Tuesday, August 10, 2010

Our Summer of Football and it’s Lessons for Entrepreneurs

The estimates vary widely, but it’s clear that more than a billion people watched a part of the recent World Cup of Football in South Africa. With such an enormous investment of human time, surely there must be abundant lessons to be learned about all sorts of things from this experience. Fortunately for us, there were, in fact, several quite important insights for entrepreneurs that can be gleaned from this most universal of all sporting events.

To begin with, the major conclusion of the World Cup was the enormous victory it was for Europe. A final between Spain and the Netherlands; with Germany the third of the “final four” qualifiers in the Cup [Uruguay being the fourth], was completely unforeseen by those in the business of predicting sporting outcomes. More likely, we were told, would be a Brazilian victory, capping the ascendancy of emerging markets as the new center of world football; but, this didn’t happen. With Europe all too often seen as the very antithesis of entrepreneurship, and frequently characterized as being “old,” “tired,” “lazy” and “complacent,” such domination of the football championship is indeed an intriguing outcome. What accounts for such a result that might help us understand entrepreneurial success?

According to the authors of the statistically-inclined book Soccernomics, world football team proficiency in an international match is best explained by three characteristics: the size of a nation’s population, the size of national income, and a country’s experience in international football [ Simon Kuper and Stefan Szymanski, Soccernomics, New York, Nationbooks, 2009, p. 33.]; yet, clearly, the biggest, richest countries did not dominate the games. China, for example, which has largest population on the planet, as well as the largest number of citizens who actually play football, didn’t even make it into the World Cup 2010; the U.S., which is the richest nation on the planet, and has the second largest population of soccer players, was eliminated in it’s first match of the post-qualifying round by Ghana: a small, poor, and relatively inexperienced team. What gives?

My sense is that there are two big factors that explain Europe’s success (and Spain’s in particular) in the World Cup, and that have immediate import for managers responsible for all sorts of teams. The first has to do with the relative importance of “experience” compared to the other two explanatory variables mentioned above. Experience is clearly the most important of the three explanatory variables, and Spain, the Netherlands, and Germany are all the beneficiaries of lessons forged in the most sophisticated and competitive rivalries in the world. The UEFA Champions League is a collection of the best players in the world, from all over the world. It is a mixing-pot of the best professional talent from every continent that is unparalleled on the planet; how could you not learn from such experiences? So, not only do the Europeans have the experience, they have the most formative experiences possible. The professional football leagues of Europe have been, and remain, the most demanding of tests for professional, and managerial competence, and Europe no doubt used this asset to full-advantage. Just as is true with industrial innovation, so it is for football: countries that remain aloof from the give and take of the best competitiveness, suffer by not learning enough relative to others.

Furthermore, European football learning takes place in a highly geographically-concentrated, international community where lessons of football success regularly move quickly from one rival to another. According to Soccernomics, it is these networks which characterize the European football community that make a big difference in the success of its teams: “the best ideas spread fastest there.” [Kuper & Szymanski, Soccernomics, op.cit. p. 27.] Those that fail to learn, fall behind. Under such conditions, it is difficult, and costly, to maintain an isolationist mindset.

The second factor that I feel is central to understanding Spain’s victory has to do with the way it managed its team’s talent. The World Cup is, without a doubt, a talent-filled extravaganza, but we all know that all-star teams are often not as good as the talent that they contain; they typically disappoint relative to their promise. Spain, however, delighted us, while Brazil was a complete let-down. In fact, Brazilian World Cup teams are typically regarded as the most talented of all teams, but this year Brazil did not even make it into the finals. According to a recent book entitled How Soccer Explains the World

: “Brazil became an international power because it played without the rigid strategic strictures of [European] continental soccer. Positions, formations, and defense weren’t valued nearly so much as spontaneity, cleverness, and the scoring of goals. .... where the European style was prose, the Brazilian was poetry.” [Franklin Foer, How Soccer Explains the World, New York: Harper Perennial, p. 120. Italics added.] Yet, “poetry” alone was not sufficient to make it into the World Cup finals; is there a lesson here?

In our study -- Virtuoso Teams-- of how “all-star” teams live up to their potential [Andy Boynton & Bill Fischer, Virtuoso Teams, London: FT-Prentice Hall, 2005.], we concluded that a secret of innovative performance was achieving a point where everyone on the team felt that they had “absolute freedom” (poetry), while top management still believed that it possessed “complete control” (prose). This is exactly what we saw in the World Cup; neither strategy nor entrepreneurship, alone, is enough; in a fast-changing world, you need both! Brazil was all about poetry (spontaneity and fluidity), while Germany and the Netherlands had a heavy emphasis on prose (strategy and discipline). Spain, however, had a marvelous combination of both; and won the whole thing!

The lessons of the World Cup are important for entrepreneurs. Football, as with business, is all about learning and being more responsive than the other competitors. This typically requires both a thoughtful approach to the challenges at hand, and the ability to adjust as the environment changes. Neither poetry nor prose is sufficient to be the best; you need both. Furthermore, competing in environments where you have sufficient diversity and operational excellence to test the mettle of the competitors is the best place to learn how to navigate between poetry and prose, and for that reason is vastly superior to winning in non-challenging environments.

Bill Fischer is Professor of Technology Management at IMD and Director of it’s Managing Innovation Globally program, to be held in Hong Kong, October 25-27, 2010. He played soccer for Clarkson University.

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