Major League Innovation

Abstract

Managers tend to pick a strategy that is least likely to fail rather than picking a strategy that is most efficient. The pain of looking bad is worse than the gain of making the best move. This sounds like guidance from a management consultant trying to initiate changes within a major corporation. But it is actually a quote from The Hidden Game of Baseball, written in 1960 and published in 1984, in which Pete Palmer expresses his understanding of the way professional baseball teams were created, players were recruited, and games were played. Palmer was part of a small underworld of curious minds who were analyzing baseball statistics and arriving at conclusions about how the game worked that were very different from the principles upheld by Major League Baseball (MLB) managers, owners, and players. Amateur sports statisticians, digging through the records in a quest for a higher understanding of the game, created a whole new set of ideas about how a team should be built and how baseball should be played. But they had no connection to or influence over Major League Baseball itself, so their ideas remained a minor sideshow for more than 20 years--until Billy Beane, the general manager of the Oakland As, one of the league's most unsuccessful teams, hired Paul DePodesta as a sabermetrician, applied data analysis to his organization, and began winning baseball games with one of the lowest-paid teams in the league. This transformation represented a major disruptive innovation-it demonstrated that the data analysts really had discovered a recipe for turning low-cost players into winning teams with only minor changes to coaching and other structures. Today, this story is famous thanks to Michael Lewis's bestselling book Moneyball and the movie that followed. [ILLUSTRATION OMITTED] Over time, as Beane repeated his success in multiple years, cracks began to form in the traditional thinking about how to create a winning team and a profitable MLB business. Teams from Toronto to Boston began to imitate Oakland's methods and to hire away the management talent that had implemented it. Hidden knowledge. Disruptive ideas. Fringe subcultures. Entrenched power players. Legend taken as fact. All of these conspired to prevent new ideas from displacing the historical wisdom driving the business of baseball for more than two decades. But as long as everyone followed the same set of established rules, there was no need for anyone to worry about the impact of new ideas. That worked until just one team escaped the accepted wisdom and adopted a new set of rules. And Billy Beane kept working at those new rules, perfecting the approach until his team was consistently beating much better, richer teams. The As story proves that a new idea is powerless as long as no one will adopt it. But when an upstart company decides to stream movies on the Internet, an impoverished country establishes manufacturing facilities that are 90 percent less expensive than those available elsewhere in the world, a cafe abandons food to focus solely on coffee, or a baseball team hires players based on base hits rather than spectacular home runs, then the competitive field changes. To the established way of thinking, it appears that a revolution has appeared overnight and no one could have seen it coming. But in truth, powerful ideas take decades to develop a following. Everyone can see it coming, but no one takes it seriously because it is not part of the historical lore of the industry. Not until one competitor uses the idea to turn the tables on its competition do other companies scramble to understand what has happened, trying their best to compensate, often with the goal of reestablishing the playing field of the past and returning to the rules they understand. …