All organizations must periodically transform themselves to improve or sustain their competitive positioning. The challenge is to anticipate when transformation is required and to effectively direct the transformation process.
Realizing that it’s not enough to rest on the laurels of the past or the successes of today, businesses from Pasadena to Panama are acknowledging the need for constant transformation to retain competitiveness and ensure future viability. While for some organizations being innovative and proactive comes easily, for others, especially those with long, generally successful histories, embracing change can be a traumatic, even excruciating process.
Century of Success
On January 1, 1923, Southern California beat Penn State 14 to 3 and began a New Year’s tradition in the country’s newest football stadium: the 57,000 seat Rose Bowl. Today the Bruins of UCLA call the Rose Bowl home every fall and football teams across the country compete for a chance to play in the annual New Year’s game. During the rest of the year, the 82-year old stadium is a historical landmark serving the city of Pasadena, California, by hosting community events such as flea markets and concerts.
Three thousand miles south of Pasadena, in a country with a passion for “fútbol” rather than the pigskin, a different type of legacy is witnessed in the operation of the Panama Canal. August 14, 1914, marked the official opening of the Panama Canal and the conclusion of a project that had cost 5,609 lives and $375 million1. The 50-mile Canal took 10 years to build. To this day, it represents one of the greatest engineering accomplishments in world history. Controlled by the United States until 1999, the turnover of the Canal to Panama was met with widespread anxiety that under Panamanian control the Canal’s operation would be jeopardized. Yet, the Panama Canal Authority (“ACP”2 ) quickly silenced all doubters by consistently improving the Canal’s safety record and profitability.
“You have got to be state-of-the-art, because white elephants aren’t very popular.”
-William Leishman, former member of the Tournaments Board of Directors and grandson of the man credited with getting the Rose Bowl built.
The term “White Elephant” hardly describes the Rose Bowl or the Panama Canal, yet parties involved with both are concerned that without change the expression may become appropriate. Members of the Rose Bowl Operating Committee (“RBOC”) point to the Orange Bowl when asked the reason for their concerns. In 1987, the Miami stadium lost the Dolphins to the more modern, amenity-filled Joe Robbie Stadium in Broward County. The move resulted in a staff cut from 18 to 2 with the old stadium falling into such disrepair that at the 1990 Orange Bowl Game raw sewage dripped on fans. In 1996, the annual bowl game followed the Dolphins to Broward County leaving the historic Orange Bowl empty except for occasional concerts.
Feelings of Orange Bowl déjà vu occurred in Pasadena in 1999 with talk about moving an expansion or existing NFL team to Los Angeles3. The talks were a wake up call to the RBOC that the tenants they had depended on, the Galaxy soccer team and UCLA, could be wooed to leave if a more modern stadium were built. Their concerns weren’t unfounded. The Galaxy soccer team left the Rose Bowl in 2003 for a brand new soccer-specific stadium in Carson, taking with it $500,000 in annual revenue for the Pasadena stadium. Fears of UCLA following the soccer team’s lead were relieved when UCLA signed a lease for another 20 years. Yet, the RBOC has seen enough to know that if something doesn’t change the Rose Bowl may be following in the path of the Orange Bowl. Case in point, the NFL recently gave $5 million each to Los Angeles and Anaheim to study the feasibility of building and supporting a new football stadium in either community. At a current loss rate of about $2 million per year, the RBOC’s very existence is threatened without an NFL team calling it home.
In Panama, the ACP predicts the Canal in its present state (operating at 93% capacity) will be incapable of meeting shipping demands by 2010 without an expansion. The exploding trade volume with Asian countries led to the development of ever larger container ships in the late nineties. These Post-Panamax ships4 measure up to three times the maximum size allowable in the Canal and can be operated more cost-effectively than Panamax ships without using the inter-ocean shortcut. Alternate trade routes such as increased utilization of the Suez Canal, or, in an ironic twist of history, the construction of a new and larger canal in Nicaragua, or an overland transit corridor in Mexico5 (the very potential competitors prior to the United States’ involvement under Theodore Roosevelt one hundred years ago) are also being discussed as possible solutions to the current limitations of the Panama Canal.
Expansion and Renovation
With major threats on the horizon, the goal of the Rose Bowl and the Panama Canal is the same: a transformation that will modernize the 20th century landmarks for 21st century success. For Pasadena, transformation means a $500 million renovation plan that seeks to preserve the historical past of the stadium while modernizing it to lure an NFL team and the profits it represents to the Rose Bowl.
In Panama, transformation means expansion in the form of a third lane that is estimated to be a seven-year process, involving thousands of workers, at a cost of $5.25 billion. However, if successfully completed the extra lane will ensure that the Canal avoids being reduced to a regional waterway by increasing traffic capacity and allowing Post-Panamax ships to make the passage.
¿Vale la pena?6
For both the Rose Bowl and the Panama Canal change comes at a high price, with risks to the communities around both of these historic landmarks and the environment in which each one exists. The neighborhood association for the residential area around the Rose Bowl is up in arms over the idea of more large events each year as well as the “crowd” that the NFL tends to attract. Citing traffic and environmental concerns, as well as noise and vandalism, many residents feel that an upscale residential community is not the place to be holding NFL games.
In Panama, concerns run parallel. In the rural areas surrounding the Canal, La Coorinadora Campesina Contra Las Embalses7 is protesting the new dams and resultant flooding that would take place if the Canal were to be expanded, forcing thousands of campesinos to evacuate their land. Environmentalists see the proposed expansion as a threat to Panama’s biosphere, one of the world’s most extensively protected territories.
For both the stadium and the Canal financing will be a major challenge. Pasadena did the unprecedented when they declared that the $500 million needed to renovate the Rose Bowl would not come from the city, but rather the NFL itself. The citizens of Pasadena have “wised-up” to the often not-so-lucrative deals of having an NFL team. They argue that having a football team in the nation’s 2nd largest media market (the Los Angeles area) is plenty of incentive for the NFL to foot the cost of renovating the stadium. Yet, the Rose Bowl’s biggest hurdle is the lack of unity among the citizens of Pasadena. Although the City Council voted in June 2005 to stop negotiations with the NFL, this issue is now back on the ballot in time for the November 2006 elections.
In Panama, the expansion would cost an estimated $5.25 billion, a gigantic amount to a poverty-stricken country like Panama, representing five times the ACP’s annual revenues8. Much like the RBOC, the ACP is searching for innovative solutions and is currently investigating alternatives such as foreign investment in exchange for agreements on future passages and alliances with major ports in both the U.S. and Latin America.
Facing the Future
All organizations must periodically transform themselves to improve or sustain their competitive positioning. In Pasadena and Panama the writing is on the wall. The fate of the Orange Bowl and the increasing number of Post-Panamax ships serving an ever growing global trade are tangible warning signals highlighting the need for transformation. But time is not an ally. Simply holding on to a glorious history and looking back will almost certainly lead the RBOC and ACP down the path of obsolescence. Both the Rose Bowl and the Panama Canal have strong foundations from which to launch successful transformations. Innovation and hard work stood at the beginning of their 20th century success stories. While the world has changed in many ways during the past 100 years, innovation and hard work will again likely be the catalysts for their 21st century successes.
In a historic moment for Panama, the Panamanian people overwhelmingly approved the Canal’s expansion in a national referendum on October 22, 2006; a courageous and necessary move to preserve this vital artery of the ever increasing global trade.
Voters in Pasadena rejected “Measure A” on the November 7, 2006 ballot, leaving the Rose Bowl’s destiny at the mercy of continuing City subsidies and patient tenants, who will demand the City meet its contractual obligations and invest in much need capital improvements. However, the source of these funds is yet unknown.
1These numbers pertain to the American construction era only and do not include costs or lives lost from the French era of attempted construction during the late 19th century.
2Autoridad del Canal de Panama; an entity of the Government of Panama which is embedded in a unique legal framework giving it full financial autonomy from the Panamanian Government.
3Los Angeles hasn’t had a team since 1996 when both the Rams and Raiders left.
4Ships classified as “Panamax” are of the maximum dimensions that fit through the Canal’s locks: 965 ft long, 106 ft wide, and a draft of 39.5 ft.
5The “Trans-isthmus Corridor.” The isthmus is the narrowest point of land in Mexico’s southeast.
6Common Spanish expression meaning “Is it worth the trouble (pain)?”
7The Peasant Organization against the Dams
8The ACP had annual revenues of US$1,209 million (US$1,063 million) in the Fiscal Year ending September 30, 2005 (2004).
Carlson, Heather. “Panama Leaders considering Canal Upgrade.” The Washington Times, September 21, 2004.
Cho, Cynthia H. “New NFL bid 3rd and – Longshot?” Los Angeles Times, April 6, 2006.
Cullen, Bob. “A Man, A Plan, A Canal: Panama Rises.” The Smithsonian, March 2004.
“Expansion would Increase Capacity, Allow for Larger Vessels and Enhance Panama’s Economy,” www.panCanal.com, March 2, 2003.
King, Neil, Jr. “Panama Canal at Crossroads.” April.
Lacques, Gabe. “Pasadena Could Learn Lesson From Demise of Orange Bowl,” Pasadena Star-News, 29 April 2001.
Lacques, Gabe. “Rose Bowl may face Thorny Problem,” Pasadena Star-News, May 22, 2002.
Lacques, Gabe. “Rose Bowl to Hang ‘Vacancy’ Sign,” Pasadena Star-News, January 24, 2002.
Mireles, Ricardo Castillo. “An alternative to the Panama Canal,” www.logisticstoday.com, May 2005.
Ruiz, Kenneth Todd. “NFL initiative alive, well.” Pasadena Star-News, August 21, 2006.
Scott, Gary. “Don’t Forget Granddad,” Pasadena Star-News, April 27, 2003.