The Oakland A’s challenged and changed their business model Can you? Ed Curry Vistage chair
How many have read “Moneyball” by Michael Lewis?
Billy Beane, GM of the Oakland A’s, in response to a “gut” feeling, a very tight budget and supplemented by comprehensive statistical analysis challenged the long standing baseball theories as to: • draft choice metrics • major league player metrics • correlation of the metrics to salaries • game strategies
Draft choice metrics Shifted from high school stars evaluated on foot speed, throwing speed, big league “looks” to college players with accumulated statistics including overall winning percentage. High School Star Foot speed Throwing speed Big league College Player Foot speed Throwing speed Big league
Major league player metrics Shifted on base percentage ahead of batting average and other traditional metrics.
Correlation of metrics to salaries <ul><li>Because their ranking of these metric differed from the other major league teams they were able to significantly reduce salaries, especially for second tier players. </li></ul>
Silos Silo Three Silo Four Silo One Silo Four Silo Two Silo Five
Games strategies <ul><li>Based on intensive statistical analysis they switched their emphasis to on base percentage and avoidance of outs over traditional bunting and base stealing tactics. </li></ul>Visstage
Results <ul><li>2002 American League West </li></ul>Team Wins Loses Games behind Payroll $ $/win Oakland 103 59 -- 41,942,665 407,210 Anaheim 99 63 4 62,757,041 633,909 Seattle 93 69 10 86,084,710 925,642 Texas 72 90 31 106,915,180 1,484,933
Example <ul><li>Does anyone have a similar personal example? </li></ul>
Run Rate Traditional Future Run rate Revenues 1000 1000 Cost of sales 600 600 Gross margin 400 400 R&D 50 50 0 Selling 200 20 180 G&A 100 20 80 Operating expenses 350 90 260 OI before future expenditures 50 140 Future exp 90 Operating income 50
<ul><li>“ Until the tide goes out; you don’t know who doesn’t have a bathing suit.” </li></ul><ul><li> – Warren Buffett </li></ul>
Observation <ul><li>Entrepreneurs have an economic model in their “gut” it may or may not be comprehensive. </li></ul>If you come to a fork in the road, take it . – Yogi Berra If the world was perfect, it wouldn't be. - Yogi Berra I never said most of the things I said. - Yogi Berra The future ain't what it used to be.. – Yogi Berra