The future of Scotland's professional teams has been called into question, and the idea of basing a club side in London has been mooted as part of the SRU's strategic review.
The SRU are approximately £23million in debt and Scottish pro teams Glasgow, Edinburgh and Borders struggle to attract crowds to match their counterparts in Ireland and Wales.
The current professional set-up, according to Irvine, is certainly flawed.
"We have to be realistic about this, in the last few seasons quite simply it's not worked," Irvine told BBC Radio Scotland.
"We're having a complete review of what we're doing and what we're going to do with professional rugby, because we have to have success at professional rugby."
The exodus of Scotland internationals from the professional clubs has escalated in recent weeks, and Irvine believes a range of factors are driving players out of the country.
"We're having great difficulty retaining players and attracting players, and it's not just about money. Money is part of it, but there's other things to it," said Irvine.
"There's facilities, there's the ambience, there's the crowds, there's the atmosphere, and we're failing in all of them.
"We're going to have a complete new look at it and then come forward with ideas.
"There have to be changes. Quite simply it's not working and with the structure that we have just now a lot of the top players don't want to remain in Scotland and that's wrong."
Irvine had no complaints about Scotland's display against Ireland today, in a 19-18 RBS 6 Nations Championship defeat.
"I don't think you could ever fault the commitment today," he said.
"I thought the players put their bodies on the line and it was a magnificent performance against one of the best teams in the world.
"The boys are bitterly disappointed because they came so close, but I said to them that they can hold their heads up high because I thought it was an outstanding effort today."
He added: "Admittedly we've got a problem in scoring tries, but I can tell you that Ireland team knew they were in a hell of a game today."