Moneyball in the NHL
When I say “analytics” chances are you don’t think of baseball, but you should.
Major League Baseball has to lead the way for professional sports to use heavy analytics to build successful and profitable teams and they’ve been doing it for decades. The success of Sabermetrics (a term used to describe analytics in baseball) was popularized by the 2011 Oscar-nominated movie starring Brad Pitt and Jonah Hill, depicting Billy Beane, the manager of the Oakland Athletics, who used “On Base Percentage” as a way of recruiting cheaper players while increasing wins.
Although it was made famous fairly recently, Sabermetrics has been around since the early 70’s. Oakland wasn’t even the first team to use it, but they were the most successful. Their success caught the attention of every other major professional sports team. Signaling that those numbers and spreadsheets may be the key to money and wins.
This brings us to the most overlooked professional sports league in the US (except probably soccer), the National Hockey League. Professional hockey is actually the 6th most popular sport in the United States (according to a Harris Interactive poll) behind College Football, Auto Racing and Professional Basketball.
Despite its stagnant popularity, analytics in the NHL has been heating up in the past few years. Since the New Jersey Devils hired Sunny Mehta in 2014, a professional gambler and statistician, the NHL has been experimenting with their own “Moneyball”.
So how’s it going?
Not very well actually.
To understand why, let’s jump back to baseball for a second. The basis of Beane’s success was using an identified driving metric that, if increased, would lead to wins. That metric was “On Base Percentage” or the average rate at which a player goes from batting to on base. This is a collection of hits and walks, basically anything that gets you from the batter’s box to first base.
Easy enough to track and also pretty easy to recruit for. There were a few more intricacies with the application of an OBP first mentality, including a less valued but still important focus on Slugging Percentage, but I’ll leave that to the movie to explain.
Here in lies a major problem for hockey, there is no clearly defined driving metric. A few contenders have been Corsi, puck touches, and puck possession, but unlike baseball, finding talented players with high statistics for these isn’t always easy or cheap.
How much do they get paid?
Baseball has a large pay gap between leagues. From the MLB to the highest level of minor league baseball (AAA) it’s a shocking difference. The minimum pay at the AAA level is $2150 per month, and that only covers 6 months out of the year (according to Baseball America). So there’s a ton of talented players who would be willing to work for much less than their pro counterparts and can probably do a pretty good job. This doesn’t exist in hockey, or at least not in such a dramatic fashion. With leagues like the KHL, players who don’t work in the NHL still have a chance to make a decent living (much like soccer where leagues are plentiful). So there’s a personnel issue, not to mention the fact that scoring in hockey can be much more complicated in baseball and the driving metrics we talked about don’t seem to work very well in the limited experiments we’ve seen in hockey.
To summarize the issues with Moneyball in the NHL, there’s not a clearly defined driving metric, there’s a much smaller pool of available talent, and an aggressive salary floor to increase the minimum wage of professional hockey players and basically eliminate the incentive to get cheap players out of the farm leagues.
Bring it home
So that was interesting, but how does it relate to businesses? Specifically for business advisors, there are two main lessons to be learned here:
Identify a niche
First, you need to identify a niche. Just like hockey is different from baseball, a law firm is different from a coffee shop. Using the same thinking and metrics to track both can be pretty silly, the same way On Base Percentage doesn’t apply to hockey. And it’s almost impossible to be an expert in both sports, rather pick one that you love and learn all that you can about it.
Keep it contextual
It’s easy to look at a company and lose track of the environment in which it operates. Nothing exists in a vacuum and context is everything. Businesses always have competitors for customers, employees, and resources. Companies are subject to government regulations, taxes, and environmental changes. Understanding the world in which companies operate at a global as well as industry and community level is the difference between an okay advisor and an irreplaceable advisor, a linchpin for your clients.