it’s a Nokia 3310 once recognized as the
greatest phone ever produced I guess
most of you in this room on one didn’t
you please raise your hand if you owned
a 3310 Wow so almost a hundred percent
market share here so you remember that
it never ran out of battery
you could play snake on it
it was world famous for being the
indestructible phone so in the mobile
industry is saying used to go that if
someone drops an iPhone the screen
breaks if someone drops a Nokia 3310
the floor breaks it was unbelievable
solid the 3310 embodied exactly what
Nokia stood for as a brand resilience
quality and innovation it was products
like this one that turned Nokia into one
of the most successful companies on the
planet but as you will also remember
there is another and a more tragic side
to this story because today the 3310
rest in peace at the gadgets graveyard
it’s become a symbol of the collapse of
Nokia a company that went from 50%
global marketing to 3% in less than five
years and it made me think that there
while we talk a lot about how an
organization achieve success maybe we
don’t talk enough about the
psychological challenges that often
follow success because if you think
about it almost every industry has its
own Nokia story companies that once
dominated their industry but then
somehow completely lost the mojo they
all leave us with that million-dollar
question why do successful companies
actually fail and what could they have
done to stay ahead of the pack so I’m
going to try and answer that question
today not by using additional menace
thinking but by using an dia from
football analytics which I believe
explains why many successful companies
so often hesitate to change until it’s
too late before I start I need to ask a
very important question do we have any
Newcastle United supporters in the room
yeah there’s a couple of there
so guys I’m just gonna warn you the next
ten minutes will be painful okay I know
the last 25 years have been painful but
okay don’t take this personal this is
the stadium of Newcastle United st.
James’s Park every other week 50,000
died hard supporters flocked to the
stadium to watch the team play and
instinctively Newcastle United has all
the building blocks to become a really
successful football clubs they got a
billionaire businessman owner they got a
fan base most other clubs would die for
but despite all that Newcastle is also
known as the team that never really
fulfilled its potential but then a
little bit more than five years ago in
2012 the fortune seems to change for
Newcastle because they sensationally
finished fifth in the English Premier
League the strongest league in the world
there was an amazing achievement all the
experts predicted Newcastle to be
battling avoid relegation now they were
fifth inside Newcastle the excitement
were bubbling – the management team was
convinced this is the start of a new era
in the football club’s history so they
decided to reward the head coach and his
old coaching a historic long unbreakable
eight year contract and they really
tried to do everything they could to
keep the squad together for the
following season because that’s how
successful organisations are supposed to
think right the following season this
happened Newcastle almost relegated they
finished 16th and no one had a clue what
was going on because they had the same
players they had the same coaching staff
they even played in the same stadiums I
mean nothing’s changed how could a
largely unchanged team go from 5th to
6th
in less than 12 months I’m gonna try and
answer that question but first I’m gonna
give you a little bit of background
because in football there’s a good old
expression is frequently used by coaches
players commentators experts it goes
like this the league table never lies it
kind of assume is that once the last
game of a season is played justice
prevails the teams that finish top of
the table is the best performing team
and it seems that relegate are the worst
performing teams at the end of the day
everyone gets what they deserve it’s not
that simple actually and let me explain
your wife
please meet Matthew Benham he’s a game
play he convinced me the brightest guys
in football they don’t work for the
football clubs they work in the gambling
industry and I’m not talking about the
amateur gambler the guy that is placing
a bit every Saturday morning to trigger
trigger his weekly rush of adrenaline
I’m talking about the pros the guys that
are using sophisticated mathematical
models to place the bets that’s the
brightest guys and Matthew is one of
them he’s an Oxford graduate in physics
that decided to set up his own bidding
syndicate in North London basically an
office full of PhD statisticians
calculating the probabilities for the
outcome of football games that has made
him a rich man so rich he decided to buy
the Football Club he supported since he
was a teenager
Brentford in West London and that’s
where I met him five years ago at Jersey
wrote the training round of Brantford
at the time we met Brentford was third
in Ligue 1 which is the third tier of
English football there was only five
games remaining of the season and
Branford was pushing for a promotion
so I said to Matthew what do you think
are you gonna promote this season what
does your god feel say and I didn’t I
gave me an answer I didn’t quite expect
it was not an answer full of excitement
the guy just looked at me and then he
said very dry well at the moment there’s
a 42% chance we promote that common made
me realize that I met someone who four
completely different about the game
then I ever met before over the next
couple months Matthew and I started to
meet regularly to exchange the ideas
about how you could run a football club
differently in particularly how would it
be possible to break the correlation
between spending and results that seems
to exist is it possible to not outspent
but I’ll think the competition by using
the weapons of a gambler data and
analytics one day we had lunch at a
restaurant together in Soho in London
and Matthew said to me he’d been looking
to buy another Football Club and I
immediately responded why don’t you take
a look at the club I supporter when I
was a teenager if say Michelin based in
the Western rural Denmark in the middle
of nowhere
Michelin was almost broke at the time so
it was a perfect place to thing radical
ideas a week later we flew to Denmark
and we had a look at the club eventually
he decided to buy the club he made me
the chairman of the club and we run the
club together for the past four years in
the first season we won the first
championship in the club’s history and a
year later we became a world-famous
because we beat the mighty Manchester
United’s in the Europa League
unfortunately in the UK that’s more
perceived as these the absolute
embarrassment of Manchester United than
the genius of Michelin but we will live
with that suddenly media newspapers TV
stations from all the world was flying
to Western Denmark to learn more about
this little Club no one can pronounce
the name of which is run by an English
game using data and analytics to find a
competitive edge so is the thing if you
want to understand how a gambler thinks
there’s one concept you must get is this
the league table always lies why is the
gamblers saying that because he
understands football is a very random
game it’s a much more random game than
basketball for example why is that
because football is a low scoring sport
there’s not a lot of goals in football
you know the average number of goals in
a football game is 2
point-eight the average number of goals
in a basketball games is above 200 he’s
the principal the fewer goals there is
in a sport the more impacts random
events F random events like the ball
getting deflected and spins into the net
or the referee making a wrong call in
the last minute of the game
ultimately this means that’s the best
team when it’s less often in football a
low scoring sport then in a high scoring
sport like basketball and that’s why the
league stabilize it lies more after 10
games than after 20 games but even 38
games that is a full season 38 games is
a very small sample size you know it not
enough to strip out the randomness from
the equation so I gambler is in the
business of making predictions and
backing those predictions with his bets
and when he’s decides to Beckett him and
place a bets he doesn’t look at where
that team is in the league table he
looks at underlying performance
indicators to have more predictive value
tells him more about where that seam is
likely to go in the future then his
current league field position so let’s
go back to New Castle glory season when
they finish 5th and revisit that through
the lens of a gambler because we’re as
experts in the game were overly
impressed by new consoles performance
the gamblers were very skeptical their
analysis showed that this was a fragile
bubble that could burst any time here’s
why one of the statistics a gambler
trusts a lot is that assists ik called
goal difference is the difference
between the number of goals at seam
scores versus the number of goals the
opponent scores it’s a very reliable
indicator for a team strength so let’s
look at that Newcastle finished 5th with
a total shot differential of plus 5 a
long way behind the four top teams and
if you look at that column is by far the
lowest number this indicates what a
gambler calls an extremely effective
goal distribution our goals in football
are important not all goals are equally
important
so he’s an example let’s say Newcastle
scores two goals over two games and the
opponent scores six goals Newcastle will
be better off winning one in this first
game losing six one and a second rather
than losing twice free one same goal
difference but different number of
points so if a team is able to produce
consider number of goes throughout the
season how effective with those scores
fall the goal distribution there’s a big
degree of randomness to that and if you
break down Newcastle 65 points this
season you will see that it was driven
by a very effective goal distribution
eight wins with one goal and free major
losses with more than free goes it’s
very unlikely statistically to be able
to repeat 65 points with a +5 goal
difference another statistic again but
Trust is something called shot
differential the difference between the
number of shots had seen producers
versus the number of shots the opponent
produces it’s statistically very well
documented in football that the best
team overtime produce more than the
worst teams so let’s have a look at that
and as you can see Newcastle finished
fifth with a totally shot differential
of minus one point four clearly they
don’t belong in this company this
indicates unsustainable high conversion
rate when you have a positive goal
difference driven by a negative shot
differential it indicates
unsustainable high conversion rates how
many of those shots were converted to
goals a new cast that had especially one
player this season who stood out his
name see say the top scorer a key
component of their success he converted
33% of his shots ladies and gentlemen
that’s a freaky number okay the same
season the best player in the world
Lionel Messi from FC Barcelona converted
20% here’s how I would put it New
Castle’s fifth place is the equivalent
of a public traded company having a very
high share price and a very low customer
satisfaction at the same time you can
have that for one year but
can’t maintain that over time he is a
visualization of how a gambler perceived
the situation the black line shows the
number points Newcastle achieved
throughout those two seasons when they
were fifth and when there was 16th the
red line is the underlying performance
what a gambler calls expect the points
so as you can see Newcastle got a lot
more points in the first season when
they finished fifth than the underlying
performance justified actually Newcastle
performed almost the same way in those
two seasons they just got less lucky and
this reframes the original question
because why did Newcastle management
team not see this downturn coming why
did they decide to reward the head coach
with a historic long unbreakable
contracts when the results were clearly
unsustainable
I believe that Newcastle was blinded by
one of the most common management
illusions what psychologists call
outcome bias the assumption that good
results are always the consequence of
good decisions and superior performance
or let’s put it in another way success –
lucky – genius and this is where the
missus becomes about much more than just
football analytics right because when an
organization fails it comes very natural
for us to dig for reasons to ask the
tough questions why did we fail how can
we do things better but when we are
successful we don’t ask those questions
we tend to just cruise on blinded by
outcome bias we expect results to
continue automatically we don’t dig into
them and ask what was actually the
underlying reasons for the success was
it because of the oil price was because
of good leadership or because of
exceptional market conditions how many
companies do you think confuse good
leadership with good market conditions
is the thing successful organisations
should think more like a good gambler
because a good gambler has trained his
brain to resist the human tendency to
assume that good outcomes
always
mean that someone acted brilliantly a
good gambler treats success with the
same skepticism as he treats failure and
this is what successful organizations to
do to if they want to stay relevant ask
themself the questions of a gambler why
were we actually successful how do we
separate luck from skill is it possible
that hourly table sometimes lie – thank
you very much [Applause]