Below is a chapter I have written for a new book titled: Horizon 2030. The book was due to be published at the European Health and Fitness Forum in Cologne during April 2020. Due to the COVID-19 pandemic, the book will now be published in September 2020.
For some businesses in the European fitness industry, a single decade is just another chapter in a long and triumphant story of providing a compelling service that consistently resonates with its customers. Contrast this with other businesses that fail to navigate a single decade: they arrive, they attempt to serve, but soon they are gone. So some flourish and others fail, and yet the competitive environment and economy in which they operate are often similar. Success now and in the future depends on creating meaningful moments of connection. Business leaders may not see themselves as trend spotters or expert ‘futurists’, but there are market signals that can inform and guide a business to stay synchronised with the current and emerging expectation of customers.
The purpose of this chapter is to explore how the world is changing, but also to understand what, over time, remains the same. It will argue that success in this new decade can flow from a realisation that the fitness industry is transitioning from a ‘service’ and ‘experience’ economy to an ‘impact economy’. Possessing a clear contextual understanding of how the world currently is and could become is an essential part of charting a successful long-term corporate strategy.
Rapid industrialisation and mechanisation of daily lives are leading to the unintended consequence of creating generations of inactive people. For many people, human-powered movement is now measured in just minutes across the entire day. In 1961, seven out of ten UK households did not own a car, but by 2018 this had fallen to only one in ten (Office for National Statistics). Mechanisation, along with what could be loosely termed as ‘facilitating technology’ – the web, smartphones/apps, digital streaming and digital marketplaces, now consume people’s lives. As a result, the UK population is around 20% less active than in the 1960s. If the current trend continues, it will be 35% less active by 2030 (Public Health England, 2014). Other countries are not immune to this phenomenon. As a country becomes more prosperous, then so physical activity levels can decline. The result is that as physical activity is progressively engineered out of our towns, cities and everyday lives, it creates high societal costs. Physical inactivity is responsible for one in six (17%) of all preventable deaths in the UK, which makes it as dangerous as smoking. A Lancet study reported that physical inactivity caused more than 5.3 million of the 57 million deaths that occurred worldwide in 2008 (Lee et al. 2012).
This means that demand for what the fitness industry provides is likely to continue in the future, but it does not possess a monopoly, nor is it automatically the first choice for how consumers attempt to integrate physical activity back into their lives.
Cultivating a forward-looking business mindset
All businesses can benefit from ‘trend watching’ as a tool to provide insight into the rapid pace of change affecting the world and consumers. This is particularly acute in the fitness industry, where the nature of the relationship between consumer and brand can be unpredictable. A single negative experience can quickly turn a raving fan into a raging critic. It is easy for organisations to understand the trends, with many companies offering to track the global consumer ‘Zeitgeist’ (the spirit of the time) and helping to answer the question: ‘What will my customers want in the future?’ This approach identifies cultural memes (a spreading cultural item or idea). It is consumer-focused and qualitative, often using a global network of researchers to feed back their observations and reinforce the trend with examples of emerging products and services. An organisation can also draw in help from more strategic future-looking agencies. They can explore the life conditions – the social, technological, economic, environmental and political factors (STEEP framework) – that could affect people’s lives and provide quantifiable evidence that helps organisations to plan for the future.
A society of abundance
As countries become richer, so the supply of goods, services and experiences become ever more abundant. Abundance is defined as an ample and copious supply. Those people who are fortunate enough to live in a prosperous country – one with a high Human Development Index (HDI) (a composite index of life expectancy, education, and per capita income indicators) – experience abundance every day without necessarily being consciously aware of it. Look across any product and service category, and abundant choice exists. If not immediately available offline, then no need to be concerned as it is only a single mouse-click away. The Amazon platform was reported to be selling approximately 120 million products by April 2019 (ScrapeHero analysis). This is a conservative estimate and excludes the millions of products being sold via third-party sellers using the Amazon Marketplace. Of course, this is the dominant platform, but is just one of many that service the abundance society. Look forward ten years, and how do you believe this trend of abundance will unfold?
Why this matters
Just one generation ago, the European fitness industry benefited from the scarcity society. Consumer demand was growing, but the supply of clubs was limited. A single club could claim an entire catchment area and operate with no or limited competition. Back then, due diligence on a potential new club location was simple; if a competing club was already established, the recommendation would be to move on to a virgin catchment area. Now the fitness industry marketplace is evolving in a way that is analogous to the Amazon marketplace. The first category was the multi-facility club, but this has now exploded into a diverse ecosystem of providers.
Businesses can flourish as a part of this abundant ecosystem, but the customer proposition must resonate with customers on a deep and authentic level.
The experience recipe
An experience occurs when a company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event (Pine et al. 2011).
It is 2030, but human desires remain unchanged
The paradox of this abundant world is that it does not guarantee to improve well-being or a sense of happiness. That deep surge in excitement due to the arrival of a new Tesla or a promotion at work can often quickly subside due to the phenomenon of hedonic adaptation – a steep surge in happiness which then reduces to a previous baseline or ‘set point’ level. Brickman and Campbell in 1971 coined the phrase ‘hedonic treadmill’ to explain this phenomenon of human behaviour, which provides fuel for businesses such as Amazon. Therefore, if filling lives with physical goods provides only a temporary sense of contentment and happiness, then this may partially explain the rise of the experience economy which is being championed by businesses such as Airbnb and even Apple.
Airbnb is one of the world’s largest marketplaces for unique, authentic places to stay and things to do and says that it exists to ‘promote people-to-people connection, community and trust around the world’. Since being founded in 2008, it has facilitated half a billion guest arrivals. In 2016, the business extended its platform to incorporate places to stay with things to do and began offering curated experiences. An out-of-the-ordinary experience has the potential to remain with a person for a lifetime. Take a look at the image of Airbnb guests paddling on the Adriatic Sea in Croatia by moonlight (Figure 1).
Figure 1: Night-time stand-up paddling on the Adriatic Sea.
The boards are equipped with underside LED lighting, which illuminates everything around and under the board. This experience goes beyond physicality and taps into what Professor Steven Reiss defines as a person’s desire for tranquillity and social contact. (Figure 2). It helps to answer the question: What drives our thinking, actions and behaviours? Regardless of the decade, these human desires remain unchanged.
Figure 2: Enduring human desires (Reiss 2002).
This Croatian paddling experience was rated 4.94 on a five-point scale by 294 guests at December 2019 and looks under-priced at just €43. Having launched with 500 experiences back in 2016, Airbnb was offering 30,000 experiences at the end of 2019. Looking ahead ten years, it is plausible to imagine that Airbnb will be influencing humanity on the scale of Amazon. Should Airbnb be viewed as part of the wider fitness industry ecosystem? It wants to connect, engage and enrich the lives of the industry’s customers, so perhaps it should be. Now, as in the future, businesses are competing for a person’s scarce and therefore valuable time, which means that competitors will progressively appear from the most unlikely of places.
Apple Store wants to become the town square
Apple is becoming the maestro of staged experiences and views its everyday mission as far more than being the creator of compelling technology. In the past, it viewed its stores as a platform for selling its products. Progressively those stores are becoming community hubs which become the stage for a diverse range of experiences that are designed to enrich lives. The fitness industry has its outdoor gyms, while Apple invites people to experience its technology playgrounds. ‘Today at Apple’ encourages people to come along and learn how to do more with the products they love in workshops (Skills sessions) and attend talks. Apple Stores now offer guided health and fitness walks. People meet at the store and then enjoy a one-hour local walk with a fitness trainer and Apple associate. People are taught how to weave physical activity into their everyday lives, and if technology is needed to keep track of progress, there is always the Apple Watch to consider. This compelling one-hour experience is offered for free, which is a very attractive price-point. This is another brand we can add to the ever-widening fitness industry ecosystem. Perhaps in the future going for a workout will increasingly start at Apple rather than the local gym.
The Apple service acronym
A: Approach customers with a personalised, warm welcome.
P: Probe politely to understand the customer’s needs.
P: Present a solution for the customer to take home today.
L: Listen for and resolve issues or concerns.
E: End with a fond farewell and an invitation to return.
Exploring the impact economy
As the fitness industry travels towards 2030, it will need to respond to the explosion of experience offerings which will emanate from diverse and sometimes unexpected new businesses who also want to participate in the health and fitness economy. However, if more businesses are migrating towards an experiential business model, how will differentiation be possible?
One plausible scenario is that more fitness providers will adopt the logic model illustrated in Figure 3. They will strategically pivot to become agents of change and migrate to the emerging impact economy. Today in the year 2020 many parts of the fitness industry operate to the left side of Figure 3, where a key measure of success is the number of members a fitness brand has acquired (the output) as a result of its investment into inputs and activities. As an example, Planet Fitness, the US low-cost gym franchise, reports having 14.1 million members across its 1,899 locations at September 2019 compared with another franchise, Anytime Fitness, that reports 4 million members across 4,500 gyms at August 2019. So which of these two businesses is more effective at changing and enriching lives? This output measure of counting members does not help in answering the question, and yet it has been used as marker of success across the global fitness industry for the past 50 years. It is an unsophisticated measure because it does not convey the impact, the life-changing difference that clubs and centres are making. It is like measuring the well-being of a person based on how much they earn.
Figure 3: Fitness industry logic model.
The scale of a business is often confused with its social impact, but they are very different measures. We know from studies of health club attendance behaviour (Bedford 2013, Middelkamp et al. 2016) that joining a club is no guarantee of regular attendance which is sufficient and sustained to create a health benefit. Contrast this to businesses that strategically focus on outcomes (intermediate effects) and impacts (progress on a health or social issue), which is to the right-hand side of the logic model. The starting point now becomes: What in our members’ lives are we trying to change or enrich? For example, how can our clubs and teams be harnessed to combat increasing levels of mental illness? What interventions can be tested to help reduce the global pandemic of type 2 diabetes? How can a business be used as a platform to improve social cohesion and combat rising levels of loneliness?
Clubs now become the stage, with exercise and movement the ‘active ingredient’, in the pursuit of a greater social mission. This will require a redefinition of the everyday mission of this remarkable industry and perhaps a different type of leadership team and language to describe success – less financially biased and instead more socially empathetic.
Methodologies such as Social Return on Investment (SROI) and the Social Value Calculator which has been developed in the United Kingdom now exist to help fitness businesses to measure the health and social value of physical activity. By analysing physical activity behaviour of members, along with geo-demographic information, it is possible to calculate how many lives are being saved through reducing the risk of heart disease, various cancers and dementia. It is also possible to quantify the impact in other areas such as well-being, education and even reducing crime. Oxygen Consulting has enthusiastically championed this wider social agenda for the fitness industry because it allows businesses to tell an ‘impact story’ which is more compelling and persuasive than just a ‘financial story’.
London social impact of sport and physical activity research
London aims to be a happy, healthy and not just a prosperous city. Using the Social Return on Investment (SROI) methodology, it was estimated that in London, the following cases were prevented due to sport and physical activity sport in 2015/2016:
(London Sport 2018)
Organisations that people will increasingly care about are those that can prove the difference they are making. In other words, how are they demonstrably making the world a healthier and more socially just place. Critically, can they prove it? As an example, charity: water, an American charity which exists to bring clean, safe drinking water to people in developing countries, allows a person to go onto Google Maps and track their donation all the way through to the building of a new well, along with the well’s GPS coordinates. Donors can go one step further and log into the remote sensors that measure the flow of clean water (Figure 4).
Scott Harrison, its founder, says that charity needs to be reinvented because it does not provide sufficient transparency for more socially conscious consumers who demand more evidence about the impact of their donation. Some readers may wonder why the fitness industry should be concerned about innovation in the charity sector. This matters because the emerging consumer expectation is that all other industries will become equally transparent and evidence-based.
Figure 4: charity: water allows people to track their donation online.
The future is about paying attention
The present health and fitness industry has a tendency to fixate on what other similar businesses are doing. It is a bias of business leaders to be primarily concerned by others who operate in the immediate market boundary and to pay less attention to market innovation in adjacent industries. They are paying attention, but not always to the right things. As an example, the former marketing director of the global Blockbuster movie rental business that went bust famously said that they were constantly paying close attention to how consumers were ‘consuming films’, but then completely missed the consumer shift to online film streaming which was pioneered by a little known start-up called Netflix. Netflix offered to sell its fledgling business to the once-dominant Blockbuster for just $50 million. The offer was rejected because the Blockbuster leadership was obsessed with the proposition of consumers visiting a store and talking a video home for the weekend. The present market capitalisation of Netflix is now $139 billion (at December 2019). Therefore, fitness clubs that believe they are solely competing against other clubs will become increasingly vulnerable. With this myopic mindset, there is a real threat of being substituted or ‘sideswiped’ by an unexpected alternative.
A United Nation forecast indicates that the global population could grow to around 8.5 billion in 2030, up from its present 7.7 billion in 2019. Mechanisation and ‘facilitating technology’ are likely to slowly reach more of these people and continue to discourage human-powered movement. It means that the fitness industry, with all its constituent players, will continue to have a core role in supporting people to integrate physical activity and other healthy behaviours into their everyday lives. However, in this abundant ecosystem, every business must be committed to delivering experiences that deeply resonate with customers. The businesses that flourish will be those that understand that people are intrinsically motivated by different things, and a failure to understand this may partially explain why too many people prematurely terminate their memberships.
As the next decade begins, the industry must become less ‘output’-oriented and commit to foster ‘impact’ businesses. These businesses care less about the size of their business and care more about measuring lives changed and enriched. Proof, evidence and social change will become the new currency.
The American fiction writer William Gibson once stated, ‘The future has arrived — it’s just not evenly distributed.’ This conveys the phenomenon of ideas spreading at different rates across the world. This means one person’s present experience in Japan could be a near-future service innovation for someone in Finland. The UK low-cost gym segment began ten years after Germany, so those who were paying attention to this German affordable fitness trend were able to explore a plausible scenario of it spreading to other regions. Now you know: the future is already here, so step forward and embrace it.