Management Strategies

09:00 AM
Sam Maule
Sam Maule
Commentary
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Lessons Learned From Moneyball

Throwing money at the problem isn't always the answer.

I was returning from the NextBank Europe Conference in Barcelona to the US last week and Moneyball was one of my in-flight movies. I couldn’t help but notice the similarities between banking and baseball with respect to the shift in how we engage with our customers and the impact of digitalization. This had been preached from the pulpit in Barcelona by every single presenter at the NextBank Europe event.

I know you are taking it in the teeth, but the first guy through the wall... he always gets bloody... always. This is threatening not just a way of doing business... but in their minds, it's threatening the game. Really what it's threatening is their livelihood, their jobs. It's threatening the way they do things... and every time that happens, whether it's the government, a way of doing business, whatever, the people who are holding the reins -- they have their hands on the switch -- they go batshit crazy.

The quote above is my favorite part of the film. This scene takes place between John W. Henry, the owner of the Boston Red Sox, and Billy Beane, the hero of the story played by Brad Pitt (who else, right?). In the scene Mr. Henry is offering Billy a $12.5 million dollar contract to leave his position as General Manager with the Oakland A’s to assume the same role with the Red Sox. The offer was the largest GM contract in all sports at the time. And fittingly enough, Billy Beane passed on this opportunity.

Moneyball is based on a true story, and I highly recommend the book. John W. Henry is still the owner of the Red Sox and now has three World Series titles under his belt due in part to his adoption of the moneyball approach. Billy Beane is still with Oakland pursing a championship. The ability to land talent in order to win a championship is still a major factor in baseball.

There are two distinct reasons Billy Beane was offered this position with Boston. The first, he took a leap of faith and adopted Bill James's statistical data analysis approach in identifying talent and in the focus of the Oakland A’s playing strategy. This approach was counter-intuitive to how baseball talent and management had been practiced across the league for the previous 100+ years. In hindsight, it is simple enough to understand why this approach was successful for a small market team such as Oakland. They didn’t (and still do not) have the capital resources to compete and retain top-talent players such as Jason Giambi, Johnny Damon, and others. These players routinely left Oakland to land large contracts with cash-flush teams such as the New York Yankees and yes, the Boston Red Sox. 

What the data analysis, otherwise known as sabermetrics analysis, proved was Oakland could compete with the larger market teams if it changed the rules. The team’s focus shifted from one of big-name talent to the sum of the whole team. Individual contributions to the bottom line from all players trumped individual talent. Amen, and amen.

The second and more impactful reason Billy Beane was offered this position is because he had the chutzpah to stand up, implement, and stick with this approach. He let go of higher-priced talent and brought in players who didn’t meet the baseball norms. Everyone, and I mean everyone, thought he was nuts. Until it worked. Funny how that happens, isn’t it? Changing an industry with a legacy approach to business is tough slogging.

This should strike a nerve for those of us in the financial services space. Many continue to operate under the old norms because this is the way banking has always worked, and, to be honest, they don’t know any other way. Our industry needs a wakeup call. Desperately. Digitalization is leading a revolution across the banking industry, and the accelerated pace of change from technology is transforming business and consumer engagement models across the financial services ecosystem.

The other reason I decided to put pen to paper, I mean fingers to keyboard, is the recent news that my good friend Brad Leimer was hired by Santander to head up its US Innovation Team. I applaud this move. We need more voices and leaders like Brad from the fintech community in leadership positions within financial services. We need folks who aren’t afraid to stand back and take a long hard look at how we go about the act of banking and advocate change where it is needed. Brad joins a talented and growing group of banking and financial services executives leading innovation teams that include Dominic Venturo, Claire Calmejane, Dan Makoski, Dale McCrory, Matt Wilcox, and Paul Bridgewater

Look, if you ask me what the definition of banking will be in five to ten years my response will be, “pretty much what it is today.” What I mean by that is, the core services that banking provides aren’t going to change. Money will be deposited, loans will be made, credit will be established, etc. What will change is how we go about these activities. Banking as a verb, as an engagement model, will continue to shift dramatically. New players will continue to encroach on the business model. The point of Moneyball isn’t that the game of baseball changed, it is that the way one strategically approaches and manages the game requires change.

Being a voice in the wilderness can be tough. I’m reminded of another good friend, Bianca Buckridee, and her experience with setting up a social media customer service model. Bianca had to convince senior bank management that there was a business need where none had previously been identified and had to set up a practice/processes where none had ever existed. The reason Bianca was successful is due to her passion and belief that she was doing the right thing. And, more importantly, she wouldn’t shut up. She continued (and continues) to evangelize the need for change in how banking engages with its customer base. This requires tenacity. Brad, Bianca, and Billy Beane are three of the most tenacious people I know.

Brad will face quite a few challenges in his new role. Weeding out the signal through all the noise and chatter of "disruption" to the banking model will be time consuming. Throwing money and resources at problems isn’t always the answer. Setting up a process to move from ideation to implementation is extremely tough. But I’m positive it can be done. It just requires the right person to step up and lead.

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Sam Maule serves as a Consulting Manager at Carlisle & Gallagher Consulting Group. He joined the firm in June 2011 focusing on the Cards & Payments Community of Practice. In this role, Sam provides industry subject matter knowledge and experience to CG's Financial Services ... View Full Bio

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Byurcan
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Byurcan,
User Rank: Author
10/6/2014 | 11:44:17 AM
Re: Innovation
If that's the case, then the A's need to hire Josh Burnes (http://en.wikipedia.org/wiki/Josh_Byrnes) or another Joshua to actually take them into the promised land.
KBurger
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KBurger,
User Rank: Author
10/6/2014 | 11:30:59 AM
Re: Innovation
Yes, execution is the less-exciting side of innovation that doesn't always get as much attention as it should. And I guess there also are some principles around data and statistics involving either "special circumstances" (black swans or short periods of time such as playoffs vs regular season) that also need to be factored into the Moneyball approach. Or maybe it's simply the "Moses Factor" -- Billy Beane can lead his people to the Promised Land but will not be allowed to actually enter it.
sammaule01
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sammaule01,
User Rank: Apprentice
10/6/2014 | 10:46:29 AM
Re: Innovation
I'm actually addressing this issue in my follow up post to Moneyball:  "Why Delivery is The New Money" (thanks to the Oakland A's yet again failing in the post season and inspiring this write-up).
KBurger
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KBurger,
User Rank: Author
10/3/2014 | 10:52:41 AM
Re: Lessons learned?
I'm still dealing with Lou Brock for Ernie Broglio #cubsfanswillunderstand
KBurger
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KBurger,
User Rank: Author
10/3/2014 | 10:22:42 AM
Re: Innovation
Great post Sam & I agree with the innovation/inertia issue. But I also think a big challenge around innovation actually is the current widespread embrace of it. Lots of financial services firms are focused on innovation, not everyone is defining innovation the same way (or applying it to the same kinds of problems & issues) and hence the results are going to be different and potentially meaningless (or at least confusing). That is, an innovation project that doesn't succeed could actually have failed because it's not really about innovation, it's about automation or some kind of process improvement. In other words, overuse of the term/concept could devalue it. Sam, do you see this pattern in the industry?
Greg MacSweeney
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Greg MacSweeney,
User Rank: Author
10/2/2014 | 10:12:39 AM
Lessons learned?
Here's a lesson: don't trade for Jon Lester. LOL

leimer
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leimer,
User Rank: Apprentice
10/1/2014 | 2:18:08 PM
Thank you Sam...
Sam - I appreciate your kind words and our ongoing conversations. And as a long-time Berkeley and Oakland resident, I've seen Moneyball in action since Billy Beane joined the Athletics - unfortunately his teams are now 0-7 in elimination games based on last night's loss to the Royals (but I'm more of a Giants fan probably).

Sports analogies aside, while some of the most interesting things happening in financial services today are coming from the startup community, there are plenty of opportunities for banks to remain not only relevant, but vibrant - as long as they retain focus on the customer in every development. It's also critical that banks remain very connected to the developer community, which is why I've been at Finovate and FinDEVr that past two weeks. 

As much of traditional banking services become a utility, those that leverage more engaging personalized banking experiences will thrive. New ideas in every customer segment are being unearthed weekly - you have to act as the early warning system for these ideas - and work to deploy those that are most interesting (and ultimately impact overall engagement, which is increasingly the path toward growth, retention and profitability).

As we move further into digital experiences, the next decade will be even more incredibly disruptive than what we saw in the recent economic downturn. As I've said (now many times) before, there will be blood.  

That's why working within financial services now is simultaneously exciting and terrifying.

I look forward to the times ahead. Feel free to connect and discuss some more.

Brad Leimer, bradley.leimer@santander.us and @leimer on Twitter. 

 

 

 
sammaule01
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sammaule01,
User Rank: Apprentice
10/1/2014 | 12:18:33 PM
Re: Innovation
The battleground within banking is over coming inertia.  Not my words - I was actually quoted this by an EVP of one of the top banks in the U.S.  There are plenty of ideas out there - the mastery is in actual execution and implementation of these.  Not in 200 page Powerpoint presentations but in actual protypes that are tested in the real world and then integrated in product roadmaps and launched.  This is the advantage the distruports have - a niche focus on solutions that they can design, test, and launch in 60 days.  Most banks can't schedule a meeting in 60 days.

My hat goes off to those driving innovation within the banking community and who actually do something... actually launch products.
Byurcan
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Byurcan,
User Rank: Author
10/1/2014 | 9:34:08 AM
Innovation
Thanks for the thoughts Sam, it's always good to get sports involved ina  business discussion in some capacity. It is true that the people with innovative ideas within orgs ften have to go to great efforts to get their voice heard, or taken seriously, due to the natural inertia that comes in running a large business. But in the end the efforts are often worth it. 
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