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Using Baseball to Explain New Operating Models for Finance and Your Career

I was reading Thomas Friedman’s Thank You For Being Late last week while sitting on a beach, and thinking about its key tenet that accelerations in technology are reshaping industries, careers, politics, really all of society. Even something considered as “timeless” as the game of baseball has been reshaped by technology.

Over two seasons from 2012-2013, the Houston Astros lost two thirds of their games, so it seemed unlikely with Sports Illustrated magazine featured the team on a cover and proclaimed them to be “Your 2017 World Series Champs.” And then it came true.

Major League Baseball, and the Astros in particular, championed several new business models to revitalize the team in what the magazine called “Baseball’s Great Experiment,” a deep dive into data analytics through all facets of the game. In this way, they are an example of a trend that mirrors business and society as a whole: large-scale, macro trends in society lead to the development of new capabilities, which leads to new ways of conducting business.

This is the basis for a new AFP interactive guide, “Your Roadmap to the Future of Finance,” where we take this model and lay it out over the three dimensions of FP&A: finance and business, technology and data, and your personal effectiveness. In this article, we will use baseball to explain how the dynamic plays out.

MACRO FORCES: CHANGES HAPPENING ACROSS ALL INDUSTRIES

No surprise, data is fundamentally reshaping sports as in so many other areas. In economic terms, when a good becomes commoditized and inexpensive, we will use more of it. As data became cheaper, we developed more ways to capture it, and more ways to use it, developing data mining tools, analytics, and pervasive deployment of the technology. These are all the same trends we see in other aspects of our lives.

NEW CAPABILITIES: NEW WAYS OF ACCOMPLISHING TASKS

In the sports world, the ability to gather, structure and analyze information at a cheaper level has made it accessible to all teams and allowed them to spend liberally to create a competitive advantage in data analysis. As one technological leap makes the next leap easier to accomplish, this progress has created new capabilities for the baseball world that feeds the analytical engine. For example:

  • PITCHf/x: Records every pitch thrown by every pitcher and provides information such as the type of pitch, location over the plate, and ball movement vertically and horizontally.
  • FIELDf/x: Digitally records the position of all players and hit balls in real time.
  • Retrosheet: Re-creates and digitizes the play-by-play of every game in baseball history for download and analysis. 

New capabilities to record and analyze information has led to new metrics that employ the data. Baseball is filled with statistics that did not exist a decade ago, including:

  • UZR—Ultimate Zone Rating, which quantifies a player’s entire defensive performance by attempting to measure how many runs a defender saved.
  • LIPS—Late-Inning Pressure Situations are defined as any at-bat in the seventh inning or later where the batter’s team trails by three runs or fewer, is tied or is ahead by only one run.
  • SIERA—Skill-Interactive Earned Run Average quantifies a pitcher’s performance by trying to eliminate factors the pitcher can’t control by himself—such as an error by a teammate.

NEW MODELS: RE-ARRANGING WHERE, WHEN AND HOW WORK GETS DONE

The essence of “The Road Ahead” is that the broad changes and new data capabilities lead to new models of work for finance, and here we see this playing out in many ways for the game of baseball.

The first significant change in the baseball model has taken on the name of the book, Moneyball. In it, one team, the Oakland Athletics, in 2002 built a competitive team on a low budget by applying advanced metrics to show who brought the most value to a club on a per dollar basis. This overturned the then-traditional logic of player assessments which were based on judgment and intuition.

The second change came in how the game is played, such as defensive shifts that realign players in the field, new hitting styles building on the “launch angle” metrics, and pitching changes that emphasize throwing fewer strikes.

THE ROAD AHEAD FOR FINANCE

Change is happening at a faster pace in all elements of our society, and resisting it will consign our companies and ourselves personally to the bottom of the competitive standings. This paradigm of macro  changes leading to new capabilities leading to new models demands that we be agile in our preparation and response in order to remain relevant. The interactive guide, “Your Roadmap to the Future of Finance” explains how these changes play out for you and your company, and what new models exists for your career.

Check out the interactive tool Roadmap to the Future of Finance.

ABOUT BRYAN

Bryan Lapidus, FP&A, MBA is the Director of the FP&A Practice at the Association for Finance Professionals. Bryan has more than 20 years of experience in the corporate FP&A and treasury space working at organizations like American Express, Fannie Mae and private equity-owned companies. At AFP, he is the staff subject matter expert on FP&A, which includes designing content to meet the needs of the profession and helping keep members current on developing topics. Bryan also manages the FP&A Advisory Council that acts as a voice to align AFP with the needs of the profession.


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