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Taking Moneyball tactics to the enterprise

Billy Beane's success with the Oakland A's offers a BI analytics lesson to IT execs, analysts say

September 30, 2011 07:08 AM ET

Computerworld - The success of the Oakland Athletics in building a winning baseball team by using unique performance metrics, as shown in the movie Moneyball, could be repeated in corporate IT shops, say IT executives and analysts.

Moneyball, which opened last week, is based on a 2003 book of the same name by Michael Lewis. It describes how the Oakland A's general manager Billy Beane eschewed traditional metrics such as RBIs and home runs when evaluating and selecting players for the team.

Instead, he focused on lesser-known and rarely used metrics such as walks plus hits per inning pitched (WHIP), on-base average, and value over replacement player (VORP) when deciding how valuable a player would be to the team.

His approach resulted in the creation of an Oakland baseball team that made it to several playoff rounds in the early to mid-2000s even though it had the lowest payroll in Major League Baseball.

"Like professional sports teams, traditional companies must rethink how [such] measures can also drive changes in business processes." said Rita Sallam, an analyst with Gartner.

Enterprises must find ways to modify and optimize their processes by using lessons learned from early adopters of such approaches like the Athletics, Sallam added.

Social Compact, a Washington D.C.-based non-profit, is already applying such methods with considerable success as part of its effort to get businesses to invest in struggling inner cities.

Social Compact collects and analyzes overlooked economic indicators from a community to build a detailed profile of its true economic potential, said Alyssa Lee, president and CEO of the non-profit The profile is far more detailed than can be done using census-derived information, she added.

Social Compact's neighborhood profiles, for instance, draw from multiple local sources and includes information contained in building permits, certificates of occupancy, utility usage data, tax assessment figures, bill payment patterns and consumer expenditures within a community. It also looks at secondary sources of income that people in a neighborhood might have, such a second job.

Often such profiles help city planners, community organizers and businesses look beyond negative stereotypes that often come from census data-based evaluations, Lee said. "We create an information base that is representative of the true economic strength of a community," she said.

Social Compact collects data from a variety of public, private and commercial sources within a local community.

The non-profit uses technology from DataFlux, a SAS subsidiary, to standardize, validate and to integrate the data. It also uses the DataFlux tools to develop maps of a local community that pinpoint areas that lack basic amenities such as a grocery store, a pharmacy or a bank.

The techniques described in Moneyball can be applied to key business processes such as vendor selection and portfolio optimization in any organization, Sallam said. "Player selection for instance, is similar to vendor selection. You need to look at quantitative and qualitative measures," when selecting a vendor, she said.

Enterprises can benefit enormously from identifying all of the quantitative and qualitative factors that contribute to success, not just the obvious ones, she said.

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