From the baseball diamond to the boardroom

Sears, Kmart parent adds 'Moneyball' stat man Paul DePodesta to its board

The Harvard University economics grad who upended centuries of baseball thinking, bringing his computer and fresh statistical formulas into the Oakland A's war room, is going to help Sears find out if it has game.

Translating Major League Baseball "moneyball" lessons into major-league retail victories can't be any harder than turning a catcher into a first baseman, right?

Paul DePodesta, one of the heroes of Michael Lewis' "Moneyball: The Art of Winning an Unfair Game," a great 2003 baseball book (and later a movie) about the 2002 A's that's more about business and epistemology than baseball, has been named to the board of Hoffman Estates-based Sears Holdings Corp.

To be sure, he's an unconventional choice for the parent of Sears and Kmart. But Chairman Edward Lampert is thinking outside the box score, welcoming the New York Mets' vice president of player development and amateur scouting into his clubhouse.

Underdogs bark the same in any field. And by now it should be obvious to everyone that the long-awaited revival of Sears, if it's going to happen, will require new ways of managing a very old game.

"What Paul DePodesta … did to bring analytics into the world of baseball is absolutely parallel to what needs to happen — and is happening — in retail," said Greg Girard, program director of merchandising strategies and retail analytics for Framingham, Mass.-based IDC Retail Insights.

"It's a big cultural change, but that's something a board member can effect," Girard said. "And he's got street cred to take it down to the line of business guys who need to change, who need to bring analytics and analysis into retail decisions."

DePodesta, a star in certain circles, is hardly a household name, largely because he didn't lend his name to the 2011 film version of "Moneyball." Aaron Sorkin's screenplay fictionalized the athletic DePodesta in the guise of Peter Brand, a deadpan, clear-eyed lump of genius played to an Oscar-nominated fare-thee-well by Jonah Hill.

Channeling deep data through a transformative prism, valuing on-base percentage above traditional benchmarks such as home runs and batting average, Brand's data provided the ammo Brad Pitt's Billy Beane needed as Oakland's general manager to blow up the A's, remaking them into a worthy rival of the New York Yankees. This, despite a payroll one-third the size of the Yankees'.

"Payroll talk is a little overrated," he told the San Jose Mercury News in January 1999, about two months into the new job. "You still have to make good decisions, no matter what your resources are. And if you don't have the same resources as your competition, you have to make even better decisions. I would never rule out the possibility of being competitive. It's not a tombstone just because your payroll isn't high."

The budget-conscious A's would take second in '99, their first winning season in seven years at 87-75, and made the playoffs in each of the next four seasons. He subsequently was general manager of the Los Angeles Dodgers and worked with the San Diego Padres before joining the Mets.

A classic example of what DePodesta new-think has brought to teams is Kevin Youkilis. Lewis observed that Youkilis was written off in college as "a fat third baseman who couldn't run, throw or field." But his on-base percentage was staggering.

DePodesta dubbed Youkilis, who went on to play for the Chicago White Sox last season and just signed with the Yankees, the Greek God of Walks.

"What begins as a failure of imagination ends as market inefficiency," Lewis wrote. "When you rule out an entire class of people from doing a job simply by their appearance, you are less likely to find the best person for the job."

Who or what will be Sears' Kevin Youkilis remains to be seen, but a few victories would help.

A loss of more than $3 billion in 2011 all but erased memories of small profits in previous years. Shares, which hit their 52-week high of $83.43 in March, are in the mid-$40 range.

"Domestic Sears and Kmart stores have been underperforming their retail peers on top-line growth for many years," said Fitch Ratings, which has a negative outlook for the company's credit rating.

For the third quarter, the company reported a smaller-than-expected loss, thanks to better cost management, a leaner inventory and a 20 percent growth in its total online business.

As in baseball, there is no shortage of statistics, from point-of-sale transaction records to customers' online habits and backgrounds.

"Analytics has been something folks in retail have talked about for quite some time, but they're redoubling their efforts now," Girard said. "Drowning in data and not knowing what data's relevant, which data to retain and for how long, is the No. 1 challenge retailers are having as they move into what we call Big Data."

That would seem to be where DePodesta, his computer and his prisms will come in handy.

Lampert said the company was excited about adding DePodesta's "strong analytical skills and talent assessment acumen" to its board. But he fits even better than that.

"They're underinvesting in their stores, but they're doing a good job online, and engaging customers online there's a lot more data," Girard said. "This guy brings a fresh perspective. He comes from the outside. He's analytically inclined. And he understands how you have to change culture."

Sears' focus shouldn't be on hitting home runs. As DePodesta preaches, what's important is not striking out. Now the challenge will be to listen.

philrosenthal@tribune.com

Twitter @phil_rosenthal

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