Intro to Strategy

3/28/16  

Michael Moore

Strategy Department

Kellogg School of Management

Northwestern University

STRTM 431: Business Strategy

Session 1A: “What is Strategy”

Remember to turn off, stow, or

otherwise disable all electronics

What is Strategy?

Agenda

1.  A strategy vignette

2.  Course objectives and policies

3.  Internal economics & strategy: The Value

Creation and Capture Framework

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!

Who is this guy?

“Moneyball” as Strategy

How to build a baseball team:

Assets and activities of major league baseball

teams

•  Old School: The Scouting System - Scouts

searching for talent

• 

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Where? “The Bush Leagues.” Amateurs (high

school/college, Latin America, minor leagues)

“Beating the bushes”

•  Every scout’s dream: a “5-tool” player. Hit, hit for

power, run, catch, throw

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The Old System Worked (for the owners)

•  Baseball as an industry

•  Teams were (for the most part) profitable

•  Players couldn’t change teams, hence had no market

power. Salaries low.

•  The “National Pastime” was alive and well…

•  Football, basketball not well-developed at professional

level

The importance of context: two rules that helped the

owners

•  Antitrust Exemption

•  The Reserve Clause

The ‘70s: Game Changers I

•  Television & advertising – Money pouring in

•  Free agency (Curt Flood, Andy Messersmith)

•  Market power (and value) transferred to

players

•  What happened?

•  Players began to capture a lot of the value created

•  Sandy Koufax, arguably the greatest pitcher of

his era, had to hold out for $100,000/year in

1964.

•  Alex Rodriguez – The $20M man?

•  Only teams with lots of TV money (e.g., Yankees,

Dodgers) could buy up all the talent.

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A Strategic Problem

If you’re a poor, small market team, how do you

compete?

The Bill James Baseball Abstract:

Game Changers II

•  Data Analytics make it to The Show:

Sabermetrics

•  What metrics are most predictive of winning?

•  What metrics do teams look at?

•  Are they missing...