How to Think Strategically. Greg Githens
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regular season games than any other team (except the Atlanta Braves) and reached the playoffs several years in a row. They did this with the lowest payroll in the industry.
The strategic-thinking narrative for Billy Beane and the Oakland A’s organization reveals several lessons for good strategy, which are applicable to many other situations and organizations. Here are seven:
• They recognized the reality of their situation. Their rivals had comparatively immense resources. If the Oakland A’s used conventional thinking, they would have little chance of being successful. A line from the movie captures the requirement for unconventional (strategic) thinking, “If we think like the Yankees in here [referring to a competitor and the criteria for drafting players], we will lose to the Yankees out there [on the playing field].”
• They found and applied insights. Building off the hypothesis that the marketplace for baseball talent is inefficient, Oakland expanded the use of sabermetrics, the empirical analysis of in-game activity in baseball. Sabermetrics originated with a group of hobbyists who played fantasy baseball (also called Rotisserie leagues). The owners of these fantasy teams would compose teams based on actual players, and then compete based on the real players’ actual performance on the field. Sabermetrics, with 20 years of publications, was not a secret weapon. Any of Oakland’s rivals could have exploited it.
This outside-the-mainstream innovation provided specific, actionable insights that allowed Oakland to construct a new competitive logic.
• They developed a new set of dominating ideas. Some ideas are more important than others, and a new strategy is a configuration of elements. For Oakland, the dominating ideas included these: nontraditional statistics could model a player’s performance, the average player usually performed to his statistical average, the market for talent was inefficient in that rivals were willing to overspend for performance, and shrewd negotiation could acquire undervalued talent.
The logic of baseball offense is straightforward: the presence of a runner on base increases the likelihood of scoring runs, and the more runs scored, the more games won. Oakland’s strategic logic emphasized getting the maximum offensive productivity possible for the minimum payroll dollar. Their premise was that getting runners on base was the key to winning games. In their model for the 2002 season, they estimated that scoring 800 to 820 runs would allow them to win between 93 and 97 games. To achieve this offensive productivity, they emphasized finding and coaching players to get on base and score runs. The most straightforward means to this strategy was to find players with high on-base percentages, subject to a design constraint of payroll affordability.
A new strategy has a new dominating idea that organizes its logic.
The dominating ideas of the Moneyball strategy stand in contrast to the traditional approaches: scouts assess the talent, managers organize the players on the roster, a player’s salary reflects his productivity.
The emergence of new dominating ideas implies that any given strategy may have a short shelf-life. Conditions change, causing misfit, and internal capabilities develop to yield new advantages.
• They decided what they were going to do and, importantly, not do. Oakland decided that they were not going to contract highly-paid superstar players and would instead apply their limited payroll to undervalued hitters. A strategy’s power comes from coherent design: it’s the focus on certain leverage points and the willingness to stop doing traditional activities that don’t support the new strategy. A good strategy is a systematic, orchestrated, coherent effort by the entire organization.
• They used data to suppress cognitive bias. The prevailing system in Major League Baseball placed much power in the ability of professional scouts to judge the potential of a prospective player. Most scouts worked intuitively, many of them holding to the illusion that physical appearance is predictive of the player’s ability. Oakland’s strategy included a belief that empiricism was a better predictor of performance than subjective intuition.
• They placed smart bets. A good strategy is a bet or a series of bets. Some bets may pay off, and some may not.
Each of Oakland’s unconventional trades was a bet, testing the idea that a team could measure productivity as a function of payroll expense and configure a productive offense at minimum cost. Many of those resource-configuration bets were failures, but some paid off spectacularly.
The Moneyball strategy itself was a bet that a new dominating idea could prevail. Over time, and with continuous experimentation, Oakland improved its understanding of performance and gained an advantage.
• The strategy was novel. The Moneyball strategy did not emerge from writing statements of mission, vision, and values. The strategy didn’t originate with facilitated organizational retreats, budgeting, and SWOT‡ brainstorming or other so-called best practices of strategic planning.
One lesson of this strategic-thinking narrative is the unique perspective of an individual. Billy Beane was not from an elite educational background (he skipped college to accept a professional baseball contract). His success came from sound principles: he confronted the reality of his situation, he was curious and opportunistic, he developed a unique commonsense, he looked outside of conventions for new ideas, and he leveraged his resources and his know-how.
The Moneyball story is well known. Many writers commonly use it as an example of the potential of technology: big data, data mining, and analytics. The strategic-thinking narrative is an alternative theme, which is that a good strategy’s roots are with individuals who perceive the situation more accurately than others. Good strategy has its origins in the fairly prosaic activities of scanning the environment, noticing curiosities, analyzing with a skeptical eye, deliberating with others on the situation, and designing a path forward. However, it’s also a matter of luck and placing yourself where you can benefit from the emergence of opportunity.
Good strategic thinkers are skeptical of conventional management wisdom, borrow external ideas and innovations, and construct new strategic logics. I regularly hear people who exalt the idea of leadership vision, and cite as examples the genius of Steve Jobs and more contemporary business leaders such as Mary Barra, Elon Musk, and Jeff Bezos. There’s much to admire about these people, but they’re not freaks of nature. They’re not seers who predict the future, nor are they wizards who magically create it. A more accurate story is that they’re reasonably intelligent people who are open to novel ideas, are opportunistic, and focus on the essential actions needed for future success.
The worlds of strategy and leadership have many tropes,§ and it’s important to be skeptical of them. Conventional thinkers prefer neat, compact stories. They like to attribute outcomes to a person’s character or as a supernatural gift of vision. The hard work of analysis and reframing are much better explanations for the sources of good strategic thinking.
You’ll see other examples of strategic thinkers in this book, and I encourage you to search for them in movies, books, and your own life. An individual who holds a nuanced understanding of the situation and is willing to make tough choices about focus is more likely to craft good strategy.
How to Construct a Strategic-Thinking Narrative
The strategic-thinking narrative is a useful tool for understanding the creation of strategy as a competent response to a situation. The idea is straightforward. First, find a real-world example of organizational success or failure. Questions like this can help you identify the main elements:
• Who are the main and supporting characters?
• What is the context for the story?
• What is the core challenge they face?
• What are the tensions?
• What insights did the characters acquire?
• What decisions did they make?
• How did they experiment and adapt?
You can discover a narrative of strategy in every story of success or of