The Digital Transformation of Real Madrid: Q&A with Michael Sutherland

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By James Flashman-Fox

I recently sat down with the charming and charismatic Michael Sutherland, who has just finished a 5-year tenure leading the digital transformation of Real Madrid. In a broad ranging discussion, I had the pleasure of diving into Michael’s background, his move from the fast-paced tech-centric Silicon Valley to Real Madrid, the phenomenal rise of Women’s sport, sport in the Middle East, Artificial Intelligence, the evolution of media rights, and more.

Michael, give us a little bit of insight into your background in Silicon Valley and the early years of your career in the world of technology and innovation?

My career began in engineering, which stemmed from a passion for both technology, and the future. I realised early on that Silicon Valley was the place I needed to be, and made the move from New Zealand initially to complete my MBA, followed by working with one of the valley’s most exciting startups at the time – Leap Motion. We were developing an incredible technology – volumetric 3D spatial control using your hands, very ‘Minority Report’ for those who remember the movie. David Holz, Co-Founder & CTO was incredible. We developed the product with very low-cost hardware, providing the ability to track your hands and fingers with sub-millimeter precision in full 3D. A lot of companies at the time, including Intel, were pouring huge budgets into 3D tracking technology. Leap Motion’s solution to the hardware cost issue was revolutionary, ultimately keeping the adoptability by end-users in mind – this was hugely compelling for me. We benefitted from having top-tier investors including Andreesen Horowitz, Founders Fund and support from Softbank and enjoyed significant growth – HP were so excited by what we had built that they embedded the technology into their laptops before we had produced our first consumer product. However, with the technology preceding widespread adoption of virtual reality, there was a lack of clear use case for the end user. This was somewhat of an Achilles Heel for the company.

Following on from Leap Motion, you moved into a very different environment – joining the monolithic enterprise HP which had integrated Leap Motion’s technology into its own products. How did you find this change in environment, and what was your primary focus there?

My biggest learning from Leap Motion was that it is essential to understand deeply the customer problem that you are trying to solve, keeping the end user top of mind during product development. I am a huge fan of Apple who have always set the gold standard here, with relentless focus on the end user experience. Being at the bleeding edge of technology, understanding how the next generation of tech is going to marry up with real value creation is a big challenge. My experience across AI, VR, conversational interfaces and related technologies led me to my role at HP, a company which is set up to do a handful of things extremely well – namely the production and delivery of masses of PC’s and printers. I joined a unique area of the organization that we sometimes colloquially referred to as a  ‘skunkworks’ division built around the paradigm of immersive computing. We invested time in looking at connected living, the evolution of computing interfaces & natural language computing, covering the entire lifecycle from R&D, through to GTM strategy and the delivery of consumer products. In many ways, we felt like a lean start-up within a huge organization and many of our product and process innovations became a part of the larger organization. We were pivotal in introducing user testing and user research during product development phases at HP, which included introducing rapid prototyping, working with our ODMS to be able to produce hardware products faster. The significant cultural shift caused by closing the consumer feedback loop in a very tight way between our R&D engineering team and the end user of the products left an indelible impression on me.

You joined Real Madrid relatively quickly after your departure from HP. A privately-owned Spanish sports team, and one of the largest football clubs in the world, is a sharp shift from Silicon Valley – how did this move happen?

I returned to Europe after leaving HP and set up a consulting practice. Real Madrid were one of my first clients, and I originally signed on for a 3-month engagement to look at how to help grow their digital revenue. It became clear through conversations with leadership across the entire organisation that a more integrated and commercial approach would be best suited to maintaining and developing Real Madrid as a digital leader in the world of football. I put together a business plan, which led to a discussion with the board on the creation of the Chief Transformation Officer role that I ultimately took on.

Coming from the world of technology and innovation, how were you able to set out this strategy in a way that would garner buy-in from internal stakeholders at Real Madrid?

When talking about transformation, I prefer the phrase ‘business transformation’ rather than ‘digital transformation’ – the latter often comes preloaded with the idea that the company has a technology problem. Technology plays a part in it, of course, but we were talking about adjusting the way you do business and the way you adjust your business model to accelerate revenue. To be a digital leader in the world of football, we needed to take a close look at fan engagement and how that has shifted over the years, audience development, accelerating growth of sponsorship opportunities through digital excellence, and ultimately commercialisation of that audience through building DTC revenue streams. The business plan focused on brand communication & positioning, technology infrastructure and digital product development within a broader digital ecosystem. We needed to look at all of the different business units within RM, develop a connected ecosystem and create a unified digital strategy.

What were the keys to success from a strategic perspective?

We had to better understand our audience, how to acquire further ‘users’ and ultimately, how to sell directly to them. This required a new engagement infrastructure. I tend to view the structure of the football club through several different lenses. One of these was to look at the club as a retail brand, observing structural differences in professional sports teams vs pure consumer retail brands. Having separate sporting and commercial divisions posed several challenges, including capital allocation with on-pitch performance often prioritised over commercial growth. We also worked hard to bring previously outsourced additional revenue streams (outside of sponsorship, stadium receipts and broadcast) more under the control and direction of the club, giving us the ability to directly offer more value to fans and create more seamless fan journeys across all club commercial and communication channels, ultimately allowing us to grow our 1st party data fan database and understand the needs of our fans better. This was hugely beneficial in our shift towards a direct-to-consumer model; the fostering of direct engagement is beneficial for both sponsorship and e-commerce endeavours. The conversation around sponsorship and merchandising in sports clubs has evolved into a more digital-centric approach over time. Sponsors are now seeking direct engagement with audiences and want deeper insights into their demographics. This necessitates a more sophisticated infrastructure on the club’s side to cater to these demands. Similarly, the trend in merchandising has shifted towards a DTC model.

You previously mentioned the areas of technical excellence that already existed within the team at Real Madrid being a big help to getting the wheels in motion. Do you think the sports industry is doing enough hiring from the technology sector to help drive business change?

I think a lot of clubs have started hiring from outside of industry both in the US & Europe. I don’t have the exact numbers on it, but it’s happening. A careful approach needs to be taken here, because there is a lot of talent within the sports industry to be utilised. I’m also a big believer that teams and individuals within sports organisations can adapt to a more tech-forward, digital first environment, providing the right senior leadership is in place. It’s important for someone coming into a major sports team from outside of industry to be able to adapt to a unique commercial model not seen in other ecosystems.

When getting your feet under the table at Real Madrid, thinking about all of the above, fan data programs, proprietary database and ultimately the pursuit of digital revenue, were there other case studies in the sports industry that you looked to for inspiration?

Not necessarily in terms of the sports industry. There are many sports teams doing what we had set out to do very well, but I was more interested in benchmarking RM against other pureplay retail and media & entertainment brands, not only other football teams that had built their own retail brand. Real Madrid is not just a men’s football team, the women’s football team and basketball are essential to the club and were an important part of our strategy and the audience we wanted to tap into. We also had to balance the capital allocation issue not faced by non-sporting retail brands, and sponsorship can help to play a key role here. By building our audience and the quality of the proprietary data we held on this audience, the greater the value proposition to our sponsors giving us further leverage in deal negotiations through enhanced capabilities, and in turn securing strategic partnerships with top technologycompanies such as Adobe, which allowed us to leverage our investment through a collaborative approach.

The rise of women’s football, and women’s sport in general, is a huge talking point and long overdue. We know that traditional revenue streams, particularly on the media rights side, are a challenge for women’s sport in comparison to the men’s game. Do you think there is an opportunity with women’s sport to represent a new way of doing things; a new way of setting out a commercial strategy focusing on engagement from the outset, and represent the exact type of commercial entity that many high-profile teams are now trying to transform into?

Great question. At its core, the most exciting thing for me is the rise in participation in women’s sport. In time, with more talent coming into the sport, the level elevates, the competitions become more exciting, and the ‘end-product’ becomes more valuable in its truest form. All professional sport in some way is a virtuous cycle – and it is difficult to know where to start. To create higher revenue across ticket sales and broadcast rights, the demand needs to be there. What I think is fantastic is the global acknowledgement that there has been a significant lack of investment in women’s sport, so we are working with fabulous tailwinds here. There is a huge opportunity for women’s sport to engage brands that want to tell particular stories and wish to associate certain ideas with their brands – women’s sport is powerful in this perspective, which creates an interesting opportunity around sponsorship. In men’s football, the model is to buy players, win trophies, gain valuable sponsorship and media rights deals, and keep that cycle going.

Women’s football has an opportunity to engage sponsors through meaningful storytelling and brand building, generating revenue that can be invested back into the sport, and create the cycle almost in reverse. Angel City FC was recently valued at circa £180m, creating enormous value through powerful storytelling and major celebrity star power in their investor group, including some of the world’s most respected female athletes. The power of this kind of involvement has also been seen in the men’s game with Wrexham, providing major acceleration in terms of commercial growth. Monarch Collective and Mercury 13 see women’s sport as hugely commercially valuable, and it will be interesting to see how they fare over the coming years. Ultimately, the model is different to men’s football, but it is a model that can be successful and elevate the entire sport from grassroots through to the professional level.

Michael, you were recently in the Middle East getting a feel for the sports industry over there. Tell us about that.

I had heard a lot about sports in the Middle East as we all have through news, media, etc., and wanted to see it firsthand. The thing that struck me was the level of engagement. The energy and passion around advancement in sports as a whole and the pace things are moving is exciting – it is a very refreshing environment to be in. European football brings with it a wealth of tradition, with deep roots in culture and this can make change difficult. With a clean slate to work with, the way the Middle East is approaching sports is impressive. We are not just talking about PIF and huge investments into the acquisition of major sports teams and leagues, but the allocation of resources at a grassroots level, with sports being introduced to girls and boys at a very young age within schools. There is a clear desire there to build the entire sports ecosystem from the ground up, with mega city projects including Qiddiya developing a dedicated esports district. I can’t speak to how successful the Middle East will eventually be, but what is unquestionable is their desire, ambition and passion to make it happen.

You’ve recently joined the board of Kalder out of New York. Tell us a little about that and what inspired you to join them?

Developing and building the ‘Madradista’ community was a key component of our overall DTC strategy, but can often be an overlooked and undeveloped part of a club’s commercial strategy. This became just as much about connecting fans with each other as it did about connecting fans to the club. The sense of community and social engagement is powerful, and I spent a lot of time at Real Madrid thinking about this topic creating a scenario where fans can receive real value and social status from the time they have invested into their own identity as a fan throughout the years . Tapping into these deeper emotional states such as a sense of belonging to something greater, can be converted into deeper relationships with the club resulting in longevity, loyalty and retention. After I left RM, I was approached by Gökçe Güven, founder of Kalder, who I was immediately impressed with. Gökçe had a background within early teams at OpenSea & RobinHood, and we hit it off right away. When she ran me through the business, I was blown away by the versatility of the platform and adoptability for businesses both inside and outside of the sports sector. Kalder has taken a headless approach with API infrastructure making integration seamless. Kalder had captured the essence of the core mechanics of community engagement through a simple but easily scalable model, borrowing terminology and common concepts from the world of online and mobile gaming. Despite the foundation of the platform being built natively on a web 3.0 blockchain infrastructure, the user experience felt comfortable to the most non-technical web 2.0 user. This foundation allows for customizable membership tiers, from freemium to premium models, enhancing fan engagement at every touchpoint. I saw the potential to implement a deep fan engagement infrastructure, making every interaction valuable for fans. The platform’s gamification mechanics offer flexibility in structuring engagement over different timeframes. After discussing further, we decided I’d join as an advisor, hoping to contribute my expertise, especially in the sports vertical.

A big final question for you, and one that we could spend hours discussing. What technology do you think is going to have the biggest impact on the sports industry over the next five years?

I’ll give you two answers to that question. Firstly, I think Artificial Intelligence, and the next generations of it, are going to have a fundamental change in all aspects of business, both inside and outside of the sports industry. The change is here now, and the ability for sports organisations to engage with these new technologies for their own benefit remains the big question mark. It is moving incredibly fast, and I think generative AI is already starting to play a role in both the commercial and performance side of our industry. How quickly sports teams adapt to AI will depend on how tech-forward they are, the leadership within the business, and the cultural approach to being forward thinking. There are also potentially negative impacts to consider, including people generating synthetic content around a brand. This also provides an opportunity for clubs to leverage technology in the same way, however the competition is going to increase dramatically.

Secondly, I believe there is going to be a major shift in media rights and how they are distributed. The Super League proposal for a freemium platform, essentially providing the platform for a DTC global distribution of rights is a sign of things to come, with Apple paving the way here with MLS. Critics of this business model believe it doesn’t work and is not commercially viable, however I believe that if you are able to create valuable enough IP, and capture a truly global market through it, there is potential for a 4-5x increase in rights value vs the traditional methods of revenue generation here. With a global DTC model removing the role of intermediaries, there is potential to incorporate interactive components, integrating immersive media rights, disrupting the market by creating a more compelling end-product delivered directly to the end user.

Michael, this has been a most enjoyable conversation. Many thanks for your time, and I look forward to seeing you soon.

Thank you so much for having me James, it’s been an absolute pleasure.