Sportsfolio Management: What Project Executives Can Learn From the Draft

Rich Hill is one of my favorite Twitter sports follows — @PP_Rich_Hill — though I only now realized I hadn’t been following via @crossderry until recently. He does a great job of melding a fan’s perspective with his analysis. The result is well-reasoned, yet approachable opinions and projections of football drafts, rosters, and of course, game performance. He’s also a Pats fan, so he must be a man of honor and distinction!

I like to use non-traditional examples to illuminate our more mundane dilemmas. Rich’s recent post on the allocation of NFL Draft capital got me thinking. Draft picks are indeed capital. They are assets that can be traded. Also, just like your production line, SAP ERP installation, or facility, the players selected provide capabilities to their organizations over time.

Value — expressed as capabilities over time — drives the worth of the assets or initiatives in a portfolio. And as you can imagine, the trick is to pick the most valuable asset available during your draft turn. How should you approach the problem? Rich breaks it down the essence of the choice:

The question with the draft is asking how a team can best game the talent in order to maximize the value of their draft picks, or draft capital. A simple breakdown is by position, where there are clear premiums for, say, a quarterback versus a punter. Taking the best quarterback in the league in the 1st round is way better value than taking the best punter in the 1st.

And of course, draft position by round, and within rounds, matters as well. You shouldn’t expect a 100th pick to be as valuable as a first pick. So position — both on the field and in the draft — drives relative value. Therefore, to value one’s options for a particular draft pick, one must, as Rich says: “look at a position’s expected value compared to others in the draft.”

He gives a couple of examples in his post — which has some clear graphs — so read the whole thing. Here’s one quick quote about how expected and relative value works. In this example, analysis uncovers interior offensive linemens’ expected value doesn’t decline evenly through the draft rounds.

What this means is that a player selected in the top 40 would have an expected value of an All Pro caliber player. Players selected 40th-90th have an expected value of a top tier starter. By the shape of the graph, interior offensive linemen selected from 90th through the end of the draft all have roughly the same expected value, that of a rotational depth player.

So if the Patriots are interested in an All Pro guard, they would likely have to use their first round pick to increase their odds. But if they would be fine with a top level guard, they could use their third round picks in the 90s to receive roughly the same expectation as if they took the player 50th overall.

This “lumpiness” allows for differentiated draft tactics. And differentiation is the heart of breakthrough strategy.

But this is just the foundation: choosing among alternatives of the same type of capability. We portfolio and initiative leaders must, of course, select alternatives across capability types. In my next post, I’ll leverage more of Rich’s work to illustrate how to approach that problem.

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