Wednesday, June 10, 2009

Businessball Chapter 1: The Lead

I have long held the belief that basketball is the perfect analogy for business, so confident am I that it is, that I have previously proclaimed that if it doesn't happen in basketball it doesn't happen in business.

Thankfully I can hide behind vague interpretations, and stage multiple definitional retreats. My theory is less falsifiable than the theory of intelligent design.

So let's begin on what will some day form the basis of my book on business and how my love of basketball shaped my superior mind.

And let's start with what it is all about - always: the lead.

Perhaps it wasn't until Michael Jordan hit the gym the day after his first Championship that basketball truly perfected its approximation of business, but when I say that the lead always has to be maintained, that's exactly what I mean. If you are playing ball, you are trying to build your own lead. I could say the score, the win but lead will make it easier for me to break down.

You have to keep in mind that when you hoist that championship trophy over your head, and you stand on top of the world, that the moment is fleeting. It is a moment simultaneously eternal and infantismally small. It is a laural that may bring you some consolation in the times ahead, that at least at that moment, when it counted to you - you took the lead.

But here is what I mean, the average NBA career is going to be around I'm guessing 5 years, once you discard statistical outliers, like number 29 draft picks that don't play a minute and get sent to D-league. But in that career you have effectively 1 run per year at a championship, and realistically less than 1 run. Thus when you win a championship you can retire, or you go into next season, where you go back to square one in winning enough games to get to the playoffs, winning the playoffs to be conference champion, winning the finals to become champion and then... same again.

Championships aside, any playoff series is a best of 7 games. That means you have to win 4 times to win an individual championship. If you win game 1 that means best case you have to win game 2, 3 & 4. Drop a game and you have to play 5, drop two 6, drop three 7, drop 4 it's over. You have to do that for round 1 of the playoffs to go to conference semi-finals, and win round 2 to go to conference finals, win 4 times there you go to the finals.

You win game one by 100 points (unlikely) it still read 1-0 same as if you win by 1 point (far more likely). Then you have to win again, at home, on the road. The name of the game, in business and basketball is win and go again.

But enough about winning, this is about leading. Let's get within the intamacies of the game itself. Basketball differs from say 'soccer' and even it's closest cousin 'afl' in that if you have the lead, your play does not really change at all. Mentally maybe you will relax a little, but strategically you do the same thing until somebody stops you.

You have possessions, which are your offensive game. Without possession you are playing defence. Offence is about scoring points, you need at least 1 point to have a lead. Defence is about regaining posession, getting stops, turnovers, steals, grabbing rebounds etc. Defence is employed solely to enable attack. The team must always attack.

Basketball stands out because a lead has to be tirelessly maintained. It is a 'leaky bucket' lead and therein lies its fundamental similarity to business and the highest level. The speed of change is fast. The competitors scorecard is driven up by their sales force, their offensive strategy, you can confound it somewhat but ultimately you are not in control. Your lead has to be built out of your offense, your sales. It ain't soccer, you can't play nil all draws until it goes to penalty shoot-outs.

The shot clock winds down, your advertising dollars, Your dealers finance, your sales incentives program, your products lifestyle and like it or not the ball is turned over to the competitor. A crappy competitor might put up 30 shots and sink none. But it never changes the fact that you are trying to build and consolidate your lead.

You win the first game by 100, it doesn't matter come the next game, you have to win again, that means build the lead up from 0, get back on defence and try and score as hard as you can.

So too in business, you sell the most one quarter, you have the largest market share, the biggest revenues, the widest profit margin. The quarter, the week, the day ticks over and you have to start from square one. The competition/opposition is going to close the gap on you unless you keep widening it.

You keep doing what you do well crucially UNTIL something changes. This is where business goes to the wall against basketball. In basketball the objective is clear, the rules are more concrete, the perception clear, the management, top-notch. The environment changes constantly and the offence reacts. Fisher dribbles down court and tosses the rock to Kobe for the open corner 3 and he lays it in - what happens on the next offensive possession, Fisher dribbles down court and looks for the pass to find that KObe has moved. The environment has changed, why? Well whoever is on Kobe has either gone out to him and Kobe has adjusted his strategy, or Kobe moved in anticipation. Perhaps he couldn't get by because of where he was forced on the defensive play, perhaps they switched to a box-and-1 defence.

The point being that even though basketball has far less variables, (perhaps because it has far less variables) the players are far better at recognising and reacting to changes in the external environment. That is everything beyond their direct control. Thus the offensive strategy (and defensive) is constantly adjusting to both realised and potential threats.

Businesses have a bad habit of being good at something in a certain environment, and then when the environment changes, taking measures to fight the environmental change, not actually adjusting too the environmental change. They do things like ask for subsidies when another team starts killing them on labor costs, or marketing cars that don't suit the economic environment, they demand the market serve their company, not make their company serve the market.

Contributing value is the business offense, just as scoring points is in basketball. Value has to be constantly generated in order to sustain the successful existence of a business, just as a lead has to constantly be maintained in basketball. Furthermore, business has to contribute more value than it's competitors to take the lead. In basketball you can be a superstar on a losing side, you can't take the championship every year, but if you come close you can sell enough memberships and season passes and sponsership to stay in business. In business, you can not have the lead but through creating enough value, return profits to investors. But coming second is as ephermerial state as coming first, second has to be maintained just like first does. To progress requires either better competitiveness, or weaker competition both are possible, but there's only one you can truly control.

That's the fundamental connection between business and basketball.

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