Lately, I have become attracted to the book Moneyball: The Art of Winning an Unfair Game by Michael Lewis, published in 2003, and written about the science of baseball. Much to traditionalists’ dismay, it makes a convincing argument that baseball can be broken down into meaningful statistics….. but the ones that count aren’t the ones you think. According to the book, scoring runs is the key, so on base percentage (OBP) is THE key statistic for hitters. In fact, OBP is valued three times more than slugging percentage! That means guys who take walks, who get on base anyway they can….not necessarily sluggers, are the heroes of the game. Clearly unsung heroes!
We “Ooh!” and “Aah!” over the big hit in baseball, and it is pretty to see, but not meaningful in creating consistent W’s in the win column. Yet baseball scouts recruit guys who look the part (which has no correlation to success) and drop the bomb. For that reason, coaches have become a superstitious lot that think luck and bankroll predict game outcome. What is truly amazing is that even when they have seen these new principles applied, baseball’s inner sanctum is reluctant to change. Why? It runs counter to everything they have been taught as they came up the ranks and de-values the importance of their experience and subjective judgment.
Recently, a game changing business principle, called quantum profit management, is doing something similar for business. Most businesses manage by the numbers, but often at the macro level. It is in being able to break down the data in micro analysis that provides the insight to win the game. Statistics that showcase which products, customers, deals, and markets are profitable, can help companies leverage strengths and manage weaknesses. According to reports by Jonathan Byrnes, MIT professor, only 40% of any business is profitable. The question is do you know which 40% ? The rest is either profit neutral or negative income. Only by knowing which is which can you understand and manage the game for better performance.
You can take your business to the next level by dissecting the business you have today. It requires two things:
- Micro analysis of the profitability of the business
- A willingness to set aside traditional thinking, bias and rationale and accept and manage the data.
If that intrigues you, let me know. Happy to share how easy it is!