The film Moneyball recounts the true story of Billy Beane’s successful attempt to put together a winning baseball club on a relatively low budget by using a combination of technology and data analytics to decide on the players drafted (purchased).
In Moneyball, the Society for Baseball Research was the key source of data, in business, the source of data is customer insight, or Feedback. Jermey Koudi once wrote in the Economist’s guide to effective decision making that the most certain route to profitability for a business is through understanding and reacting to:
• Customer needs and preferences
• What’s going on in the market place and competitive landscape
Both strands of these valuable data are critical, but they become much more powerful with a deeper understanding achieved through analysis. When capturing feedback, managers have a treasure trove of structured and unstructured data that is there to be exploited, the type of benefits are as follows:
Eliminate unnecessary costs
After running analysis, Billy Beane realised that stealing bases didn’t correlate highly The Oakland A’s with winning of games, so guess what? They decided to stop focusing on stealing bases. Perhaps it’s this type of approach that has seen Ryanair take steps such as removing meals as standard from flights. Just as the Oakland A’s didn’t lose more matches by not focusing on stealing bases, the analysis showed Ryanair didn’t fill any less seats by eliminating free meals from flights.
Identify areas of competitive advantage
Through analysis Beane’s team realised The A’s competitive advantage arose in what is known in baseball as on-base percentage. A key lesson for business here is to identify areas where strengths lie and leverage these to your advantage. A key rule of customer experience is that an experience designed for everyone works for noone. To really find out where you are strongest you need to look to customer insight, and crunch the data to find out.
Outperform competitors
Companies that take advantage of analytics can punch way above their weight by allocating resources much more efficiently. A win for the Oakland A’s cost 33% of what a win cost the New York Yankee’s from 1999 to 2009, yet the Yankees only won 8% more games than the Oakland A’s in the same 10 year period.
Objective analysis for optimal results
In a previous post, I spoke about the importance of analysing data to leverage full value from it. The lessons learned from Sabermetrics validate this viewpoint. Beane looked at historical performance of players by correlating their performance against the key outcome, i.e. winning. I also touched on the importance of looking at the key outcomes. By focusing on analysis and key outcomes, business managers can eradicate any additional subjective noise and to take an objective approach to achieve optimal results.
In business managers often have preconceived views about how their business should be run. The central premise of Moneyball is that the collected wisdom of key decision makers in baseball over the past century is subjective and often flawed. Lessons from Moneyball can be applied in business.
The message is simple; use analysis to seek out the patterns that open up opportunities. If you are looking for some advice on how to proceed, please feel free to contact me.
I wonder what your thoughts are on the “elimination of unnecessary costs”. You cite Ryanair’s decision to no longer offer free meals as it does not decrease the number of seats filled per flight. However, in the age of social media and how that’s affected the direction of marketing, do you think it’s in a business’s best interest to eliminate the “little things” that make the overall customer experience better? Airlines in general have cut costs and added fees to the point where I can’t remember the last time I heard someone talk about how much they enjoy air travel. It’s becoming more like a necessary evil. How do you compare the value of a customer’s experience as it relates to the company’s brand and PR to the value of streamlining the bottom line?
Hello
Many thanks for your comment; it's a really interesting question, the answer to which ultimately depends on the strategic positioning of the brand in question.
For a low cost brand like Ryanair the key is to meet customer expectations, anything above that is unnecessary. Being able to continuously meet customer expectations is a pretty high benchmark to set and requires considerable attention. If businesses can consistently succeed in meeting expectations, this is a customer experience success.
The cost of failing to meet customer expectations far exceeds the cost of failing to exceed them. There is an interesting Harvard Business Review Article entitled "Stop Trying to Delight your Customers” from 2010 that advocates this position. In this article the authors suggest that exceeding customer expectations can be a costly and time consuming business.
While there are plenty of little things a business can do in order to delight customers, it boils down to a strategic decision about brand positioning. Many businesses go out of their way to delight customers, and to attract customers by doing that extra bit more, using "G.L.U.E.” (Give Little Unexpected Extras) to delight customers.
For some businesses it may be part of the brand promise to delight customers, and a lot of the time customers will pay that little bit more to be delighted. In the same space, if you look to the likes of Virgin Airlines, giving little extras is a key differentiator. But this form of differentiation comes at a price. Virgin Airline customers, however, come to expect these little unexpected extras as it is part of the brand promise.
In the case of Ryanair, low cost is the brand promise. Ryanair offer to get you from A to B at the lowest possible price. Anything over and above this is superfluous to their brand promise, moreover, it would detract from their offering, as it adds in cost.
In PR terms, I don't think that giving extras is what delights Ryanair customers, getting them from A to B at the lowest possible price on time is what has proven successful. So while there is merit in doing the "little things”, I think it only works for brands that set out to differentiate themselves in that way. Many brands compete on experience, and some compete on cost. Regardless of which category a brand falls in to, managing experience and expectations is critical. For those that compete on cost, like Ryanair, it is in their interest to eliminate these little things. It is a bold strategy, and Ryanair are one of few companies to consitently succeed at it; but Ryanair don’t pretend to be anything different than what they offer.
Please feel free to contact me if you would like a discussion re: same. I appreciate your interest.