Guest Post: Moneyball – Hoshin Kanri

This week is Lean series week at Beyond Lean.  The blog posts will center around strategy deployment (or Hoshin Kanri).  Justin Tomac, Chad Walters, Karen Wilhelm and Tony Ferraro will be guest blogging.  This will give you different perspectives from on strategy deployment all right here at Beyond Lean.

Chad_WaltersToday’s post is from Chad Walters.  Chad is a Lean consultant and owner of Lean Blitz Consulting in Augusta, Georgia, a firm focused on continuous improvement for small businesses and sports organizations. He has run projects for the Atlanta Braves, the Salvation Army, Automatic Data Processing (ADP), Eaton Corporation, The Dannon Company, and the South Bend Silver Hawks among other companies. He has been practicing Lean and continuous improvement for over eight years, is a Six Sigma Black Belt certified by the American Society for Quality, and received his MBA from Indiana University’s Kelley School of Business, where he was a member of the Kelley MBA Sports & Entertainment Academy.  You can follow Chad on Twitter @LeanBlitz.

The book Moneyball by Michael Lewis not only lays out the top-to-bottom game strategy employed by the front office of the Oakland Athletics under team general manager Billy Beane in 2001/2002, but it also serves as a demonstration of how major philosophical and operational changes require a leader willing to stay the course during trying times and full alignment of resources to accomplishing the overarching goal.

For those who are unfamiliar, Moneyball was a paradigm-shifting revelation to the way baseball front offices evaluated and valued players – greater focus on specific statistics (on-base percentage) and valuing the concept of “not making outs,” among other things. Not only did it change the way front offices operated, but it also brought the essentially-foreign concept of efficiency to a boys’ game. The Oakland Athletics, in an effort to compete with the big spenders while on a shoestring budget themselves, employed statistical analysis with baseball players to take advantages of inefficiencies in the game. In 2011 Moneyball was made into a movie starring Brad Pitt as Oakland Athletics general manager Billy Beane and Jonah Hill as assistant general manager Peter Brand (the name chosen by the writers when the real assistant general manager at the time Paul DePodesta wouldn’t permit his name to be used in the movie). The movie was great, but really only if you read the book first.

Lean practitioners who were also sports fans loved the entire concept of the story – it wasn’t just about doing things differently, but doing things smarter and better and bringing a cerebral approach to the game they loved. It was about change management in the face of adversity, only it happened to be in the industry of baseball.

The Athletics didn’t coin the term “Moneyball” but their overarching goal of maximizing the ratio of team victories to payroll through the use of statistics measuring team efficiency is a great example of hoshin kanri – the entire organization was aligned to the unique operational strategy to achieve this end goal of maximizing team on-field production.

In an industry where “the way it’s always been done” runs rampant moreso than any other due to the very public nature of the business, achieving organizational alignment was tough and the team’s leaders took steps to forcefully (rightly or wrongly) assure its implementation.

How did the Oakland Athletics demonstrate hoshin kanri?

  • Change management started at the top. “How baseball players are evaluated” was the change that occurred with the Athletics. They (like all other major league teams) had almost solely leaned upon scouts to evaluate players based simply on watching the players firsthand, because “that’s the way they had always been doing it.” Billy Beanewanted to change the approach to include statistical analysis, and because he oversaw the team’s scouting departmentand on-field operations it was his call. Contrast that with Peter Brand, who before being hired by Billy was a low-level advisor to then-Cleveland Indians general manager Mark Shapiro. Peter had no pull in the office, despite possessing superior education and mathematical analysis skills, so he would not have been able to influence such a monumental philosophical change.
  • “Adapt or die.” While this is quite the fatalistic view on change management, it was the philosophy Billy and the Athletics had to adopt. They had a payroll that was less than 1/3 that of the New York Yankees, so the Athletics had to go “bargain hunting” for undervalued players who featured the undervalued talents like high on-base percentages. In order for them to have a chance to compete with teams like the Yankees they had to be smarter with their dollars.
  • “Trust the process.” Billy and Peter believed in this new philosophy, and their faith was certainly tested when the team started the season poorly. They were aware that the successes would take time to arrive, and multiple tweaks to
    the process (and the process users) would occur. For example…
  • The organization’s activities had to be aligned with the overarching goals. The Athletics scouting department (including lead scout Grady Fuson) were fundamentally opposed to the idea of focusing on statistics instead of what they saw from players with their own eyes. The tension between the two philosophies became so heated that (according to the movie) Billy and Grady had an altercation that led to Grady getting fired. (Adapt or die, indeed.) While scary, it is important for all process users to buy into the change.
  • “So what’s our problem?” One of the favorite Lean tools is the “Five Whys.” When we encounter a problem, we should follow up our analysis of the cause by asking “why” five times. Billy did the same thing, continually asking “So what’s our problem?” to get down to the root of the issues.
    “We aren’t winning.”
    “So what’s our problem?”
    “We aren’t scoring enough runs.”
    “So what’s our problem?”
    “We aren’t getting enough guys on base.”
    “So what’s our problem?”
    “We are making too many outs?”
  • The ultimate poka-yoke. Billy and Peter had specifically signed former catcher Scott Hatteberg to play first base (because of his high rate of reaching base as a hitter), yet manager Art Howe refused to play him, instead opting for young first baseman Carlos Pena. Art Howe had not bought into the new philosophy. How could Billy make absolutely sure that Art would start Hatteberg going forward? Just get rid of all other first basemen on the roster! Billy traded Pena to the Detroit Tigers, Hatteberg became the new first baseman, and…
    Belief in the process and persevering can bring great rewards. …the Athletics set a record by winning 20 straight games on their way to winning the American League West division.
  • “The first guy through the wall gets bloody.” Billy was indeed the first guy to break down the wall, but the paradigm shift in all of baseball was on. In fact, the on-field success of the Athletics despite the miniscule payroll was so revolutionary that Billy Beane was offered the role of general manager of the Boston Red Sox (one of those teams with a huge payroll but inability to win the World Series). He turned the job down to stay with the Athletics, but the Red Sox won the World Series two years later with general manager Theo Epstein at the helm, using the same philosophies introduced by Billy and the Athletics.

Moneyball is the ultimate triumphant change management story, and we all aspire to such a heroic chain of events. It required a philosophy, leaders who not only believed in it but stuck with it through difficult times, process users and followers who were in alignment, and a lot of courage to try something new – unlike most traditional companies, the success of the Oakland Athletics is in plain sight for everyone in the world to see.

Advertisements

Posted on March 30, 2013, in Guest Post, Strategy and tagged , , , , , , , , . Bookmark the permalink. 4 Comments.

  1. Interesting discussion. I suggest for additional discussion utilizing a Moneyball perspective that you read my blog post I called The Moneyball Principle from July of 2012 at https://community.kinaxis.com/blogs/TBrouillette/2012/07/28/moneyball-principal

  1. Pingback: Lean or Sushi?? | Lean Blitz – Do it better.

  2. Pingback: Major League Baseball and Management by Meaningful Metrics | Lean Blitz – Do it better.

  3. Pingback: Waving Goodbye to #2013Lean Blitz – Do it better.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: