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Eight Reasons to Hold Fire

The value of competitive forbearance for decision-makers



Thursday 10 December 2015



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For those quick on the trigger, ‘competitive forbearance’ may be the more strategically sound decision, according to Goce Andrevski in this article first published by Queen's Smith School of Business:

Competitive forbearance refers to the idea that decision-makers consciously opt not to act when presented with an opportunity and when they have capability to act. Goce Andrevski of Smith School of Business turned his attention to this little studied decision dynamic by observing the decisions made by basketball coaches during games. He found that 17 percent of all competitive moves that were studied were purposefully not executed. As well, the more titles a coach had won, the more likely he was to choose forbearance. Andrevski and colleagues developed a list of eight factors that can help decision makers recognize when and why forbearing may be superior to acting in certain situations.

It’s no accident that Goce Andrevski’s management research is inspired by basketball. Andrevski, associate professor and distinguished faculty fellow of strategy with Smith School of Business, was a point guard for several professional basketball teams in Macedonia. He’s used that experience to shed light on what he terms ‘competitive forbearance’, the idea that decision-makers consciously opt not to act when presented with an opportunity and when they have capability to act.


“We felt there was a strong relationship between what managers in business are doing with what basketball coaches are doing,” says Andrevski. That’s why he looked to the hardwood to study why managers would decide that forbearing is a better strategic decision than acting.

It is a little studied area of strategic management, for understandable reasons. “When you ask managers in an office setting, it’s very difficult to get data on the decision not to do something,” says Andrevski. “It’s often not reported publically, so it is not observable to researchers or they want to conceal information from rivals. Most of the coaches that are in my study played basketball during my time [in Macedonia]. That helped me to get access to the data.”

What the Game Tape Showed
He and colleagues Wally Ferrier (University of Kentucky) and Tomi Nokelainen (Abo Akademi University) videotaped 15 basketball games and then interviewed the coaches about the decisions that went into each play. Coaches were approached right after the games and presented with video coverage to jog their memories. To ensure candid responses, their privacy was assured.

Out of all decisions that basketball coaches considered, the research team identified 673 competitive acts and 143 competitive forbearances. In other words, 17 percent of all considered competitive moves were purposefully not executed. Interestingly, the more titles a coach had won, the more likely he was to choose forbearance. Accomplished coaches, for example, often opted to leave an underperforming player in a game to sort things out himself rather than being pulled — with great results.

Based on his findings, Andrevski and his colleagues developed a theoretical model for decision-making, one that takes the process a step farther than most models of corporate strategy. According to conventional models, in stage one you identify the problem. In stage two, you develop potential solutions – competitive moves that can address that problem. In stage three, you select the most effective move among multiple courses of action.

“And then [the model] stops,” says Andrevski. “They stop at the stage where managers evaluate whether to act or to forbear. In our model, we introduce a fourth stage at which, once you choose and commit to an option you believe is the most effective, you start comparing the benefits of acting with the benefits of forbearing.”

Once you commit to an option you believe is the most effective, compare the benefits of acting with the benefits of forbearing.

There’s a lesson here for managers. “Oftentimes once you commit to a particular initiative, you don’t stop and evaluate the reasons for acting and not acting. You go with the intended act. You don’t even consider that not acting at that point can have a more positive outcome.”

From his study of basketball coaches, Andrevski and his colleagues developed a list of eight reasons for competitive forbearance that can help decision makers recognize when and why not acting might be superior to acting in certain situations. The reasons are:

  • Unrealized potential: waiting for full benefits to materialize
  • Outwitting rivals: staying one step ahead of the competitor
  • Hedging losses: avoiding a deeper hole
  • Learning through experience: setting yourself up for future success
  • Interpersonal considerations: maintaining good relations with team members or stakeholders
  • Resource management: husbanding resources to get the most out of what you have
  • Strategic inconsistency: not acting on opportunities inconsistent with your existing strategy
  • Unexpected events: sudden changes in the competitive environment that dramatically change the payoffs associated with a considered competitive move

To see how this plays out in real life, Andrevski points to Apple’s decision to refrain from integrating Adobe’s Flash Player into the iPhone and iPad. “Although the decision was heavily criticized at the time,” he says, “Adobe recently announced that it is withdrawing its Flash Player from Google’s Android mobile operating system too, and is refocusing on the emerging HTML5 standard, suggesting that forbearance was the right choice for Apple.”

“Competitive forbearance can be beneficial,” he says. “Although not acting sometimes can hurt performance, such as when managers lack capability to act or when they’re indecisive, a purposeful decision not to act can actually be good.”

Further Information

Smith School of Business Executive Education




 
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