The Law of Competitive Balance
Whilst most of us view baseball as a strictly American pastime, the sport does boast a sizeable global fanbase. However, it's not the fans, the players or even the managers that are of interest - it's the tons of data that's collected and the insights extracted from it. Bill James is an American baseball writer, historian, and statistician and has studied baseball for many, many years and he has come up with some interesting insights that not only apply to the world of baseball, but also to business. He has named one of his main findings ”The Law of Competitive Balance.” In short, this describes that there exists a negative momentum, which acts constantly to reduce the differences between strong teams and weak teams, teams which are ahead and teams which are behind, or good players and poor players.
Strategy favors the losers
Why is that? Because, as Bill James explains it, there develops over time separate and unequal strategies adopted by winners and losers; the balance of those strategies favors the losers, and thus serves constantly to narrow the gap between the two. In layman’s terms, this means that if a team is behind, this team develops and implements different strategies in order to win than the team that is ahead. In other words: Because they are behind, the losers think and act differently than the winners, who tend to become complacent and continue doing what brought them ahead – without considering that the game changes because the losers are forced to do something different.
For an example, let’s move to soccer, which I understand much better than baseball. By half-time, a team might be leading 2-0. That team is likely going to go into the locker room and hear the coach talk about continuing to do the things they’ve been doing, because it clearly has worked so well. On the other hand, the team that hasn’t scored is likely to make a series of changes, from substituting players to choosing a different system (strategy), simply because they have to if they are to win the game. Obviously, sometimes the team that was behind doesn’t come back to win, but the point is that the team who is struggling actively makes changes in order to search for solutions, whereas the winning team relies on “business as usual” – even though the game is going to change because of the losers’ initiatives.
In spite of the fact that ”The Law of Competitive Balance” is based on baseball statistics, there is no reason to believe that the same is not true in business. The best sports coaches instinctively understand this and try to instill the proper mental competitive balance in their players by talking about “winning the second half” or “resetting the score to 0-0” at halftime. A good business leader should ask his employees to do the same and:
Think like a loser!
When I say think like a loser, I don’t mean you should give up; instead you should think about how your less fortunate competitors are being forced to do something different to beat you, so you ought to examine what are they up to and how you can prepare for their changes. It’s always a very good idea to think in terms of outcompeting yourselves, because that’s how you truly identify and strengthen your weaknesses, while still taking advantage of your strengths. And that’s the exact opposite of being complacent. When you’re complacent, you neglect your weaknesses and utilize your strengths, but you forget that your competitors are working hard to balance your strengths, leaving you with only weaknesses.
I’m sure you’re familiar with the saying, “If it ain’t broke, don’t fix it.” Basically it means that if something is working adequately well, leave it alone. And I agree that sometimes there are things that don’t need to be changed or replaced, but far too often, having a cavalier attitude about latent threats to your business will only get you in trouble. So here’s my advice: If it ain't broke, break it!
If you don’t, your competitors will. So step into the shoes of your competitors and think about what you would do to outcompete your own company. Find your weaknesses and fix them, before your competitors take advantage of them. That is and will always remain the starting point – look at your company from the outside and thereby eliminate complacency as an option.
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