Strategy Innovation from TopGolf in the Declining Golf Market

Blog Post The Strategic Frame, Innovation that Creates New Value

Transformational strategy innovation often leads to rapid expansion, even in declining markets. An article on TopGolf in the May 2014 issue of Golf Digest provides an illustrative example.

Rapid Growth in a Declining Market

Golf is a declining market. In the U.S., fewer people are playing golf, and golfers are playing fewer rounds. The $2.6 billion golf equipment market has shrunk by $300 million since 2007 (source: WSJ).

Yet, TopGolf is growing rapidly. In the last two years, they have added four locations. This year, they will open six more. And it all began with a strategy innovation in 2011.

What is Strategy Innovation?

In their book the Power of Strategy Innovation: A New Way of Linking Creativity and Strategic Planning to Discover Great Business Opportunities, Johnston and Bate define strategy innovation as “a shifting of a corporation’s business strategy in order to create new value for both the customer and the corporation.”

Transformational strategy innovation transforms the enterprise’s business model, how the enterprise creates value and therefore makes money. This creates new markets where none previously existed. For example, 60% of TopGolf’s customers have never played golf.

The Transformation that Launched an Era of Expansion

For 11 years, TopGolf was a small driving range company with a unique innovation: microchips embedded in the balls allowed customers to see how far they hit. Like most golf courses and driving ranges, TopGolf collected a majority of their revenues from usage fees.

When the company sold in 2011, TopGolf’s new owners flipped the business model, ushering in an era of rapid expansion.

The new owners turned a driving range with a bar into a bar with a driving range. They invested in food, beverage, design, music, and lighting. They also undertook a cultural transformation. Instead of hiring golfers, they looked for “creative, energetic and often quirky” people in new, competition-style auditions.

The transformation has been revolutionary. Today, food and beverage sales account for a majority of TopGolf’s revenue. On the weekends, people routinely wait for hours to play, buying beers and appetizers while they wait. TopGolf Austin is #5 on the Texas Alcohol Beverage Commission top sales list for Austin. By 2017, TopGolf plans to have 18 million people playing, eating, and drinking at 50 U.S. locations.

Want to learn more about strategy innovation?

Start with the Moen case from Strategy Innovation on how the plumbing supplier tripled its revenues and increased market share 72% in less than a decade: The Discovery Process: How Moen Tripled Revenue.

 

(For an in-depth case study on strategy innovation, download this Moen case from Strategy Innovation: The Discovery Process: How Moen Tripled Revenues.)

 

 

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