An Open Letter to Stuart Sternberg
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An Open Letter to Stuart Sternberg, Majority Owner, Tampa Bay Devil Rays and Devil Rays Fans: Why There Is Hope
From Mike Pagliarulo and Adam White of www.BaseLineReport.com
Stuart,
As we write this letter to you, your Devil Rays are 24 games back from the Red Sox. The year has long been over for your team, and most baseball experts feel you never have a chance, not this year, not ever. Not with the Yankees and Red Sox financially steamrolling your organization. And especially not if the Baltimore Orioles manage to get their act together, which they likely will with the hiring of Andy MacPhail, and you have to compete against three financial superpowers.
But we at BaseLine Report think you have an opportunity. Here’s how:
To summarize Newton’s Third Law, for every force, there is an equal and opposite reaction force. This lesson from the world of physics is applicable to the world of business, including professional baseball, though with a twist. Let’s call this BaseLine Report’s Third Law:
For every baseball force (budgetary resources, organizational talents, tradition, rules changes, etc.) there is an opposite, albeit inequal, reactionary baseball force; such opposite force can be proactively utilized by those teams not enjoying the benefits of the original force.
So what the heck are we talking about? Let’s compare the Yankees and your Devil Rays. The Yankees spend far more ($200M+ budget vs. $25M) are worth far more than your team, and have a far larger market potential than you will ever have. Though this obviously provides the Yankees with a huge advantage to acquire higher priced (and theoretically better) players, the budgetary discrepancy also offers advantages to the Devil Rays, namely:
You can take chances! Let’s assume the Yankees are worth $1 billion and your Devil Rays are worth $150 million. The Devil Rays can afford to take more chances because the Yankees have more to lose.
A parallel in the business world you’re so familiar with is how large, established companies generally don’t innovate internally, but tend to acquire companies to help them grow. Time Warner (SI) spent $25M to buy www.FanNation.com, when they could have built the same site themselves for $500K. But they didn’t do it internally because of the risk (lawsuits, damaged brand, opportunity cost, etc.) a failed initiative posed to Time Warner’s overall worth. Time Warner in essence paid $24.5M to outsource risk.
The Devil Rays can innovate internally without paying an equivalent risk-outsourcing tariff because they don’t have the overall worth. You should act as if you are www.FanNation.com, whereas the Yankees are Time Warner. Take chances! Take chances other teams can’t and won’t take! Implement planned and controlled recklessness. It is the only thing you have that can worry other teams.
What are those chances, you might ask? It is up to you to understand your organization and identify were opportunities lie, but, as outsiders, we’d like to suggest a few:
1. Gut your baseball organization structure. Identify your core competencies and build a new structure around those. With a smaller budget, you can’t be good at everything, or even many things. So focus on a few things. Keep the organization flat, meaning there are few, if any, layers of middle management. The Yankees wouldn’t do this, because it would be too risky. They’re about asset protection.
2. Create core competencies. Okay, this is a step back from #1, but you don’t really have any core competencies. You’ve proven to be above average in acquiring (but not developing) talented minor leaguers, but that’s about it. So pick some areas you want to excel in, that would give you advantages relative to your competition. Here is what we propose in order:
2.a. Be the best at teaching and developing young pitchers. Hire the best pitching coaches from rookie ball to the majors. Hire pitching coach assistants and give them the resources they need to do the job.
2.b. Sign career minor league catchers, shortstops and centerfields who have proven themselves as good minor league players, good teachers and good role models, and assign them to the minor league teams. Pat Borders catching rookie ball pitchers, Jimy Williams teaching infield defense to AA players.
2.c. Stress defense in the minors. Hire dedicated defensive position coaches. Practice defense every day before hitting.
2.d. Make 80% of your draft picks pitchers for the next five years. You’ve created the structure for them to grow and develop in the above steps, now get them in your organization.
2.e. As the pitchers advance, identify trade prospects and core prospects. Use the trade prospects to acquire position players at the AA and major league level.
So what does this core competency get you? Decreased cost of operations, because you need fewer resources allocated to non-pitching needs (coaching, scouting, etc.). Increased return on investment in pitching because with heightened focus you should have improved results and because you’re creating assets that are in high demand. Overall it’s a greatly increased ROI on your minor league expenditures.
3. Develop processes to develop and protect your competitive advantages. Training, player evaluating, coach evaluating, training evaluating, drafting, trading, player projecting are all key processes that must be formally documented, analyzed, evaluated and corrected as needed. Hire a Quality
Assurance Manager to ensure the established processes are appropriate for your goals and that the processes are being followed. Then create and implement a corrective action strategy so that lessons are learned and processes are continually improved upon.
4. On the business side, teach to innovate! As a cash-poor organization, you’ll never be able to consistently fill executive and talent positions with high-priced talent. You need to develop it and be prepared to replace it when the talent walks away. Create the best intern program in baseball. Pay the money to hire a couple of the best baseball executives to be management coaches/mentors, and let them create a pool of young talent with bright minds and new ideas. Let this young talent continually innovate for you.
5. Prepare for a change of course. Hire and train managers on the business side who are flexible and can change course both for themselves and the organization as a whole on short notice. If the environment changes or the competition changes, they need to be able to efficiently scrap the plans outlined here or any other plans ahead of the competition. You need to be able to adapt before the big boys.
In summary, you have hope. You just need to take chances and be an innovation leader.
Regards,
BaseLine Report
www.BaseLineReport.com
