Tag Archives: Moneyball

Moneyball and retail: How to play smarter with big data

With the start of another baseball season upon us, I can’t stop thinking about Moneyball—the story of the Oakland A’s General Manager Billy Beane and his revolutionary method for recruiting and evaluating Major League Baseball players.

For those of you who aren’t familiar with the book (or subsequent movie starring none other than Brad Pitt), Michael Lewis’s Moneyball: The Art of Winning an Unfair Game takes a close look at how MLB’s veteran scouts, talent evaluators, team owners, and general managers in the early 2000s relied only on traditional methods and their gut instincts to evaluate and choose players.

Recruits at this time were viewed through a lens that leaned solely on superficial statistics like number of home runs, RBIs, or even a player’s appearance. Players with the “right” attributes commanded large salaries like those of the New York Yankees—money which small-market teams like the Oakland A’s simply could not afford.

To win at this “unfair game,” Billy Beane spearheaded an effort to dive deeper into the player data he already had at his fingertips—thereby uncovering the hidden value of players who were not identified as assets right off the bat. Today, the majority of MLB teams employ some form of deep statistical analysis, and recruiting on gut instinct alone is virtually unheard of.
What does Moneyball have to do with retail?

Much like Billy Beane, today’s retailers may feel they are playing in an “unfair game.” To many, competing with the New York Yankees of retail seems impossible.

Moneyball taught the baseball industry to use data to focus on individual players and the (sometimes hidden) value they could bring to a team at large. And while retailers may not have the resources, logistics, and of course, money, to compete with the behemoths of the industry, they do have the data at the fingertips to succeed by playing smarter.

If retailers dive into their data and focus on each individual consumer, as well as their products and services, there’s an opportunity to uncover hidden value in the data associated with the consumer and the products they seek—just like Billy Beane did with the Oakland A’s.

So why should retailers revisit this well-worn story?

  • It’s the customer, stupid. Most pundits and practitioners would agree that the retail dynamic has shifted. The consumer now has the bulk of the power. But the consumer is also willing to provide retailers with a wealth of data and information. Much like Billy Beane was able to, can retailers leverage this data to uncover more about their consumers? Who of them are really profitable? How are they interacting with the brand? And what do the answers to those questions mean for long-term profitability in a highly-competitive industry?
  • Efficiencies in the supply chain. How well is supplier A performing compared to supplier B? Are there metrics that can be measured to gain greater supply chain efficiencies? How about distribution networks, warehouses, and stores? Retailers need to be open to measuring new (and maybe counterintuitive) KPIs across their operations. By seeking data that might uncover new ways to measure and improve operations, retailers can get ahead of the game.
  • Product evaluations. Think of each product as a baseball player. While some products are consistently the highest performers, is it possible there are other equally profitable products sitting on the bench? By analyzing assortment under a data-focused microscope, retailers have the power to understand all the costs and opportunities associated with each product and mix, and identify the hidden gems lurking in their assortments. What else could be uncovered that may have been otherwise viewed as a retail truism?

None of these insights are especially earth-shattering, but what is surprising is how often retailers neglect them. The data is there. The insights are at our fingertips. It’s not about amassing more data, it’s about using the data we have to make smarter, more informed decisions. Billy Beane and the Oakland A’s didn’t discover a wealth of new player data—they looked at the information that was available to every other team and asked different questions of it. If retailers want to compete with retail Goliaths, it’s time they start asking different questions, too.

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