As summer marches toward fall, the Olympic games give way to pennant races in Major League Baseball. I have a lifelong love affair with baseball, so this is a special time of year for me. While I relish the game because of the simple joy it provides, I also appreciate the strong business lessons that are embodied in baseball.
Professional baseball, you see, is a business. While the over-arching vision for any major league club is to win a world championship, each must first recognize the need to make money.
Profits provide the capital which fund facilities, equipment, payroll for talented athletes, and financial returns for owners. Ideally, these eventually lead to a world championship. Indeed, that is the outcome for one team each year. The organization that accomplishes this with consistency is deemed to be a dynasty by its fans—a blue-chip business by those of us who view them through business lenses.
Using those business lenses, the general managers of major league clubs have evolved in their thinking since around 2000. Led by forward thinkers like Billy Beane with the Oakland A’s and Theo Epstein with the Boston Red Sox (now the Chicago Cubs), the important question became “how does a baseball team make money?”
The first answer to this question is somewhat obvious—and applies to virtually every business: you provide the value that your customer is seeking.
What is the value that the paying customer is seeking from their baseball team? They want a winner, a team that they can identify with and be proud of. So how does a baseball business deliver the winning team their customer wants? They must score more runs than their opponents.
This answer moved the management thinking from the customer perspective to that of the day-to-day operations of the team. What does a team do on a daily basis to outscore their competitors? This should sound familiar to anyone running a business: what is it that we continuously must do that puts us ahead—and keeps us ahead—of our competition?
The story that author Michael Lewis tells in his best-seller, Moneyball, documents how Billy Beane sought answers that formed the basis of the day-to-day operations of the Oakland A’s. Those answers were encompassed in two major insights: to score more runs than the other guys, you need to (1) get players on base (to cross home plate, you first must get on base), and (2) you need to have a defense that keeps the other team’s players off the bases (strong pitching and fielding).
These insights may seem so simple that one might wonder if these GM’s weren’t guilty of over-emphasis of the obvious. However, recognizing that these are the desired outcomes, they then asked: what are the best ways to get players on base?
Baseball purists gave the typical answer: have great hitters. Baseball statistics, however, tell a different story.
It is not the great hitter that gets on base most often; it is the batter who walks the most. That means that the competence that should be recruited is not the next Babe Ruth, but rather the guy who has the best eye for the strike zone. On the flip side of this, the pitchers that should be recruited are those with the ability to consistently pitch strikes.
Recognizing that he needed someone who had carefully observed the key factors that correlated with scoring runs and winning games, Billy Beane brought in a Harvard geek named Paul DePodesta who had never played baseball. All he had done was figure out what competencies and daily operational priorities led to runs and wins. This didn’t go down well with the “old school” baseball gurus and scouts, but it worked.
None of this should be interpreted as major league teams not seeking strong hitters or fire-balling pitchers. However, they are not the operational priority. That priority shifted to seeking the competencies that most directly correlate to getting men on base, scoring runs, winning games (thereby delighting their money-spending fans), making money, and eventually winning championships and building a dynasty.
So it is with every business: we must determine what most directly correlates to success and make those factors operational priorities.
Like all businesses, baseball is subject to a variety of factors that may disrupt the fundamental assumptions that drive strategies, tactics, and the achievement of desired outcomes. Loss of key players may derail the daily operations of a business; weather or other unforeseen events may similarly undermine plans and assumptions. However, over time, diligent execution of operational priorities will ultimately lead to an outstanding business. It works in baseball (Theo Epstein is at it again with the Chicago Cubs), and it works for virtually any business.
Richard Tyson is the founder, principal owner and president of CEObuilder, which provides forums for consulting and coaching to executives in small businesses.
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