Newcastle Football Club was purchased last January by Mike Ashley. His investment has cost him over £250m so far. From the beginning he was an unconventional owner, preferring to sit with the fans rather than in the Directors box. The club had appointed a new manager some six months before Mike Ashley took over. He had been a very effective manager but never created a style which was ‘pleasing to the eye’. Mike Ashley sacked this manager and replaced him with a local legend called Kevin Keegan, who was simply adored by the fans and has a reputation second to none about his passion and enthusiasm for the game of football.
However, the fairy tale did not work and Kevin Keegan resigned about two weeks ago. The fans have all turned against the owner in a vicious campaign. The owner has decided to put the club up for sale (although he wants a sale price of £300m – not a bad return!).
There are no winners in this sorry story. But there are lots of lessons to be drawn. Firstly, there is this idea which is seen as the first commandment of business: Listen to your customer – the customer is always right. In this case, Mike Ashley made a bad mistake by actually getting too close to his customers. Sitting with the fans may have been fantastically symbolic and endearing, but he got caught up in the hype. He lost his perspective as a business owner and instead went with the instinct of the crowd. Most customers will say (if asked) that you need to lower your price, improve your service and reward loyalty. This is great when you are a large company with resources and scale to do that.
When you are a small business, you have to simply ensure you survive. The easiest lesson on business courses is to teach consumer sovereignty. I have found it a pretty useless lesson as it just was not practical to implement. There is nothing which will undermine your staff more in an organization if you are constantly seen to be distancing yourself as the founder from ‘them’. Mike Ashley, when sitting with the fans, was telling the fans “look, I am one of you” this is the same as sending out a signal to his staff that he was not one of them.
To me leadership is about balancing calls. I am not suggesting that you do just one thing in an extreme or the other. You just have to be careful to recognize how other stakeholders may view your actions.
The other mistake from this sorry lesson is that football is not a business. It is about passion. It would be a dream come true for me if I was rich enough to become a shareholder at Arsenal. I also know that this dream would soon turn into a nightmare.
The way you behave as a fan is different from the way you behave as a business owner. I know that if I was a director of Arsenal, I would encourage reckless spending so that we could win a trophy. The directors of Arsenal are rightly applauded at the moment for taking a very long term view of the club. I feel safe in the knowledge that they are at the helm and not someone like me!
The lesson for entrepreneurs and investors here is clear as well. You must have passion for your business but it is not the same as having passion changed into a business. I have seen too many business plans which don’t make commercial sense. These are plans where someone is trying to make money from a passion they have. Nothing wrong with this – just remember if you are looking for external investment, the numbers have to stack up as well.