Date: Jun 01, 0204 Author: Dr. Stephen Chambal Source: Analytics Magazine (
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The Perduco Group is a small defense consulting company in Dayton, Ohio, near Wright Patterson Air Force Base (WPAFB). The company specializes in high-end data analytics with core competencies in data architecting, business intelligence and business analytics. Perduco was formed in 2011 and has grown rapidly to 21 employees. Twenty of those employees are working in the defense space, and one, Dr. Jacob Loeffelholz, is the lead for a strategic push into the sports domain. Now, what is a defense consulting company doing with a director for sports analytics? The easy answer is simple: sports are fun. However, the real answer is more tied to core capabilities, business opportunity, two chance encounters and a willingness to believe in what you're doing!
Big, Ugly Data:
Perduco's data competency is tied to integrating and aggregating big, ugly data. This includes the use of enterprise data architecting to build the data infrastructure required when solving client problems. On the analytics side, the company specializes in advanced or predictive analytics and has broad-based expertise and experience in the field of operations research (O.R.). This core capability in O.R., coupled with an ability to visualize and communicate results, gives Perduco a competitive advantage in the defense space. This same advantage can be applied to other business areas such as energy, healthcare and finance. However, a chance encounter and 30-minute discussion brought a new opportunity -- sports -- to the forefront.
I retired from the United States Air Force in 2011 and partnered with Toyzanne Mason to form The Perduco Group. My final assignment in the Air Force was spent serving on faculty at the Air Force Institute of Technology (AFIT) at WPAFB. On a return visit to AFIT in 2012, I stopped in to visit with Dr. Ken Bauer, professor in the Department of Operational Sciences at AFIT. We traded updates, and the topic turned to sports. Ken mentioned an article he had recently published with Jacob on predicting NBA outcomes using artificial neural networks. I knew Jacob from his time at AFIT and had even helped Jacob find a job with a defense consulting company (not Perduco) after graduation. What he did not know, however, was that Jacob's article had just topped 1,000 full downloads from the Journal of Quantitative Analysis in Sports. For those not familiar with academic literature, this is an uncommonly high number. I left AFIT that day knowing two things: Perduco was going into the sports domain, and Jacob was the right person to lead this push.
I first called my business mentor and vice president for Perduco, Chris Mason, and brought up the idea of expanding Perduco into the sports sector. As a sports zealot, Chris was very interested but needed to understand the business case before committing to this decision. Jacob and I met to discuss the potential opportunities and the growing application of analytics in sports. Jacob highlighted a number of areas where analytics could be leveraged in the sports domain. More importantly, they both recognized the limited use of advanced analytics from the O.R. discipline, which could quickly be adapted to solve many problems in sports, as many of the challenges are similar to those being faced in defense. In fact, Perduco was already working in a number of these crossover areas.
‘Quantified Warrior':
The defense community is very interested in what is called "quantified warrior," which is an ability to monitor and assess a soldier's condition and to understand how to optimize their performance on the battlefield. As one can imagine, athletic teams are very interested in maximizing their players' performance "on the battlefield." A second example is related to overhead monitoring and the collection of surveillance data to understand and predict activities on the ground. The intelligence community is continuously engaged in this type of effort in order to provide better assessments of enemy activity to commanders on the ground. STATS Inc. recently installed SportVU, an overhead surveillance system in all professional basketball arenas to track player movements on the court at all times. The collection systems allow coaches or team "commanders" to better analyze team and opponent behavior and evaluate performance on the court. There are countless other examples of defense crossover areas, but in every case, O.R. is a critical requirement in solving these problems.
The business opportunities were there, and in the summer of 2012, Perduco made the corporate decision to hire Jacob as the lead for all things sports. Jacob's first task was to determine where the company should focus in this very broad business area called sports analytics. This led to a one-year path of exploration, investigating a number of ways to generate revenue through the application of advanced analytics and O.R. This also led to a second chance encounter which would result in Perduco finding their sports focus in the summer of 2013. Before jumping ahead, there is useful insight into covering two major explorations, which are, in some ways, still being pursued within the company.
The first push into the sports sector came in the form of team consultation. Anyone passionate about sports analytics has read the book or seen the movie "Moneyball." The idea of helping teams pick players, make trades, analyze strategy and win more games is what sports geeks get excited about -- the sexy side of sports analytics. Perduco aggressively pursued direct team consultation and met with a large number of organizations at both the professional and collegiate levels and across multiple sports including football, basketball, baseball and hockey. Professional basketball quickly became the target of interest, and Perduco developed a number of prototype applications to demonstrate the benefits of O.R. capabilities to team management. Scout scheduling optimization, aggregate player evaluation and prediction of player performance are just a few of the solutions presented to professional teams. Although these solutions were well received, Perduco gained little traction with respect to establishing formal consulting agreements with organizations.
Team Consultation:
Perduco discovered a number of challenges when pursuing direct team consultation. Teams are very protective of their data and even more protective of the questions related to team and player challenges. Even with a willingness to sign non-disclosures and protect data sources, teams are hesitant to fully share information with respect to organizational decisions. Additionally, most teams were interested in how the capabilities presented were being used by other teams. The idea being, if no one else was using the tools, there was no forcing function for them to adopt new analytical methods. Put another way, teams are very interested in being "first to be second." The challenge then became getting the first team on board, which highlighted the most critical issue limiting the expansion into sports -- relationships. Relationships are the foundational building blocks required to make any business successful. Perduco had many strategic relationships in defense, but building a similar network of connections in professional sports would take time to develop. The company continues to pursue team consultation, and in January of 2013, an NBA Western Conference team began using Perduco's scout scheduling optimization tool and is now seeing great benefits with their use of this capability.
The second major push into sports came in the area of business-to-business consulting. The connections are easier to find, and the relationships are easier to build. Companies supporting the sports industry are very interested in new capabilities and are willing to discuss challenge areas where they see a need for analytical solutions. New or advanced capabilities give companies a competitive advantage in a rapidly changing and dynamic market space. Perduco met with a number of sports companies, including STATS Inc., and continued to gain exposure for their predictive analytic expertise. The business case is working, but it takes considerable time and resources to develop solutions at the level required for these companies to market to their client base. Business-to-business was expected to be the major push in sports until a second chance encounter presented Perduco with a new option and a major shift in company focus.
Prior to my 20-year reunion, I reconnected with an old friend and classmate from the Air Force Academy, Troy Neihaus. We talked over the phone and during this call, Troy mentioned Perduco's website and noticed the push into sports analytics. He had a friend who was part-owner of a company in the fantasy football space and offered to make the connection. The next day, Perduco was introduced to Full Time Fantasy, a company that runs a very popular fantasy football website FFToolbox.com. The first phone call lasted only 30 minutes, but the decision was made to shift focus, resources and energy into web-based fan support for fantasy sports.
Fantasy Sports:
Jacob, working with FFToolbox, quickly researched the fantasy sports landscape and identified numerous opportunities for advanced analytics and data visualization. The two companies began developing a strategy to move forward and outlined both the execution and business plan to make this happen. The integration of FFToolbox's expertise in fantasy sports and Perduco's depth in O.R. provides enormous opportunity to bring advanced and unique capabilities to the market space. Furthermore, FFToolbox is already recognized as a leader in the space with nearly 10 million users visiting their website on an annual basis. This footprint provides immediate exposure for Perduco analytics at a level never imagined this early in the company's expansion into sports. In fact, the building footprint in sports has led to the spin off of Perduco Sports from the parent company, The Perduco Group, which happened in the spring of 2014.
Full Time Fantasy and Perduco are on schedule to release their first integrated capabilities in the summer of 2014. A number of capabilities are being developed, tested and implemented into the FFToolbox infrastructure. These capabilities will provide users access to advanced analytics for analyzing players, simulating drafts and visualizing statistical information in an easy to use and understandable format. The goal is to put the power of O.R. in the hands of active fantasy sports players who may not otherwise have access to these types of mathematical algorithms. FFToolbox gives their customers a competitive advantage of their own when competing in daily, weekly and season-long fantasy sports games. The fantasy sports market is an explosive industry with millions of potential customers, each looking for an edge and bragging rights when competing against family, friends, co-workers and unknown opponents across the world.
Perduco has spent nearly two years committed to expanding into the sports domain. Perduco's core capabilities in operations research and its passion to bring advanced analytics to the sports industry has kept the company moving forward at all times. The expected business areas have shifted here and there, but with each shift came increased opportunities for success. The chance encounter with Bauer in summer of 2012 led to the hiring of Loeffelholz and the launch of sports analytics within Perduco. The chance encounter with Neihaus in summer of 2013 led to the introduction of Perduco to Full Time Fantasy and the launch into the fantasy sports market. Believing in chance encounters and being ready and willing to react when they happen has been a driving force behind this adventure. If the pattern continues, the next chance encounter should be coming soon in summer of 2014 and could ignite the viral power of the Internet and launch Perduco into an overnight success, 24 months in the making!
