"I'm very conscious I've got to get the balance right because ultimately my responsibility is to produce a winning England team," the 46-year-old told the Daily Telegraph in an interview.
"I never pick on reputation -- form has to come into it. You have to look at the opposition and the type of game you're expecting and select the players best suited to that.
"We have players of great potential but at the moment we're 13th in the world. We've got to be better, everything we do has got to be better. Even being second in the world isn't good enough, we have to be the best we can be, and that's the best."
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Southgate also said his side needed to develop the same ruthless winning mentality that Eddie Jones has instilled in the country's rugby team, which has led to their unprecedented run of success.
"It's clear they don't believe they can be beaten. That plays a huge role," Southgate said after Jones' side scored a late converted try to beat Wales 21-16 in Cardiff last Saturday to extend their winning streak to 16 games.
"You get a sense of the culture that's there. One of the things I was interested in was that culture.
"How are they working? How do they deliver? Because that's what we are trying to take into the England team: how do we create an environment that will bring the best out of the players?
"Confidence plays a part. As a coach, you're working out how to challenge at every moment. That said, the challenge should also come from the players themselves. Ownership of what they are doing is really important."
(Reporting by Shravanth Vijayakumar and Simon Jennings in Bengaluru; Editing by John O'Brien)
