Tips Business Owners Can Take Away From the Movie Moneyball

Chia-Li Chien | June 14, 2012

I don’t understand baseball at all! Growing up in Taipei, I was familiar with the Little League World Series, making my memories of the game of baseball game only as much as the Taiwanese Little League winning. But I like Brad Pitt and had heard about this award-winning movie, Moneyball. It remained in my NetFlix queue for a long time before I finally watched it.

This movie was based on the book Moneyball: The Art of Winning an Unfair Game by Michael Lewis, published in 2003. In the book, you can find a few clues about running a valuable and profitable business. I would say most people understand baseball as a game or entertainment. However, there is a lot from this movie that privately held businesses could definitely benefit from.

The movie is about the Oakland Athletics (A’s), its general manager Billy Beane, and how he picked players and worked them into the team during the 2002 season. Brad Pitt plays Billy Beane. His character essentially realized and recognized that his management team couldn’t run the business like the richer competitors in Major League Baseball. They just didn’t have the kind of revenue to support other more famous and expensive players.

Beane knew something had to change and he turned to a “performance based” plan to scout his team, looking for undervalued players who had not been given a chance to prove themselves. As a result of this “performance based” analysis and selection process, the Oakland A’s won twenty consecutive games—their best winning streak in the history of the franchise. Beane was offered the position of general manager by the Boston Red Sox, a package which included the largest salary offered in the history of that club—$12.5MM. Although Beane made a clear personal choice to stay with the Oakland A’s, the Boston Red Sox deployed the same method Beane had used and won the World Series two years later.

Create a Scalable Platform

You are the leader of your business and as a result, you should strive to make your business valuable at any and all times. To do so in these ever-changing economic conditions, you must realize, recognize and be prepared at to change! In the Aggregation Age that we’re in today, businesses have evolved and leveraged their intellectual capital. They control the process while not necessarily owning it.

The businesses that can reposition themselves in front of the curve can greatly benefit from wealth creation. That being said, to do so cost effectively, you must prepare to reposition your business above any benchmark market value! This requires you to rethink your business model. A business model on a scalable platform will reposition your business for substantial value or wealth creation, for you the owner!

As general manager Beane realizes and recognizes that something has to change for his team. He leveraged their intellectual capital to analyze and select undervalued players. Their process involved looking at the historic performance of players. They then used that intelligence to build a cost-effective team set to outperform the return on investment of the season. So who was the intellectual capital in the movie? Well, remember the role of the 24-year-old economic major, the Yale graduate? That’s right. He built a program to capture the entire selection process and to statistically look at a player’s historic performance to assemble their pay and cost structure.

Let’s just imagine for a moment—what it could have meant if Beane had been able to sell that process to the Boston Red Sox or any other baseball team. Beane would have created a scalable platform. The Oakland A’s would have new uncovered a revenue source that further diversified their revenue.

In a privately held, business, at best, your CFO or CPA benchmarks your net profit within your industry, region, etc. However, to compete in a global environment you face several challenges to profitability—or in other words—to keep your business valuable and attractive at all times.

A scalable platform in a small to mid-sized business is defined as orderly and efficiently delivering a large number of products (include services) to a large number of customers. It leverages both economy of scale (decrease average unit cost with single product) and economy of scope (decrease average unit cost with diverse products). The entire platform is bound by proprietary intellectual properties, which are mostly several sets of streamlined processes in real-time and cloud technology (or software). It ultimately standardizes any customization into repeatable product offerings. It is teachable, repeatable and easy to update or upgrade based on customer demand or forecast in customer needs.

In Moneyball, only a few components of a scalable platform are used, such as:

• Centralized process of undervalued players’ historic performance analysis and review
• Centralized on-going monitoring of the cost structure to replace under-performing players

As a business owner, you know your business and industry better than anyone else. You know the trends and you know you have to be on top of your game at all times! And not just for survival, but for creating substantial value and wealth for you, your family, your team and ultimately your customers.

If you are already using key performance indicators (KPIs) to track your business performance on the regular basis, I encourage you to revisit your business model. Perhaps you can take few baby steps to slowly change your business direction into a scalable platform. This will help reposition your business for value and wealth creation.

I also recommend you attend my next 90-minute webinar. During the webinar I will take a closer look at building business value in the three major categories of activities in your business. Go ahead and reserve your seat now—don’t miss any opportunity to build your business in VALUE—because the goal is not only to grow your business in revenue—but also in VALUE. This objective will ultimately help you achieve your financial independence when you’re ready to cash out!

Exit is neither a bad word nor about losing your social status. It merely means re-positioning your NEXT JOURNEY®— whatever that might be. This requires fundamental business value in order to successfully and profitably exit the business, regardless to whom you sell. You deserve to be compensated for the amount of risk, time and hard work you have put into your business!

As portrayed in Moneyball, Beane realized and recognized the need for a game changer. He did not start off knowing what to do, but he found that linchpin and became the most valuable general manager ever in the history of Major League Baseball.

So, I don’t understand baseball. Sometimes I don’t know everything about my client’s products (including services). My business serves as a linchpin for our clients and for repositioning them for value growth, so that ultimately they will be compensated for the amount of risk, time and hard work put into the business!

Do you have a linchpin in your business helping you reposition your business for value growth?