In 1927 two men, separated by an ocean but united in desire, set records in their respective sports that have stood as enduring standards of true talent and immeasurable value to their team. Babe Ruth hit 60 home runs for the New York Yankees, which was more than any other American League team had combined. A record that stood for 34 years until Roger Maris, also of the Yankees, hit 61. Later that year Dixie Dean began a season for Everton in the old First Division of English Football and ended up scoring 60 goals, a record that has never been beaten nor equalled. Goals, home runs and baskets tend to generate the most headlines, and they have generally been the currency to measure both individual and team success and to drive idolatry. But these are frequently overrated in terms of the overall impact on a team,especially if other issues such as a leaky defence, frequent injuries or underperforming supporting players are taken into consideration.
This has parallels in business where similarly spectacular headlines and over-hyped metrics, such as stock price, total sales, and numbers of customers, have historically been used as the key indicators to rate success. For many businesses and investors, these have been found to be less dependable, dangerously unstable and unpredictable over the longer term. We only have to look at the banking or utilities industries in the UK and more recently, on-line roller coasters such as ASOS and AO, for evidence of that. While the big numbers can still resonate, more attention is being focused on data that delivers the most relevant and timely insights – the combination of data sets that enable effective and intelligent investment – that go into achieving success, whether that’s on the field, in the standings, at the box-office or in the board room.
The Right Figure – Where Contribution and Value Meet
1930 when Babe Ruth earned $80,000 a reporter asked him why he had made more money than the President, Herbert Hoover. Ruth famously answered, “I had a better year”. In a statistics driven game this was an early example of having the right insight or data to back-up his claim and measure his success, however glibly it was stated. Back in England, where scoring was reputationally valued but less so financially, Dixie Dean’s weekly waged topped out at £8, (yes really!) and it was many years before footballers in England were paid a living wage. Dixie once remarked to George Best when discussing players’ salaries, “When I was playing, I couldn’t afford a pair of boots never mind boutiques.” Now it’s off the scale in the other direction and has no relationship to actual sporting talent, organizational intelligence or value to the team. Value is measured more in shirt sales and other spurious commercial links such as Newcastle United’s sponsorship by pay day loans company, Wonga. This led Nick Forbes, the leader of Newcastle city council, to say he was “appalled and sickened” that Newcastle would “sign a deal with a legal loan shark”.
But that’s no real surprise as football, as evidenced by FIFA’s recent troubles and the actions of many countries’ football executives, has never had more than a nodding acquaintance with ethics or good governance. And their ability to assess talent, measure performance and align value are equally strange bedfellows. Nowhere is that truer today than in the English Premier League (EPL) where the ratio between brains and money is at an all-time low. Clearly common sense, business acumen and basic financial intelligence don’t show up on the list of qualifications for football executives. Although thanks to the largesse of Sky and BT Sports, you really would have to be totally incompetent as a football executive not to make some money. But it’s the long suffering fans that are ultimately paying the high cost of freight and fiscal imprudence on that particular gravy train.
Stars in their eyes – Money in their pockets their only goals
Speaking of total incompetence, you only have to look at the recent transfer fiascos at Manchester United as an example of how modern football teams do business. They’ve just paid £36 million plus £22 million in “add-ons”, for Anthony Martial, an untried, unproven French teenager that the press in France called “delusional” and a “hallucination.” Just prior to that, Angel de Maria was sold at a loss of around £15 million, having been paid £175,000 per week, and Radamel Falcao was paid £25 million in salary and bonuses for an anonymous season. This wouldn’t have been bad if either had produced the goods for Man U, but, unfortunately like so many of today’s “stars”, they spent more time in the Bentley show room and the tattoo parlour than on the practice field. As de Maria and Falcao only scored four goals each at Man U., it’s unlikely that they will score 60 goals in their lifetime! And then to top off a really fabulous transfer window, there was the failed transfer of David De Gea which led to Real Madrid and Man U. spending the last week in an own goal scoring blame game.
Of course, as I’ve already noted, goals aren’t the only way to measure success in a player. But in the absence of any other obvious talent, or contribution, which deeper analysis may eventually uncover should teams decide to investigate; they appear to be the only real measures that we have. And de Maria and Falcao aren’t the only duds that Man U, or for that matter any of the Premier League teams, have hiding in their drawer marked “financial disasters.” The total haircut on these losers will run into hundreds of millions of pounds. But if we didn’t have this type of activity then the poor football agents would probably have to get by on just a few million a year rather than the obscene amounts that they now trouser, for doing almost nothing. But I digress. Let’s move on.
Computer says “yes” and “no”
Let’s return to North America where in the past few years there has been some game changing activity in the sporting financial landscape. Although there is still some silly money being thrown around, the concept of salary caps and greater financial prudence is beginning to gain currency and acceptance, although probably out of necessity rather than increased common sense or discovery of a social conscience. This has led to a slow, subtle, but seemingly irreversible change in how sports teams rate, evaluate, and ultimately sign and pay for players.
Major League Baseball is where this change has been most keenly felt and where statistics have generated legions of anoraks for many years. The catalyst for this change actually started in the late 70’s when Bill James, who had no experience as a writer, but had a huge obsession with baseball, started collecting his own brand of statistics and began publishing his Baseball Abstract. What made his approach radically different was that he took serious issue with many of the statistics that had been historically used to rate players and teams and to demonstrate and value success. It took some time before James’s statistics had a measurable effect on the game, and many people, both inside and outside baseball, thought of him as an eccentric and misguided journalist or just a bored number cruncher. That was until Billy Beane became the general manager of the Oakland A’s in 1997. Michael Lewis tells the story of Billy, the Oakland As, and his discovery of James’ statistical approach, in his excellent book Moneyball. He hits an early and resounding home run in the book when he states that Bill James found that “the statistics were not merely inadequate: they lied. And the lies they told led the people that ran baseball to misjudge their players and mismanage their games.”
An intelligent approach to the price of success
The book’s main theme is charting the success of the Oakland A’s new approach and Billy Beane’s role in it. The A’s, who, as a smaller market club, similar perhaps to Bournemouth or Watford, simply didn’t have the resources of the bigger teams such as the New York Yankees or Boston Red Sox to attract the top stars and newly minted prospects. He tells how Billy Beane used a whole new range of metrics to help the A’s to sign players who not only didn’t show up on other teams’ radar and scouting systems but were thought to be significantly inferior to the highly paid stars and prospects that the other teams were courting. And this wasn’t just a one year phenomenon. Oakland has consistently out-performed the richer teams by staggering amounts. One stat that puts into perspective is the amount of money each Major League Baseball team has “paid” for a win. Based on a formula developed by Doug Pappas, a leading authority on baseball finance, over a three year period the A’s paid around $500 thousand per win. Compare this with the nearly $3 million that richer teams such as the Baltimore Orioles and Texas Rangers spent, for far less success and far more player aggravation and mediocrity.
A new way of thinking – Powerful combinations lead to hidden valuation
In a nutshell Billy Beane started to rethink baseball and looked for new baseball knowledge. He used a systematic, scientific investigation of the sport to utilize data and drive insight that hadn’t traditionally been used to value players. In doing this he uncovered and mined hidden gems of players that might have otherwise been left to languish in lower leagues, or never make it all because of historic talent evaluation prejudices rooted in baseball traditions. He was able to start looking at players in very different ways and to use measures and evaluation, both physical and psychological, in powerful combinations that showed players true worth and made a lasting impact on baseball history. Perhaps if Man U. hadn’t lead with their wallet and utilized some of these ideas, they would have never signed Martial, de Maria or Falcao. Recently, that old Dutch master Louis van Gaal, the Man U. manager , no doubt in an attempt to deflect attention from that great deal maker Ed Woodward, stated that neither player fit the club’s culture, perhaps because climatically becoming Mancunians wasn’t ever on their bucket list. Unfortunately as Louis is a throwback to the old days, similar to a lot of baseball traditionalists, he has failed to grasp the fact that this is something that Man U needed to find out before they signed them. What was needed was a more detailed analysis of individual attitudes, behaviours, cultural backgrounds and other non-football specific traits. Had they done this and identified and recognized some early warning signs, then they would have also passed on a host of their other expensive failures and concentrated on real potential talent who were prepared to do the hard work, and live in Manchester, in order to succeed.
Customer experience lessons from the A’s
There are significant parallels between the A’s and business today; and how many companies use outdated and irrelevant statistics to delude themselves into thinking they are delivering great service, and that their customers love them. Realistic, forward thinking businesses are developing new approaches to customer experience by rethinking customer engagement and being smarter about what data they use to build and maintain their strategy, and how they use this insight to retain and “sign” new customers. In the early parts of the 21st century many businesses were as profligate as football teams and threw large sums of money at the technology companies that flashed their eyelashes at them. This resulted in businesses opening their kimonos and letting the technology “agents”in to install high priced CRM systems, flashy CTI solutions and other shiny new toys that, like footballers, blew the money but never delivered the goods.
Companies would have been better to have been a disciple of Bill James rather than worshipping at the altar of Hi-tech. His overriding message in his Abstracts was that people like Billy Beane were on the receiving end of a false idea of what makes a successful baseball player; and that if you challenge conventional wisdom you’ll find ways to do things much better than they are currently done. This is a seemingly obvious reverse play on the definition of insanity. Organizations that are redefining customer engagement are now implementing that advice without perhaps realizing its genesis and are starting to reduce the inefficiency caused by sloppy data or tired, outdated metrics such as NPS or CSAT. It’s not that I have anything particular against either of these, but they both represent a single number metric and, in terms of truly and fairly valuing the experience that each customer has, both are inadequate. Asking a customer whether they would recommend a company to their friends or colleagues (and surely never knowing if they have) and whether they are satisfied seems mildly interesting but far from conclusive in identifying both current company opinions and future decisive actions. And I’m not alone in this view. A recent poll conducted byMarketforce showed that 66% of respondents believed that a combination of metrics will be the most widely used method to value customer engagement and experience in the next 5 years.
Understanding the relationship between customer actions, attitudes, responses and value created will identify what actually makes a difference in customer terms and creates Positive Customer Outcomes (PCO). This is a measure based on a combination of values that I’ve developed and started to use with customers as an effective and enduring measure of success in individual interactions and over the longer term. As it is far more definitive in both name and value, it also reflects positively on the employee or business process as it’s difficult to have a high PCO score without an equally positive employee performance. That in turn can be translated into increased sales, customer retention, employee engagement and other more qualitative metrics that actually mean something and can be measured and analysed for their effect on the overall business. The early baseball statistics innovators realized that each event on the field had an expected run value and contributed to the overall performance of the team. This in turn showed how to account for a players performance by the number of runs scored. But how much each event on the field was worth was much harder to figure out. On drilling deeper, teams found that it contained rich seams of data that could provide the answers that had never previously been recorded or investigated fully and that made a real, lasting and consistent difference to individual and team performance.
Find the real value, and what counts most for customers
Similarly in business, every action has a PCO value and the statistics that you need to consider and combine will change depending on the type of business, the role of the contact centre and/or other interactions across various channels. But they’re worth digging for. As an example: rather than just figuring out success based on overall sales volume or individual purchases, we should look deeper. An organization I worked with recently started to take a more in-depth look and went beyond the basics to ask some much more creative and illuminating questions. What is the ratio between store visits, web sessions or phone calls per £ of sales? How many customers does each customer service agent speak to for every £ of revenue? What is the average call length of successful (sale) and unsuccessful (no sale) calls? Does a customer buy more when they call early in the day or later? Does this depend on hold time or how easy it was to get to the right place, or speak to the right person?
These may seem inconsequential, irrelevant or difficult to uncover, but in this world of excessive excitement caused by an unrealistic overdependence on big data, this data already exists, is available and at a low cost because you already own it or can quite easily get it. As Billy Beane discovered, just because nobody else was interested in a certain player didn’t mean they weren’t valuable. In fact for him, as time went on, and his quirky selections were vindicated, this made them even more potentially valuable
Bringing Data to Life – Turning Insight into Action
Maximizing the value of your insight may seem obvious but it’s clear from my own interactions as a customer that very little that I say or do, or how I use products or services, is ever used creatively to deliver a better experience or to achieve a strong PCO. For whatever reason many organizations continue to operate with beliefs and biases, many of which are long held, honestly formed but fatally flawed and operationally inaccurate when used to evaluate performance and determine customer needs and preferences. As the grandfather of customer experience Heraclitus once remarked “The Only Thing That Is Constant Is Change.” Billy Beane showed that by continuing to expand his statistical view he found traits and player attributes that everyone else was overlooking. Even when it was clear that the A’s were on to something, many in baseball derided it as just luck and continued to believe that baseball statistics were the pure accomplishments of men against other men, or perhaps in business parlance, one company against another. But this was wrong and as Bill James noted “they are accomplishments of men in combination with their circumstances”. A subtle, but extremely critical difference.
But innovative journeys into data and insight don’t just benefit customers. This can also inform staffing decisions, technology investments, new product introductions and result in huge advances in organizational engagement. They have a waterfall effect and cascade over many parts of the business refreshing, cleansing and bringing fresh new life to help the business grow and prosper. But customers are changing fast and conventional wisdom may have had its place in the sun. Businesses must take a certain leap of faith and start looking in places and finding stats that don’t appear to interest others and to turn that data into insights that create rich and contextual customer experiences. Much as we hear about “intangibles” among top athletes, there are additional layers of creativity, innovation and personalization that go beyond just connecting with customers, as there are connecting bat to ball. So don’t slow down or stop swinging for the fences.
As Babe Ruth said “Never let the fear of striking out get in your way.”