When it comes to battling with the competition, where do you draw the line? Is all fair in love, war and business?

The key text for believers in ruthless competition is probably Hardball: Are you playing to play or playing to win? written five years ago by Boston Consulting Group’s George Stalk and his ex-BCG colleague Rob Lachenauer.

For these two, a hardball approach means “creating discomfort for others and tolerating it in yourself”. Not that you should consider doing anything illegal – of course not. But there is a moral and legal grey area (a “caution zone”) which, the authors argue, is “rich in possibility”. A smart leader will recognise where to draw a “bright line” in this zone. He or she “lets everybody know when they’re getting close to it, and takes corrective action as soon as anyone steps over it”.

This sounds like quite a high-risk strategy. Sure, by playing on or just over this line you will certainly “get in there where it hurts”, as the rugby coach used to tell us. You may make some hard-won gains in market share. But you also risk public relations disasters, and attracting the attention of special interest groups that do not have your interests at heart.

This rational case for caution and restraint will not impress true-born competitors. They have a stronger appetite for risk and reward. To understand what a true-born competitor looks like, try to get hold of a photo of the American swimmer Michael Phelps as he reacted to being beaten in last week’s 200m freestyle event at the world championships in Rome. Rather surprisingly, this tale from the swimming pool tells you quite a lot about the realities of competition today.

Mr Phelps, who won eight gold medals at last year’s Beijing Olympics, had not lost a big race for five years. He was beaten by the German Paul Biedermann, who has raised his performance dramatically in the 10 months since Beijing, where he came fifth in the same event. Since then, his “personal best” time has improved by four seconds, a huge margin.

Has Mr Biedermann developed a radical new technique? No. But he has started wearing an Arena X-Glide swimming costume, a polyurethane-coated, water-impermeable suit that increases buoyancy and which appears to give him a big advantage. (For a limited period only – the sport’s governing body, Fina, has said that it will ban the latest high-tech costumes from next year.)

New technology constantly threatens to change the rules of whichever market you are competing in. Hardened competitors understand that. But just how hardened we may have to become has been set out by Michael Schrage, research fellow at the MIT Center for Digital Business programme at the Sloan School of Management, in a provocative essay in the summer issue of the Conference Board Review.

In “A ‘better’ workforce”, Mr Schrage describes a not far-off world in which employers have to consider, for example, handing out caffeine pills to staff in the search for boosted performance. Some concert musicians favour beta blockers to steady nerves; maybe attention-deficit executives should try Ritalin? Perhaps sales teams should be guzzling down “genetically engineered pheromones” to make them more likeable and persuasive?

Mr Schrage makes a bold claim. “Ever-murkier multibillion dollar grey markets in performance-enhancement will become tomorrow’s new normal, with unclear rules, questionable ethics and uncertain technologies spiralling almost totally out of control,” he writes, in full doomsday mode.

And, as a leader, the choices you make in this regard will be crucial. As Mr Schrage says: “When talented employees look to see what is organisationally acceptable or culturally beyond the pale, they don’t look first at corporate policy manuals. They look at the leadership.”

We should not be squeamish about competition. We should welcome it. Even if Mr Schrage’s wilder predictions never come to anything, he is right to get us to focus on performance improvement in an ever-more competitive world.

When I met Lord Coe, the chairman of the committee organising the London Olympics, earlier this year, I was struck by his intense competitive edge, still perceptible beneath a mellow exterior long after his running career had ended. Discussing his most famous setback, the 800m final at the Moscow Olympics in 1980, his face betrayed the disappointment he still feels. And he loves competition. “There is a primeval instinct about somebody snapping at your heels, and it doesn’t hurt,” he said.

Winners like winning, because they loathe the pain of defeat. And they will do just about anything to ensure victory. Nil satis nisi optimum. Nothing else will do.

This is an attitude of mind that can be developed, and business leaders need to encourage it in their colleagues. The script for that pep talk is already written. Arnold “Red” Auerbach, coach of the great Boston Celtics basketball team in the 1950s and 1960s, is usually credited with coming up with this timeless insight: “Show me a good loser, and I’ll show you a loser.”