How to Moneyball Your Market Like Billy Beane as a Dealer
All of us have been guilty in overvaluing certain pieces of information or assuming something that worked before will also work now. Limited experience & lack of context are the simplest reasons why. The only thing worse is making decisions perceived by legacy thought. Those old guard beliefs become the prequel for non-improvement. Unfortunately, industry specific experience & knowledge in some respects become a liability. Unless you are lucky enough to be forced into changing the rules. True growth for individuals, organizations, or industries rarely happen within comfortable circumstances.
“If we play like the Yankees here, (scouting) we will lose to the Yankees out there.”
- Billy Beane, Oakland A’s General manager
In the late 90’s and early 2000’s the A’s had built a strong team with All-Star caliber players. The majority of them were all lost in the free-agent market leading up to the 2002 season. Billy knew this cycle was doomed to repeat itself and simply trying to replace these talents in the draft, trade, and free-markets was not tenable. He had to reinvent the rules.
Instead of focusing on replacing the players, they narrowed in on what statistical correlations they should focus on and could afford. The A’s needed hits and runs to win games. They crunched years & years worth of data to figure out how many runs they needed to score and identified which correlation of statistics were most critical. They quickly discovered the stats most important to them were undervalued: on-base percentage. This imbalance, which the A’s fully leveraged, allowed the team whose payroll ranked 28th of 30 teams to make the playoffs and set an American League record for consecutive games won (20).
Far too often industries become centered around a common way of thinking & doing. These central themes are so strong that entities willfully disregard the opportunities right in front of them. They know peril is around the corner and instead of doing something dramatic to change the situation they choose to die in the slowest way they can understand. If the A’s kept doing things the old way they would have lost and no soul would have thought twice about their poor results. It's about investigating simple contrarian ideas that allow opportunities to be exposed & using technology to explore what is imaginable.
Over the next 3-5 years 40M-42M used cars will be sold annually with little YOY growth. In that same time, unprecedented concepts and events will occur in the space. And no, I'm not insinuating economic collapse, global war, acts of god, or autonomous driving. These new rules will lead to the 40m+ used cars being sold by fewer dealers every year. No one can tell you with certainty what those events will be. With that being said, I am certain that if you are not one of the few dozen “Yankee” dealership groups, using a strategy that worked for you in the past guarantees a Yankee victory now and ensures you are no longer in the league soon after. If it were easy to “Moneyball” the automotive industry everyone would do it. Simply put, it takes a GM willing to take risks, a heavy emphasis on analytical decision making, and commitment to the process to become the Oakland A’s of automotive.
Drivably provides dealers with the data they need to identify trends like “on base percentage” so they can “Moneyball” their market. Rather than trusting your gut with which cars make the most sense for your bullpen, trust the analytics to get you the wins you deserve. If you want to start applying the Billy Beane methodology at your dealership grab some time on my calendar here: https://meetings.hubspot.com/andrew403.