Simon Sinek says: “Most leaders don’t even know the game they’re in.” The key to a good strategy is to define the problem correctly. No organization can succeed if it addresses the wrong issue. At the start of each strategic shift, e.g., a transformation, leadership needs to nail down the problem it is facing and then design reasonable actions to respond to it. If we don’t take enough time to describe the problem, we will fail. I am sure you believe you know the game you are in, as did the Oakland Athletics, a baseball franchise.
Let’s play ball!
The book Moneyball: The Art of Winning an Unfair Game tells the story of the Oakland Athletics, also known as The A’s, one of the lowest-budget teams in the U.S. baseball league, who lost their star players to rich teams. Billy Beane, the manager, tried to replace Giambi, one of three stars who left the team, but this task seemed impossible with a low budget. Billy and his scouts started searching for some hidden star no one else had seen before; a big chance, considering that the A’s had $40 million for their whole roster while their opponents managed at least 160-million-dollar budgets. An analyst gave Billy a new angle on his problem. He realized: “What you don’t do is what the Yankees do. If we do what the Yankees do, we lose every time because they’re doing it with three times more money than we are.”
All staff at the A’s were baseball experts but lost sight of the real problem. The A’s problem was not that they had lost three key players and had to sign new stars, who guaranteed a certain number of home runs or RBIs. The problem was that they played an unfair game where rich teams competed with poor teams. This insight changed their approach completely.
Create solutions to the poor and rich problem.
If the Athletics wanted to compete, they needed to do it differently. Having identified the problem correctly, Beane was able to apply an unconventional solution in the sports world up to that point. The Athletics turned to sabermetrics and created a system that allowed them to sign players who were undervalued due to scouting biases of other teams. This strategy led the Athletics to two consecutive playoff appearances and forever changed the world of professional baseball. Today all baseball teams use sabermetrics.
How to apply Moneyball in business:
You will not be able to use baseball stats to find the problem that skyrockets your business. However, I will show you an example of how this can work in the business world. And we will take a closer look at what is required to start the search for your problem.
Nucor started in the automobile sector with a different name at the end of the 19th century. They went bankrupt, reinvented themselves in the 1930s, and faced yet again bankruptcy in 1968. Since they were not able to get good prices in the domestic market and the steel from abroad lacked quality, Nucor’s CEO decided to make their own steel, building their first steel bar mill. Due to economic constraints, the company purchased an electric arc furnace far cheaper than the traditional steel blast furnace. It was also smaller and, therefore, more flexible.
Nucor rethought the steel industry not only on the technical side but also on the business side. The company decentralized the overarching functions, and today, each mill carries out its own projects including marketing and sales. Blue-collar workers are responsible for their mill and pitch their ideas. They directly apply their knowledge. The philosophy of Nucor is to try new ways and requests from each employee to work on enhancements, even if they fail. When Nucor opens new business relations, frontline workers show up to the surprise of other companies’ management. Even more surprising, they have only 60 people in their headquarters and are the most profitable steel cooperation in the United States. They outperform their competitors in each metric by changing the approach to the problem. Their solution was born out of necessity while facing bankruptcy. They could not imitate their competitors since they had more money and assets. Nucor changed the game. So how do you get a strategy shift by tackling the right problem?
How to get started:
When diagnosing your problem, a simple call to deliver faster won’t do. You need to identify the underlying convictions and assumptions (double-loop learning). You can do so by using different formats to enable double-loop learning. I present some proven methods that I have used in workshops below:
- Nine Whys: a simple liberating structure imitating a nosy little schoolboy, asking you continuously why, digging deeper into the underlying assumption of “We have to deliver faster.”
- On another occasion, I used the format “I observed … we need to change it because … I propose to …”. Participants are forced to share their observations, which helps them to focus on the real problem and don’t fall into blaming shortcomings on external factors. “This information was not forwarded to me” converts into “I observed that I had not full access to the necessary details “. The participants must also explain why it is important to change something. Is it even important?
- Another liberating structure that helps you is What, So What, Now What? This is a similar approach to format number 2. Participants answer the three questions. It also enables understanding the underlying assumptions or problem patterns.
And there are many more. Regardless of the format you choose, remember that you need to identify the right problem. “We play an unequal ball game with poor and rich competitors”. This realization helped Billy Beane to change a whole sport and Nucor an entire industry.
You can do the same thing. You just have to know: What’s your problem?