Business has always been tough, but it has gotten even more difficult as competition has become more global, faster-paced and increasingly technology-dependent. So why in the 21st century would it make sense to look to The Art of War by Sun Tzu for business advice, a book on ancient warfare written centuries before the birth of Christ?
Good question. The answer is that The Art of War lays out a brilliant strategic philosophy that has proven itself over the millennia in all types of competitive endeavors. Of course, it's been applied by the military: former U.S. Chairman of the Joint Chiefs of Staff Colin Powell relied upon it and has many translations of it in his home. It's been said that New England Patriots coach Bill Belichick utilizes it to help his team continue its winning traditions. And many business strategists have used it go gain competitive advantage. It has even moved into our popular culture, appearing the in the classic movie Wall Street, in which Gordon Gekko states, "I don’t throw darts at a board. I bet on sure things. Read Sun Tzu, The Art of War. Every battle is won before it is fought."
Unfortunately, the book itself is a bit hard to read and apply, given it's essentially a series of quotations about ancient Chinese warfare. So to make Sun Tzu's concepts easier to understand and more applicable to modern businesspeople I've developed Six Principles from The Art of War that apply to business. Here they are:
I - Capture Your Market Without Destroying It
"Generally in war, the best policy is to take a state intact; to ruin it is inferior to this … For to win one hundred victories in one hundred battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill." - Sun Tzu
Too often businesses fight over market share and start price wars, only to find when it's all over, that they've won a Pyrrhic victory; they have captured the market but left it devoid of profits. The airline industry illustrates this as price cutting has produced many money-losing airlines and terrible customer service.
Instead, to prosper you must capture your market in a manner that leaves the industry healthy. This can be done in numerous ways; developing new ways to serve the market or by using subtle, indirect, and low-key approaches that will not draw a competitor’s attention or response. Amazon did this in the book retailing industry, capturing much of that market and then expanding to serve others. More recently, Netflix overcame Blockbuster with a different business model that the latter ignored and now Red Box has been able to find yet one more way to serve and win in the home video market.
II - Avoid Strength and Attack Weakness
"An army may be likened to water, for just as flowing water avoids the heights and hastens to the lowlands, so an army avoids strength and strikes weakness." - Sun Tzu
Many times businesses will launch direct attacks on the competitors in the hope of profit. Yet direct, unsubtle and heads-down assaults on a competitor's strengths rarely works. Instead they drain a firm's resources and rouse the other company to fight back strongly.
What one must do instead is find the competition's weaknesses and capitalize on attacking those. For example, instead of directly taking on the big retailers in cities, Walmart started out in small towns. In this way the company was able to eliminate weaker local competitors while simultaneously growing stronger. Then, when Kmart later launched a direct price war against Walmart, it was unable to win against Walmart's strength, its low-cost model.
III - Maximize the Power of Business Intelligence
"Know the enemy and know yourself; in a hundred battles you will never be in peril" - Sun Tzu
Business intelligence is crucial to learning the competitor's strengths and weaknesses and understanding one's own capabilities. One case in point hails from in the burger wars between McDonald's and Burger King. The latter had decided to attack McDonald's and its renowned French fries by making its own better and touting them to buyers. Apprised of this, McDonald’s CEO sent an urgent letter to all restaurants, telling them that "Burger King will launch a full frontal assault on one of our greatest assets—our fries." In the letter he then laid out detailed instructions on how to ensure only high-quality fries would get served. Through smart intelligence about its competitor's plans McDonald's won that round of the fight.
IV - Use Speed to Overcome Your Competition
"Speed is the essence of war. Take advantage of the enemy's unpreparedness; travel by unexpected routes and strike him where has taken no precautions." - Sun Tzu
In business, as in war, speed is essential. The changes companies face, whether social, technological, political or economic, are only accelerating. If a firm cannot move rapidly to respond to market changes it will not survive. Speed is instrumental in being the first to market, enabling a company to take advantage of fleeting opportunities and keeping the competition off balance. Companies such as Coca-Cola are continually bringing new products to market or finding new ways to deliver choice and convenience to customers via innovations like the multi-product Freestyle soda dispenser.
V - Use Alliances and Strategic Control Points to Your Advantage
"Therefore, those skilled in war bring the enemy to the field of battle and are not brought there by him." - Sun Tzu
By forming alliances with other companies one can acquire new capabilities and access new markets. Even allying with competitors (co-opetition) can be a smart strategy as well. The NFL determine that this was the way to go when it gave up its feud with the old American Football League to join with it, form a larger league and create the Super Bowl. The latter is now the often the most watched broadcast every year.
Controlling strategic positions is another way to compete successfully. Owning critical patents, seats on standards boards, a powerful brand or the direct relationship with the customer all can lead to gaining the lion's share of the industry profits. One need only look at Google in web search or Apple in the smartphone and tablet markets to see how holding a strategic stronghold can pay off.
VI - Develop your character as a leader to maximize the potential of your employees.
"When one treats people with benevolence, justice and righteousness, and reposes confidence in them, the army will be united in mind and all will be happy to serve their leaders." - Sun Tzu
For a leader to successfully execute Sun Tzu's strategic philosophy requires not just intelligence; character is critical as as well. One cannot align the team on the right path and deliver real value to customers long term without having sufficient character, a sense of self-awareness and an understanding and empathy for others (i.e. emotional intelligence). We know this from studying great leaders in history, the people we work with every day and the science of leadership.
If one follows these six principles one can be successful. Winning the business battles of the future can be helped by using the wisdom of the past.