Variable performance aside, the company behind the team is showing a clean pair of heels to others in the all important financial performance stakes. According to the company, its use of Adaptive Insights for planning and budgeting is key to that success. Recently I chatted with Rob Gagliardi, CFO of the Rays to get his take on progress and insights into what makes for a successful implementation in a complex environment.
Before getting into the meat of this story it’s worth noting that the MLB provides one of the most detailed and rich set of statistics for any sport in the world. That background can make Gagliardi’s life tough but equally rewarding:
50% of our expenses are baseball related, those guys have been the most receptive, but they are mostly the very tech-savvy people anyway. We have some of the sharpest analytical minds over there. They always want more and that’s OK. I really don’t mind them pushing us.
Again as background, the assumption is that MLB teams are multi-billion businesses. Gagliardi explained out that outward appearances mask a different inner reality; one where modern day challenges are no different to much larger organizations.
It’s a billions-of-dollars industry for sure, but we’re all just a small team. You can’t just go out and spend a lot of money on an Oracle or IBM product. Not only that, we don’t have the man-power to maintain that stuff. I held off for a good while while, eeking out what I could from the numerous spreadsheets. But there comes a point where it’s just not possible to meet the needs of the owner and colleagues who expect to see information at the snap of a finger.
On being collegiate
Finally on the background topic, I was surprised to learn just how collegiate the various team managements are. For example, Gagliardi told me that as he was going down his solution selection check list, he spoke with peers in other teams to get an assessment of their outcomes, even if that meant discussing a competitive product.
The Red Sox and the Rays is a huge match for both sides and passions surely run high but behind the scenes off the field I spoke with my counterpart there – they took Host (Analytics) – I guess my thinking about how analytics should work helped convince few of the other teams, too. Not just the capabilities, but that the price is right.
That collegiate environment was confirmed byPeter Woll, vice president of financial planning & analysis, New York Mets.
While our franchises compete on the field, as a finance organization we are aligned across the MLB in terms of best practices to deliver the greatest return for our owners and the MLB at large.
Fast track to success
Back to the implementation. The project started in January 2016 and was largely functional by May the same year. It was assembled by a tiny finance team and, remarkably, was completed while at the same time ‘doing the day job’ and during the playing season. Gagliardi describes the post live situation as one spent customizing Adaptive worksheets that ‘dragged’ the project into August. What about those customizations?
We track our sales based on an individual ticket buyer who just buys for one game, a season ticket holder, a group packaging of people who buy tickets for 20 or more as part of an organization or some other function, and a few different other categories. We’re able to track that information and we budget down to each game in a day of the week.
Why would you do that? It turns out that each part of the business model has different characteristics that can be discretely identified. Aside from the regular season games, that might also include external functions and events during the off season. The Padres stadium for instance has hosted the Rolling Stones, Taylor Swift along with Monster Trucks. These provide additional income streams that ll need planning and reporting upon.
The Rays go a lot further. Take scouting, an important activity that feeds the future playing roster.
Each scout has a lot of nights out of town and associated with that there’s hotel stay, airfare, rental car, meals, and some statutory expenses. We just made up an input sheet that basically said, “Jane Doe is going to be out in California. That’s her region. She’s going to spend 20-days out a month.” In Excel, it was always a nightmare because if you made any changes at all then you had to make sure that everything was all linked up properly. Having a more dynamic sheet, we’re able to just add a person and everything required gets populated and then all the expenses we’d map to the appropriate account.
As our conversation continued I could see how Adaptive has given Gagliardi and his team a good amount of control over the business combined with the ability to manage the cost buckets that span more than 25 departments. I then asked where the project goes from he
It’s one of the things where this is going to be continually evolving. It’s one of those things you didn’t realize when we were doing Excel, what could be done in Adaptive. It was a learning process just seeing what’s possible while working with the Adaptive implementation team. We would share our Excel books. They said, “Yeah. We can do that.” We just peppered them with the things we wanted first, the highest priority and, the hardest ones that we worked were in the Excel world. It’s something we’re already looking to expand our sheets for the 2018 budget.
That’s very much the bread and butter of any planning and budgeting scenario and I wanted to know if there is more that could be done. Gagliardi says that as the business evolves, the Rays want to think about how they can target the ‘customer of one.’ What kinds of spending patterns are involved? What can be done to optimize in real time while customers are at the game? What offers would encourage a fan to spend more and on what things? The answers to those questions don’t necessarily reside in Adaptive but Adaptive can serve as the vehicle through which currently decentralized departments can think about planning for the future. That, in turn, opens up the question of how, strategically, finance steers IT.
I’m going to be talking to others in the MLB how they are tackling this. We’re all building data warehouses and having to pick up new languages like R (for advanced analytics as in Hadoop and MapR) which is OK but it begs the question whether we’d be better centralizing.
Sport’s IT and technology is evolving rapidly and we are seeing many different examples of experimentation designed to optimize the whole of the the business and not just manage large cost buckets. The Rays example is a good proxy for how this is playing out.
I suspect that one of the keys to succeeding is a recognition that there is a difference between MLB the sport and MLB the entertainment business. Understanding that opens the doors for people like Gagliardi to have the types of relationship that both mitigate against project failure while providing the platform for promoting success.
Instead, I have long argued that no business is differentiated by its debits and credits or the pristine state of its balance sheet. Instead, I argue that differentiation comes from having open minded CFOs proactively aligning finance to business needs. The Rays case is an excellent example of that in action.
Our closing discussion about advanced analytics piqued my interest and I would like to revisit this case in a year’s time to understand the progress that’s been made, and hear the lessons learned.
Image credit - via MLB