managemnet company strategy managemanet Lessons on Customer Engagement from Fan Controlled Football

Lessons on Customer Engagement from Fan Controlled Football

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Any sports fan can tell you about yelling at the TV during championship games, going crazy over a manager’s strange line-up choices, and watching, incredulously, as players take outrageous shots during crunch time. Sometimes, it appears a team doesn’t really want to win.

Many of us would happily take the helm in these situations — arranging the roster for the final match, deciding the necessary substitutions during the game, announcing a change in the game strategy, or calling the final play to decide and deliver the trophy. Wouldn’t that be great?

Welcome to the world of Fan Controlled Football (FCF).

For the last two years, the Fan Controlled Football league has operated like an esports venture, using blockchain-based decision-making to let fans control real teams with real players over a seven-week regular season — from branding to front office staffing to real-time game decisions. The project — an early application of Web3 technologies — is an excellent example of what can happen when consumers’ desire for brand transparency is combined with consumer participation and control over the brand. More pointedly, FCF serves as a bellwether for organizations interested in increasing consumer engagement and decision-making power.

After studying the league since its founding in 2017, we have developed a set of best practices that businesses should apply to any democratized, customer-controlled product or service. The key takeaway is that the success and potential of democratized platforms like FCF are not limited to esports. But to be successful, companies that want to give their consumers greater decision-making power must rethink the relationship between customers and management.

What is Fan Controlled Football?

In 2021, FCF set out to democratize professional sports and create an unprecedented live fan experience. After a successful first season, FCF expanded from four to eight teams in 2022, featuring seven regular season weeks and one playoff week, culminating with the People’s Championship.

So how does it work?

To start, fans buy an NFT that attaches them to a team and gives them voting power. Then, every Wednesday, fans participate in a live draft to determine the players and teams that will play that week. The condensed version of an outdoor football game (seven vs. seven competition) is played on a 50-yard field in a high-tech arena and streamed live on Twitch, NBCLX, DAZN, and fuboTV. Using the FCF mobile app, fans can vote on which plays to run during the one-hour game. For example, when the team is on offense, fans can vote to “run” or “pass” and then pick one of four diagramed play options. Within 15 seconds, the coach is informed and tells the team the play that won the vote; fans then watch as the play unfolds on the field.

Just like in a video game, a fan can improve their FanIQ, which increases their voting power the more they interact with FCF and proves (to other fans) how well they know the game. In addition, fans are rewarded for their involvement in drafting the players and calling the plays by receiving key moments from games via play-to-earn NFT drops.

According to the founders Sohrob Farudi and Grant Cohen, the first two seasons proved successful especially in terms of community engagement, with more than 230,000 registered fans (making it a top 10 sports app in U.S.), 2.4 million live viewers per week, and over 100 million highlight views across all FCF distribution platforms. FCF increased viewership from 375,000 per game at the start of season one to 1.39 million at the championship game of season two.

Further, fans who download the app and join a team engage at a very high rate. More than 75% actually vote on drafts, substitutions, plays, etc. Engagement is particularly strong among die-hard fans of FCF Web3 solutions (essentially, a way to obtain Web3 extras), who have a 40% higher retention rate than non-Web3 fans. The former are particularly interested in Web3 applications that help them have heightened powers in the game. As a result, FCF was able to sell over 20,000 NFTs to them with an average revenue per user of nearly $1,000.

Given these benchmarks, it’s not surprising that FCF was able to raise $40 million in venture capital by the end of its first season. The league attracted numerous high-profile investors, including team owners such as former NFL star Marshawn Lynch, DJ Steve Aoki, and rapper Quavo.

Why Web3?

Through blockchain technology that enables direct participation, FCF joins the physical sports and digital worlds to create a new, exciting fan experience. In doing so, the decentralized nature of the blockchain ensures that the FCF platform enables tamper-proof tracking of fan tokens used to participate in decision-making and other league-related activities. NFT holders, for example, can transact with each other and design and sell items in the team store. They have a blockchain-powered say in decisions about FCF such as league rules, game mechanics and expansion plans, and get early access to team share sales to purchase real ownership shares.

When FCF started to develop their strategy in 2017, they launched with the vision of building an organization in which a decentralized fan community makes the key decisions. As part of FCF’s predecessor project, FANCHISE, Farudi and Cohen bought Salt Lake City as a proof-of-concept team in the Indoor Football League for the 2017 season and let fans vote on the team’s name, colors, and coach via a mobile app before the team began play. The “Salt Lake Screaming Eagles” were the first ever fan-controlled professional sports franchise.

In the first season, however, it became apparent that the concept of fan control of the team, while well received, did not equate to sporting success. As a result, the 2017 season ended with a record of 5-11. FANCHISE decided to disband the Salt Lake Screaming Eagles team and instead create their own league where fans call the shots. The start date, originally scheduled for the 2018 season, was postponed several times until FCF league finally launched in February 2021.

The flaws in this initial approach quickly became apparent, and FCF experienced early-on how the community reacts when it believes it is not in control. In 2017, the community was called to vote on whether the suspended NFL defensive end Greg Hardy should join the Salt Lake Screaming Eagles’ roster. With the tight vote of 50.1 to 49.9%, the community decided not to sign Hardy. Many of the fans who had voted “yes” were quite disheartened and believed it was just a publicity stunt and that the vote was rigged. The subsequent debate infuriated the founders. As a result, they focused on how to become as transparent as possible in their communication with fans, so fans know exactly what they control.

FCF also decided to move towards what is today known today as Web3, with the vision of bringing all community voting onto the blockchain so that there is a distributed, immutable ledger ensuring transparency. They used Web3 technologies to drive revenue generation and improve player experience.

Building an early Web3 startup does not come without obstacles. In the early days, FCF had to remove technical impediments that many startups face, such as improving the Wi-Fi signal and connectivity in the new game venue to enable real-time play calling and to overcome latency challenges with broadcasts. They also needed to grow their organization to include a variety of different roles, from sports operation experts, digital product designers, engineers, and communication experts.

The rapidly changing Web3 environment posed another significant challenge: regulatory scrutiny and vague prospects. While regulators in many countries are issuing new guidelines for Web3, the jurisdictional picture remains fuzzy . [Therefore, the slowly emerging legal roadmap and the limited legal ownership through NFTs challenged the FCF team to appropriately design and extend the consumer participation model].

How to Design Consumer-Driven Products

There are some general, universal lessons to be learned from the FCF example:

Carefully design participation opportunities.

To successfully introduce consumer participation, management needs to determine whether consumers can decide on certain matters and what decisions consumers want to make. Determining the guardrails requires sufficient knowledge about the company and the consumer. So, it is still up to management to develop and offer decision options to consumers that make sense from a business perspective. For example, consumers should only vote on issues where sufficient information can be made available and for which a consumer view is relevant. Consumers must also really care about the decision and its consequences. Therefore, the scope of decisions must be carefully selected and continuously adjusted to meet consumer needs.

Incentivize consumer engagement from the start.

Regular consumer participation is not a given. Consumers are only willing to invest their time if participation is convenient and fun, and if their effort is worthwhile. Therefore, the design of voting mechanisms should be efficient and entertaining. Like a video game, consumers should be able to earn bonus points for their efforts and see their names reflected in leaderboards.  By introducing FanIQ, FCF incentivized people to participate and increase their influence relative to others through well-thought-out decisions.

Sustain consumer participation through authenticity.

If consumers lose confidence in the implementation of decisions or in the voting mechanisms, their commitment will immediately diminish. Therefore, the authenticity of organizational leaders and the decision-making options they grant are important. Executives should be less concerned about a potential loss of power and more aware of the added value that comes from sharing responsibility with consumers. Consumer participation is essential, especially in trade-off situations. For example, consumers could decide whether the company should enter into a financially attractive sponsorship agreement with a suboptimal brand fit. Their vote could avoid negative consequences such as product boycotts or social media outcry. If consumers are convinced that managers value and respect their opinions, they will also make more responsible use of their voting rights.

Commit executives to new responsibilities.

True co-determination shifts some of the decision-making power from a company’s management to its consumers. To establish a lasting and successful model of shared decision-making authority, it is important that leaders accept consumer decisions regardless of their own vote. At the same time, the responsibility to run a thriving business remains with top executives. To achieve this tricky balance, a change in thinking is required. While in the past, management decisions had to be justified retrospectively, especially to shareholders and stakeholders, the task now is to develop decision options for consumers and explain their respective advantages and disadvantages. In this way, managers increase their own credibility and consumer acceptance of the company’s direction.

Introduce consumer participation with new products.

When companies think about giving consumers a real say, the question quickly arises as to whether they should do this for existing products or for new ones. Having a say in the future design of existing products is certainly easier for consumers at first, as they have already gained experience in dealing with them and might also have better judgment. However, the lessons learned from the FCF League argue for launching a new product that is geared toward consumer participation from the outset. Setting up a new league facilitated the introduction of new rules of the game and took pressure off the FCF to compete with directly comparable products like the NFL. At the same time, it encouraged consumers to become familiar with the new product and its participation rules.

Ease access to consumer participation.

Web3 is in full swing and has been flourishing in recent years, despite the small fraction of consumers who can adequately access it. Organizations must invest in educating consumers about fundamentals of DAOs and decentralized applications, and ease access. Entering the Web3 space is still too cumbersome for most consumers. To be ready for mainstream adoption, the user onboarding journey for Web3 must be a more seamless experience.

Whenever possible, tap into existing communities.

Embracing Web3 technology can help leverage existing online communities. In the FCF example, the league transferred management responsibility for some of its teams to existing NFT communities such as the Bored Ape Yacht Club and the Kingpins. Vetting and including existing Web3 communities early on helps to engage even the Web3 enthusiasts who are not football fans but enjoy consumer participation. This approach lowers the barriers to entry for non-sports fans and creates access to a new topic.

What’s Next for Fan Controlled Sports?

Other successful esports organizations such as Team Liquid, which operates teams in more than 10 different strategy games like League of Legends and Dota 2 and built a thriving community across the gaming ecosystem, have inspired FCF to expand into other sports. With an expansion to Fan Controlled Hoops planned for 2023, FCF parent company Fan Controlled Sports & Entertainment (FCSE) will expand the fan voice to basketball. To improve the engagement of the community, they are applying many of the proven FCF principles and forgoing the standard five-a-side format of traditional basketball in favor of new rules, including penalty points and possession instead of free throws. Games will be played out on a fully interactive smart LED court in Atlanta that lights up to reveal game mechanics such as “lit zones,” powerups, “lit players,” substitutions, and statistics.

FCSE combines live sports with fantasy and video game elements with more established, traditional sports leagues to engage future generations of fans. Younger fans of Web3-enabled leagues (and possibly more traditional clubs and leagues) are seeking more control but also more opportunity; as such, sports fans will increasingly be in charge during games and will also be able to acquire rights to cash flows such as prize money and transfer surpluses from real teams.

This approach also fits very well with the increasing demand for bottom-up decision-making, as seen in the emerging DAOs that allow token holders to participate in the management and decision-making of a company. FCF further demonstrates how to create consumer value by effectively combining virtual and physical reality. Giving consumers more power may seem bold at first, but it can actually shift decision-making power to those who have the company’s best interests in mind. Ultimately, this can lead to better decisions.

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