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A new way of thinking about predictive analytics

Billy Beane, Daryl Morey, Tom Davenport on building an analytic culture

Beane, Morey and Davenport (l to r) discuss analytics in sports.

The popular book and subsequent movie Moneyball described a new way of thinking about analytics in sports. Today, Billy Beane, General Manager of the Oakland Athletics and inspiration for the Moneyball movie, is discussing how that new way of thinking applies to business as well.

Beane was on stage at the Premier Business Leadership Series with Daryl Morey and Tom Davenport. Morey is General Manager of the Houston Rockets and Co-chair for the MIT Sloan Sports Conference. Davenport is co-author of Competing on Analytics and Analytics at Work.

Beane and Morey have both seen success in applying analytics to player selection for their teams with well documented results. Of course, the methods they use were not developed in the athletics arena.

“We didn’t invent anything,” says Beane. “We robbed ideas from Wall Street and academics outside our business who said there was a different way of doing things.”

Like many analysts in business, Beane initially experienced resistance to what he wanted to do with the Oakland As, but he suggests that communicating in a way that the business can understand is important to getting buy-in. “One of the things that helped was being a former player,” he says. “Being an inside guy helped give me a lot of credibility.”

Another way to build credibility is to show a few early wins with analytics, but for some businesses, picking an area to focus on can be a challenge. “In sports, these guys have a relatively easy time deciding where to focus,” says Davenport. “What players do we want and what do I pay my players? The challenge for businesses is to figure out the equivalent for that.”

For a starting point, Morey encouraged leaders to start looking for ways to test their assumptions with data. “Anything with an assumption that is driving a decision, gather a little bit of data and apply it to that decision,” says Morey. “You’ll be shocked sometimes how much human judgment played a role in that decision.”

Of course, with the use of analytics increasing in sports and in business, can leaders expect analytics to continue to produce results? If everyone’s playing this game now, where’s the edge. “You have to keep innovating. Once people catch up, try new things. There’s always something else you can improve with analytics,” says Davenport. “Even a little of a pricing edge makes a big difference when you have tens of thousands of sales.”

Ultimately, says Morey, analytics gives you a decision-making advantage. “It just shifts the odds in your favor a little bit.”

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