Oakland A’s General Manager Billy Beane started the “Moneyball Revolution,” where analytics replaced intuition as the primary method of evaluating talent and assembling a professional baseball team. And while Beane’s critics entertain some self-satisfaction from the recent mediocrity of the A’s, there’s no doubt that quantitative analysis has changed baseball forever.
Similarly in the marketing discipline, while practitioners often debate whether marketing is more “art than science”–a trend towards analytics is afoot.
Tradition and convention are certainly hallmarks of Major League Baseball. And for many years, the status quo reigned–especially in the processes used to construct a baseball team.
Using knowledge, intuition and experience to evaluate talent, field managers and scouts would scour high schools, practice fields and colleges looking for the missing pieces that could potentially elevate them to a championship. Gut decision making ruled–until Billy Beane and the Moneyball analytics revolution started.
An ESPN Magazine article shows how based on geographical location, Oakland was forced to compete in a smaller market with revenues far lower than teams like Boston or New York. Attempting to level the playing field, Billy Beane took a different approach to baseball resourcing. Instead of trying to sign big name players with the best batting average, Beane used statistical analysis to discover indicators that he believed would have a better correlation with offensive success.
Michael Lewis, author of Moneyball–a book on Billy Beane’s methods writes,
“By analyzing baseball statistics you could see through a lot of baseball nonsense. For instance, when baseball managers talked about scoring runs, they tended to focus on team batting average, but if you ran the analysis you could see that the number of runs a team scored bore little relation to that team’s batting average. It correlated much more exactly with a team’s on-base and slugging percentage.”
And for awhile, Moneyball worked. In the early years of Moneyball, the Oakland A’s were competitive with payrolls in the $50 million range whereas larger market teams were spending $100 million plus. It wasn’t that Oakland was choosing to pocket the $50 million annual difference–they simply didn’t have that kind of money to spend. Oakland needed a way to compete and they chose analytics.
Unfortunately for Billy Beane, his competitive advantage didn’t last very long. Other baseball teams adopted statistical analysis and General Managers like Boston’s Theo Epstein quickly combined analytical prowess with the advantage of a major revenue market to assemble a perennial powerhouse. Like it or not (and some GMs still don’t), the adoption of analytics drastically changed baseball and now the use of analytics to help build a ball club is a standard process.
Similar to the adoption of Moneyball, marketing is in the throes of an analytical revolution.
Specifically, practitioners of marketing know they need fresh and accurate data for advanced marketing functions such as better segmentation, devising more effective campaigns and offers, and creating relevant interactions with the customer across multiple touch points. This data must be clean, modeled and managed–a large undertaking that involves marketers working closely with IT.
Marketers also are realizing that some understanding of analytical applications and business intelligence know-how is necessary to help analyze and translate data into actionable information that can be used to create better customer experiences. Hundreds of case studies in business publications and books have emerged over the past five to seven years as a testimony to these trends.
Analytics helped a small market team like the Oakland A’s compete with clubs that had much larger budgets. Indeed, Oakland enjoyed a period of success before larger teams “caught on” to Beane’s analytical approach.
In the same vein, the window of opportunity for marketers to adopt business analytics–before their competitors–is closing rapidly.
- With the early success of Moneyball, Billy Beane parlayed himself an ownership stake in the Oakland A’s. For marketers, how valuable will analytical skills be in the near future?
- Are you competing with companies that have much larger budgets and personnel resources? If so, what strategies are you using to win?
- Critics of Moneyball say that one cannot run a major league baseball team with a computer. Going forward–in marketing–will knowledge and intuition win out over analytics?
Are you prepared for the “Moneyball-itzation” of marketing?
Tags: analytics, business intelligence, Campaign Management, competitive advantage, future of marketing, moneyball, Segmentation and Targeting, statistics
Good post, Paul. Small businesses can’t compete head-to-head with the leaders in virtually any sector, as your post points out. For smaller businesses to succeed–and I might say any business to succeed in our present economy, a unique strategy has to be put in place and implemented. The use of analytics can work brilliantly. I also believe small players need to adopt a unique vision. Strategy comes first and then tactics. Trying to become a smaller version of established category leaders is a recipe for failure. Developing a clear, and consistently differentiated position and putting the tactics in place is critical. That helps any business attract and keep their share of great talent, marketplace (financial) success and a real shot at challenging and even unseating the leaders. Of course, as you point out, if a small business develops a winning strategy, the smart players in the rest of the category are likely to emulate it. . .
This post recalls Adam Morgan’s great book: “Eating the Big Fish”, which I recommend to all marketers, entrepreneurs and small business owners. It’s packed with great insights and practical advice to help “challenger” brands compete against the leaders in any sector.
Claire, thank you for commenting. There are few sources of competitive differentiation left to pursue. That’s why I believe it is so important for businesses of all sizes to take a look at one of their most important assets (their very own data). When customer behavior data (across all channels) is combined with other enterprise or third party data sources – a more complete picture builds -which in turn can provide insights that competitors just don’t have.
Armed with the right information (and the processes to act upon that information), companies can rise from challenger to top player.
Great post, Paul, on a great book. I actually also recently posted on the lessons of Moneyball at http://bit.ly/32Jg0O. I completely agree that using similar methods to find the right metrics can greatly increase a company’s competitive advantage. Too many companies are still relying on conventional wisdom to run their businesses, and those who take some time to think deeper will stand to benefit from their thinking. Thanks again for the post referencing a great book, and I really appreciate your thinking.
Paul,
Thanks for the insights, this comparison is spot on. Moore’s law has made it possible to compete on analytics now, whether in marketing or baseball.
Even with great data analysis you need good judgment to evaluate if you are looking at the right information. Is it cause and effect or just coincidence?
In terms of baseball, and business, another key ingredient is personnel. How many teams of great people have not met expectations because they couldn’t work as a team?
Crunch the numbers but make good judgments in their use.
Kevin, thank you for taking time to comment.
I enjoyed your post about the need to look at the right metrics and possibly pay less attention to conventional wisdom as an indicator of success. One of the things that most struck me about the Moneyball example is how difficult it really is to ‘buck the trend’ or go against the established ways of thinking. Billy Beane thought there was a better way to compete, and for awhile, he was right. It’s an important reminder in two ways: 1) Change management is hard. Really hard. 2) Competitive advantage is fleeting. Windows of opportunity are closing faster than we think.
NW Guy, thank you for contributing to this discussion. You’ve made some terrific points.
First you said, “Moore’s law has made it possible to compete on analytics now, whether in marketing or baseball.” I’ll agree, but technology adoption will only take you so far. The Moneyball example reminds me that sometimes a fresh way of looking at a problem (in this case, thinking by the numbers) can lead to success. Statistical analysis was the foundation of Moneyball, but it was the willingness to look at the problem from a different angle and then execute on an idea–often to the ridicule of “the establishment” that was interesting to me.
Loved your second comment on the need for judgment to analyze the implications of the numbers. Great quote in a Financial Times editorial about statistics which I’ll paraphrase; “Statistics matter but people often confuse numbers with facts, conferring certainty where there is none.” Judgment is absolutely critical to separate the signal from the noise.
Paul, thanks for the splendid post.
On a different note, a magazine article I have read a while back was brought to my mind as I was reading your article.
It emphasized that “change may be very painful but it is the most important ingredient for us to get to our goals.”
Maybe we should be spending more time analyzing what we are doing right than getting conscious with numerical figures.
Strategic Growth Advisors, thank you for the compliment! I will whole heartedly agree that managers of all stripes need to do more thinking and deep analysis–and this doesn’t necessarily mean quantitative measures. Questioning current assumptions, challenging false assumptions, and spending more time on creative thinking would all help us towards–as you said–”analyzing what we’re doing right” – and wrong.
Thank you for posting a comment.
The angle of “Marketing Moneyball” that has me thinking deals with hiring the right employees. Billy Beane used stats to find the right baseball players that could make the right contribution in his system. I wonder what the employee equivalent stats are that measure an one’s on-base percentage and slugging percentage when on the job.
Great question John and thank you for contributing to the discussion! You’ve probably hit on the million dollar question, or at least the answer to which -if discovered- could save employers millions of dollars. And I think you’ll hate the answer, but I believe it is; “it depends”.
So many variables, so many interlocking relationships. Where to start? Should one wish to tackle the problem, a first order of business is probably to define the role and responsibilities for the position. Then define what success looks like for key criteria. Use benchmarks if possible. Also a “weighting” factor -adding up to 100%- needs to come into play for the variables because all criteria are probably not created equal. This is a decent basis for an analytical review, but there are certainly subjective components (especially the assigned weights).
Ultimately, I believe the question comes down to correlation vs. causation. Can key variables -in the case of Moneyball (On base percentage and others) determine or predict “success” in baseball? For marketing positions, can key variables predict success? If so, what are they?
Perhaps a previous post may provide some insights as to some variables to consider. http://www.mpdailyfix.com/2008/07/desperately_seeking_distinctio.html
I most certainly don’t have all the answers. DailyFix readers, please add your thoughts.
While analytics are important and Moneyball certainly focused on that – the real message of Moneyball (and the impact to marketers) is that Billy Beane looked at statistics that were not obvious. He went against the grain and created a whole new set of numbers that were more directly tied to winning baseball games (rather than winning MVPs – or marketing awards).
Doug, appreciate your comments about the message of Moneyball. I’ll agree with you that a key and tangible lesson here is not necessarily looking at different statistics that may correlate more closely to a desired level of performance, but simply looking at the problem differently. Sometimes taking a new angle, a fresh approach, and rethinking the problem can lead to new ways to gain competitive advantage.
It takes courage to rethink what has already been thought, buck the status quo, and challenge assumptions. This to me, is one of the key messages of Moneyball and entirely applicable to the marketing discipline.
While reading, I had another post in my mind all the time. It was from Ted: http://www.mpdailyfix.com/2009/07/how_retailers_are_teaching_con.html
Yes, analytics is way more efficient and correct for making marketing decisions. But as we will all become better, is analytics going to be competitive advantage? Sure not. Again it will be about that “marketing feeling” that will make a difference.
And by that I mean also the capability to understand the analytics correctly.
Moneyball-itzation of Marketing is unavoidable, yet will never be a competitive advantage by itself.
Dusan, thank you for commenting!
You said, “Moneyball-itzation of Marketing is unavoidable, yet will never be a competitive advantage by itself.” As you know, there are few competitive advantages left in the world. Analytics by itself no, but it can be a huge part of competitive advantage.
And I’d like to see if I can change your mind. Take a look at the link below:
http://tinyurl.com/n4jq5m
No, can’t change my mind on this I think.
Don’t get me wrong, as I practically live in databases (and have created databases by myself that included ~ 70 related tables) and analytics (well, did a lot of research), I am totally aware of it’s value.
Actually, just becaues of my analytical work, there were already nice and succesfull services developed.
But good analytics can be copied. And is copied. Computer software developers are selling almost the same solutions to competitors. And if there’s a new formula, it is copied through software solutions.
In the end, the analytics tells the decision-makers: “On Tuesday distribute the leaflets with xy% discount on product Z to customers. On Wednesday your sales should go up by 5% (with 95% probability.”.
And on Tuesday the customer gets the leaflet with xy% discount on product Z from 5 stores. Where’s the advantage if we all have the same information?
I belive the advantage is in how you interpret and use that information. And that’s not analytics by itself. It’s human.
Mostly this is why everytime I come into company because they think of direct marketing, CRM or whatever, I ask WHO will work on that? It’s no. 1.
Hi Dusan, I know you know databases so I’m preaching to the choir. You said, “And on Tuesday the customer gets the leaflet with xy% discount on product Z from 5 stores. Where’s the advantage if we all have the same information?”
From my point of view, analytics can still provide a company competitive advantage- although the window is shrinking – for the following reasons.
1) Not every company has the same data sets. The transactional data a company collects from its customers can be a form of competitive advantage if harnessed.
2) Not every company has the willingness to compete on analytics. Competing on analytics takes time, investment and knowhow. Not every company is cut out for it.
3) As you mentioned above, competing on analytics takes talent to interpret and analyze the data and then decide how to utilize information for competitive advantage. A good process for finding, hiring and keeping that talent is a competitive advantage all by itself.
I 100% agree with you, – a key component of success in this space is human talent (that is until/if we get to artificial general intelligence)!
Sorry to chime in so late, Paul. As always, you’re posting on a subject near and dear to my heart.
We actually did a piece for Brandweek a few years back on how the Red Sox were putting analytics to work for their organization: http://www.copernicusmarketing.com/about/redsox.shtml
It was interesting to me to hear about where the Red Sox’s inspiration came from.
On your post specifically, I think more attention needs to be paid to what’s stopping marketers from using data and analytics to guide decisions.
Yes, there’s one camp that says marketing is all art, it’s creative, it’s better when done from the gut, yatayata. But I’m not really sure most marketers hold this view any more.
In fact, I think there’s a whole lot of marketers out there that recognize the importance of using customer insights as a guide. They know if they can get data that’s good and relevant to the decision at hand, they’re more likely to make a decision that will lead to a bigger bump in revenues, profits, and overall marketing performance than they otherwise might have gotten.
In my experience, it’s the “good” and “relevant” that get in the way of making data-driven decisions far more often than the mentality that all you need is experience and personal judgment.
If marketers can’t figure out how to use the information, I don’t jump to the conclusion that they just don’t have an analytical background any more. I might wonder instead what kind of information and “insights” they’ve been handed and if it’s clear how it relates to whatever marketing decision is on the docket.
Just thought I’d throw in another twist to the discussion here.
Kevin, thank you for chiming in! Your points are well taken regarding marketing’s overall acceptance of a data driven approach.
You said, “I might wonder instead what kind of information and “insights” (marketers) have been handed and if it’s clear how it relates to whatever marketing decision is on the docket.”
You bring up an important issue in that marketing needs to work very closely with IT to ensure that we’re handed exactly what we want–the information necessary to help drive our marketing initiatives and the business forward. That of course, is predicated upon marketers “knowing what they want/need” –an entirely different discussion!
AI, yes, nice long-term view.
Tough as far as I was reading that subject, seems like it should become HAI (Human Artificial Intelligence)… the electronics in our bodies of course. But that’s another subject I guess.
AI, yes, nice long-term view.
Tough as far as I was reading that subject, seems like it should become HAI (Human Artificial Intelligence)… the electronics in our bodies of course. But that’s another subject I guess.
And => I agree on your points very much. Especially in short-term view it is true.