Tuesday, February 10, 2004

PART II: The Oakland A's & DePodesta
Know Success = Enemy of Adaptation  

In my previous entry on the Paul DePodesta presentation to non-baseball managers on change management, I rang up a couple of his lessons. This post continues that series, and it is not the last.

If you haven't read the first and don't want to, here's some table setting:

Paul DePodesta, the Assistant GM of the Oakland Athletics featured (not extensively enough) in Michael Lewis' Moneyball, is one of the most interesting of the new statheads in baseball front offices. What separates him from the others is not that his stats are better or deeper, it's that he understands the key, final, most-difficult-to-master concept in the Management By Baseball model: Change.

He understands that to successfully manage and push change, you have to change he changes you deploy, even as you're concurrently fighting to install them in the first place.

DePodesta started in the Indians' front-office, which had been very innovative in pairing two old models with one new one to create a significant, recogizable advantage for the team. One old model was to invest in scouting and developing good players internally; the new one was to sign them to long contracts earlier in their careers, before their market value moved up very significantly, and before you really apparently needed to lock them in. The other old model was to use your excess young talent (signed or otherwise) as trade value to pick up pieces you hadn't successfully developed yourself (because no organization consistently produces the exact balance of positions and aptitudes it needs).

Until John Hart & the front-office team around him put this into play, the Tribe had had a long period of relative futility. In 1954 (111-43) and 1955 (93-61), they were extremely competitive. And then the rains came...through 1994, they hadn't won 90 games again, a 30+ year stretch of sogginess in which even a giant rat chasing Max Alvis around the home stadium wouldn't provide significant amusement.

But 1995 started a seven season stretch in which the Indigenous Americans whupped up on their division, took six div. flags and went to the World Series twice.

And this doomed them.


Winning is the enemy of adaptation. As DePodesta said in the presentation:

I was grappling with a significant issue: the Indians were very successful at this time. We kept winning the division year after year, selling out every game in our stadium and the owner took the team public at one point and was making more money than any other owner. Thomas Kuhn wrote in The Structure of Scientific Revolutions, “As in manufacture so in science—retooling is an extravagance to be reserved for the occasion that demands it.” There was no crisis in Cleveland, at least not on the surface.

How was I supposed to innovate a supposedly smooth running machine? There was, however, a crisis underlying our success. Our lofty expectations had stifled our innovative spirit. Everything we had done to be successful, we stopped doing. We were hanging on instead of trying to move forward. We signed veteran, big name players who everybody knew. Our team got a lot more expensive and started growing older. Though I was seeing all this, I didn't have much of an audience in Cleveland.

The ability to plan and push ahead change is great, and unusual. Angus' Law, the rule of 85-10-5, is that 85% of organizations cannot adapt intentionally and successfully, 10% can do it once, and only 5% can change their changes effectively.

The Indians, DePodesta thought, were in the 10%; having successfully made a change, surfing the crest of the new wave, they felt like they had this management strategy thing licked. Eventually, it's almost inevitable that nature will start changing the probabilities to invent an ebola virus to keep you from getting too cocky, venture guys will stop having quality investments to make but be awash in so much cash provided to them by impatient rich people wanting to get richer, competitors will decode your elegant system for exploiting edges.

DePodesta understand that it's not just about change, it's about changing your change, moving on, starting the process of examination and development of new changes even while you are deploying today's innovations, innovations that external change are undermining with every tick of the clock. As he said in his presentation

So is our current operating system 1.0 the answer? Probably not. We still have a lot of questions and solutions that are over the horizon that we haven't gotten to. Fortunately for us, the bulk of the baseball world is still working on upgrades to Subjective 1.0 rather than what we're doing or even finding a completely different system. Being innovative doesn't mean searching for upgrades over inefficient systems. It means searching for entirely new ways of doing things. We don't spend a lot of energy tweaking current systems that are inefficient.


Every organization struggles with this, and the bigger it is, the more the Diseconomies of Scale undermine its abilities to forge ahead and adapt.

People who are seen to be great innovators, DeLorean, Jack Welch, Bill Gates, Rommel, J.C. Penney, Arthur Morgan, Horace Mann, Click & Watson, people like that usually have one great innovation in them. They might milk it for a while by using sheer force of personal or organizational power to batter or better their competition, but the environment, by changing persistently in unpredictable ways, eventually moves the bull's eye to a place their mastery of hitting a specific spot is no longer productive. These folk are a dime a dozen compared to the handful of people who innovate innovation, as it appears DePodesta is trying to do.

Have you been in an organization that made changes as significant and successful as the Cleveland Indians did? When did they start re-tooling a little? When did they start their next big make-over?

In the next entry we'll take a look at a DePodesta's technique for finding out what needs changing, something you can apply in your own organization.

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