Moneyball turns 20: What American companies can still learn from Billy Beane and the Oakland A's – Corporate and Corporate Law – Corporate/Commercial Law

The Moneyball revolution that changed baseball just turned 20 years old. The principles employed by Billy Beane and the Oakland A's have impacted not just baseball, but numerous professional sports. Two decades later, however, corporate America still has a great opportunity to learn from Moneyball.

The Oakland A's broke with conventional wisdom by using data and analytics and targeting players who didn't always look like stars but helped score runs and win games. Data analysis identified undervalued players, allowing the A's to compete with significantly higher-paying rosters.

Moneyball principles spread to the NBA, where data analysis confirmed the value of 3-pointers and layups over long-range 2-point shots. The NBA shooting locations show how data analysis changed the game from the early 2000s to 20 years later.

Credit to Ryan Soares, Tableau Public Ambassador

What Corporate America still needs to learn and apply from Moneyball

While several sports have adopted the Moneyball approach, Corporate America has been slower to change. Here are six areas where companies can use the lessons of Billy Beane and the Oakland A's.

Real experts don't always look like this. The principles the A's used were developed by a security guard, Bill James, while working night shifts at a pork and bean factory. Bill certainly didn't look it, but his sabermetric principles proved far more effective in assessing talent than traditional player scouting methods. The best ideas often don't come from those who are most articulate, have the most prestigious title, or have the largest following.

Analytics alone are not enough; they must lead to action. Bill James published his first abstract in 1977 and ten years later his work became widely known throughout the sports world. However, it took until 15 years later for a major league team to respond to James' well-known analysis. Improving a company's analytical capabilities is an important step, but just knowing what to do is not enough. Insights must lead to action.

When Billy Beane first read “Moneyball,” he was angry. The author of the book suspected that this was because he had revealed too many of the A's secrets. Beane was actually upset by his direct quotes, including profanity, which he knew his mother wouldn't appreciate. Beane had no concerns about the “secrets” in the book because he assumed that no one in baseball would read the book and Bill James's principles were already known. The A's advantage was not that he knew what to do, but that he was willing to do it.

Get the right metrics and incentives. Baseball statistics first appeared in the New York Morning News in 1845. Teams tracked player statistics for over 150 years before the A's introduced a better way to analyze the same data. All companies use a variety of measures to track their performance. Ensuring they measure and incentivize the right things can make the difference between mediocre and top performance.

Determining the right metrics can be an iterative process, even for a statistic as seemingly simple as home runs. In 2002, the A's used their first-round draft pick on John McCurdy, a hard-hitting shortstop from Maryland with impressive stats. Little did the A's know that Maryland's left field fence was only 260 feet long, which boosted McCurdy's college stats. McCurdy struggled in the minor leagues, never playing in a major league game, and the following year the A's updated their analysis to include park dimensions. The same lesson applies to the corporate world. Leaders must ensure their metrics and incentives are aligned with overall goals. As famous investor Charlie Munger said, “Perhaps the most important rule in management is to set the right incentives.”

Team dynamics are still important. Even Billy Beane, the analytically minded A's general manager, didn't make decisions based solely on data. Beane traded for Jeremy Giambi, who was a good statistical fit for the A's. Despite the data, Beane traded him for a statistically inferior player due to off-field issues and “too much fun with a losing team.” In baseball, as in business, it is rare for the contributions of a star employee to outweigh the costs of negatively impacting the performance or morale of his team members.

Get the right people on the bus. In “Good to Great,” Jim Collins emphasized the importance of getting the right people on the bus. Identifying and hiring the right talent and separating from the wrong talent have been instrumental in the A's success in Moneyball. Business teams are the same, although developing talent is important, getting the right people on the team first is crucial. Devoting sufficient time and resources to the hiring process can seem limiting and counterproductive, but the impact of quality improvements in hiring decisions is hard to overstate.

You can win as an innovator and as a quick follower. Despite the A's unlikely success, their approach has not resulted in a World Series title in the 20 years since Moneyball was released. The Boston Red Sox won the 2004 World Series two years after the A's breakout season, using tactics modeled after the A's coupled with a higher payroll. The success of the Red Sox shows that it's not just the first innovators who can benefit from new ways of thinking. Even renowned innovator Steve Jobs famously said, “Good artists copy, great artists steal.” Both innovators and fast followers can benefit from new ways of thinking.

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