a lot. Can you tell us sort of the thinking that went into that?
SK: We wanted to acknowledge that we fell short of our goals. Even though we tried just as hard, the effort was there, the financial commitment was there—I mean, we spent as much on players in 2011 and '12 as we have in '13—the results weren't there and we are in the results business. That's an old cliché in sports but it's so true. It was a campaign that was designed to speak directly to our fan base, that we recognized we fell short of our goals and we have an obligation to restore that faith and credibility into the team, because people love the Red Sox – they want to love the Red Sox. You really have to screw things up for the fans to not love you, and we did; we screwed it up. We didn't get it done, we didn't deliver, we had a bad couple of years and that's why I think this year has felt so rewarding and so much better. Of course we want to win the World Series every year, but really it's about consistently putting a team out there that people are proud of.
BK: And for what's it's worth, I think you guys restored the faith in 153 games. You didn't use the full 162, so—
SK: That's enough. Thank you.
SK: Right now, at this moment in time, we're in a great place. Hopefully we'll go deep into October. Time will tell how that plays out.
BK: He's Sam Kennedy, the chief operating officer of the Boston Red Sox Baseball Club. Sam, thanks for joining us today.
SK: Great to be with you, Brian. Thanks for having me.
BK: So we've left Fenway Park and I'm here with Professor Stephen Greyser, the Richard P. Chapman professor of business administration at Harvard Business School. He's an expert on brand marketing, advertising and corporate communications, nonprofit management and, perhaps most importantly for this segment, sports management. Professor Greyser, thank you for joining us.
SG: Happy to be with you both at Fenway Park and here at the Harvard Business School.
BK: What is it that the ownership did so right in the first decade that they acquired the team?
SG: Ownership started with a very firm commitment, not only to the team on the field, i.e. the product, but also to the ballpark, which had been the bone of a lot of contention as to whether there should be a new Fenway Park and if so, where should it be? etc. But ownership made a commitment to Fenway Park and they made a commitment to improve Fenway Park for the fans. I think the other thing they did is worked very hard, have worked very hard, to be part of the community and to have the larger Red Sox entity be part of the community.
BK: The previous owners the Yawkeys, were legendary. Yet, under the Yawkeys the team never experienced the kind of success that it did under the new ownership. And the new ownership are relatively newcomers right, they've only been here for a little over a decade. How would you explain that phenomenon?
SG: There's probably no single answer, but the one area that I focus on has to do with building an effective corporate culture, both on and off the field. Something for example that the Kraft family has done with the Patriots.
BK: Fast-forward to 2011/2012. Things go bad, and the ownership's motives and their integrity come under fire in a very public way. What could or should they have done differently at that time?
SG: Many fans basically think ownership had lost its focus on the team on the field. The reputation has suffered from what could be called, for those that really follow the club closely, a breach of trust as a friend of mine calls it. And it takes time and other mending actions to restore that trust.
BK: If you were advising a room full of CEOs from other kinds of sectors, other than professional sports, what kinds of lessons could they draw from this Red Sox saga?
SG: In my opinion, part of the Red Sox erosion of reputation came from what a lot of people saw as a drifting of ownership focus from the club on the field, to what one could characterize as corporate-ization and commercialization. Sort of running after money instead of focusing on the product on the field. I think most notable in this regard was purchase by the Red Sox parent company of the Liverpool Football Club in the English Premier League. Ownership or top management has to keep its focus on the product or service that is of value to the various stakeholder groups - I'll use the more business analogy. The product on the field is excellent going into the postseason of twenty thirteen, but the reputation is still trying to make a comeback from what I call the egregious erosion in the wake of the fallout from the September twenty eleven swoon, and the decisions for the twenty twelve season, plus the performance.
BK: He is Professor Stephen A. Greyser, the Richard P. Chapman professor of business administration at Harvard Business School. Thank you for joining us today.
SG: You're welcome.