Moneyball: From Baseball Teams to Your Business

There are some valuable lessons about actionable metrics that business leaders can learn from the movie "Moneyball".

Business and sportsHow did a baseball franchise achieve 103 victories (the same number as the New York Yankees) in a season with only a 41 million dollar payroll (one-third of the Yankees)? That is the question the blockbuster movie “Moneyball“, starring Brad Pitt, answers.

Moneyball is a movie based on the book of the same name, written by Michael Lewis, which details the history of Billy Beane, the general manager of the Oakland Athletics in the early 2000’s. Billy Beane became famous in the baseball world for breaking with the franchise management paradigm and introducing an innovative scientific approach to hiring baseball players. With the help of Peter Brand, an economist graduating from Yale, Billy implemented a system based on statistics to find players who appeared to be poor fits with other teams, but who had good player stats; stats which other teams didn’t deem useful. Using this approach, they optimized the franchise budget and built a winning team with no expensive or stand-out star players.

The movie not only resulted in Brad Pitt’s Oscar nomination but also created numerous lessons for business owners and managers; after all, a baseball franchise is nothing more than a business.

Check out some lessons that your business could learn from Billy Beane:

The traditional approach isn’t necessarily the best one, and change can be a painful process:

For decades baseball scouts all worked the same way: Look for new stars by watching them play, then analyze subjective criteria, such as the way the player holds the bat or throws the ball. Team scouts never looked at the numbers that matter to have a winning team and resisted Billy when he used “nerdy” projections to choose the best players.

With this significant change in approach, Billy put a huge question mark on the old school scouts’ value, and certainly many of them hated this approach, since it threatened their livelihood. Billy had to deal with employees that were afraid of changes and tried to break from the new strategy. He didn’t surrender, he used his power when necessary and kept going with his plan even during bad times.

If you need to make a significant change in your business, have studied the solution and are confident in your choices, don’t be afraid of the modification. Listen to opposing opinions, but don’t give in simply because no one has done it before. Don’t be afraid to break from the traditional way – the world changes and traditional approaches can be improved upon.

Pay attention to actionable metrics rather than vanity metrics:

Certainly, a player with a strong arm and ability to hit home runs would add more passion to the game and fire up the crowd. But what about a player with a powerful arm capable of hitting the ball with enormous strength and has lower runs-per-game average than another player with ordinary strength at bat?

So, if you had to choose, which player would you pick in a draft?

This situation is a classic example of Vanity Metrics versus Actionable Metrics. In this example, hitting power is a vanity metric, a number which is believed to be a positive indicator of success, but actually doesn’t guarantee success.

A very common vanity metric in business today is the number of followers on a given social media site. This looks like a success indicator, but in reality, this number doesn’t say anything about the company goals. Looking at only this number, it’s impossible to know if the business will succeed or not. We don’t know if the number of followers guarantees a related sales volume, and that is the real goal.

On the other hand, average runs per game is an actionable metric. Looking at this metric, we are able to determine if the player helped the team to score or not. The statistic of runs-per-game is a metric which impacts the real goals of the team. An example of an actionable metric for an online business, is data obtained in the sales funnel tracking, such as “the number of social media followers who clicked on a call-to-action link” or “the number of website visitors who filled out a form”.

Actionable metrics help business leaders make good business decisions and is proof of business success.

If your business could use help defining actionable metrics, please reach out to us.

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