The Cleveland Browns show how analytics trump ‘Gut-Feelings’ and improve process
Watching the NFL Draft this past weekend I was once again reminded of how analytics are improving processes everywhere.
I was watching the Cleveland Browns get panned by talking heads all day for not drafting a QB which they so desperately needed. But, I also knew the Browns had recently hired Paul DePodesta who was the brains behind the analytical approach Billy Beane took constructing the roster of the early aughts Oakland Athletics. Their revolutionary innovation was written about in Michael Lewis’ best-seller “Moneyball” (and was also turned into a movie).
The Browns, a historically bad franchise, had three first round picks. With each pick they drafted great players, however, there was a glaring hole at the absolute most important position on their roster, quarterback.
What a wasted opportunity; 3 quarterbacks had been selected in the first round. ln fact one was taken with a pick the Browns traded. What were they thinking!?
Well, the next day they were able to select a quarterback (Deshone Kizer of Notre Dame) who many scouts had rated neck and neck with the quarterbacks drafted with much more valuable picks in the first round. What an arbitrage!
Not only did they secure three extremely talented prospects to fill positions of need in the first round (including the drafts widely regarded best player available Myles Garrett), they drafted a first round projected quarterback in the second round.
They did all this by ignoring the outside criticism and conventional wisdom teams have always used and instead stuck to the ratings they had and saw an inefficiency in teams reaching for quarterbacks. They let one slide to them and derived the most value out of their picks. This could end up being a franchise-altering draft for the Cleveland Browns.
The Cleveland Browns are one of the first teams in the NFL to embrace advanced statistics in roster construction a strategy immortalized in the aforementioned Michael Lewis book Moneyball. This “Moneyball Strategy” was originally applied by Billy Beane and the Oakland Athletics who used analytics to exploit inefficiencies in the market to acquire undervalued talent which helped their low budget team compete with the much more cash rich franchises like the New York Yankees and Boston Red Sox.
Since then analytics have made quite an impact on the sports landscape. For instance, the NBA has wholeheartedly embraced analytics, led by visionary Houston Rockets GM Daryl Morey whose major insight was that shooting more corner three-point shots and reducing the number of mid-range jump shots would increase efficiency. The results have been historically efficient offenses. Teams leading the charge in this category include the San Antonio Spurs and Golden State Warriors, who each have quite a few championship banners hanging in their arenas owing in part to the application of these analytics.
Now I know you’re probably thinking…isn’t this an investor relations blog? Are you auditioning for a job at ESPN, I know they recently laid a bunch of people off but this is ridiculous.
My answer, yes this is an investor relations blog, and no you could never pay me enough to work for someone else again, being a business owner is the key to happiness in America.
Here’s the tie-in, all these examples of analytics have one thing in common, groups with limited resources used analytics to identify market inefficiencies they could exploit for their benefit.
Analytics are everything!
My business partner has a catchy little line he likes to say; “everything we do is bathed in math and science…but it’s not rocket science!”
Everything…I mean everything we do is based on analytics because if you can’t measure it you can’t improve it.
Are you using analytics in your investor marketing programs? Are you looking for market inefficiencies where your company can improve their shareholder acquisition cost?
Do you know your shareholder acquisition cost?
Do you know your investor conversion rate?
How many people per week visit your IR website?
How many people show behavior online that would make them a potential investor?
Is your IR firm asking these questions? Are you? If not, give us a call, we’d love to help you find the inefficiencies you can exploit to reach your goals. It is our passion, we love this stuff!