Feedback Analytics, Moneyball results

The film Moneyball recounts the true story of Billy Beane’s successful attempt to put together a winning baseball club on a relatively low budget by using a combination of technology and data analytics to decide on the players drafted (purchased).

In Moneyball, the Society for Baseball Research was the key source of data, in business, the source of data is customer insight, or Feedback. Jermey Koudi once wrote in the Economist’s guide to effective decision making that the most certain route to profitability for a business is through understanding and reacting to:

• Customer needs and preferences
• What’s going on in the market place and competitive landscape

Both strands of these valuable data are critical, but they become much more powerful with a deeper understanding achieved through analysis. When capturing feedback, managers have a treasure trove of structured and unstructured data that is there to be exploited, the type of benefits are as follows:

Eliminate unnecessary costs
After running analysis, Billy Beane realised that stealing bases didn’t correlate highly The Oakland A’s with winning of games, so guess what? They decided to stop focusing on stealing bases. Perhaps it’s this type of approach that has seen Ryanair take steps such as removing meals as standard from flights. Just as the Oakland A’s didn’t lose more matches by not focusing on stealing bases, the analysis showed Ryanair didn’t fill any less seats by eliminating free meals from flights.

Identify areas of competitive advantage
Through analysis Beane’s team realised The A’s competitive advantage arose in what is known in baseball as on-base percentage. A key lesson for business here is to identify areas where strengths lie and leverage these to your advantage. A key rule of customer experience is that an experience designed for everyone works for noone. To really find out where you are strongest you need to look to customer insight, and crunch the data to find out.

Outperform competitors
Companies that take advantage of analytics can punch way above their weight by allocating resources much more efficiently. A win for the Oakland A’s cost 33% of what a win cost the New York Yankee’s from 1999 to 2009, yet the Yankees only won 8% more games than the Oakland A’s in the same 10 year period.

Objective analysis for optimal results
In a previous post, I spoke about the importance of analysing data to leverage full value from it. The lessons learned from Sabermetrics validate this viewpoint. Beane looked at historical performance of players by correlating their performance against the key outcome, i.e. winning. I also touched on the importance of looking at the key outcomes. By focusing on analysis and key outcomes, business managers can eradicate any additional subjective noise and to take an objective approach to achieve optimal results.

In business managers often have preconceived views about how their business should be run. The central premise of Moneyball is that the collected wisdom of key decision makers in baseball over the past century is subjective and often flawed. Lessons from Moneyball can be applied in business.

The message is simple; use analysis to seek out the patterns that open up opportunities. If you are looking for some advice on how to proceed, please feel free to contact me.