CASES TO ACCOMPANY CONTEMPORARY STRATEGY ANALYSIS NINTH EDITION Copyright © 2016 John Wiley & Sons, Inc. Case 1 Tough Mudder Inc.: The Business of Mud Runs Really tough. But really fun. When I got back to the office on Monday morning, I looked at my colleagues and thought: “And what did you do over the weekend?” —TOUGH MUDDER PARTICIPANT Tough Mudder Inc. is a Brooklyn-based company that hosts endurance obstacle events—a rapidly growing sport also known as “mud runs.” During 2015, about 600,000 participants will each pay between $180 and $260 to tackle a 10- to 12-mile Tough Mudder course featuring 15 to 20 challenging obstacles. The obstacles include wading through a dumpster filled with ice (the “Arctic Enema”), crawling through a series of pipes part-filled with mud (“Boa Constrictor”), and dashing through live wires carrying up to 10,000 volts (“Electroshock Therapy”). The 2015 schedule com- prises 46 two-day Tough Mudder events (a separate run on each day) in the US, Canada, the UK, Ireland, Germany, and Australia. Tough Mudder’s website describes the experience as follows: Tough Mudder events are team-based obstacle course challenges designed to test your all around strength, stamina and mental grit, while encouraging teamwork and camaraderie. With the most innovative courses and obstacles, over two million inspiring participants worldwide to date, and more than $8.7 million raised for the Wounded Warrior Project by US participants, Tough Mudder is the premier adven- ture challenge series in the world. But Tough Mudder is more than an event; it’s a way of thinking. By running a Tough Mudder challenge, you’ll unlock a true sense of accomplishment, have a great time and discover a camaraderie with your fellow participants that’s experienced all too rarely these days.1 Tough Mudder was founded in 2010 by former British school pals Will Dean and Guy Livingston. While a Harvard MBA student, Dean entered Harvard Business School’s annual business plan competition using Tough Guy, a UK obstacle race based upon British Special Forces training, as the basis for his plan.2 On graduat- ing from Harvard, Dean and Livingstone launched their first Tough Mudder event. On May 21, 2010 at Bear Creek ski resort, Pennsylvania 4,500 participants battled through a grueling 10-mile course. This case was prepared by Robert M. Grant. ©2015 Robert M. Grant. Copyright © 2016 John Wiley & Sons, Inc. 436 CASES TO ACCOMPANY CONTEMPORARY STRATEGY ANALYSIS The Market for Endurance Sports The origins of endurance sports can be traced to the introduction of the modern marathon race in 1896, the triathlon in the 1920s, orienteering in the 1930s, and the first Ironman triathlon in 1974. In recent years, a number of new endurance sports have appeared, including: ● adventure races—off-road, triathlon-based events which typically include trekking/orienteering, mountain biking, and paddling; ● obstacle mud runs—cross-country running events with a variety of challeng- ing obstacles; ● novelty events—fun events such as 5K races in which competitors are doused in paint (Color Run), running with real bulls (Great Bull Run), and food fights (Tomato Royale). Tough Mudder used several strategic variables to map the market and position the different products (Figure 1). Obstacle mud runs were initiated in the UK in 1987 with the annual Tough Guy race organized by ex-British soldier Billy Wilson (which provided the inspiration for Tough Mudder). In the US, Warrior Dash launched in July 2009, followed by Tough Mudder and Spartan Races in May 2010. A flood of new entries followed. During 2011–2013, new entrants included: Mud Mingle, Play Dirty Adventure Runs, Dirty Girl, Mudslayers, Gritty Goddess Runs, Alpha Warrior, Big Nasty Mud Run, Survival Race, Udder Mud Run, Fugitive Mud Run, Hot and Dirty Mud Run, and many more. During 2013, there were 3.4 million participants in US obstacle mud runs paying a total of $290.1 million.3 By comparison, triathlons attracted about two million participants in 2013. In 2013, close to 350 organizations offered obstacle mud runs. The surging popularity of mud runs pointed to the desire of the young (and not so young) to turn away from video screens and virtual experiences and test their physi- cal and mental limits in the Great Outdoors. FIGURE 1 The market for endurance sports Collaborative Unconventional Color Run Tough Mudder Tough Mudder Spartan Races Warrior Dash Low risk High risk Activity-led Brand-led event event Color Run Warrior Dash Ironman Spartan Races Marathons Marathons Ironman Competitive Traditional Source: Adapted from a presentation by Nick Horbaczewski to Strategic Planning Innovation Summit, New York, December 2013. Copyright © 2016 John Wiley & Sons, Inc. CASE 1 TOUGH MUDDER INC.: THE BUSINESS OF MUD RUns 437 TABLE 1 Tough Mudder’s leading competitors Spartan races Warrior Dash Founding Started by Joe De Sena in 2010 Red Frog Events LLC launched Great Urban Expanded overseas through Race in 2007, Warrior Dash in 2009, and franchising Firefly Music Festival in 2012 2015 events US: 108 mostly 1-day events US: 27 1-day events Overseas: 76 events in 26 countries Canada: 1 event (No overseas events after 2014) The product 3 types of race: Sprint (3 miles, 3- to 4-mile race with 12 obstacles 15 obstacles), Super (8 miles, 20 followed by post-race party (beer, bbq, obstacles), Beast (12 miles, 25 live music) obstacles) Sponsors Reebok, Clif Bar, Paleo Ranch Jerky, Shock Top Brewing, Vibram, Anytime Bodybuilding.com, PursuitRx Fitness, Gold Bond, Rockin’ Refuel The psychology of mud runs (and other endurance sports) is complex. The satisfaction participants derive from overcoming their perceived physical and men- tal limits combines with identification with warrior role models and the nourishing of camaraderie. The New York Times referred to the “Walter Mitty weekend-warrior complex,” noting that, while the events draw endurance athletes and military veter- ans, “the muddiest, most avid, most agro participants hail from Wall Street.”4 A psy- chologist pointed to the potential for “misattributed arousal”: the tendency among couples participating in endurance events to attribute increased blood pressure, heart rate, and sensory alertness to their emotional relationship with their partner. Bottom line: “Want your boyfriend or girlfriend to feel intense feelings of love and desire for you? Put yourselves through a grueling, 12-mile obstacle course!”5 During 2013–2015, the mud run industry experienced a shake-out as many weaker organizers were unable to attract sufficient participants to cover their costs. At the same time new entry continued—new obstacle race series were launched by BattleFrog in the US and Swedish-based Nexthand’s “Toughest” obstacle races in Scandinavia and the UK. By 2015, the industry leaders were Tough Mudder, Spartan Races, and Warrior Dash (Table 1). Growing the Company, Building the Brand Tough Mudder’s strategic priority was to establish leadership within an increasingly crowded market. How to position Tough Mudder in relation both to other endur- ance sports and to other obstacle runs was the critical strategic issue for CEO Will Dean. Dean believed that compared to traditional endurance sports—such as mara- thons and triathlons—the key attributes of obstacle course races were that they pre- sented significant personal risk, of injury, hypothermia, or extreme exhaustion; they could be collaborative rather than competitive events; and they were more engaging by allowing a variety of experiences and challenges. However, combining the various attributes of the mud run experience— exhaustion, camaraderie, fun, and fear—was challenging in terms of product design. In trading off individual achievement against collaboration, Dean emphasized the collaborative dimension—Tough Mudder would be untimed and team-based; Copyright © 2016 John Wiley & Sons, Inc. 438 CASES TO ACCOMPANY CONTEMPORARY STRATEGY ANALYSIS the individual challenge would be to complete the course. A more complex chal- lenge was the need for Tough Mudder to present itself as formidable (“Probably the Toughest Event on the Planet”) while attracting a wide range of participants. Making it a team-based event and giving participants the option to bypass individual obstacles helped reconcile these conflicting objectives. Appealing to military-style principles of esprit de corps (“No Mudder left behind”) also helped reconcile this dilemma. This combination of personal challenge and team-based collaboration also encouraged participation from business enterprises and other organizations seeking to build trust, morale, and motivation among teams of employees. The principle of collaboration was not only within teams but extended across all participants. Before each Tough Mudder event, the participants gather at the start line to recite the Tough Mudder pledge: ● I understand that Tough Mudder is not a race but a challenge. ● I put teamwork and camaraderie before my course time. ● I do not whine—kids whine. ● I help my fellow Mudders complete the course. ● And I overcome all my fears. As psychologist Melanie Tannenbaum observes: “this pledge is setting a very powerful descriptive norm … a very powerful determinant of our behavior … More than anything else, though, there’s a little part of our brains that hasn’t quite left the ‘Peer Pressure’ halls of high school. We want to fit in, and we want to do what oth- ers are doing.”6 The spirit of unity and collaboration provides a central element of Tough Mudder’s marketing strategy. Tough Mudder has relied almost exclusively on Facebook for building its profile, encouraging participation, and building community among its participants. Its Facebook ads target specific locations, demographics, and “likes” such as ice hockey and other physical sports. Tough Mudder also makes heavy use of “sponsored stories,” which appear on users’ Facebook “news feeds” when their friends “Like” Tough Mudder. Most important, Facebook is the ideal media for Tough Mudder to exploit its greatest appeal to participants: the ability for them to proclaim their courage, endurance, and fighting spirit.