Uncomfortable Questions

11 October 2018

Preparation for the worst-case scenario is a recipe for success.

When food is plentiful, a squirrel will take nuts and bury them so it has sufficient food for the tough winter months ahead. When times are good, it is human nature to enjoy the ride. But the good times never last forever and, when times get tough, it pays to have planned ahead.

Assume that in just 10 years' time, the number of people playing poker machines is half what it is today.  Now consider what that means for your club.  For most clubs, as for any business, the loss of 20 to 40 per cent of net revenue cannot be managed and will cause closure.  Yet, it is not a far-fetched possibility.

Research shows 75 per cent of poker machine players are currently aged over 55, and gaming machines struggle to compete with young people's preference for Xbox and digital wagering on mobile phones so, without major change, the trendline for gaming is heading in only one direction.

There are plenty of other circumstances that can cause a crash in gaming machine revenue, from further smoking bans to tax increases, the legislation of online casino gambling, restrictions of operating conditions or perhaps widespread availability of virtual reality gaming.

The smart approach is to assume a worst-case scenario.

In this context of a financial crisis and with so much at risk, it can be overwhelming for club leaders to plan for the future and invest early in change.  Yet they must if they are to leave the club as a legacy for future generations.  Like the squirrel, the best way to ensure long-term success is to plan for the many circumstances that might cause failure and make decisions right now to mitigate the worst-case scenarios.

This requires committees and managers to ask, and then answer, some uncomfortable questions: Will people still play poker machines in 10 years' time?  What would our club look like if we had to survive with half our current level of gaming revenue?  How can our club transition to generate substantially more non-gaming revenue so that we can survive a major gaming downturn?

Dealing with these questions will cause you to ask many, many more questions.  Why do people come to our club and what else could they come to the club for?  What is our club's competitive advantage and how can we better leverage it?

Armed with this knowledge others must ask similar uncomfortable questions.  Numerous charities, sporting teams and community groups rely upon the revenue from gaming and should be planning ahead.

If you think it will all somehow work out, consider Kodak and Fuji Film.  Kodak designed the first digital camera, but failed to develop it (excuse the pun) commercially.  It now generates only US$16 million in annual revenue.

Fuji Film embraced the difficult questions and we able to transition into digital photography and new lines of business, now generating annual sales of US$21.7 billion, putting it in the top 500 companies worldwide.

Grappling with the answers to the most uncomfortable questions will help each of us to be prepared for the very worst that can happen.

(SOURCE: Josh Landis, ClubsNSW Executive Manager - Public Affairs, ClubLIFE September 2018)

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