Friday, August 15, 2003

CHANGE: Anaximander, the World Champion Angels & Peter Drucker  

The only thing constant in the universe is Change; It is constant only in that Change changes unpredictably -- paraphrasing Anaximander

Change is the greatest challenge to managers. Fewer than 5% master change, yet mastery of change is the total "E-ticket" for making a difference.

Managers can win, briefly, without embracing change, either because (a) they were lucky, (b) mastered some small details that the environment was rewarding at the moment, or (b) because they rapidly acted on good observation before the system could change out from under them. Rob Neyer's article "Angels' rise was surprise, but downfall is not" is, I think, describes an example of (a) and (b).

Here are the key points of his piece (go read it...I've vivisected his piece for brevity):

In 2002, the Anaheim Angels won 99 games during the regular season, and then they won the first World Series in their 43-season history.
In 2003, the Angels are 56-64 and in moderate danger of finishing last.
A year ago, the Anaheim Angels scored 851 runs, fourth in the league (and only eight runs behind the Red Sox, who were second). They did that, mostly, with a .282 team batting average that was five points better than anybody else. The Angels were 11th in walks and 10th in home runs.
At some point or points, I wrote that the Angels wouldn't repeat their scoring success in 2003 unless they drew more walks and hit more home runs, because an offense built upon batting average is a house of cards.
Well, the Angels are making me (and Joe Sheehan, who made exactly the same point, in more and better detail) look like a genius. They're 11th in walks (again), seventh in home runs (just barely) ... and 11th in runs scored. Why? Because while they're not drawing more walks or hitting more homers, they've dropped from No. 1 in batting average to No. 10.
The biggest differences?
Last year, David Eckstein batted .293; this year he's batting .255.
Last year, Adam Kennedy batted .312; this year he's batting .268.
Last year, Scott Spiezio batted .285; this year he's batting .256.
Last year, Darin Erstad batted .283; this year he's batting .252.
Last year, Benji Gil batted .285; this year he's batting .192.
Should we have known that each of these players would do what they've done? No, not exactly. But each of them did play better last season than we might have expected, so we might have predicted that each of them would decline somewhat this season.
Should we lay any of the blame at the feet of general manager Bill Stoneman?
Sure. If the Angels were winning, we'd give him some of the credit. They're losing, so he deserves some of the blame.
One of these days, I'm going to compose Rob Neyer's Laws of Baseball. One of them is, "There's no such thing as a pitching prospect." (I didn't invent that one, but I'm going to co-opt it.) And another is, "You should never think you're good enough."
Bill Stoneman thought the Angels were good enough. When I talked to him last March, Stoneman expressed regret that he didn't have exactly the same 25 players that won the World Series last October.
His exact words? "I wish we were more the same."

And because of individuals' variability and an ever-changing rate and direction of change, in baseball, as in any organization that operates in a dynamic environment, stasis guarantees slow death. I'm not an advocate of the grow-or-die cult; there are as many environments that reward focused smallness as reward lumbering behemoths, and organizations should change size and departmental ratios in response to changing markets if they want to optimize productivity. And if the organization is perfectly, absolutely tuned to the immediate environment (like insurance companies who optimised on the Clinton Years' high stock-market returns to subsidize policies and undersell the competition) it will struggle to survive, even with billions of dollars of cash flow and book value.

Peter Drucker, in a consult to a tool company, was told by their executives that the firm's drill bits were improving in quality and declining in price and yet their sales were going down consistently. After exploring the drill bit marketplace, Drucker says, he came back to the company and told them "Customers don't buy 1/4 inch drill-bits, they buy 1/4 inch holes", his zen saying that meant the company was so focused on the repetitive mechanics and tactics of what it was doing so well, it forgot what business they were in. As times change, the environment changes, and if you define your business as sub-components, even great sub-components, the environment will slowly move away from your business.

Stoneman fell in love with his great players (components) that brought the Angels their 1st-ever World Series victory, and forgot his business was fraught w/change. Stoneman's quote is the perfect mantra for a slow (in this case, fast) dissolution. Managers' change decisions have mechanical components and require some forecasting and more than anything else require not overoptimizing...creating a Soviet Five-Year Plan and expecting the 5th year targets to be as accurate as the 1st or 2nd years'. You allow slack for inaccuracies, and you set up mid-course corrections.

I know most of the insurance companies that used investment income to subsidize policy prices either didn't have a contingency plan in place or had one but didn't have the organizational courage to keep them from belly-flopping into the pits of financial torment. They forgot what business they were in (the insurance business) and drifted into the "making money off float" business, like really-big-time check kiters.

So scary, so avoidable, so frelling typical.

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