Inspiration from the Moneyball story lives on

As I watch the tweets from the MIT Sloan Sports Analytics Conference taking place today, I am reminded about a blog post I wrote a few years back after having the opportunity to have Billy Beane, of the Oakland A’s and protagonist of the Moneyball story, speak at my company’s conference in 2011 (before the movie). Creating new value from data, in any domain, remains a vast opportunity for growing healthy companies, hiring the right people, and provoking a great customer experience. If you’re curious about how analytics and sports work together, or if your business has any of the following characteristics:

• Only traditional key metrics used to measure performance

• Undervalued or undiscovered insights that can make a big difference

• Attempting to use analytics to aid decision making and resource allocation

• Competitors which have much larger budgets

Then please read on… blog post content from Maritz blog (since removed) shown below. (old ref: http://cxcafe.maritzcx.com/lessons-from-baseball-for-voice-of-the-customer)

Lessons from Baseball for Voice of Customer - August 2011 - Al Nevarez

(originally posted on Allegiance's blog, which became MaritzCX Cafe later)

At last year’s Allegiance Engage Summit, Billy Beane gave attendees an insightful and entertaining presentation on the importance of analytics. With the movie Moneyball being released this week, it’s a good time to re-visit this blog post and how it applies to VOC.

What do Billy Beane, the General Manager of the Oakland A’s, and your company’s Voice of the Customer (VOC) initiatives have in common? At the basic level, you both have employees, operational metrics, and outcomes. But there are more similarities. Do these sound familiar?

Traditional key metrics used to measure performance

Undervalued or undiscovered insights that can make a big difference

Analytics to aid decision making and resource allocation

Competitors that have much larger budgets

On the heels of the Allegiance Engage Summit this year, I re-read Moneyball by Michael Lewis. This time, my copy was autographed by Billy Beane himself. Beane’s inspirational Summit talk reminded us that sports and business have much in common: metrics, analytics, and insights that can provide teams and businesses with unfair advantages.

Quotes included below are from Moneyball by Michael Lewis.

Correlation analysis to understand drivers

… “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. [Runs scored] correlated much more exactly with a team’s on-base percentage and slugging percentage.”

“If this sounded compelling when baseball players were paid $150k per year, it sounded one hundred times more so when they were paid $15M a year.”

VOC programs capture a significant amount of structured data, such as satisfaction and loyalty ratings, demographics, segments, and operational data. Tools, such as Allegiance Engage, allow you to efficiently focus or filter these and understand the correlation between driver metrics and key metrics. These insights can help focus resources and investment on those drivers that are most significant or important to your customers.

Avoided costs

Correlation analysis also tells us how to avoid unnecessary costs. When Beane and his analytics team realized that bunts and stolen bases had little correlation with winning games, they stopped training on these. The time and money that would normally have been spent on perfecting stealing bases and bunting were diverted toward perfecting skills that correlated with winning more games.

Clearly, the metrics we capture in VOC have varying importance. It’s critical that we have tools that help us discover the metrics that make a difference. The impact of some metrics may be significant among a particular demographic and not among others. Our correlation tools should allow for a bird’s eye view of the entire organization, as well as help you to narrow or refine the results to a local business unit or a specific demographic.

It’s not enough to observe. You must measure.

“Think about it, one absolutely cannot tell, by watching, the difference between a .300 hitter and a .275 hitter. The difference is one hit every two weeks.”

Experience and gut feel may have their place. But it’s important to validate or measure purposely with metrics. In Beane’s case, he created winning teams by focusing on a prospect’s past performance, not appearance. He “systematically eliminated guys ‘you could dream on.'”

Numbers and stories

Bill James, a widely influential baseball statistician and writer, said “When the numbers acquire the significance of language, they acquire the power to do all the things which language can do: to become fiction and drama and poetry. The numbers also describe character, psychology, history, power, grace, glory, consistency, sacrifice, courage, success, failure, frustration, bad luck, ambition, and discipline.”

Sounds familiar. Does your VOC program have a dashboard and reporting that tell a story? Does your customer feedback management tool require you to export its data and have you spend time constructing charts and graphs, or is the “story builder” built-in?

How will you win?

In Beane’s case, he found on-base percentage to be the key driver that drove the team to win more games. But why did this metric win? Turns out, getting on base has a direct relation with wearing out the pitcher. The best batters force the pitcher to throw more pitches because pitchers work harder to avoid the skilled batters’ strengths. As a result, the good batters are often walked because the pitcher is working extra hard to keep the ball outside of the batters’ sweet spots. And when a pitch does hit the sweet spot, a careful batter will almost always make contact and get on base.

What’s your company’s advantage? Perhaps it’s customer service, employee attitude, or simply an amazing product. The key is to understand which advantage drives revenue and ROI. Once you know the aspect of your business that is highly correlated to revenue, make an effort to understand the root cause for that correlation. Dig deeper to understand the key customer values that are causing your consumers to ring your cash register.

Math and a chance

Rama Ramakrishnan, a professor at the MIT Sloan School of Management who spoke at the Allegiance Engage Summit, described how he built a company that optimized pricing and price adjustment timing for the retail industry. The analytics approach yielded many times ROI in a short period. He summarized the win, “…our retail customers didn’t build any new factories, and didn’t hire new employees. They just used our math to discover hidden patterns they could exploit.”

In Moneyball, there is example after example of players who got a chance to be in the big leagues because of math. The math exposed undervalued skills that made a real difference, which lead to more games won.

VOC is awash with structured and unstructured data. This abundance of data suggests there are hidden patterns to be exploited. Leading VOC management platforms, such as Engage7, use a combination of quantitative and qualitative techniques to help discover new patterns that drive success in your business.

Measuring the advantage

Between 1999 and 2009, the average Cost Per Win for the New York Yankees was $1,736,754. For Oakland, it was only $579,246. The Yankees won 1,063 games in that 10-year span, while Oakland won 977. Beane knew the Yankees had an unfair advantage with their budget, so Beane set out to develop new unfair advantages with tools that didn’t require a lot of capital investment. He turned to analytics.

Leading companies with corporate-wide listening and measurement initiatives already know the value and importance in tracking their “unfair advantage.” They use a wide variety of metrics, such as average scores, box scores, NPS, and Engagement index. Winning companies optimize the drivers and their operations that correlate with revenue generation. Analytics enable any company to compete with rivals with larger budgets.

Hollywood

Moneyball, the movie, starts filming this summer. Brad Pitt will play Billy Beane’s character. Analytics makes a great story. Analytics will be sexy again. What will be your story?