As the wife of a baseball expert (and co-author with Michael of Beisbol) I known for years about Bill James, Sabermetrics and Michael Lewis’ book, Moneyball, that inspired the new movie starring Brad Pitt. So I was more than happy to head out on the opening weekend to see the movie.

What I didn’t expect was how much it felt to me like a parable about intangibles and innovation.

Here’s the Moneyball story: Baseball lends itself really well to statistical analysis because every move can be and is counted. If you’ve ever been to a baseball game, you’ve probably seen a fan in the stands keeping track of the progress of the game: each batter’s strikes, balls and hits. For a hit, there is an accounting of the fielding of the ball and the advancement of the runners.

These statistics have always been available through annual compilations and huge baseball encyclopedias. Fans of the game have pored over these stats for more than a hundred years.

What Bill James did was to take a look at all of these statistics and draw some revolutionary conclusions about what was important to the success of a team (such as on base percentage and runs created) In an interview in BusinessWeek about the movie, James said:

“My work is trying to figure out how to quantify something that has previously been regarded as intangible. It’s not to say that there aren’t true intangibles. People think that you start with the statistics, which was never true. You start with a question and you end up with a statistic.”

The movie shows how these statistics were resisted by those working in baseball organizations. There is a great scene where the protagonist, Billy Beane, manager of the Oakland A’s asks his scouts how the team can fill the holes left by some great players that had been lured away to higher budget teams. The A’s had (and still have) a budget that is a tiny fraction of teams like the NY Yankees.

The scouts offer wisdom such as a player not being worthwhile because he has an ugly girlfriend (and therefore, the scout supposes, low self esteem). Beane doesn’t buy it and keeps saying we can’t think like everyone else or with the money imbalance, we’ll lose. If ever there were a manager screaming for innovation, it was Beane. (And, by the way, the best innovations often comes from the tightest constraints)

Billy calls on the geeky analyst he has just hired, a Yale graduate with a PC and a lot of statistics about what really drove a team’s ability to win baseball games. Using his statistics, the analyst identified a number of players with low price tags who were overlooked and undervalued for one reason or another.

They put together a team that almost made it to the playoffs. On the basis of his incredible season, Beane was offered a job with the Red Sox, which he didn’t take. But the Sox did hire Bill James and others who helped guide the eventual victories in the World Series. (Here’s a good coda to the Beane story)

Here's the intangibles story: The word intangibles was used a number of times in the movie. (In fact, I stopped following the word “intangibles” on line a long time ago because over half of the references were to sports reporting.)

But here’s the thing: in sports as well as in business, “intangibles” tends to be a cop out.

And a dangerous one at that. If you believe that intangibles are behind success, then you are accepting that there is some magic to how things work.

If you believe that intangibles are behind success, then leaders are putting themselves in a special class as interpreters of this magic.

If you believe that intangibles are behind success, then your performance can’t be measured.

Those of us that are IC practitioners care to differ with this view of the world.

We believe that the “intangibles” are very real and understandable and measurable. Is there magic and luck in business and in life? Absolutely. But we are all doing ourselves a disservice if we attribute anything associated with intangibles to luck and magic.

The intangibles that drive business success today are knowledge assets. They are the competencies of your people, the shared knowledge with your partners and the knowledge that gets captured and put to work inside your organization. The shift to the knowledge era has shifted the importance of intangibles from a supporting to a leading role in your business.

Billy Beane was a catalyst to change the way baseball teams are managed. He did it by refusing to accept intangibles as a dark art but, rather, to push and probe to gain deeper insight into what was really happening.

Make intangibles real in your own organization. Change the way your business is managed. You may just end up changing much more than that.

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Comment by Mary Adams on October 13, 2011 at 9:23am

Abhijit-

Yes, we all know intangibles when we see them. And it's ultimately this overall impression drives the success of a persona or an organization. This is why in Intangible Capital, we call reputation "the new bottom line." The fact that I made a financial profit last year doesn't determine whether I am going to make money next year. It's my reputation that gives me that ability, if you will, the right to make profits. 

 

There is value in just knowing what people think of you. In fact, it tells you a whole lot. But as businesspeople we can't afford to just sit and hope people will like what we do. We have to find ways to create organizations that can deliver on a promise day after day.

 

To me, that's the value of what we as IC Practitioners do. We help people understand the mosaic of knowledge assets that together make up the whole of the organization's impact (and consequently its reputation). To understand this, to be able to measure it, manage it, monetize it and innovate are the key management challenges of business today. 

 

Many others look at a company and say that they don't need to understand the intangibles as long as they are making money. I differ with this view because it is so short term and leaves too much to chance. The actors you mentioned, sports stars and Steve Jobs all work hard to achieve their stardom. They manage their work and their image very carefully. Businesses should do the same. 

Comment by Abhijit Talukdar on October 7, 2011 at 1:29pm

Hi Mary,

Let me commend you for highlighting the importance of intangibles in the world of baseball. I have made a note to myself to watch 'Moneyball' as soon as I can!

Meanwhile, your article stirred up a thought that has been in the back of my head for a while - the importance of intangibles in the world of sports and performing arts. Unlike events in the business world, sports and performing arts (dance, orchestra, plays, concerts, tv soaps, movies, standups, etc) are played out right in front of our eyes day in and day out, whether inside an auditorium, in the open, in a stadium on TV or a cinema screen. In all of this, we intuitively recognize and value the talent on display by the performers and very quickly single out the less talented. How do we do this? How do we manage to recognize such talent universally? For instance, why is it the case that Michael Jackson is recognized as a phenomenon the world over? Or why is it the case that some actors such as Clint Eastwood, Robert De Nero, John Travolta, Al Pacino, etc, become megastars whereas the vast majority of the remaining actors are relegated to oblivion? Obviously, there are some 'intangibles' about these performers that endear us towards them. Universally. We just do not bother to quantify these factors as long as we are in agreement about them. However, whenever we disagree, we do tend to apply our mind and start noting reasons why one performer is better than the other. Don't we? It is a natural reaction to a basic instinct - to recognize and value talent.

It is just easy to do because sports and performing arts are played out in front of our eyes in real time. In the case of business events however, we are left with applying our minds post-facto. That is where the charm is lost. For instance, you could not have missed the universal outpouring of grief over the sad demise of Steve Jobs yesterday - he was acknowledged as a great innovator and some even compared his achievements to Thomas Edison and Henry Ford. Perhaps true. But why did we have to wait until his demise to acknowledge his achievements? What were his 'intangibles' that so endear him to us today? Couldn't we have acknowledged those with the same intensity while he was still alive? Certainly, his achievements were as important then as they are now.

But no we didn't. And that is the reality. In this sense, IC practitioners are trying to swim against the tide. We are trying to capture and highlight the intangibles that drive great businesses. Perhaps, it would be more rewarding for us to shift out focus to sports and performing arts instead!

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