“The granddaddy of all [strategic] mistakes is competing to be the best, going down the same path as everybody else and thinking that somehow you can achieve better results.” – Harvard Business School Professor Michael Porter, perhaps the leading expert on business strategy
“I don’t want Penn State to become the kind of a place where an 8-2 season is a tragedy. You can’t tell kids that a football loss is a tragedy. It’s not.” – Penn State Coach Joe Paterno, 1971
The groundswell of fan, alumni and letterman support for Penn State interim coach Terry Smith is not just sentimentality. This spontaneous outpouring gives the trustees, President Neeli Bendapudi and Vice President Pat Kraft the opportunity to pivot from the misguided “Natty or Bust” strategy that ended in the disappointing failure of James Franklin’s tenure as head football coach.
Although Franklin should be credited with following our tradition of emphasizing family and post-graduate success for his players, his failure to offer the same sort of blunt comment such as the Paterno quote above has had predictable results. It was my pleasure to watch last year’s CFP semifinal while on research leave in Sydney, Australia, and by coincidence the sports bar was the same one selected by Penn State undergrads on study abroad. After the heartbreaking loss, I observed that the Nittany Lions were one mental error by a 20-year-old from the national championship, a pretty successful season. Three undergrads demurred: it was NOT “success with honor.” The best explanation for this year’s collapse against mediocre foes was precisely the feeling that a two- or three-loss season, foreshadowed by the loss to Oregon, would constitute a tragedy.
As a professor of sports law and strategy, I study sports around the globe. To my knowledge, there are only two programs that succeeded in Franklin’s stated goal of spending his way from “great” to “elite”: Manchester City and the Los Angeles Dodgers. In both instances, backed in one case by a sovereign wealth fund and in another by multiple billionaires, they succeeded by vastly outspending rivals. Penn State lacks the resources to do this.
Instead, pivoting to Terry Smith as permanent head coach would allow Penn State to recalibrate what Professor Porter calls the “distinctive competitive position” that strategic firms should seek in order to create a “unique value proposition.” That “unique value proposition” is sustained success (typically great, occasionally elite) with the honor and pride in the quality of the character of the young men who play for those who came before them with no names on their backs, and the demonstrable success of the lettermen who return each year.
Strong leadership is required by the trustees and president here, because there is a potential conflict with the strategic objectives of football coaches and athletic directors. Although “Natty or Bust,” it is the “granddaddy” of mistakes for the university, not clear this is so for Coach Franklin or Dr. Kraft. Franklin came close, and he might have been set for life if a few plays against the Ducks had gone the other way; the downside is his $8 million contract is guaranteed, and he lands well with another program that he will likely serve well. If Dr. Kraft stays the course by hiring a coach whom he thinks will accomplish what Franklin couldn’t, and he succeeds, he again is absolutely set for life and widely praised for his bold moves; but if the next coach does not (as Porter predicts is likely) move Penn State from “great” to “elite,” and he too is shown the door, he still keeps his contracted salary. Given what an outstanding athletic administrator Kraft is, he too will land well at another program.
Who is left to pick up the mess from the failed “Natty or Bust” strategy? This is, therefore, a good gamble for Franklin and Kraft, but not for Penn State. For this reason, although the trustees and president should not micromanage which coach Kraft picks focused on a championship, or which coach Kraft picks to return to Penn State’s unique value proposition, they cannot buck-pass the critical decision on which strategy to pursue.
It is significant that Michigan’s fight song is “Hail to the Victors,” and fans of my own football-mediocre alma mater, California, sing that if we rally round our banner, “we will never fail,” while Penn State students, faculty and alumni conclude our own “Raise the Song” by focusing not on victory but the hope that our lives might swell the fame of “Dear Old State.” Terry Smith’s life has certainly done that, regardless.
The successful strategy for Penn State, the distinctive value proposition, is to seriously compete for the national championship but to return to Joe Paterno’s wisdom: two losses is not a tragedy. If we are the one left standing that will be wonderful, but if not, we can take pride that we are not just another LSU or USC. Going down the other route is akin to placing your chips at the roulette table at the new casino: a big reward if you are improbably fortunate, but nothing left if the gamble fails.
Professor Stephen F. Ross teaches about law and business strategy at Penn State Dickinson Law. He has testified before Congress and the Knight Commission on sports law issues and has consulted for sports leagues, teams and players associations in the USA, Europe, Australia and New Zealand.
