Finding That “Right” Metric
Since we are in the middle of the major league baseball playoffs, and in honor of the recently released movie “Moneyball,” I thought it was only appropriate to discuss how the pursuit and identification of the “right” metrics has not only changed how the game of baseball is managed, but has the same potential impact on how you manage your business.
In 2004, Billy Beane published the book, “Moneyball” that chronicled how the Oakland A’s were using new data and metrics in order to determine the value of any particular player. The A’s were unique in the use of sabermetrics, which is the application of statistical analysis to baseball data in order to evaluate and compare the performance of individual players. The results were that the A’s had an “unfair competitive advantage” in determining how much to pay any particular player playing any specific position, especially in the costly era of free agency.
As a result, the A’s enjoyed a significant cost advantage in what they were paying for wins versus someone like the Yankees (see chart below).
Unfortunately for Billy Beane and the Oakland A’s, other teams (most notably the Boston Red Sox) copied this model and reduced the competitive advantage that the A’s briefly enjoyed. But that’s the nature of a competitive business isn’t it, whether it’s in sports, retail, banking, entertainment, telecommunications or health care.
So how does one survive in a world where competitive advantage via analytics can be so short-lived? By constantly innovating, thinking differently, and looking at new sources of data and analytic tools to surface those significant, material and actionable insights that can differentiate your business from that of your competitors.
My next blog will go into more details on how new “big data” sources and analytic tools will further re-define how baseball teams – like all competitive organizations – will derive competitive advantage.