What does a “Moneyball” strategy actually mean, and how can it be applied in the finance world?
It’s a question we’ve heard a lot since announcing Billy Beane, Oakland A’s GM and pioneer of the Moneyball method, as the keynote speaker at Adaptive Live in San Francisco next month.
So consider this a little pre-event training as we breakdown some Moneyball basics, and explain how finance professionals can use this same strategy to make better decisions and grow their businesses.
An Exercise in Efficiency and Innovation
At its core, Moneyball is about efficiency. If you’ve seen the movie Moneyball, you already know that the strategy is rooted in using analytics to maximize assets. It’s about making decisions based on statistics instead of intuition or popular opinion. In the case of the A’s, Beane measures things like on-base percentage (how often a batter reaches base compared to the number of at-bats) and slugging percentage (total bases divided by the number of at-bats) instead of traditional and widely accepted metrics like batting average.
Modern finance technology has created an opportunity to track more detailed metrics than ever before. And with cloud-based finance tools, you can collaborate across departments using that data to lead strategic business decisions and make equally efficient use of all assets.
Remember: Even if everyone else is measuring the same metrics, that doesn’t mean those metrics give you the most helpful information about your business. How you use your financial data to lead the company can be your competitive differentiator. Think about the future goals of your company, and then decide which data best show what needs to be done to reach those goals.
Moneyball is about a consistent state of evaluation and analysis so that you always have a future plan, and you’re always ahead of the competition. Since the late 1990’s, new technology and constant analysis have been keys to helping the low payroll A’s stay competitive with other high payroll teams.
As a finance professional, you know the financial state of a company and of an industry is continually changing. Financial planning, budgeting, and forecasting is a continuous exercise, as numbers that are applicable today are not guaranteed to hold true six months from now. So once you find your key metrics and create plans and budgets based on your most impactful KPIs, you must continually re-evaluate your metrics to make sure your plan accurately represents your business. The point is to use your data to find trends that the competition is missing, and then use that upper-hand to always stay a step ahead.
Building a Winner
In the end, Moneyball is about winning. And to build a winning company – like building a winning sports franchise – you must assemble the right team. That means identifying and hiring employees that fit your current needs and can grow into leadership roles down the road (See Adaptive President Rob Hull’s guide to “Hiring Tomorrow’s Leaders, Today”).
Finance performance metrics give companies the best sense of today’s needs and of future needs, meaning you can assemble a team that can build your company today and lead it in the future.
No doubt Billy Beane can explain his Moneyball method better than I can. So get the insider’s guide to gaining the inside track with data analytics. Grab your ticket to Adaptive Live to hear Billy Beane explain how you can apply his Moneyball strategy within your own business to accelerate growth and drive success!