Nothing to Lose: How Businesses Need to Learn From the NCAA Tourney and Play to Win
After watching a half dozen upsets in the men’s and women’s NCAA basketball tournament over the past couple of weeks, it is impossible to dismiss the power of having ‘nothing to lose.’ It is true that any team entering this tournament knows how to win big games, but why is it that teams that are outsized and with less talent routinely beat the Goliaths? The expectation that the biggest and best teams are going to win strangely works to the advantage of the underdog who is expected to lose. But these surprising results are not really that surprising. Smaller teams can play more aggressively. They can take more risks, try for more big plays to catapult them ahead.
Interestingly, this same principle applies to businesses. Last week a friend was telling me that I was being unfair demanding that large businesses innovate the same way that start-up’s do. He explained that leadership in large business is being paid to avoid losing share while small businesses leaders are paid to acquire it. In other words, the expectation is that the large business will continue to slowly grow, while no one expects much of the small start-ups anyway. We are constantly reminded that start-ups usually fail, so they are willing to try new tactics and ideas in a sink or swim fashion.
Just like the world of basketball, the analogy plays out. Large businesses struggle to win the big new market battles. If everything goes exactly as planned, they prevail. If smaller competitors properly innovate, the big business can lose share anyway. I think this is why big businesses pay lip service to innovation. They want to cover that base even if the thrust of their activity is much more conservative in nature. CEO pay also factors into the equation. CEO’s grow accustomed to a seven figure lifestyle and the easiest way to keep that lifestyle is to not make a mistake. It ensures that even if the business falters there will be another equally high-paying job around the corner. Backsliding stock prices due to ‘business conditions’ cannot be blamed on a CEO, can they?
It is important to remember that life is an uncertain gamble. Business leaders are paid to mitigate risk, but they are also paid to create growth. Unfortunately, nothing grows without risk. Regardless of what the spreadsheets and charts and graphs say, it is absolutely imperative to innovate and try new ideas at any business looking to grow. And the point of a business is to grow regardless of what dividend-mongering shareholders say. Looking for profitability year after year with zero risk is short-sighted. Eventually, smaller competitors will find ways to change the game. This can be devastating for even the most mature business model. Look at how Tesla is keeping one of the most established industries in America awake at night. Similar stories have already played out at Google and Apple’s assent to prominence.
Google and Apple desperately cling to innovation and keeping a ‘small company’ feel to their businesses. They understand that getting to the Final Four in their market is their reason for existence. Winning the entire tournament is their quest. We may not be seeing any Cinderella stories in this year’s tournament, but look at the top seeds who were eliminated early on. Imagine how those top seeds feel? They were bigger and better, and they are on the sidelines until next year. In the business world, shareholders may have to wait much longer than just until next season. It is both a cautionary tale and a beacon of hope for any business looking for growth regardless of size or stature.
How is your business planning to win the tournament? Have you ever been beaten out of a market by a weaker competitor? How did it feel?