The World Cup Draw

Well, if you read my last post and you followed the draw, you know that I think the USA got one the best possible draws -- as good as we could have reasonably expected. Overall, however, it was kind of a predictable draw, with few surprises and few really compelling story-lines in the group stage.

The USA's Group C is comprised of England, Algeria and Slovenia. England are a very strong side, but they have exploitable weaknesses at striker (other than Rooney, they are looking at the lumbering Heskey, the unpredictable Crouch or the untested Defoe) and certainly at goalkeeper (vis. "Calamity James"). And, England always struggle outside, well, England, but certainly outside Europe. They haven't made it past the World Cup quarter-finals in two decades.

Second and third match opponents Algeria and Slovenia are, at least by FIFA rankings, among the weaker teams in the tournament. Not that the US team couldn't blow it against either of them -- you'll hear a million times between now and June that there are no weak teams in the World Cup -- but believe me, Sunil Gulati and Bob Bradley were doing cartwheels in the aisles when they heard that we avoided both Ivory Coast/Ghana out of Africa, and France/Portugal out of Europe. And ESPN is going to market the fuck out of the England/USA opener, with Beckham and Donovan, the ghost of 1950, and the rise of the colonies to challenge the inventors of the beautiful game.

Mexico looked at first to have secured a dream draw in Group A against the pathetic hosts, South Africa. But Pot #3 produced the very good Uruguay, and Pot #4 cursed them with France. Heh. They still have a shot at advancing, but having to open against the hosts is never a great result. I think they could just squeak through, but I wouldn't be surprised if they finish last in the group.

Argentina, Holland, Italy and Spain received major gifts from the draw, particularly Italy. I'd be shocked if any of these four don't finish first in their respective groups. The English were feeling pretty good about their group, too, with only the game against the USA presenting a difficult match-up.

There isn't a clear Group of Death, but the best candidates are probably Group G with Brazil, Portugal, Ivory Coast and doormats North Korea; and Group D with Germany, Australia, Serbia and Ghana. You have to like Germany and Brazil to finish at least second in their respective group, but there could be some very big surprises. Mexico's Group A may not be Group of Death, but it's clearly a "Group of Grievous Injury."

World Cup Draw Preview

This Friday at 9:00am Pacific time, the iniquitous bureaucrats from FIFA, along with a handful of celebs and pols, will get together in Cape Town, South Africa for the once-every-four-years ritual known as the World Cup Draw.

This horrendously boring event, which can be cringe-inducing in its mock seriousness and cheese factor, involves grown men and women drawing 32 balls (representing the qualified teams) from 4 glass pots and placing them into eight groups. To punch it up, there are lots of speeches and terrible musical performances. Despite this, the draw, which is televised in 170 countries, is expected to be watched by almost 200 million human beings.

Why? Because the draw matters. Matters, at least, to the billion or so people who care about the sport of football and its ultimate tournament, the World Cup. The aspirations of teams and nations to footballing glory will hang, in some measure, on the result of the draw.

FIFA announced the seeding for the tournament today and produced a first surprise: they abandoned the tradition of seeding based on performance in the last two World Cups and went with FIFA rankings as of October 2009. On this basis, France were excluded from one of the top seedings (which prevent the best teams from eliminating each other in the first round); while Holland moved into France's spot.

The #1 seeds will be spread out across the 8 groups, and include hosts South Africa, Brazil, Argentina, England, Holland, Germany, Italy, and Spain. No arguments there. Excluding France was extremely fair, given their poor form of late (and the taint of their qualification over Ireland on Thierry Henry's handball). It was equally fair for them to elevate Holland, who have been on a tear and are FIFA ranked 3rd in the world.

The other major decision FIFA made was to put the North American teams in Pot #2 with the relatively weak Asia/Oceania teams, rather than with the unseeded but stronger South American or African teams, who went into Pot #3. This was clearly done to enhance the likelihood of African teams making the elimination rounds, but makes it much more difficult for the USA and Mexico, who would have had a high probability of drawing South Africa, the weakest seeded team by far, in the group stage.

From the USA perspective, the best case would be: 1. South Africa (or England, who always suck outside Europe); 3. Paraguay (or Algeria, if #1 is England); and 4. Slovakia or Slovenia. The worst case would be 1. Brazil or Spain; 3. Ivory Coast or Chile; and 4. France or Portugal.

And then there is the proverbial "Group of Death." Every World Cup has one, or at least a debate about which of the several tough groups truly constitutes this cup's Group of Death. The GoD refers to a group in which at least three strong teams are drawn together, meaning that one pre-tournament contender gets sent packing before the elimination round. There's a chance for a Brazil, Mexico, Ivory Coast, Portugal group, or a Spain, USA, Cameroon, France group.

When the dust settles, and we've endured Sepp Blatter, and Charlize Theron, and David Beckham, the freaking Soweto Gospel Choir, Johnny Clegg, et al., at least we'll have a tournament.

Confederations Cup Final

The heartbreaking Confederations Cup final, in which the tenacious but ultimately over-matched USA team went down 3-2 in the 84th minute to a fantastic Brazil side, made me realize that America has actually become a footballing nation. The collective anguish of hardcore football fans and bandwagoneers alike put us in an elite group of disappointed bridesmaid nations who get close but fail to lift silverware: the Portuguese of Figo's golden generation; the Spaniards who, prior to Euro 2008, were legendary big-game choke artists; and, frankly, the English, who've consistently underachieved on the big stage since 1966. Great.

We also join that short list of "teams who lost to Brazil in a final": Argentina (4-1) and Australia (6-0) in the Confederations Cup; Sweden, Czechoslovakia, Germany and Italy (twice) in the World Cup.

What a match -- and what a great advertisement for international football and next year's World Cup. The USA came to play, and after absorbing a few minutes of pressure, found some space on the right wing for Specter to launch a Beckham-worthy cross into the box, which Dempsey nudged into the net at the far post. It was a perfect start for the USA, up 1-0 after ten minutes. Fifteen minutes later, again under a lot of Brazilian pressure, Ricardo Clark pounced on a lazy pass around the American eighteen yard box and played an incredible through ball to a breaking Donovan, who played an equally perfect ball to Davies on the left, got it back and calmly beat the last defender and then the keeper for 2-0. And that was the halftime score.

The USA succeeded with a high-energy attack and aggressive defending. Again, they completely conceded the right wing to Maicon, as they did with Sergio Ramos in the Spain match, but that spacing hurt them much worse in this match. Fabiano's first goal was a great turn from a combination on the wide-open right side just 46 seconds into the second half. That Brazil goal, scored so quickly after a halftime where Bradley surely told his team to hang on for as long as possible, pulled the thread that unravelled the USA's dream start.

Specter actually did a decent job in the first half controlling Robinho, but in the second half Dunga made some tactical changes on the left, where Kaka abused Specter to create the second goal. By the 75th minute, the USA looked completely wiped and Kaka was rampant. Lucio won it with his late header, but Brazil had a half-dozen other opportunities turned away, and Kaka probably scored a goal that was not allowed, as well.

Brazil's comeback was both predictable and excruciating. It wasn't total dominance -- the USA had some good chances in the second half, including two nice strikes by Donovan and Dempsey around the 65th minute, two good but fruitless runs by Davies, and a couple of decent set pieces. But Bradley's second half plan was lame. He was slow to react to Dunga's changes, he made poor substitutions that were poorly timed, and he relied too much on deep defending and goalkeeping. His luck ran out.

The top USA players -- Howard, Dempsey, Donovan, Onyewu -- proved that they are legitimate international talents. The FIFA technical team named Dempsey the 3rd best player in the tournament, and Howard won the best keeper honors. On the other hand, DeMeritt, Bocanegra and Specter looked ordinary in the final. Altidore was utterly missing in action. Davies showed his inexperience. There was no depth in the squad, particularly with Bradley junior out of the final on a red card.

It's pathetic to point to the USA's brave and skillful performance in the final and say they won the first half, and won honor by improving from the previous 3-0 humiliation at Brazil's hands in the group stage. As Donovan aptly put it post-match, the USA doesn't need respect, they need to win big games when they get the chance.

It's equally pathetic to chalk a collapse in a winnable final up to experience, but I can't help but think that this was great learning for the team and coach. Four out of five matches against teams ranked in the FIFA top 5 (Italy, Spain, and Brazil twice), the fifth against the African champions in Africa. Including World Cup qualifiers, they had to play 7 matches in 25 days. If they can go to the nightmare of Azteca Stadium in August and get a draw or win against Mexico on the road, we'll see if this was truly transformative.

The good news is that the USA has a lot to build on. They were the youngest team in the Confederations Cup, with an average age of just 25.

The other good news is that we are certainly in for some great entertainment in next year's World Cup. The European powerhouses will be vulnerable, because they always struggle outside Europe (as we saw with Spain and Italy in this tournament). The Egypt and Spain wins, and the positive performance in the final against Brazil, will put the USA in good standing with FIFA for the all-important World Cup draw in December. Our crap seeding in 2006 got us drawn into a death group with Italy, the Czech Republic and an excellent Ghana. In 1998 we got Germany, Yugoslavia and Iran. We need a seeding where we are not the 3rd or 4th best team in the group.

USA in Confederations Cup Final

There's absolutely no way to make rational sense of it. The US men's national football team, who looked so pathetic and shambolic in their first two matches of the FIFA Confederations Cup, will play the final Sunday against either Brazil or South Africa after handily defeating Spain in the semi, 2-0. Spain, as in the Euro 2008 champions, FIFA's #1 ranked team in the world.

For those unfamiliar, the Confederations Cup brings together the national teams that win each of the six FIFA regional championships (Spain for Europe, USA for N. America, Brazil for S. America, Egypt for Africa, Iraq for Asia and New Zealand for Oceana) plus the defending World Cup champion (Italy) and the host of the next World Cup (South Africa). With the exception of Iraq and New Zealand, those are all good teams.

The Confederations Cup is clearly not the World Cup; it's more like a super-charged friendly tournament, and primarily functions as a tune up for next year's World Cup. Teams get to play in the same stadiums, stay in the same hotels, deal with the travel. So all the participating countries bring their best players, to get them accustomed to the conditions they will experience next June in the big show.

The USA was drawn into the group of death, with Italy, Brazil, and a very good Egypt team. Meanwhile, Spain got an easy draw, with an lucky-to-be-there Iraq, a New Zealand team that probably won't make the World Cup, and the mediocre host South Africans. Spain predictably cruised through the group stage, winning all three matches by a combined 8-0.

The group of death lived up to its name. The USA played Italy pretty close for 45 minutes, but struggling for 65 minutes with 10 men after a harsh red card ultimately wore them down and they gave up 3 late goals, losing 3-1. Meanwhile, Brazil only barely edged Egypt 4-3 on a questionable late call. In the next round, Brazil obliterated the USA 3-0. As my friend Ben Jones wrote me, "They look like boys amongst men." But in the other match, a tough Egypt scratched out a clutch 1-0 win over Italy, which set the stage for the insane third round in the groups.

The USA started the day dead last in the group, with zero points, a single goal for, and a -5 goal difference. They needed a 7 goal difference reversal vis-a-vis Italy and a win over Egypt, or a 6 goal reversal and more goals scored than Italy. I don't know what the betting odds were in London for that result, but it had to be 1,000-1. Yet that's precisely what happened.

The USA looked inspired against a fatigued Egypt, winning 3-0. And Brazil improbably defeated Italy by the same score. It was a nail-biter through injury time in both matches, as a consolation goal by either Italy or Egypt would have sent the USA packing. But the results held and the USA went through to the semi's. To face Spain. By any argument, the best team in the world at the moment.

And so, when the USA took the field today for the national anthems, you could have excused them for feeling more than a little lucky to be on the field, and looking only for a little experience against a great opponent before settling for certain defeat and the consolation game against South Africa. After all, a Brazil-Spain final seemed inevitable given the USA's earlier run of form.

Much to everyone's surprise, it turned out to be a fabulous game. The USA came out with confidence and really pressured the Spaniards in the first ten minutes. Davies had a bicycle kick off a Dempsey cross go wide left, and then Dempsey himself went just wide a few minutes later. The USA gave Spanish defender Sergio Ramos a ton of space to run up the Spanish right wing, and when he did so, the American's used their pace to counter-attack, often catching Spain with only three defenders.

Spain had chances, but the USA back four of Specter, DeMerit, Onyewu and Bocanegra, where huge. In the 27th minute, and not really against the run of play, Dempsey chipped a clever ball from the left wing to Altidore at the top of the box, who muscled an over-committed Capdevila, turned, and fired a rocket off the hand of Casillas, which deflected in off the post for 1-0.

The last 15 minutes of the first half and the first 15 minutes of the second were all Spain. The USA back four did what they could, but it came down to a heroic effort by Tim Howard, the USA keeper, who had, by my count, 6 great saves during that spell. Then, with about 20 minutes to go, the USA got a few good minutes of possession, and put a nice little sequence together when Feilhaber made a skillful run at the Spanish defense, played a nice ball out to Donovan on the right wing, who sent a dangerous cross square across the box. Sergio Ramos thought he had time for a touch before clearing the ball, but Dempsey pounced on his error and curled a low shot past Casillas for 2-0. Bradley got sent off on an idiotic straight red card a few minutes from time, but the 10-man USA held on for a famous win.

Why did Spain lose? For one, they simply had a bad day. They just didn't play up to their Euro 2008 potential, and were particularly weak passing in the attacking half of midfield, where they are generally so dominant. Part of it was the lack of quality of their group stage opponents, too. While the USA had a trial by fire against the likes of Brazil and Italy, Spain had no world-class teams to deal with during their group stage, so they were a bit rusty.

But credit the USA -- they really gutted it out and, as I said, had a great tactical plan. Old-fashioned American hustle. Played tenacious defense, got big-game goalkeeping (always an American characteristic), and took their chances despite being out-shot 29-9. The USA had only two shots on goal, and finished them both.

It was a thrilling match for fans of USA football. Can the USA win the whole enchilada? After this game, who can say?

Thoughts on the American Idol Finale

In many ways, this year's finale was an odd repeat of last year's: the earnest heartland guy overcomes the splashy stage kid for the crown. Last year it was Cook over Archuleta; this year it was Allen over Lambert.

Lambert was a much stronger competitor than the lightweight Archuleta, and would have made a worthy winner this year. He was made for television -- his histrionic goth/vampire vibe, his faux sincere mugging at the judges' constant praise, his risky interpretations and his vocal pyrotechnics were ratings gold for Fox. In a lot of ways, his theatricality was more reminiscent of David Cook, who has proved to be a mediocre recording artist now that he's standing on his own. Lambert was not my favorite -- I thought he always over-sang his songs. I think people who thought he was robbed of the title need to listen to him without looking at him.

A lot will probably be made of "America not being ready for a gay American Idol." I think that's mostly nonsense. Lambert's sexuality was never an issue in the competition (no more than Allen's background as a worship-leading neo-Christian). On TV, he read more glam than gay, and I think he suffered in a zeitgeist that doesn't value glam as much as authenticity. In a different America (a time of Bowie, or Boy George), he might have won hands down.

Allen can certainly sing. He is not nearly the "star" that Lambert imagines himself to be, but he plugged away all season and rarely missed the mark by much. I thought the pairing with Keith Urban during the finale was genius; Allen held his own, vocally, and you could imagine a crossover niche he could fill in the music industry after that performance. He was much less well-served by the horrible theme song "No Boundaries" penned by the relentlessly annoying new judge, Kara DioGuardi.

The finale also demonstrated that the best two contestants were in the final. In performance after performance, the eliminated contestants showed their limitations. The three numbers featuring the finalists -- Allen with Urban, Lambert with KISS, and Allen & Lambert with Brian May of Queen -- were the highlights of the evening.

As an entertainment franchise, Idol is a juggernaut. The steady string of industry talent on stage this season (Kanye, Flo Rida, Miley Cyrus, Slash, not to mention the parade of B-listers in the finale) is testament to the self-reinforcing nature of Idol. Fox & Freemantle aggregate huge audiences, the sponsors (Coke, Ford, etc.) drool over the kind of reach that no longer exists in network television, the industry talent lends legitimacy to the contestants, and that talent is motivated to show up by the potential of performing to the huge TV audiences. It's a perfect marketing virtuous circle.

Idol's ability to generate stars is somewhat less certain. In terms of sales, only two of the show's seven winners have generated any real heat: Season One winner Kelly Clarkson in pop and Season Four winner Carrie Underwood in country. Two other contestants have had great careers launched by the show: Jennifer Hudson, who won an Oscar for Dreamgirls; and the amazing Chris Daughtry, the North Carolina auto mechanic whose post-Idol record became the fastest selling rock debut in history. Oh, and Clay Aiken, whatever you want to make of him.

I am a sucker for reality TV that dramatizes creative people at work (i.e., Project Runway, Top Chef). Idol has clearly gotten a bit ponderous and self-reflexive lately, and it takes itself oh so seriously. But at its core, it's about talent and performance and character cast up in the tense high-wire act of live TV and popular voting. I don't see our appetite for that kind of entertainment going completely away any time soon.

A Costly Price War

I've talked quite a bit in the past about the turning point that the year 2004 represented in the video game business. To recap, in that year the internet revolution finally rocked the game business to its core, with electronic distribution and new business models reaching mainstream acceptance. Between the release of World of Warcraft, the launch of Half Life 2 through Steam, the Shanda, TenCent and JAMDAT IPOs, and several other events, 2004 was a watershed year for the industry. I've argued that the nature of value creation in the video game business, traditionally grounded on intellectual property ownership and retail distribution, was forever disrupted.

But something else of great importance happened in 2004 that often gets overlooked in critical reviews of the business. It was much more subtle and easy to miss -- a publisher launched a super high quality product and offered it for sale at a very low price. This relatively small act of busting the pricing cartel and using QPR (quality/price ratio) as a competitive weapon had profound implications for one of the industry's great companies.

The game was Sega/Take-Two's ESPN NFL 2K5. This American football simulation, developed by Visual Concepts, was first launched on the Sega Dreamcast in 1999. It was considered innovative, but hampered by it's exclusive association with Sega's poorly-accepted hardware platform. In 2001, the franchise went multi-platform, and in 2003 added the ESPN branding to its NFL license. Sega aimed the product directly at one of the most popular and successful video games of all time, EA Sports John Madden NFL Football, with limited results. In 2003, Madden outsold 2K4 over 10-to-1.

In 2004, Sega agreed to co-publish 2K5 with Take-Two. The companies, faced with a daunting entrenched competitor but possessing a high quality product, took an innovative approach: they offered the game at retail for $19.99, less than half the price of Madden. And they sold boatloads. They went from less than 10% unit share of the football category, to well over 30%, and expanded the overall market.

The success of the 2K5 strategy provoked an extremely aggressive response from EA. By the end of December 2004, EA announced a five year exclusive licensing arrangement with the NFL and the NFL Players' Association. By the end of January 2005, they added a 15 year deal with ESPN, effectively stripping the 2K franchise of its branding (and most of it's legitimacy as a football simulation).

But EA accomplished this at tremendous cost. At the time of the deal, there was speculation that EA paid in excess of $300MM for these rights. Let's do some math. Let's assume, for the sake of argument, that number is correct. It creates a royalty burden of $60MM per year for each of the five years of the deal, that must be amortized across units sold. Assuming 5 million units sold at $35 wholesale (it's likely more units at a blended lower wholesale), that's a royalty burden of $12 per unit, or over 33%. Based on my direct experience as an NFL/NBA/MLB licensee at JAMDAT, that's almost twice what we paid for non-exclusive rights to the league and players' association in a typical deal.

Play that out a little further. That's over $25MM annually that would have dropped to EA's bottom line, or around 8 cents per share. Just to give you a little perspective, EA earned 75 cents per share in fiscal '06 and 24 cents per share in '07. They lost $1.45 per share in fiscal '08.

EA accomplished their goal of eliminating the 2K series as a competitive threat (in fact, they eliminated it as a product altogether), but at tremendous cost to profitability from one their most reliable profit contributors, Madden. At the time, the analysts lined up to praise the deal, assuming that EA knew what it was doing and that they could grow the football market to accommodate the increased royalties. But I wonder how many of them would think it was anything other than a Pyrrhic victory now.

Strat Planning

Following up on my post about OODA, I thought I'd expand a little on the reason for strategic planning and some specific methods I've used in the past to facilitate planning.

One of the important lessons that Colonel Boyd derived from his study of military history was the importance of decentralized decision-making and field-level initiative. As the military has applied Boyd's concepts on the modern battlefield, this lesson has been further reinforced. Quoting from the Boyd Wikipedia entry:

"... [T]he most effective organizations have a highly decentralized chain of command that utilizes objective-driven orders, or directive control, rather than method-driven orders in order to harness the mental capacity and creative abilities of individual commanders at each level."

This only works if you have (1) creative, intelligent commanders (or managers in business); and (2) a strategic framework that establishes common objectives and helps establish a context for orientation, the second "O" in OODA. This orientation context is vitally important -- I like to call it a "shared hallucination" of the company's place and purpose. Managers need the flexibility to make quick decisions, but unless those decisions are consistent with the overall strategy of the organization, the results can be haphazard and uncoordinated.

Clear, simple articulation of corporate strategy is crucial. I have primarily used two tools to help me do this: a recursive goal-objective-strategy-metrics approach to writing the annual plan, and a threat map.

In my recursive goal-objective-strategy-metrics approach, the CEO establishes the top-level plan. This plan is comprised of a single, overall goal for the company (a thing to be accomplished, not a mission statement), some key objectives that support the goal, the strategies necessary to achieve the goal and satisfy the objectives, and some metrics by which success can be measured. This top-level plan should fit on a single page.

The recursive aspect of this approach is that each of the strategies from this top-level plan becomes a goal for the next level plan. So if one of the top-level strategies is "Finish the product before Christmas," the VP of production gets this as her goal and will develop objectives, strategies and metrics to reach it. This can get pushed down even further into the organization, so departmental managers get an annual goal and articulate their objectives, strategies and metrics.

The beauty of this approach is that it rolls perfectly back up into the master plan. If you want to know why the art department is outsourcing to China, for example, you can see that it satisfies their goal of delivering all art assets in September for $1MM, which serves the higher goal of shipping for Christmas on budget, which serves the top-level objective of reaching cash flow break-even by the end of Q1. And if one of the lower-level strategies fails, if China outsourcing can't deliver by September, you can change it to something else consistent with the overall goal. And that change propagates up and down the chain.

In practice, I only used this tool at the top-level and one level down, as a way to coordinate strategy at the VP level. But it worked to keep everyone on the same page. Actually, the process of writing and critiquing the plan as a team was more important than the resulting document, because the process surfaced tensions, fostered debate, and led to a better plan.

The other strategic planning tool I really like is the threat map. The way I create a threat map is to put my business in the center of a series of three concentric circles. The first circle closest to the center represents the immediate, near-term competitive threats, the next circle represents the medium-term threats that might arise in certain circumstances, and the outer circle represents the long-term threats.

Radiating out from the center I draw several axes, representing the things that will make the company successful (or its key vulnerabilities). I then place the competitive companies and market trends on the map, in the temporal bands, near the axis along which they are attacking my company. In addition to clarifying competitive threats, this was actually a great way to see opportunities, set priorities, and think about candidates for alliance, business development, and acquisition.

For example, in the case of JAMDAT, we had three axes: intellectual property, distribution, and game quality/innovation. On our map, we identified EA early on as a medium-term threat to us via intellectual property, so we sought to license the most dangerous of their properties from them, effectively neutralizing their threat and co-opting their advantage against us for several years.

Another example: we identified content aggregators as threats to our direct distribution relationships with carriers. In response, we carefully avoided using them as an alternative to the lengthy carrier sales process, even at the cost of immediate and incremental revenue, so we wouldn't inadvertently strengthen the aggregators' collective market position against us. This is a perfect application of strategy to value creation; the default response of the sales team would have been to simply maximize revenue, but that would have diminished our long-term competitive advantage.

Ultimately, the threat map and the annual plan are just tools. Without intelligence, creative thinking, and decisiveness in execution, the best laid plans are worthless. These tools can help direct a good team, but they can just as easily reveal weak organizational design and bad hires. Caveat emptor.