Everyone says they’re growing the game. Here’s a framework for actually doing it:

It’s been two weeks since the PGA Show and the feedback from folks around the industry has been generally positive.  It should be.  TaylorMade kicked things off in grand fashion with some provocative statements and the introduction of HackGolf.  From there, everyone I encountered seemed to have a good understanding and acceptance of the challenges we're facing and an upbeat disposition about our ability to overcome them.

The Show for us (TGA) was excellent.  We’re starting, slowly but surely, to see the industry embrace our model and impact.  The Southern California PGA’s acquisition of two of our franchises has played a big role in that.

The Show for me personally was also very good.  In addition to my TGA commitments, I had the pleasure of meeting several readers of this blog and learning about some of the awesome things this community is working on.

Since leaving Orlando, however, I’ve found myself with this nagging and growing discomfort about the Show’s central theme – the concept of “growing the game.”

What bothered me this year was how loosely this phrase was being thrown around.  Countless people were wearing pins on their badges that proclaimed: “I’m growing the game.”  Everyone from equipment companies to PGA Professionals to industry associations to teaching aid companies to basically everyone else was touting how they grow golf. 

They’re not wrong.  What’s the definition of “growing the game” anyway?  Is it making golf easier?  More enjoyable?  Faster?  Cheaper?  More accessible?  Yes yes and yes.  By this vague description, basically everyone in the industry is in some way shape or form trying to “grow the game.”  That’s a good thing from a 100k foot level.

My issue is that the phrase is becoming shallow.  It’s used more in self-aggrandizing ways than in meaningful ones.

What does “growing the game” actually mean?  Is it our goal as an industry to increase the number of overall players?  Overall rounds?  Annual spending?   Enjoyment?  TV viewership?  What?  In the tennis industry, they measure success by ball sales.  What's that metric (or metrics) for golf?

And that’s where my discomfort resides.  When everyone believes they’re growing the game through countless different ways without a clear overarching strategy or collective objectives, we’re accomplishing everything but accomplishing nothing.

It’s important to note that the lens I view the golf industry through is almost entirely influenced by player development.  I have a deep personal relationship with the concept of “growing the game” as my entire career has been dedicated to bringing new players into the sport.  Within this context, here’s how I’d create an industry-wide framework and strategy for growing golf:

Step 1 – Identify the three categories of players:

Group 1 – Core golfers

Group 2 – Occasional golfers

Group 3 – Non-golfers

Note that I do not differentiate between lapsed golfers and those who have never played the sport as BCG and Golf 2.0 do.  My view is that, either way, the reasons why they stopped playing or never started are very similar.

Step 2 – Define what “growing the game” means in each category:

Core golfers – increased annual spending

Occasional golfers – increased rounds and memberships

Non-golfers – increased overall participation

Step 3 – Identify the key drivers of Step 2 goals:

Core golfers – equipment/apparel, lessons, training aids, tournaments, travel

Occasional golfers – time, cost, course availability

Non-golfers – knowledge, availability, time, cost, difficulty

Step 4 – Identify strategies for each driver (only some of many listed below):

Core golfers – equipment/apparel advancements, cost-effective lesson packages, regional tournaments and social outings

Occasional golfers – increase pace of play, decrease costs, define/promote other ways to play and enjoy “golf”

Non-golfers – target youth and millennials, embrace alternate forms of “golf,” create simple and cost-effective introductory programs

Step 5 – Partner with key stakeholders for each driver (only some of many listed below):

Core golfers – TMAG/Callaway/etc., PGA of America, PGA Professionals

Occasional golfers – Tee it Forward, TopGolf, TMAG’s 15” cup, PGA Junior League Golf, Speedgolf, more customizable holes/courses

Non-golfers – Get Golf Ready, TGA, FootGolf

Conclusion:

Not only would a concise and straight-forward outline like this give the industry a framework within which to operate, but it would help identify for all stakeholders where their value proposition lies compared to others and what their focus should be.  Imagine the collaboration, idea-sharing, acceptance, resource-sharing, etc. that could come from this.  How great would it be for the dialogue to shift from buttons that state “I’m growing the game” to real conversations where someone could say - “I’m growing the game by focusing on group 2 with the incorporation of Speedgolf during twilight hours.” - and everyone involved understood what was just said and how it aligned with their own strategies?

I understand that the common counter-argument to my view is “golf is a niche sport and we should accept that” but I disagree.  That, to me, is a deferral of responsibility for declining participation.  Every day I see people pick up a club for the first time and have an amazing experience who aren’t part of the “niche.”  That is why I believe golf has tremendous room to grow through both traditional and non-traditional ways.  But we need to start with a plan.  And there needs to be objectives we all buy into.

Thank you for reading this far along in my post and taking the time to hear my thoughts on how we should frame the conversation and craft the strategy to accomplish “growing the game.”  I welcome your thoughts and feedback.

Have a great weekend and Happy Entrepreneuring… 

Analyzing Taylor Made's Purchase of Adams Golf

This has been a big news week in my world – the PGA Tour announced significant structural changes, my company TGA officially announced the launch of TGA Premier Youth Tennis with the USTA as a Founding Partner, Los Angeles announced itself as a meaningful startup community at Start Engine’s Demo Day (where I’m a Mentor), and Taylor Made announced its acquisition of Adams Golf.

I’m going to talk about all of these items in future blogs, especially TGA’s strategic decision to enter the tennis industry as the lessons learned are already reminding me of case studies I used to debate in business school. 

Today, however, I want to look at Taylor Made’s Acquisition of Adams Golf, which was announced on Monday.  I’m going to look at it from three perspectives – financial, strategic, and implications for entrepreneurs.

Financial:

Taylor Made Adidas Golf Group acquired Adams Golf for ~$70 million, or $10.80 per share. This represents a premium of ~71% over the share price from before Adams Golf announced it was examining major new strategic directions in early January and a 9.5% premium over their closing price last Friday of $9.86.  Upon news of the acquisition, shares rose 8.8% to $10.73 on Monday (where it currently remains), indicating that the market likes the acquisition, at least for Adams Golf.  Shareholders must like it too considering the stock at this time last year was $5.22.

Adams Golf had $11.85 million of operating income in 2011 on $96.50 million of revenue, so Taylor Made gets an equipment company that is profitable with ~12% operating margin. This seems pretty good considering Callaway, the other publicly-traded golf equipment company, had an operating margin of almost -10% last year with $81.09 million of losses on $886.53 million of revenue.  Therefore, Taylor Made paid 0.72x revenue and 6x earnings.  I don’t have any comps to compare these multiples to, but at first glance they look pretty good to me considering the lack of profitable equipment manufacturers in the industry.

Strategic:

Adams Golf’s focus on mid-high handicappers nicely complements TM’s portfolio of products that focus on low-mid handicappers.  Therefore, the acquisition buys top-to-bottom market share for Taylor Made.  Additionally, when analyzed through Porter’s Five Forces (which is a great model for looking at strategic decisions), the deal looks like a good one:

Threat of New Competition – the acquisition makes the largest golf equipment manufacturer even larger.  I agree with many leaders in the golf industry who feel that we’re about to see consolidation amongst equipment manufacturers and this move is a step in that direction.  As a result, threat of new entrants into the market decreases as barriers such as capital requirements, brand equity and economies of scale tilt more in favor of Taylor Made. Analysis – thumbs-up for TM.

Threat of Substitute Products or Services – since there are no alternatives to golf clubs – meaning, you need to have them and them alone to play on a golf course – this “force” doesn’t apply much to the acquisition.  In terms of customers spending their time/money on activities that substitute for golf, this deal also has no impact. Analysis – neutral for TM.

Bargaining Power of Customers – consolidation almost always leads to less bargaining power for customers due to fewer options that create less competition.  Analysis – thumbs-up for TM.

Bargaining Power of Suppliers – this move gives greater economies of scale to TM and therefore gives them greater influence over suppliers. Analysis – thumbs-up for TM.

Intensity of Competitive Rivalry – I believe the acquisition will increase rivalry in the short-term as competitors scramble to compete with a growing market leader through increased advertising spending and so forth.  However, in the long-term, I don’t believe any equipment company can create a sustainable competitive advantage through innovation due to USGA regulations.  Therefore, manufacturers will (and are) evolving from R&D houses to marketing firms.  Once this happens, golf clubs will essentially become a commodity from a technological standpoint and industry leaders will need to succeed through brand equity.  New  private-label entrants will then be able to enter the market with equal quality and significantly reduced price-points through reduced overhead, thus increasing competitive rivalry for everyone.  For both the short-term and long-term, that spells trouble for Taylor Made.  But, I believe this will happen regardless of the Adams acquisition. Analysis - neutral for TM.

Implications:

For entrepreneurs, I think consolidation is bad news in the short term and good news in the long term.  As technology becomes a commodity, and big players fail to innovate (as is often the case with consolidation), opportunities will arise for new entrants to capitalize on the huge market of people who want top-of-the-line technology but don’t want to pay $500 for a driver.  If and when that happens, hopefully entrepreneurs will be there with a solution that makes golf more affordable and therefore gets more players into the game.