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Competing

Book recommendation: Moneyball: The Art of Winning an Unfair Game, Michael Lewis, W. W. Norton & Company; (April 2004).

It's a book about baseball and also a great business book with some interesting "lessons," some of which I discuss below. If you're a baseball fan you'll really enjoy it. If you're not a baseball fan you will "see through" the baseball stuff and recognize the business points.

The very brief overview is that this book is the story of the Oakland A's and their General Manager, Billy Beane. It's about how he built the A's into a consistently winning team with one of the lowest payrolls in baseball. In a league where the rich clubs spend 5-10 times on payroll versus the poor clubs.

It offers some tremendous business lessons, especially for small business owners as they compete with larger firms who have more assets, people and leverage.

An overview

If you're not into baseball here's a few quick facts. There are 30 major league teams. The richest, like the NY Yankees, have seemingly unlimited resources to put together great teams. The "small-market" teams (a baseball definition that includes some of the biggest cities in the country) sometimes have a total payroll (25 players) equal to what the top two superstars on rich teams earn.

The A's management figured out a way to be competitive in the above environment despite all of the "experts" insisting they couldn't [be successful]. And with all the "experts" dismissing every year they were successful as a fluke.

They did it by doing some things that are universal to all businesses. I'm going to quickly cover three of them.

Research

The A's staff got incredibly analytical on their research. They became fascinated with "off-beat" statistical studies that the "experts" ignored. This led them to believe that:

• Putting a good team together was as much science as art.

• Can't-miss prospects miss too often (an interesting sub-plot is that Billy Beane was a can't-miss prospect who missed)

• Much of the conventional wisdom is over rated

Conventional wisdom (doing it "by the book") in baseball is similar to small businesses where the owner has no business plan because it's all "in my head." It's where the owner's mantra is that the current new product or service will get the company to the next level (although the last 10 didn't get them there). Or, we did it this way years ago so we will do it this way now.

As good marketing people always insist, research is the key. Marketing will fail if you don't research your market, the customers, the industry and trends.

Employees all have key roles

Competing with the Yankees is no fun when they can spend $150,000,000 more than you. So the A's management team took their research and found inexpensive players who had the traits they wanted. Many of these were cast-offs from other teams. After 2001 they lost three superstars. They came back to win their division and have a 20 game winning streak. They found the players who filled the roles they had defined. They looked for chemistry. They believe drafting college baseball players (maturing, more relevant experience) is a much better bet than high school players.

Look at your business. Can you compete with the heavily funded firms? I'm not suggesting you get low paid people. I'm suggesting you have defined roles within the company and fill those roles with people who can excel at those tasks. I recently saw a situation where, after some employee shuffling, a manager volunteered to take a vacated position. It had previously paid a salary 80% of what he made. Of course he didn't want to take a pay cut, he just wanted to fill that role. That is not a good use of personnel. (Especially when, by all indications, the position was overpaid to start with.) Find the right person, put them in the right role and see what happens. If they aren't capable, don't let them stay in that position.

Sometimes people outgrow a small business. Just like the A's can't compete on the open market for high priced talent you can't afford to keep people in over-priced roles. That's why defining the position is important.

Timing is everything

In one of my talks I make the point that "Timing is everything so make your own good timing." The A's have done very well over the last five years with a low payroll. They have not done that well in the playoffs. The experts claim it's because of their style. The A's believe their style proves itself in the long run (162 game season) and luck comes into play in a five or seven game series.

We can all do things to make our own good timing, create some luck and make things happen. Sometimes that's the difference in two companies. One is proactive and the other isn't. I see the same thing with business buyers who have new found freedom if they aren't working at the time. Some get into searching for a company 100% and others prefer the golf course. Six months later those in the latter group are still searching.

Summary and postscript

The above is meant to be a synopsis of how there is always more than one way to do things. The Yankees, Red Sox and other teams don't have to do what the A's do. They have the bucks to get the impact players. The A's have proven you can compete without the same resources.

So can small business owners. Often we compete on service (see my May newsletter, on my website, titled "We're all in a service business"). Many people have found out that service and quality are more important the lowest price.

Finally, especially for baseball fans, look at the reader reviews of this book on Amazon.com. They're hilarious. All the loyal fans writing in to dispute some little thing or tell why their team doesn't do what the A's do and they're winning.  They're missing the big picture. And that is what I just mentioned - there is always another way to do things and be successful. You do quality research, find your style, fill the roles and be successful. We all know that in sports and business (and life) there are too many people who spend too much money and aren't successful. It's nice to see success stories, in any industry.

© Copyright John Martinka 2004. All rights reserved.