In part one (yes this so big it's a two parter) I will identify the reasons and diagnosis/ evidence it is dying and then in part two offer some possible solutions.
And this comes from a point of honest and open discussion, if we all just shut down and hope for the best or keep repeating what we have always done then we are doomed to failure. I happen to know about leisure and fitness, you could apply these ideas to many types of business that are dying right now.
Imagine a business where 1) most staff get paid minimum wage 2) the company doesn't have to pay rent on it's premises 3) you don't have to pay VAT 4) and if you are lucky someone gives you a grant each month as well. If this business can't make a profit or break even, then their business model is in big trouble, it is a failure model.
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| Film reference for the day. |
The same goes for the big monolithic health clubs. They have more overheads but still follow the minimum wage model, and yes they can raise some money from the private sector for a while but eventually the house of cards collapses. There is no sound business at the core of what they are doing.
The pressures on these business are considerably higher than they were 10 years ago. The market has fragmented and exploded. The competition comes from budget clubs charging �16.99 a month, from micro gyms (so called boutique gyms, but I don't like this name, makes it sound like a clothes shop in Camden), crossfit, workout in the park, fitness apps, online coaches, people buying programmes from someone on instagram.
Too big to fail? Of course not, visit any high street, where has Blockbuster, Woolworths, Virgin Megastore and a hundred other big business's gone? They failed to adapt to the emerging future. And remember the financial crisis, several banks only exist now because they were bailed out. And then there are governments and nation states which fail all the time, such as is happening in Europe right now. To think that the people running the leisure industry are any different would be myopic at best.
You think anyone is going to bail out the leisure industry when it goes pear shaped? Local governments are �10 billion in the hole, their priority is not going to be to save your LBT class (although, local councils do seem to love swimming pools for some reason...)
The basic business model centres and clubs hasn't really changed since the 1980's. Have a big building. And the contents of these buildings have evolved from squash courts to multi gyms to big gyms, and always the ubiquitous swimming pools. And in the 1990's the big health club chains expanded and most leisure centres just followed this model with monthly memberships and gyms and studios and all that, and nothing has really changed. Then there was the concept of leisure for all, even though it never can be because at some point you have to charge some money and even if it was free some people don't want your product, and now most budget gyms are way cheaper as well.
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| Actual money pit and perennial excuse. |
If It can happen in the private sector, anyone remember Esporta, Holmes Place, Canons? Then it can happen in the semi private/ trust/ charity/ council funded sector as well.
Signs & Symptoms.
"most companies perish while their management is frozen with terror"
(Goleman, Boyatzis & McKee, 2002;320)
A few key pointers that an industry is in trouble:
- Heavy discounting of the product, hoping that somehow this will attract new customers (as Seth Godin says, if someone doesn't want your product, discounting it won't make any difference).
- Raising the price for existing customers. If they are already with us, may be we can make them pay more.
- Reverse pyramid management structure. The front line service is cut but you still have a whole bunch of middle and upper managers (people rarely make themselves redundant).
- A 'sell more' one trick pony strategy. We just need to sell more, this isn't a strategy but a shrill shout of someone who has run out of ideas. This is like the manager of a football team saying 'what you need to start doing is winning', and 'if you keep kicking the ball at the goal one of them is bound to go in'. Thanks coach, we all know what we need to do, but how, where is the plan, where is the coherent strategy?
- And engaging in a whole process which Otto Scharmer and U Lab at MIT would call 'absencing'. There is closing down, holding onto what we already know, holding onto the patterns of the past and collectively enacting results that no one wants.
- Continuing to pursue aspects of their business that do not make money in the hope that these will somehow magically transform into something that makes money and they don't want to piss off the minority of people who still use these services.
- In his book Holacracy Brian Robertson lists some other warning signs about organisations including "emails flying around with many people cc'd in, often for unclear reasons" and "people have lots of ideas about what 'we' should do... but 'we' doesn't do it" (Robertson 2015;41)
Cutting costs, skimping on staff, not fixing things, does that sound familiar? It's the standard model for most failing business's.
"It's what most companies and institutions are doing today - they respond to challenges by doing more of the same: cutting costs and becoming lean and mean, but not reinventing themselves." Scharmer & Kaufer (2013;245)
Clues
#1
A lone person with a Skype connection can make more money and influence more people than most of the current traditional fitness industry.
#2
Micro gyms don't follow the same old tired model. In some ways they have figured out that 80% of their business comes from 20% of their clients (Paretos Law). However, I do see some micro gyms which end up following the same path as the business's they left. They decide to have monthly memberships with all sorts of discounts for all sorts of people, they then decide that what they need is longer opening hours and before you know they're paying some poor sap (coach) to sit on a reception desk for minimum wage while not actually coaching anyone. At this point they have become a single site version of what they tried to avoid except the owners have some equipment that they personally like in their gym. For how to do it properly see Cressey Performance, Cosgrove and Mike Boyle to name a few.
#3
50% of people in management positions are not adding any value. Another 20-30% may be adding value in one persons view. Therefore 70-80% of people in management can be removed from their role and the organisation will run smoothly. (Boyatzis, 2015, Coursera.org)
Think about that for a second, and if you're a manager really think about that. Does your organisation really need you, do the customers in your club really need you. What do they really need, what value are you adding?
#4
The only asset you have that can't be copied is your staff.
Most aspects of your business can easily be copied, anyone can rent a space and lease a load of equipment. Anyone can have a really good website these days. These are not hard things to copy.
The only thing that you have that cannot be directly copied because they are unique are your staff. They create the culture, they create the atmosphere. But how much are we investing in ground level staff?
Despite this, the turnover of staff is very high in leisure at the lower levels. How can you retain customers when you can't retain staff. The holy grail of member retention is lost before you've even engaged with a customer.
Right now, Sport Direct have announced that they will be paying above minimum wage. This means that a company that is widely regarded as being one step above working in a gulag has just trumped most of the leisure industry.
Most aspects of your business can easily be copied, anyone can rent a space and lease a load of equipment. Anyone can have a really good website these days. These are not hard things to copy.
The only thing that you have that cannot be directly copied because they are unique are your staff. They create the culture, they create the atmosphere. But how much are we investing in ground level staff?
Despite this, the turnover of staff is very high in leisure at the lower levels. How can you retain customers when you can't retain staff. The holy grail of member retention is lost before you've even engaged with a customer.
Right now, Sport Direct have announced that they will be paying above minimum wage. This means that a company that is widely regarded as being one step above working in a gulag has just trumped most of the leisure industry.
And why do most people leave?
"The number one reason that people cite for quitting is dissatisfaction with the boss. In a tight labor market, when people have the ability to get an equivalent job easily, those with bad bosses are four more times likely to leave than those who appreciate the leader they work for." (Goldman, Boyatwzis, McKee 2002;105)
#5
Thinking this is a service industry when it's an experience industry.
It's easy to think you provide a service, here is a room full of machines, here is a swimming pool. Thinking in terms of pure utility. And there are some customers who want a pure utility, a cross trainer, a class taught by anyone in any old room. These people are going to go and buy the lowest price option.
In the world of renting telephone lines and broadband, this idea of service works. All prices are pretty much the same, the same line is coming into your house whoever you rent it from. However much these companies think they are different they really aren't.
It's easy to confuse customer service and experience. One way to think of it is explained by Pine & Gilmore (1998) in their seminal article:
"The easiest way to turn a service into an experience is to provide poor service." (Pine & Gilmore)
More on this later in the solutions section.
That's the end of Part 1. The stage is set, we all know what the problems are, but how do we change it? See you in part deux, which is here.
For more on all this stuff please see the following posts from me
The digital disruption of the fitness industry
Induction, Program, Leave, Repeat
No Joining Fee. The Fitness Industry Epic Fail
References and acknowledgements.
This whole thing has a big debt to two Massive Online Open Courses. (MOOCs). The future of learning probably isn't �9000 a year institutions any more.
Inspiring Leadership through Emotional Intelligence. Case Western Reserve University. www.courser.org
U Lab: Transforming Business, Society and Self. www.edx.org
U lab website
plus
The Science of Happiness. University of Berkeley. www.edx.org
Books
Godin S (2011) We Are All Weird
Goleman D, Boyatzis R, McKee a (2002) The New Leaders. Transforming the Art of Leadership into the Science of Results.
Scharmer O & Kaufer K (2013) Leading from the Emerging Future.
Robertson B (2015) Holacracy. The Revolutionary Management System that Abolishes Hierarchy.
Wallman J (2015) Stuffocation. Living More with Less.
Journals
Pine & Gilmore (1998) Welcome to the Experience Economy. Harvard Business Review.
"The number one reason that people cite for quitting is dissatisfaction with the boss. In a tight labor market, when people have the ability to get an equivalent job easily, those with bad bosses are four more times likely to leave than those who appreciate the leader they work for." (Goldman, Boyatwzis, McKee 2002;105)
#5
Thinking this is a service industry when it's an experience industry.
It's easy to think you provide a service, here is a room full of machines, here is a swimming pool. Thinking in terms of pure utility. And there are some customers who want a pure utility, a cross trainer, a class taught by anyone in any old room. These people are going to go and buy the lowest price option.
In the world of renting telephone lines and broadband, this idea of service works. All prices are pretty much the same, the same line is coming into your house whoever you rent it from. However much these companies think they are different they really aren't.
It's easy to confuse customer service and experience. One way to think of it is explained by Pine & Gilmore (1998) in their seminal article:
"An experience occurs when a company intentionally uses services as the stage."And guess what, if you think you are in the service industry you probably turn your product into an experience everyday you don't clean something or someone gets told the wrong thing at reception and the complaint comments flood in.
"The easiest way to turn a service into an experience is to provide poor service." (Pine & Gilmore)
More on this later in the solutions section.
That's the end of Part 1. The stage is set, we all know what the problems are, but how do we change it? See you in part deux, which is here.
For more on all this stuff please see the following posts from me
The digital disruption of the fitness industry
Induction, Program, Leave, Repeat
No Joining Fee. The Fitness Industry Epic Fail
References and acknowledgements.
This whole thing has a big debt to two Massive Online Open Courses. (MOOCs). The future of learning probably isn't �9000 a year institutions any more.
Inspiring Leadership through Emotional Intelligence. Case Western Reserve University. www.courser.org
U Lab: Transforming Business, Society and Self. www.edx.org
U lab website
plus
The Science of Happiness. University of Berkeley. www.edx.org
Books
Godin S (2011) We Are All Weird
Goleman D, Boyatzis R, McKee a (2002) The New Leaders. Transforming the Art of Leadership into the Science of Results.
Scharmer O & Kaufer K (2013) Leading from the Emerging Future.
Robertson B (2015) Holacracy. The Revolutionary Management System that Abolishes Hierarchy.
Wallman J (2015) Stuffocation. Living More with Less.
Journals
Pine & Gilmore (1998) Welcome to the Experience Economy. Harvard Business Review.
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