News & Opinion

Industry titans to PGA Tour: Innovate, or else

Faced with the threat of a rival pro tour, the established circuit needs to ‘constantly innovate’ and focus on the customer to lead change rather than be overrun by it, business executives advise

PEBBLE BEACH, Calif. – It would be unfair to suggest that the PGA Tour is under siege. Yet, there’s no doubt that the proposed Premier Golf League could be a disruptor in professional golf. How serious of an impediment is the upstart league, and how should the PGA Tour address the potential threat?

At last week’s AT&T Pebble Beach Pro-Am here, the field was dotted with numerous company senior executives hobnobbing with professional golfers.

AT&T Pro-Am
The opening hole at Monterey Peninsula Golf Club, one of 3 sites used during the recent Pebble Beach Pro-Am, which attracts not only the world’s best touring professionals but also captains of industry.

Some of those industry leaders, such as Kenneth Chenault, the former CEO of American Express, ran established, iconic companies that have withstood the threats of other businesses, large and small, over the years.

Scott McNealy, the former CEO and co-founder of Sun Microsystems, was considered to be a disruptor in the early 1980s when Sun broke into a rapidly expanding technology industry.

Taking the position that there are no entitlements in business or life, Chenault used that philosophy during his nearly three decades at Amex, where he rose to CEO. It’s a philosophy to which he would suggest that any dominant player in any industry would adhere today.

But more importantly, Chenault advised to “constantly innovate.”

“You’ve got to put yourself constantly in a leadership position,” Chenault said, “and that only comes with innovation.”

Chenault, 68, is now on the board of one of the biggest disruptors in the hospitality space, Airbnb. He touts the slogan “innovate or die,” regardless of whether a company is the big dog in its industry or a figurative Chihuahua, nipping at the heels of its competition.

In looking at the PGA Tour, its business model essentially has been the same since the Tour’s inception: a mix of corporate sponsorship and TV money is the main financial driver.

The product is based on 72-hole stroke-play tournaments, with few exceptions. The annual WGC-Match Play and Zurich Classic two-man team event and the Barracuda Championship, which uses a modified Stableford scoring system, are the three outliers.

While the Tour can point to ShotLink, which has compiled a statistical database of play during the past 20 years, the technology’s uses have been limited to media and TV partners. Now, with the advent of gambling, ShotLink+, the newest iteration of the database, could bring a real value to the data for fans. This might not be the type of innovation that Chenault was fostering, but it does rise to the level of being beneficial.
The European Tour has tried to expand beyond its core 72-hole stroke-play events with the GolfSIxes team format; the newly created Scandinavian Mixed, which includes male and female competitors; and the recent ISPS Handa Vic Open, in which men’s and women’s tournaments were held concurrently on the same course, using alternating tee times.

However, with few exceptions such as ShotLink+ and some variations on tournament formats, neither of the major professional tours has made significant changes to its product over time.

That is one key reason why the upstart Premier Golf League has a chance to get a foothold in the game, according to other industry leaders.

“We had to find something that was different,” said McNealy, using his experience at Sun as an example. (McNealy’s son Maverick competes on the PGA Tour.) “You can’t do the same thing the big guys do, because they always outspend you. They’ll out-brand you, so you have to have a controversial strategy. If everybody does the same, [what] you’re doing there is no differentiation. No differentiation, no pricing power; no pricing power, no profits; no profits, no business. You have to be controversial and correct. If you’re controversial and wrong, you just look stupid.”

Richard Fisher served as president and CEO of the Federal Reserve Bank of Dallas in 2005-2015. He actually was a disruptor because he came out of the asset management/hedge fund side versus the traditional economist who typically holds such positions on the Federal Reserve board.

“I was a disruptor; I was on the other side,” Fisher said. “And it takes a while to earn people’s trust.”

Fisher concedes that those who are being disrupted are reluctant to understand the position of the disruptor.

With the PGA and European tours, both seemed to have drawn a line in the sand with their players on what would happen if they were to jump ship for the proposed tour.

Fisher says his role as a disruptor was different because he had to fit inside the traditional culture of the Federal Reserve. The PGL is different, he says.

“They are trying really to divert from the traditional culture,” Fisher said. “I think that’s going to be a tough row to hoe.”

Nonetheless, there are times when it makes sense to listen to the disruptor.

Every industry is different. In technology, working with others is crucial; in professional golf, it’s not nearly as important.

According to John Chen, the chairman and CEO of BlackBerry, partnering with others in business is crucial.

The PGA Tour has built many relationships and partnerships, but in the ecosystem of professional golf, the relationships are really more tangential. Should they be more direct or collaborative?

That is where the PGA Tour could look not only to solidify its relationships with Augusta National Golf Club, the USGA, the R&A and the PGA of America, but also its rival European Tour and other tours around the world.

How should the PGA Tour do it? The best way would be to work with the governing bodies on issues that affect golf in general, such as the equipment/distance issue, which the European and PGA tours seem uninterested in tackling.

At the same time, because the PGA Tour is the dominant player, it could work on expanding its relationship with the European Tour with an eye toward an acquisition or merger, making the dominant player even more dominant.

“I don’t believe that you can be completely closed and continue the dominance, so to speak, for a long time,” BlackBerry’s Chen said.

Many golf observers forget that the PGA Tour was spun off from the PGA of America in 1968. Meanwhile, the NFL recently celebrated its 100th anniversary.

At 52 years old, the PGA Tour is not facing its first attack.

Greg Norman’s proposed world tour in the mid-1990s was an attempt to disrupt professional golf, but the idea went nowhere.

Today, the PGL is believed to be very well funded, with money from Saudi Arabia and Japanese conglomerate SoftBank behind the effort. Though the upstart tour says it wants to work with the PGA Tour and has proposed an 18-week schedule, it’s hard to see much wiggle room in which both groups could find common ground.

Tom Nelson, the chairman, president and CEO of National Gypsum Co., says the best way to defeat a potential disruptor is to focus on the customer.

In professional golf, the customer is not only the fan but the TV and cable networks, sponsor companies and the charitable interests.

“Hopefully, you’ve got long, deep relationships and partnerships and you’re so integrated with what they do, so you can bring value to them,” Nelson said. “The customer can’t tell whether you’re on your team, meaning your company’s team or the team they’re on.”

The PGA Tour is the dominant player in professional golf, but with the threat of an interloper, it seems clear from these C-suite executives that the winning approach might be to strengthen the Tour’s strategic position to make it as difficult as possible for a competitor to disrupt that dominance.

Innovate and focus on the customer. That’s the core advice from business leaders to the PGA and European tours.

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