I implore my European readers to resist hitting the snooze button. That's right, I'd like to talk about that great American pastime - baseball.
I'd like to draw your attention to one of the best business books I've ever read, Moneyball: The Art of Winning an Unfair Game, by Michael Lewis. Published in 2003, the book was intended to be a inside look at the Oakland A's, a California baseball team located only a few miles away from its market rival San Francisco Giants.
The envisioned market for this book was for the die hard baseball fanatics but a funny thing happened - the business community picked up on this book as a get-well prescription for ANY business.
Let me acknowledge that baseball is my favourite sport. Often called boring, I prefer to think of it as war: long periods of boredom punctuated with exhilarating moments of tension. Baseball is an unusual sport and includes a number of odd characteristics:
• There is no time limit on the game - theoretically, a game could last forever. In 2008 the average time of a game was 2 hours 47 minutes. The longest was 6 hours 16 minutes.
• It is the only sport where the defence controls the ball
• The best athletes are rarely the best players
• Statistics factor prominently in how a game is coached
Statistics? Yes, it turns out baseball is a thinking man's game. Managers (i.e. head coaches) make decisions throughout the game based on a readily available set of statistics regarding the player match-ups and game situations to identify one that optimises the probability of a good outcome. The game moves slowly enough that there is time to think about this, and tension mounts as those decisions are put into play.
Number crunchers have been collecting data on players for the last 140 years. Players are judged not by a particularly famous athletic feat but by the statistics piled up over their career. Those stats translate into MONEY. The better your stats, the more you can expect to earn. For teams, the conventional wisdom is simple: teams with the best players (as defined by their stats) win more games and as a result have higher payrolls. And the corollary to this belief is that a high payroll increases the probability of having a winning team.
Enter our hero, Billy Beane, youthful general manager of the Oakland A's and former major lead player who was more interested in the business of baseball than playing it. In his first years of running the business he made a shocking discovery: there was no statistical correlation between payroll and team success. Laughed at by the old guard in the executive circles of baseball, Beane hired a team of number crunchers to explore this dichotomy. Why should he increase the size of his payroll if there was no statistically significant benefit?
Beane's team of nerds discovered that what really mattered was being good at the right time, that critical moment in the game when you win or lose. He further discovered that there were many players with below average salaries that were statistically very good when it really mattered. Beane put in place a new system in Oakland. A system that allowed them to assess the entire baseball population and choose the "best" players and get them for bargain prices. While the rest of the baseball laughed at Beane's team of mathematicians sifting through league stats, the Oakland A's having one of the leagues lowest payrolls just won, and won, and won.
In 2008, Tampa Bay, another team that has adopted the Moneyball model made it to the World Series Championship with the 2nd-lowest payroll in all of baseball. Sitting out the championship series (again) were the famous New York Yankees with a payroll of nearly five times Tampa Bay.
[click to expand - Source: Associated Press]
So bringing this story back to the arena of high technology business, what does this tell us? From my viewpoint there are many parallels between the baseball world and our high tech world. We are in the knowledge business, and like baseball, it's a people business. We win or lose based on who's on our team.
But do we do any better than the stodgy old baseball bureaucrats who happily judge talent by the same old metrics they've always used? Do our HR systems really identify the real stars of our business? Probably not, but its easy to fix.
We start by using the same process that Beane used, understanding in great detail the elements of "winning". Focus on execution and specifically execution when it counts. Some examples:
- Look at all the patents in your company and map them onto shipping products. Are your key inventors more obvious after looking at the revenue associated with those patents?
- Look at quality. Are there any teams that are consistently producing higher quality products than others?
- Look for unsung heroes. Are there people in the organization that always seem to come alive when things get tough? Some of the best people are often the quiet ones who get things done without taking the time to take credit. Your team knows who they are - ask them.
Every business is different but it's not difficult to identify the key statistics that you want to measure in your organization. It's a healthy exercise for teams to discuss the behaviours that are valued and identify the real stars of the team. Everyone needs heroes, why not someone we know.
In 2009, we can expect to see many unsigned players that may be without a team. If you are shrewd, you will be able to pick up some very good, unappreciated talent for a good price. And you'll look like a genius, just like Billy Beane.
Warren Savage, President and CEO of IPextreme, is a well-known and published authority in the field of semiconductor intellectual property.
He has a long history of pushing the envelope of design methodology from his work in fault tolerant computing at Tandem Computers in the 1980's and driving reliable design methodologies into commercial practice at Synopsys for its DesignWare IP product in the 1990s. Much of his thinking became embodied in the seminal book on IP reuse, the Reuse Methodology Manual.
Previous columns
(Nov 07) Warren Savage On: Making the Case for Invented Here
(Dec 07) Warren Savage On: Swiss Cheese Solutions
(Jan 08) Warren Savage On: Collaboration Needed for Success
(Feb 08) Warren Savage On: Knowing Your No
(Mar 08) Warren Savage On: The Next Big Thing
(Apr 08) Warren Savage On: Gumming Up the Works?
(May 08) Warren Savage On: Waiting for Godot
(Jun 08) Warren Savage On: Our Virtual Future
(Jul 08) Warren Savage On: Being Plugged In
(Aug 08) Warren Savage On: The Dog Days of Summer
(Sep 08) Warren Savage On: Samurais, Sedans, and Semiconductors
(Nov 08) Warren Savage On: Doom and Boom
(Dec 08) Warren Savage On: Back to the future