Think like Strategists: Lessons from the Masters of Strategy
All men can see these tactics whereby I conquer, but what none can see is
the strategy out of which victory is evolved.
Apple unveils an iPod Shuffle half the size of its previous model, but able to play twice as many songs.
Wal-Mart sells a package to doctors for electronic medical records through its Sam’s Clubs.
Charles Schwab provides a one-year, no-fee consultation service to select clients.
SAS, Dell, IBM, and Oracle market their data-mining expertise to help medical providers perform detective work and improve care.
What do those companies have in common? First, in all instances, they launched a new product or service during a severe recession, overlaid with intense global competition. Second, those companies made use of a powerful driving force, the human element, which became the foundation of all their energetic activities. That is, all actions that preceded and followed their product and service introductions were handled by individuals with a positive mind-set. Third, those individuals proved responsive to fresh ideas, innovative about developing business-building strategies, and enthusiastic when implementing their plans. And they succeeded in their actions in spite of harsh competitive conditions.
Finally, managers also displayed ample expertise in developing business plans that were aligned with their respective corporate cultures. They developed strategies that incorporated an indirect approach, surprise, speed, and comparative advantage—all of which were directed at decisive points in the marketplace. The combined effort was driven by effective leadership that focused on their employees’ heightened morale.
During a similar period, the business press featured an overflow of brilliant case examples about the ongoing successes of such companies as Google, Facebook, and Amazon. Beyond the superior application of technology, those firms exhibited many of the attributes listed above.
In contrast, the scenarios for the more cautious and reticent organizations during those difficult economic times dictated approaches triggered by cost-saving plans, such as halting new product introductions, shelving costly projects, reducing marketing expenditures, and the ultimate step, laying offpersonnel.
Initiating survival strategies in a tough economy is one thing, and quite acceptable, where few new ideas materialize, or where managers and staff are immobilized by excessive fear, caution, and lack of skills. Nevertheless, it is no great comfort when you consider that growing a business is the true measure of a company’s long-term progress. Retreating is not what you bargained for.
Also at the time, among those successes, there was also a dark side to the then Internet revolution, with numerous dot.com failures. On examination, and notwithstanding substantial funding from venture capitalists, it did not take long to see that many had incomplete, or at best, shabby business plans, ill-conceived marketing strategies, vacuous corporate cultures, lack of even rudimentary competitor and customer intelligence, and poorly defined customer segments.
War is a matter of vital importance ... the road to survival or ruin. It is mandatory that it be thoroughly studied.
In this concluding chapter, what can we sum up from the above examples? What principles, concepts, even theoretical propositions can be singled out about running a business in today’s challenging marketplace and which are “a matter of vital importance (and should) be thoroughly studied”? What can be found in the writings of the masters of strategy to help you think like a strategist? The following quotes demonstrate some unfailing truths.
As water has no constant form there are in war no constant conditions.
War is more than a true chameleon that slightly adapts its characteristics to the given case.
The references to “no constant form” and “chameleon” are useful metaphors for the constantly changing environmental, economic, and competitive conditions of the marketplace. Yet, even accounting for the unpredictability of events, each campaign needs the structure of a plan to contain the great number of variables that exist in every situation.
Some variables can be isolated and measured; others cannot be reliably controlled. For instance, there are the sometimes amorphous factors of judgment, experience, and intuition. Beyond those are the even more subjective variables of luck, chance, friction, morale, and the paradoxical nature of risk that need to be assessed. And laced through the whole process is the even more elusive factor of human behavior at different stages of an event.
Even market intelligence can be a variable depending on its reliability, timeliness, and applicability for developing strategies. Thus, the conduct of competitive business is based less on a formally developed theory and more on intuition, experience, and an understanding of the rules or laws of action, reaction, and flexibility.
To that end, it is incumbent upon you to exploit an advantage through continuity of effort, even within the uncertainty of the “fog of war.” Therefore, keep your competitor under continuing surveillance and pressure. If you maintain the initiative, it denies the opposing manager time to regain his equilibrium and renew his resistance.
That means that every pause between success and the next push gives your competitor a fresh opportunity to seek help from somewhere else and continue to oppose your efforts. Maintaining ongoing pressure, therefore, helps secure success at the least cost.
There is still another factor that can bring action to a standstill: imperfect knowledge of the situation. The only situation a commander can fully know is his own; his opponent’s he can only know from unreliable intelligence. His evaluation, therefore, may be mistaken and can lead him to suppose that the initiative lies with the enemy when in fact it remains with him.
What matters therefore is to detect the culminating point with discriminative judgment.
To win victory is easy; to preserve its fruits, difficult.
A well-thought-out business plan is an essential prerequisite to committing any amount of resources. (See Appendix 3, a proposed format for a Strategy Action Plan, which you can customize for your own use.)
As part of the planning process, you should be aware that every campaign should have a “culminating point.” That is the point at which further action could prove costly and counterproductive.
One key conclusion is associated with this concept. Avoid entering several markets at the same time, for the following reasons. Consider the potential threat of “imperfect knowledge of the situation” when entering more than one market at a time, such as facing the resistance of a different set of competitors in each market and determining each culminating point. Then think seriously about the risk of spreading thin your human, financial, and material resources by entering multiple markets simultaneously.
A possible exception to this guideline is the conscious decision, after suitable research and estimates of competition and other relevant factors, to roll out a product without differentiating the offering, thereby treating all segments as equals with a one-size-fits-all approach.
With many calculations, one can win; with few one cannot. How much less chance of victory has one who makes none at all! By this means I examine the situation and the outcome will be clearly apparent.
Therefore I say: Know the enemy and know yourself; in a hundred battles you will never be in peril.
When you are ignorant of the enemy but know yourself, your chances of winning or losing are equal.
If ignorant both of your enemy and of yourself, you are certain in every battle to be in peril.
No one starts a war—or rather, no one in his senses ought to do so— without first being clear in his mind what he intends to achieve ... and how he intends to conduct it.
Effective management requires well-honed leadership skills to implement even the most basic competitive strategies. That means developing coherent objectives and strategies and “being clear in his mind what he intends to achieve.” In turn, that requires a rational approach to estimating the situation and using a meticulous correlation of ends and means that focuses on a decisive point in the marketplace.
Sales, profits, return on investment, and other financials are well- established points for measurement. Others include customer satisfaction levels, customer retention rates, and corporate image. More difficult to measure are the flexibility to react with speed to an emerging market trend, degree of preparedness against aggressive competitors, levels of employee morale, and effectiveness of customer relationships. Also to be considered are measures covering operational efficiencies, effectiveness of internal communications, and progress on innovation.
Similarly, to the extent that you are able, attempt to acquire comparable information about key competitors. Then you can gain an all-around view of your business, which introduces a balanced assessment beyond the standard financial numbers. In the process, you can flag any underlying causes of an internal procedure or a market event, thereby getting an early warning signal to make rapid adjustments.
One mark of a great soldier (or strategist) is that he fights on his own terms or fights not at all.
One ... question is how to influence the enemy’s expenditure of effort; in other words, how to make the war more costly to him.
A manager who understands the nature of competitive actions should also be able to identify his or her comparative advantage and thereby fight “on his own terms.” There are a few points worth noting. First, comparative advantage applies to using one’s own strengths against an opponent’s weaknesses, rather than attempting to match the rival’s capabilities. Second, an equally important point in the search for a comparative advantage is to make the campaign relatively more expensive for the rival. Consequently, given the dynamic nature of competition, determining strengths and weaknesses is the primary approach to developing comparative advantage, which leads to superior strategies and tactics. (See Appendix 1 for a “Strategy Diagnostic System” and Appendix 2, “Appraising Internal and External Conditions.”)
Another tool that is useful for comparative advantage is benchmarking, which serves a different purpose. Benchmarking allows you look to other industries and companies that excel in specific areas. It can apply to anything from production rates and defect levels to how you answer an inquiry.
First popularized in the 1970s by Xerox, benchmarking assesses your own performance, compares it with others, and if they are superior, helps you find out what it takes to match or exceed that level. This form of comparison broadens your perspective as you gain insight into how other companies operate. It thereby becomes not only a benchmark for your operation, but also stimulates fresh thinking and new ideas that can be adapted to give your operation a competitive advantage.
In war the result is never final. Even the ultimate outcome is not always to be regarded as final. The defeated state often considers the outcome merely as a transitory evil, for which a remedy may still be found in comparative advantage considerations at some later date.
Generally in battle, use the normal forces to engage; use the extraordinary to win.
Now the resources of those skilled in the use of extraordinary forces are infinite as the heavens and earth, as inexhaustible as the flow of great rivers.
If you can realistically internalize the sage advice that the “result is never final” and “the use of extraordinary forces [comparative advantages] are infinite,” then you can look forward to the incalculable possibilities of what ingenuity, imagination, creativity, and intuition can produce. It therefore becomes entirely reasonable to assume that each competitive situation would have many possible solutions.
Consequently, there is no need to rely on a single optimal solution. This is especially so if you unleash the creative capabilities of your staff through team participation.
In that context, then, you cannot assume that an organization’s fate, its whole existence, hangs on the outcome of a single event, no matter how seemingly decisive. Thus, even after a failed campaign, there is always the possibility that a turn of fortune can be brought about by developing new sources of internal strength.
In addition to the above realities, successful managers sought ingenious ways to frustrate competitors’ plans. And where possible, they even attempted to unhinge their rivals’ alliances. Above all, they and their subordinates were adept at gathering, analyzing, and acting on business intelligence, with special attention to competitors’ moves. They learned that ongoing business intelligence can spell the difference between success and failure in any competitive environment. (Many of the failed dot.coms discovered this truism, too late.)
Consequently, look at competition with a 360-degree view, along with a reflective view of your own business circumstances in a changing marketplace of erupting technologies, environmental concerns, and new customer dynamics. What you are likely to see is a panoramic scene that can impact your decisions about selecting markets, launching new products and services, and devising winning strategies.
The requisite for a man’s success as a leader is that he be perfectly brave. When a general is animated by a truly martial spirit and can communicate it to his soldiers, he may commit faults, but he will gain victories and secure deserved laurels.
By command I mean the general’s qualities of wisdom, sincerity, humanity, courage, and strictness.