3 minute read / Feb 13, 2020 / strategy /startups /
When You Have an Advantage, Speed Up the Game
“Basketball can be modeled as two-biased random walks. Each team has a probability. Each team has a probability of scoring each trip down the court…this model suggests a strategy: stronger teams should speed up the game to create more possessions.” If you shoot more accurately, then more possessions over time creates a greater delta in the final score. This is a great idea from Scott Page’s the Model Thinker that I find I quote a lot when discussing competitive strategy.
Does this theory pan out? Let’s go to the data for the current basketball season. The Milwaukee Bucks have won the most games this season with 45 games of 52 played. Their shooting attempts per game is third in the league at 91.5 field goals per game. Their field goal shooting percentage is second at 48.2%. Their field goals attempted is 5th in the league. The combination of top decile shooting and near-top decile shots per game produces the best points per game of 119. And the fact that they capture 15% more defensive rebounds than the next best team doesn’t hurt. So, yes.
This model of thinking about competition is valuable in business. Suppose you have two startups competing directly. Imagine yours is the one with the better shooting percentage. In business, the analogy might be competitive win rate. Your sales teams wins 5 percentage points more customer contracts than the competitor. Let’s ignore other situations like single vendor sales processes, replacements, upgrades, etc.
The winning strategy is to accelerate the game. For startups, that means starting as many sales conversations as possible. Over time, the better win rate garners more market share. If you assume that the company benefits from solid net dollar retention, something magical happens. The compounding effects of growth create a geometrically scaling advantage - in theory, at least.
What if you’re the team or the company with lesser shooting percentage? You can’t play the same game and win. You must change the game to focus on three point shooting or set plays or some other aspect where you can create a relative advantage. In the world of business, that might mean focusing on a customer segment, a vertical, or solution selling. And this is the dynamic we see in many parts of business: competitors vying to shift the competitive landscape.
Like all economic theories, this one simplifies quite a lot. Execution is never perfect. Scaling sales teams and companies are hard. And the teams with the best shooting records and most attempts per game may not win the championship. But building a strategy around this idea can be a useful exercise for an executive team in a competitive market.