The Asset Pipeline
For NHL front offices to construct a Stanley Cup-caliber roster, they must exhaust every possible avenue to identify and acquire talent. One avenue stands out when looking at what separates the elite teams from the rest of the pack.
Let us consider the three ways teams can acquire assets:
Free Agency
Trade
Drafting
Free Agency
Signing a big-name free agent often comes at a premium as teams are paying top market value. In a salary-capped league where maximizing each dollar is paramount, free agent salaries can quickly become inefficiently allocated, especially when free agents are usually at the beginning of the end of their careers. They become distressed assets that are difficult to turn back into cap space.
Related reading: Understanding Asset Liquidity in the NHL
The real cost of acquiring a player in free agency is not the salary paid to the player but rather the opportunity cost of cap space.
Trade
When teams go the trade route, they are swapping assets, and while in theory, the outgoing value should be at least equal to what is coming in, it is challenging to find a trade that is going to be assuredly a net positive in value. Unless they are taking advantage of an illiquid team.
Related reading: Analyzing Liquidity to Cultivate Opportunity in the NHL
Drafting
Drafting is the only avenue that doesn’t extract a fee. In fact, teams are given 7 of them every year. How the 32 NHL teams manage their draft capital is the difference between the Edmonton Oilers being unable to provide Connor McDavid depth and the Tampa Bay Lightning assembling a back-to-back Stanley Cup winner.
Draft picks are critical to a team's success in the NHL, but they should be seen as more than random lottery tickets. Rather, teams should use them as an opportunity to create surplus value.
All teams are given seven draft picks to start the season, and those that consistently get the most value out of those picks will have a major competitive advantage.
While a team's ability to draft well is undoubtedly an advantage, there are other ways to create value with draft picks.
To truly maximize the value of their draft picks, teams should view them as a part of a larger team-building strategy, rather than just a shot in the dark. By viewing draft picks as part of an asset pipeline, teams can ensure that they are making the most of the resources given to them.
How does the Asset Pipeline work?
Stages in the asset pipeline:
Draft
Drafted players make their way into the asset pipeline and either make an immediate NHL impact (asset) or need time to develop.
Developing
A critical step in the pipeline - this is where prospects hone their skills in order to succeed at the next level. They either become an asset or they ultimately bust.
Asset
Once developed into an asset, this means that the prospect has either:
Turned into a serviceable roster player
Traded for another player that fits a need
Recycled for futures
Recycled for futures
Asset management is crucial as draft picks are the resource that keeps the asset pipeline running and it is important that teams continue to replenish it. This means that if a player doesn’t fit in a team’s long-term plans it is better to at least recoup a draft pick if possible instead of losing the player for nothing.
Once a team has a strong asset pipeline, they have essentially created a war chest to acquire talent and remain competitive.