New venture question…Is it worth it?

I have worked with numerous sports industry entrepreneurs and growing companies in my career. I have also taught a class on entrepreneurship in the sports management program at NYU for the past 5 years so I have had the opportunity to research and analyze many other new product and service initiatives.  While many may not consider an established university to be of the entrepreneurial set nor the rebuilding and rebranding of its athletic department as a “new venture”, they are in fact just that. And as part of those worlds, they are subject to the challenges that any startup may face, e.g. financing, strategic alignment, market competition, etc.

Seattle University is in the midst of a major effort to drive awareness and attraction of its overall value through its athletic department. This idea of acheving such goals through high profile sports has been tried before and is still being tried at other institutions, most notably the building of a D-1 football program to raise a school’s profile.  The results are mixed, partly because they are hard to measure. Are the school’s capital raising and spending diverting resources from better uses in the university community? What return in terms of prestige and of course, profit, will the university see? It is hard to argue that in the short term at least, such efforts, require running a deficit that may not be recovered.

Seattle University’s efforts are worth watching as they involve a host of issues impacting the worlds of sports, business, academia, and social responsibility.

You can read about Seattle U’s efforts in the great piece by Greg Lamm at the Puget Sound Business Journal. The full story can be found at^2444221&page=1, with an excerpt below.

Friday, November 13, 2009

Seattle University: Shooting for glory; Behind Seattle U’s high-stakes strategy to build its brand through big-time sports

Puget Sound Business Journal (Seattle) – by Greg Lamm Staff Writer

Imagine a business venture that requires you to invest millions of dollars and a decade of time to develop a new version of an old, noncore product.

Statistically, the new version has little chance of earning a profit. As you spend more on it, you must cut elsewhere at a time when money is tight. You also could confront ethical issues in your zeal to make the product a success. But if the product finds an audience, it will bring national recognition, help you recruit top talent and possibly lead to marketing deals and financial support from company “alums.”

This is exactly what’s in play when head coach Cameron Dollar sends his team onto the court for the tipoff of its season opener at Oklahoma State on Saturday.

Seattle U is in the midst of a 10-year effort to lift its men’s basketball team, the Redhawks, to NCAA Division I play. Its leaders hope the move will raise the Jesuit school’s regional and national profile, much like Gonzaga University in Spokane, and perhaps reclaim the glory Seattle U enjoyed half a century ago when its team played in —and dominated — Division I.

After quitting that division in 1980 to focus on academics, Seattle U is once again pouring money into its athletic program — doubling its staff, expanding facilities and launching teams in a variety of sports. The expansion comes during a brutal recession and as other parts of the school are being forced to eliminate classes, trim teachers, freeze wages and reduce financial aid.

The payback is by no means certain. Few Division I schools have athletic programs whose revenue exceeds expenses, according to National Collegiate Athletic Association statistics. And while rallying generous alums and gaining a higher profile are not uncommon side benefits, these depend heavily on winning — with all of the potential for risks and rewards that this can entail.

Seattle University leaders say they’re well aware of the risks. “We’ve gone into this eyes wide open on the financial and business dimensions, very much so,” the Rev. Stephen Sundborg, Seattle U’s president, said.

Sundborg is confident that his strong oversight of athletics will help prevent any potential rule violations. Seattle U, he added, is determined to join Division I to boost its brand in ways that translate into more donors, more sponsors, better students and a fired-up alumni base.

“I see it as fundamentally a strategic decision,” Sundborg said. “It’s also about athletics, but it’s athletics as a strategy, and we think it is a very important thing to do.”

Investing in the product

To shoot for the big leagues, Seattle U has inked a five-year, $900,000 deal to lease KeyArena and boosted annual athletic spending by $1 million a year. Seattle U is taking over the SuperSonics’ court. The Redhawks’ red-and-white logo is painted over the green and gold of the NBA team, which moved to Oklahoma City last year.

But as spending ramps up at the Seattle Center arena, across town on Seattle U’s campus, Professor David Powers is grappling with cost cuts. As dean of the College of Arts and Sciences — the university’s largest school — he’s charged with holding the line on spending to help balance the university’s $173 million operating budget. A 5 percent budget cut, for example, forced Powers to cut classes and part-time faculty, although he said the cuts did not have a major impact on core courses available to students.

“We canceled a few classes which had low student demand and we did not renew the contracts of a number of part-time faculty members,” Powers said in an email. “These adjustments allowed us to continue to offer a broad academic curriculum of high quality to our students in a challenging economic environment.”

The recession took $41 million — a 20 percent bite — out of the university’s endowment fund, cutting it to about $165 million for a university with 7,751 graduate and undergraduate students.

These realities make a spending increase difficult. But increase it must. Sundborg launched the campaign to join the top tier in 2004 and the university has until 2013 to persuade the NCAA to let it into the club. The decision hinges on a series of trial seasons and how much support the university musters for its athletics department. Financial commitment is a major yardstick, although the NCAA doesn’t set a minimum that a school has to pump into a program.

Seattle U also is joining a funding race against other universities that have a sizable head start. It’s as if Seattle U is just starting its engine to catch a pack of Indy cars already speeding around the track. Seattle U’s athletic department will spent about $8.2 million this year, up from about $4.5 million when the Division I campaign began. It aims to reach $10.5 million by 2013.

That would put Seattle U below the average of $13 million that its peers in the West Coast Conference spent on athletics in 2008. The WCC is the league Seattle U wants to join because it includes such rivals as Gonzaga and University of Portland as well as other private faith-based schools in the Northwest and California.

Tim Leary, Seattle U’s executive vice president, acknowledges that spending is a “moving target.” By the time Seattle U reaches its goal in 2013, its spending will still be less than the average spent last year by the peer schools — and may not be enough to keep it in the game.

Raymond Sauer, an economist at Clemson University in South Carolina who follows college sports spending, said the rush to establish top-tier winning athletics creates an arms race of ever-escalating cost.

“The more people that are out there chasing that prize, the more resource they are expending,” Sauer said. “It’s becoming more costly for teams in Division I to compete for the spoils.”

But Sundborg is undeterred. A big-time basketball program, he said, will open a “window to a great university” to a wider audience and will give students something positive to rally around. Sundborg also is relying on support from alumni and corporate donors whose charity is essential to a host of campus projects, from new housing and classrooms to new study and sports facilities.

(The story continues at^2444221&page=1)