Analytics is en vogue.
It’s chic. It’s hip. It’s trending.
And, it has proven that brains constantly win over brawn (and intuition) both in boardrooms and in the wide world of sports.
That’s what this year’s featured speakers, Michael Lewis, author of Moneyball: The Art of Winning an Unfair Game, and Billy Beane, Vice President and General Manager of the Oakland Athletics, will discuss at the IBM Information On Demand conference (October 23-27, 2011, in Las Vegas).
If you’re not aware of Moneyball, it’s a behind-the-scenes story of the Oakland Athletics and how they changed the game and leveled the playing field through the innovative use of analytics that allowed the team with the lowest budget to consistently compete against the big market, deep pocket teams.
Moneyball took the veil off a much-treasured secret and demonstrated that new ideas could produce positive results in the traditional world of Major League Baseball.
The book was also recently made into a major motion picture – in theaters now – starring Brad Pitt as Billy Beane. It is receiving rave reviews.
Moneyball was really the catalyst that brought analytics into the mainstream, sparking a wave of analytics-focused best sellers, including Competing on Analytics, Super Crunchers, Smart (Enough) Systems and The Numerati.
The Information On Demand social media team had the opportunity to speak with Michael Lewis about his book, the movie and the parallels between baseball and business.
Who Is Going To Read A Book About Analytics?
In the late 1990s, Lewis was living in Berkeley, Calif., and started to pay attention to the local baseball team, the Oakland Athletics.
He had some awareness of the payroll discrepancies in baseball and thought it was strange how many games the Oakland A’s were winning given how little money they had in relation to the competition.
“The answer was so shocking to me that this team, in response to its financial disadvantage, was rethinking the game of baseball that I launched into Moneyball,” said Lewis. “This was a weird book for me. I had never written a word about sports and if you asked me what ‘Sabermetrics’ was, I’d have guessed it would have had to do with fencing. I didn’t have any idea this world existed and didn’t realize how rich the environment was until I got into it as a writer.”
Beane, however, wasn’t worried about his secrets getting out. He was more concerned about what his mother might think of the way he spoke, mainly his profanity.
When Lewis asked him if he was going to be upset for giving away his secret formula, Beane laughed and said, “Do you really think people in baseball are going to read your book?”
Leveling the Playing Field
Today, every team in baseball has turned its sights to the once dark art of analytics and the playing field has been leveled. Now big budget teams like the Boston Red Sox are using this strategy to draft players and identify free agents.
“When the book came out, the markets were poised to become a lot more efficient,” said Lewis. “And, when the Red Sox decided they were going to apply this new way of thinking to players and baseball strategies…that was the beginning of the end for the A’s advantage. Now it’s normal. The war is over.
“If you’re a team that isn’t trying to be on the cutting edge of using data to better value players and strategies, you’re at risk of being exploited in the marketplace and everyone understands that.”
Don’t Let Statistics Become Fetishized
If baseball can take analytics to the field, why don’t more organizations use the technology in their game plans? The benefits are endless.
Lewis believes that any organization – from sports to business to government – “needs to be looking for new ways to mine their data, and new ways to think about their data.”
But he also warns that baseball provides a great best practice for any business thinking about deploying an analytic solution.
“The funny thing about this story,” said Lewis, “is that it’s true the Oakland A’s set about trying to create new data and generate new information that wasn’t on the baseball field.
“But, a lot of the inefficiency in the game came from the misuse of the data that existed. The data was there, but people were just not thinking about it properly. So you could easily calculate a player’s on base percentage, but baseball was not appreciating the value of the statistic.
“And, to me the story is not just the importance of the data, it’s a story of being careful how you use it once you have it. Because the minute you start to measure something and have a statistic, it has a tendency to become fetishized, like a player’s batting average.
“Unfortunately, it wasn’t a key offensive statistic and it led players to be misunderstood.”
It’s like a marketing department only doing simple segmentation to identify customers for a direct mail offer. This analysis provides a somewhat superficial view of the customer and leads to one-to-some direct marketing (and lot of junk mail).
Basically, it perpetuates accepted wisdom that all customers (and baseball players for that matter) are created equal.
Change is Good; Don’t Be Scared to be an Innovator
For baseball teams (and businesses and government agencies), now comes the hard part – continually innovating to find new statistics that have hidden meaning.
Lewis says the low-hanging fruit has been plucked because it was relatively easy to assign statistical credit and blame to what happens on the baseball field.
However, if athletes weren’t so expensive nowadays no one would care about the ramifications of clean data and in-depth analysis.
Nor would the business world – except in today’s environment, where acquiring a new customer is that much more expensive than proactively keeping one.
“The business decisions become extremely important,” said Lewis. “It’s worth investing in complicated ways of evaluating them [players and customers] because if you find a slight edge it means saving millions of dollars.”
That is why those in the C-suite (and in many instances IT organizations) need to become more accepting to analytical techniques and not be afraid of what the data often reveals, or how it might change business processes.
In Beane’s case, he had to change if his ballclub was going to be competitive and survive. He challenged baseball’s traditionalists and angered the gods of conventional wisdom.
Sometimes the world isn’t flat.
Sometimes it’s white, round and has 208 stitches.
For more information:
Listen to an audio interview of Michael Lewis discussing the movie and his upcoming session at the conference.
Read a recent IBM interview with the head of statistical analysis for the Chicago Cubs.
Register now for IOD11 and BAForum; and start building your schedule.
Take the AQ quiz and find out how well your organization uses analytics.