Inter: Galaxy or Inter: Galaxy or Black Hole?Black Hole?

Yang SunMing GongXueping Li

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In a TV talk show......

• Host: Suppose that one of your key defenders is injured, what you do?

• Adriano Galliani (AC Milan CEO): We’ll buy a veteran defender and utilize his experience.

• Luciano Moggi (Juventus GM): We’ll buy a high potential young player and train him to be the best.

• Massimo Moratti (Inter Milan Chair): We’ll buy another star forward…

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Inter Man Utd (benchmark)

€118,000,000 Annual Player Wage Cost

€115,000,000 Annual Player Wage Cost

€148,400,000 Turnover in 2003 Growth Rate varies around Ø

Negative Profit (there are other spends)

€251,400,000 Turnover in 2003 12% Compound Annual Growth Rate

Profit ≈ 20% * revenue

Bought 106 first-team players (Including 20 superstars) in 10 years (Spent €562,800,000)

Spent less than €200,000,000 on buying players (6 star-players) in the past 10 years

Ø Champions since 1989 9 League Titles in the past 12 years

Sources: Man Utd Annual Report 03, The Deloitte Football Rich List 2004, http://www.footballtransfers.info/, and http://sports.163.com/tm/021206/021206_270400.html

=

<<

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P-V-C

• Purpose Value of Money =

Make the money you spend be worth the money, so that you run a healthy business.

• Viewpoint Massimo Moratti (Chairman of the club,

enthusiast of soccer)

• Context Running F.C. Inter Milan in the next 10~15 years

(long-term scope)

Value AddCost

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The Rich List really follows their historic performance

1. Manchester United € 251.4 40% 33% 27%

2. Juventus € 218.3 10% 54% 36%

3. AC Milan € 200.2 16% 55% 29%

4. Real Madrid € 192.6 30% 34% 36%

5. Bayern Munich € 162.7 40% 60%

6. Arsenal € 149.6 27% 50% 23%

7. Liverpool € 149.4 28% 42% 30%

8. Internazionale € 148.4 20% 57% 23%

9. Newcastle United € 138.9 34% 43% 23%

10. Chelsea € 133.8 33% 32% 35%

2003 Revenue Souce Distribution

Revenue Match Day Broadcast Commercial

Source: The Deloitte Football Rich List 2004,

millions

9 titles in 12 years

5 titles in 10 years

……

3 titles in 10 years

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Market Segment

Royal FansCore Market

Mostly local/regional90% Revenue

Driven by long-term performance

Tottering FansMarginal MarketCan be global10% RevenueDriven by short-term performance, big faces, etc.

Sources: Man Utd Annual Report 2003

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Revenue Management is not the core competence!

Hire sports business MBA’s and/or sports business consultants (they are all over) to figure out every possible ways to make money – but you are not promoting your position on the “rich list” unless you maintain playing success.

Let’s focus on the core competences that really make a difference …

Sources: Man Utd Annual Report 2003

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The Core Processesnow and in the future

GatherPlayersGatherPlayers

TrainPlayersTrain

Players

PlayMatchPlay

Match

ReleasePlayers

ReleasePlayers

Players Team Team

Team

Players

Performance

Primary“cash in” Process

Primary“cash out” Process

ManageBusiness

$$FansMedias

Sponsors

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Purchasing Behaviors

• In a TV talk show......• Host: Suppose that one of your key

defenders is injured, what you do?• Adriano Galliani (AC Milan CEO): We’ll

buy a veteran defender and utilize his experience.

• Luciano Moggi (Juventus GM): We’ll buy a high potential young player and train him to be the best.

• Massimo Moratti (Inter Milan Chair): We’ll buy another star forward…

GatherPlayersGatherPlayers

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Player-In Player-Out at Inter(Clu: No way to make money by trading players)

Source: http://www.footballtransfers.info/…… …… ……

€462,800,000106 Players in 10 years

€284,500,000

Christian Vieri £32m(1999) present

Ronaldo £18m(1997) £28.49m(2002)

Francesco Toldo £18m(2001) present

Hernan Crespo £16.57m(2002) £16.8m(2003)

Fabio Cannavaro £14.57m(2002) present

Clarence Seedorf £13.5m(1999) Swap (2002 F. Coco)

Robbie Keane £13m(2000) £11m(2001)

Dennis Bergkamp £12m(1993) £7.5m(1995)

Nwankwo Kanu £4.7(1996) £4.5m(1999)

GatherPlayersGatherPlayers

ReleasePlayers

ReleasePlayers

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Training is the essential value-adding process.

It is impossible to improve all the measuresand it really takes time (Δt) to improve!

Spiritual Mental Technical Physical

Adaptability Aggression Flair Crossing Passing Acceleration Natural fitness

Ambition Anticipation Important matches

Finishing Set pieces Pace Stamina

Controversy Bravery Influence Dribbling Long throws Agility Strength

Loyalty Consistency off the ball Corners Penalty taking

Balance Versatility

Pressure Creativity Positioning Heading Tackling Injury proneness

Condition

Sportsmanship Decisions Teamwork Marking Technique Jumping

Temperament Determination Work rate Long shots First touch

Professionalism Dirtiness

Cross-position capability Cooperate characteristics

TrainPlayersTrain

Players

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Squad Transition

Δt

t

Performance

Old Generation

Young Generation

TrainPlayersTrain

Players

PlayMatchPlay

Match

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Squad Transition

Δt

t

Performance

Old Generation

Young Generation

TrainPlayersTrain

Players

PlayMatchPlay

Match

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Organizational IssuesAre Essential!

• Belief must be aligned!(Making money has no conflict with splendid performance)

• Great changeroom atmosphere must be maintained

• Give opportunities to young players!• Try to retain the knowledge

from the old generation.• Cross-organizational issues: Good

relationship with partner clubs (switch players, co-own players, co-train young players, outsourced training, etc)

Manager* and Coaches

Players

Top Management

* Manager = Head Coach

TrainPlayersTrain

Players

PlayMatchPlay

Match

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Have the right people!

GatherPlayersGatherPlayers

TrainPlayersTrain

Players

PlayMatchPlay

Match

ReleasePlayers

ReleasePlayers

Players Team Team

Team

Players

Top Mgt

Manager*

Scout

Manager Coach

Manager Coach Top MgtManager

Performance

physiotherapist

physiotherapist

Process that primarily“cash in”

Process that primarily“cash out”

* Manager = Head Coach

Make (theright) Decision

Control the Training

Control the Match

Make (theright) Decision

Align the Belief

Top MgtManager

Manager, Coach, Phys. Manager, Coach, Phys. Manager, Top Mgt.

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Business Rule #1

• Buy no more than 1 star player each season

• Benchmark Man Utd.• Benchmark Real Madrid

# of stars

value add

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Business Rules #2

• Buy players you need, not those you want!

– Ask for your coaches’ opinion.– Still need to train them well.– You need world class nutritionists and

physiotherapists to take care of them.

• Benchmark Man Utd.• Bad example: Real Madrid

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Business Rules #3• Spend at least €5m/year in your

youth team– You need world class scouts to address this.– You need world class coaches to train them.– You need world class nutritionists and

physiotherapists to take care of them.– Give chances to young players.– (Note that not all young players will work out.

You need to risk-pool them)

– Benchmark Man Utd• The following key players in Man Utd 02-03 squad

are from Man Utd Youth Team:David Beckham, Ryan Giggs, Nicky ButtPaul Scholes, Gary Neville, Phil NevilleWes Brown, John O'Shea

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Business Rules #4

• Give at least 1 full season to your manager (head coach)

03-04 Hector Cuper Alberto Zaccheroni

02-03 Hector Cuper

01-02 Hector Cuper Marco Terdelli

00-01 Marcello Lippi

99-00 Marcello Lippi

98-99 Gigi Simoni Luciano Castellini Roy Hodgson Mircea Lucescu

97-98 Gigi Simoni

96-97 Gigi Simoni Luciano Castellini Roy Hodgson

95-96 Roy Hodgson Ottavio Bianchi Luis Suarez

Not like this: (Inter 10-year Manager List)

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Business Rules #5

• Hire a world class VP/GM

• In player purchasing/selling– You can really get the player you need– at a reasonable price– negotiate well to address payment

installment agreement.

• In day-to-day management– Utilize his leadership to create great

organizational atmosphere.

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Ultimate Recommendation• Hire Industrial EngineersIndustrial Engineers

(not MBA’s) to address:– Strategic Decision Making– Tactical/Operational Decision

Making– Knowledge/Information Base– Process Control and Continuous

Improvementin your core competences

Differentiation Cost

Add Science to the Art of Sports!Add Science to the Art of Sports!

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Add Science to the Art of Sports!Add Science to the Art of Sports!

GatherPlayersGatherPlayers

TrainPlayersTrain

Players

PlayMatchPlay

Match

ReleasePlayers

ReleasePlayers

Players Team Team

Team

Players

Top Mgt

Manager*

Scout

Manager Coach

Manager Coach Top MgtManager

Performance

physiotherapist

physiotherapist

Make (theright) Decision

Control the Training

Control the Match

Make (theright) Decision

Align the Belief

Top MgtManager

Manager, Coach, Phys. Manager, Coach, Phys. Manager, Top Mgt.

IE’s

IE’s

IE’s

IE’s

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Questions