Football’s example can help companies score
Like many lecturers, I have a library of presentation slides. The most frequently used is 15 years old and relates the performance of English soccer league clubs to their expenditure on players. Both wages and transfer fees over a 25-year period are included. The message is that you get what you pay for. There is a strong relationship between cash spent and average league position.
There were some outliers. Aston Villa never fulfilled its potential. But two performances were much ahead of econometric predictions. Teams managed by Brian Clough had always done better than their objective calibre. Some team leaders make a real difference.
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But the outstanding story was Liverpool. Liverpool and Manchester United had invested more than others. But while the performance of Manchester United was exactly what our equations predicted, Liverpool had done much better. Manchester United had assembled a group of outstanding players. Liverpool had assembled an outstanding team.
The story of the 2006 World Cup is that outstanding teams defeated groups of outstanding players. All players in top sides are very good. The reason the countries in the final four were not the ones pundits expected was that their predictions were based on the quality of individual players. But the trophy goes not to the best players, but to the best team.
My footballing slide is popular mainly because references to football bring back to life audiences battered into somnolence by harangues on transformational change. But the serious purpose of the analysis is to illustrate that business success is not simply a matter of acquiring the best people, technology or resources. Businesses create value by establishing a difference between the cost of their input and the effectiveness of their output. The Italian team was more than the sum of?its?parts,?the?Brazilian?team?was?not.
The difference between output and value added is relevant to every type of business, but especially important for the professional services company
