I love writing about applying lessons from sports to the tech and game spaces, so an article I saw in the MIT Sloan Management Review, “What Businesses Can Learn from Sports Analytics” by Thomas Davenport, really resonated with me. Davenport is one of the people who have molded strongly my love of analytics, as his book Competing on Analytics initially got me thinking how the game industry could be improved by applying analytics. That the Oakland A’s are again one of the surprise success stories in baseball further reinforced the relationship of analytics and sports. In Davenport’s recent article, he shows how we can apply techniques used successfully in sports to tech or game companies.
Analytics is all the rage in sports. Davenport points out that every professional baseball team has an analyst on staff, while many professional football, soccer and basketball teams also do. Yet, other sports teams are behind many other industries because they are often smaller organizations and typically have old-school executives who do not appreciate the value of analytics. Although not applied universally, Davenport draws several lessons from how sports teams use analytics that are relevant to all businesses. Continue reading “Lessons from sports analytics”
I have been intrigued for years that a huge financial sector has continued to rely on intuition while industry after industry has discovered that using analytics give you a better chance to succeed. Moreover, it is a sector that brags about the fact that it fails 99 percent of the time yet fails to embrace methods to improve those odds. I am talking about venture investing, the venture capital industry.
Moneyball and the venture community
For those who have seen the movie or read the book Moneyball, which I have written about multiple times, one of the most poignant scenes is the Oakland A’s smoke filled draft room where scouts with years of experience determine the best prospects to select based on their gut of what makes a great baseball player. When I first read about it, the parallels to how game company executives select what games to green light were incredibly apparent and I was certain you would see a similar transformation of the game industry. We did, with analytics driven social game companies putting many old school game companies out of business.
The venture capital space has uncanny parallels to the pre-Moneyball baseball industry. You have investors with years of experience sitting in Red Bull filled rooms deciding which investments to pursue based on intuition. The claim that they are investing in the management team is another way of saying they are selecting those leaders who feel like rock stars; who they think look like a star. They are basing it on measurable that they feel are important but have not proven empirically are the keys to success (just as baseball executives undervalued walks and over-valued defense).
Correlation Ventures, the Billy Beane of VC
A recent article in Forbes, “Venture By Numbers,” shows this situation is changing. Correlation Ventures started in 2011 with the philosophy to bring a quant-based approach to venture investing. Their mission was to stockpile 25 years of data on every venture deal consummated, evaluate this data with proprietary algorithms and then pick investments via pattern-matching software. Continue reading “Moneyball finally comes to VC”
Monday night the Oakland A’s gained a playoff berth with a roster that most experts believed at the beginning of the season would not even approach playing .500 baseball. Although most experts in hindsight now see the quality of the A’s players, they are failing to realize their success is again the result of Billy Beane’s (Oakland’s General Manager) ability to use analytics to gain a competitive advantage.
Continue reading “Moneyball strikes again: How to use analytics for sustained competitive advantage”