Flip Your Competition

Book: Judo Strategy: Turning Your Competitors' Strength to Your Advantage
Author: David B. Yoffie
Publisher: Harvard Business School Press
Price: $29.95

Even before you read a word of Harvard Business School professor David B. Yoffie's latest book, Judo Strategy: Turning Your Competitors' Strength to Your Advantage, a picture opposite the title page offers a preview of coming attractions. It shows a 10-year-old Japanese girl standing triumphantly above a shocked -- and prone -- Russian president Vladimir Putin. Seconds before, Putin, a black belt in judo, had been flipped by the small child, despite outweighing her by at least 100 pounds. There's no question who's in charge -- and it's not Putin.

Judo's recurrent theme -- that if strength is properly channeled, the weak can defeat the strong -- is what fascinates Yoffie, the Max and Doris Starr Professor of International Business Administration at HBS, and his coauthor Mary Kwak, a research associate there. "The original insight came when I was doing research for my last book [ Competing on Internet Time: Lessons From Netscape and Its Battle With Microsoft ] and interviewing the head of engineering at Netscape," says Yoffie, a scholarly sort who has never actually tried judo and has no intention of ever being flipped. When he asked a question about Microsoft's operating system, the engineer gave a judo-like answer: "You can either look at Microsoft's operating system as a great asset, or you can think of Windows as a liability that slows Microsoft down." Yoffie says, "It got me thinking about a field called judo economics that went way back, almost 20 years, with basic ideas about using an incumbent's strength to your advantage."

Netscape wasn't the only example. Everywhere Yoffie looked, he saw tiny companies rising from nowhere to confront huge, lumbering, powerful companies. They were making moves that seemed completely counter to conventional management wisdom. So Yoffie decided to use judo as a way of explaining the phenomenon, profiling companies, such as eBay and RealNetworks, that he called "black belts." He and Kwak visited judo clubs and interviewed judo masters in Boston and Tokyo to make sure that the metaphor worked.

Although much of the book was written before the recent downturn, most of the examples the authors chose hold up nicely. Judo Strategy is a good read, with lots of salient business lessons for small and large companies alike seeking to "gain a grip" in this shaky economy. Here, Yoffie sums up some of the main principles.

Movement Is Power (If You Can Be a Puppy Dog)

The first principle of judo is movement. But that doesn't mean launching an overt attack. Rather, it means using movement to get a competitor off balance and set the terms of the competition, says Yoffie. And the best way to do that? By making the rival think that you're not much of a threat until you're ready to make your move -- on your terms. Yoffie calls it "the puppy dog ploy." He says, "It's powerful and counterintuitive. You try to stay largely out of the radar of competitors. If you moon the giant, you're much more likely to see retaliation."

Capital One Financial Corp. executed the puppy dog ploy perfectly when it first began to market niche credit cards, Yoffie says. "Capital One wasn't advertising what it was doing. It wasn't establishing a consumer brand, and it wasn't telling people the methodology," he says. Because the company focused on tiny niches of the market (Buffalo Bills-affiliated credit cards, for example) and moved quickly, it eluded big rivals like Citibank until it had become a huge player in the market. "The strategy would have failed if Capital One had been open," says Yoffie. The strategy works best for a new company, but it can also be used by large companies that would like to redefine their industry, he says.

Keep Your Balance

In judo, balance is critical. Not only should you keep your balance so that you can respond to an attack, but you should force your competitor off balance. Remember the old saw: The bigger they are, the harder they fall. And that's your objective. "Balance is both offensive and defensive at the same time," says Yoffie. "Judo is about the art of continuous attack, but at the same time, you've got to retain your balance. If you're playing your competitor's game, you're going to lose."

There are several ways to achieve balance, starting with a proper grip. "You always want to get a good grip, because it helps you define the nature of the battle," says Yoffie. "You never want to go force against force." That, indeed, is the exact strategy eBay followed with AOL, a potential rival in the online-auction space. Over an 18-month period, eBay signed a series of deals that gave AOL incentive to cooperate rather than to start a competing business, which could have killed the fledgling company. As eBay became more and more popular, AOL -- which was paid to promote the site -- started to make a lot of money. Finally, eBay was able to get AOL to sign a noncompete clause. By binding itself tightly to AOL, eBay was able to hold on until it was too costly for AOL to enter the business.