Avoid Those BEMOs or Big Egregious Missed Opportunities

By Aya S. Chacar and Bill Hesterly, February 13 2020

Saudi Arabia’s Public Investment Fund sold nearly all of its 5% investment in Tesla’s stock in Fall 2019. Had it delayed the sale until early 2020 it would have made billions in gains. This example may seem like a Big Egregious Missed Opportunity or BEMO. But it is not because it is hard to predict the future movement of a stock price. Even famed stock picker Warren Buffet of Berkshire Hathaway lost $25 billion in the last quarter of 2019.

BEMOs represent considerable and relatively obvious value that could have been created if detected and action was taken. 

As with the Public Investment Fund, not all missed opportunities are BEMOs. At only 28 years old, Mike Trout is the best MLB player of the last decade. Still, he was passed over by 21 teams during the 2009 draft. Hall of Famer Mike Piazza was passed over 1389 times in 1988! These are still not BEMOs for it is hard to predict draftees’ future major league performance. In fact, Mark Appel (2013) and Brien Taylor (1991) were drafted number 1 by the Astros and Yankees respectively yet, neither ever saw a day in the major leagues.

As Sam Goldwyn famously said, “forecasting is a dangerous business, particularly when it’s about the future.” Yet, some opportunities really are BEMOs because they involve such clear trends that lead to predictable opportunities. 

MLB has survived for more than a century and has a lot to teach business. But today we want to point out some of its many BEMOs. MLB mostly shunned radio -- the transformative technological wonder of the era -- from the 1920s to the 1930s. How much money was left on the table? It’s hard to tell but just the 1935 World Series broadcast generated $400k or about $7.5 million in today’s dollars. After its belated adoption, radio broadcasts quickly became a major source of income with 1939 radio revenue amounting to more than 7% of team revenues. Was this not a BEMO?

MLB feared television broadcasts would empty the stadiums. By the late 1950s, five teams still televised no home games and there were no real national broadcasts of regular-season games well into the 1960s. It is hard to tell how much money was left on the table, but broadcasting revenue ultimately exceeded gate revenues. Even in 1947, the pioneering Yankees team received $75k for the season’s broadcasting rights or nearly $900k in today’s dollar.  Was this not a BEMO?

MLB repeatedly refused to expand the league or allow teams to move to big cities where baseball was very popular, like Los Angeles and San Francisco. In fact, for more than 50 years, MLB had only 16 teams and, even today, only 15 of the 30 most populous US cities have MLB teams! Populous cities such as San Antonio, Jacksonville, Charlotte, and Nashville do not yet have MLB teams. Yet, each of the above has proven to be a viable big-league town in either the NBA or NFL. By contrast, cities not even in the top 60 largest U.S. cities such as Pittsburgh and Cincinnati have healthy MLB franchises. MLB also has a single international team in Toronto while the game has flourished in many countries like the Dominican Republic, Japan and South Korea. How much additional revenue could have been generated from franchise sales, increased broadcasting rights, and other? Could this be called a BEMO?

MLB’s list of BEMOs would need a tome but steady and slow MLB is at times ahead of its peers. In the year 2000, it set up a separate company to develop MLB’s website. Among other accomplishments, MLB’s Advanced Media company, or BAM, started live game streaming in 2010. Given the bandwidth and technological challenges a decade ago, this was no small feat. BAM solved daunting problems in areas such as compression, geofencing, and delivery to multi-applications at a speed and cost that dazzled the media industry. 

So how can you avoid BEMOs? First of all, you need to listen to the clamor or ignore it at your own peril. Remember the internet superhighway that brought the death of famed Nokia? How about the rise of e-commerce that still poses an existential threat to Walmart? How about the rise of Tesla and electric vehicles that have major auto companies desperately playing catch-up. What can shape your tomorrow? Big data? Nationalism? Artificial intelligence? Or some new discovery in your lab?

Second, invest in your future. Make room in your life for this. Put a high level executive in charge. Identifying the next big opportunity is not a part-time job. As Peter Drucker noted decades ago, valuable innovations start with recognizing that change is occurring and then identifying new possibilities.

Finally, you need to take action. Turn potential BEMOs into great opportunities. Kodak recognized the threat of digital photography but died because the future seemed very distant. Executing on big opportunities is another topic altogether, but staying immersed in what's happening outside of your business and devoting more energy to recognizing BEMOs and getting educated is the way to start.

Avoid that BEMO and hit it out of the ballpark instead.

P.S.: Do you want to learn more about strategy? The Shortest Strategy Textbook is one place you could start. And you might want a refresher on Cost Leadership and Differentiation Strategies, or Rivals versus Substitutes.