The business world resembles a battlefield. There is a continuous battle – for customers, market dominance, as well visibility takes place. Therefore, how can you achieve success? How can you compel your rivals to withdraw, seize their territory, and become successful?
This is where these chapters come into play. Drawing inspiration from the ancient Chinese military strategist known as Sun Tzu, they elucidate how you can apply timeless principles of warfare to thrive in the world of business.
Although Sun Tzu penned “The Art of War” over 2,000 years ago, the knowledge and understanding from his renowned work remain applicable today. Covering areas from leadership to resource management and surprise tactics, this serves as your essential guide to outperforming your rivals and securing enduring success.
In this book, you will learn
- how to conquer your foes with a little bit of their resources;
- the reason you should not copy your rivals; and
- what we can learn about strategy from a McDonald’s french fry.
Chapter 1 – Seize your rival’s territory without causing its destruction along the way.
What relevance does the old philosophy of Sun Tzu hold in the context of establishing a thriving business? Before addressing this question, it’s crucial to define what “success” truly entails.
In a broad sense, Western culture typically refers to a thriving business as one that yields a return on investment for shareholders. Conversely, Asian culture tends to regard a thriving business as one that offers employment opportunities to individuals.
However, prior to achieving either of these objectives, a business must first ensure its survival and growth. As a business leader, these are your foundational objectives, and they align perfectly with the strategic principles advocated by Sun Tzu.
Sun Tzu advises his readers in “The Art of War,” to “take All-under-heaven intact.” This implies that military leaders need to gain charge over all possessions of their rivals without causing harm to these acquisitions.
In the business context, “achieving All-under-heaven” entails striving for market dominance, where you aim to control a bigger portion of your market than any of your rivals. Market dominance holds immense importance because it typically translates to profitability. Businesses that establish market dominance enjoy advantages such as enhanced economies of scale, heightened customer loyalty, and increased revenues, resulting in a more substantial financial bottom line.
However, Sun Tzu’s principle of “taking All-under-heaven” doesn’t only cover achieving dominance but doing so without causing harm. When used in the business world, this signifies that you should not damage or ruin the market you intend to conquer. Nevertheless, causing harm to a market often leads to a decrease in its profitability. A striking illustration of this is evident in the case of Philip Morris business, the global tobacco company.
In the year 1993, Philip Morris’s Marlboro cigarettes stood out as one of the world’s most lucrative brands. However, the company faced a challenge. Competing discount brands were selling their cigarettes at lower prices, progressively cutting away market share from Marlboro.
Philip Morris chose to adopt a direct and forceful approach. It confronted the discount brands by reducing Marlboro’s prices by 20%. However, in response, the discount brands further reduced their prices. Consequently, the entire industry began to experience financial losses, even that of the Marlboro brand.
Philip Morris remained a significant player, but it had neglected the counsel of Sun Tzu. While the firm may have retained dominance in the market, it had turned it into an ailing and unprofitable one.
Chapter 2 – Steer clear of your opponents’ strength and focus on exploiting their weaknesses.”
Imagine a river rushing down the mountainside, sweeping away everything in its way. What is the source of its power? As stated by Sun Tzu, the key lies in the fact that a river flows downhill all the time, not uphill.
The idea of seizing everything from your foe may seem like a formidable task. However, if you aspire to emulate the river’s approach, it becomes attainable. To achieve success in both warfare and business, refrain from rushing toward the hard feats; instead, target the accessible lowlands.
In the world of business, a lot of companies strive for market supremacy by targeting their competitors’ most formidable goods or abilities, usually through replication. If a rival is renowned for offering discounted pricing or superior manufacturing quality, these companies endeavor to provide even more significant discounts or produce even higher-quality goods.
While it might appear to be a promising approach. Since it was effective for your rivals, why wouldn’t it guarantee success for your own business? However, think of the story of AT&T, the communication firm, it shows the reason why targeting your rival’s strengths can be a costly blunder.
During the early 1980s, AT&T’s executives observed that other communication firms were diversifying into the computer industry with success. Consequently, AT&T chose to follow suit, initiating the development of its own computer products. Their rationale was straightforward: if IBM and Hewlett-Packard could do it, why couldn’t they?
However, this strategy became a grave misjudgment. In spite of AT&T’s advanced research facilities and substantial resources, they failed to gain a substantial market share in the computer industry, lagging behind their competitors. After eight years, the attempt had resulted in billions of dollars in losses, leading to the layoffs of thousands of employees.
If you choose to attack the strengths of your rivals, you’ll probably see yourself combating an uphill war, similar to that of a river attempting to flow upstream. Your quest for market supremacy will take several years, and in the end, regardless of the result, you’ll finish your resources and morale.
To steer clear of this scenario, it is rather advisable to focus on your competitors’ vulnerabilities. Identify the weakest point in their value chain and exploit it relentlessly. This is precisely how numerous Japanese businesses, like Toyota, Sony, and Honda, established themselves as international market dominators. After recognizing that their American counterparts had shortcomings in manufacturing quality, they made the pursuit of high-quality manufacturing their foremost priority.
Chapter 3 – Thoroughly investigate and analyze your rivals.
Now that you understand the importance of targeting the weakest points of your adversaries’. However, it’s crucial to recognize that this knowledge is of little use without a clear understanding of what those weakest points actually are. When plotting an attack, you must have a comprehensive understanding of your opponent.
As Sun Tzu suggests, a wise leader achieves victory by having an advanced understanding of the enemy’s intentions, abilities, and even their frame of mind.
However, you cannot acquire this insight merely by studying your opponent’s historical actions or through theoretical calculations. You can only have a genuine understanding of your opponent by engaging with individuals who possess firsthand knowledge of your opponent’s circumstances.
Only knowing your rivals’ annual revenue, workforce size, or product is not enough, but it is a great starting point. To gain a deeper understanding, you must delve into more facts. This involves purchasing and disassembling their products to assess their manufacturing costs. It also entails studying interviews conducted with their executives in the media or industry trade publications to notice any clues about their technique or mindset.
However, it’s essential to take a step further than this. To gain a genuine understanding of your rivals, you must unravel their organizational culture. You have to know the values, convictions, as well as underlying assumptions that steer their actions.
The most effective approach to knowing your rivals’ culture involves investigating the backgrounds of their senior executives. Where did they receive their education or gain prior professional experience? What life experiences have influenced how they act? Determine whether they take risks or if they are the type that plays safe. Explore the sources of information they rely on when making a choice. Combining all these details will assist you in anticipating what their potential next moves are.
As soon as you are aware of your rivals’ plans, you can readily counter their attacks. This is precisely what the prominent fast-food chain McDonald’s did when it became aware of its competitor Burger King’s plans to challenge the quality of its French fries.
Equipped with this knowledge, McDonald’s took proactive steps. It issued a memorandum to its entire restaurants, directing them to pay meticulous attention to the cooking process and seasoning of their fries. In the end, McDonald’s managed to ward off Burger King’s attack and effectively safeguard the reputation of its fries.
Chapter 4 – Speed makes up for an absence of resources.
What is the key to emerging victory in a war? According to Sun Tzu, the answer to that might come as a surprise to you. Instead of emphasizing military strength or abundant resources, Sun Tzu believed that speed was the critical factor for achieving success. In Sun Tzu’s writings, it is stated that when your foe gives you an opportunity, you have to act swiftly, much like a hare.
This concept is easy: a fast-moving army has the ability to conquer a much larger army than itself. When your army advances with remarkable speed, you can mark and defeat individual rival units before the remaining rival forces can react to your assault. This is exactly how you eliminate a larger enemy force one by one, swiftly transitioning from one unit to the other. Your slow-moving adversary will not have the opportunity to focus their forces to counter you effectively.
Swiftness compensates for a small size, and this principle applies to the business world as well. Assuming you are the leader of a small firm, aiming to capture market share from a large competitor with a lot of workers. Say your sales team can effectively finish a sales call in 30 minutes while your rival requires two hours, you’ll find that you only require a quarter of their worker to compete effectively. Moreover, with a smaller yet more efficient sales team, you’ll achieve a higher return on investment compared to that of your rival.
A great illustration of this is IBM, a telecommunications firm that utilized speed to maximize its return on investment. By reorganizing its massive single production line into more numerous efficient lines, IBM minimized the time needed to manufacture one personal computer from five days to a mere eight hours.
This innovation did not just accelerate IBM’s production speed but it also enabled them to minimize their workforce by a third. Consequently, their profitability experienced a substantial boost, and they gained a larger share of the market.
IBM’s achievement was not a one-time. In nearly all sectors, firms that operate at an accelerated pace typically enjoy a return on investment that is two to five times greater. Additionally, it is a well-established reality that fast-moving firms have the tendency to experience rapid growth. When Walmart, the retail giant, entered the discount retail sector, it outpaced its rivals by 80% in terms of speed. This lightning-fast maneuvering enabled Walmart to expand three times faster than other discount retail chains. The rest, as they say, is history.
Chapter 5 – Engage your rival in two locations simultaneously.
Predictable attacks are easy for your rival to defend against. To truly inflict harm, whether in warfare or business, you must catch your opponents off guard and strike them with a surprise attack. When they eventually know they are being attacked, you would have already emerged victorious.
Sun Tzu’s teachings emphasize a two-pronged technique to surprise your foe. This approach involves using two types of attacks: a direct and an indirect attack.
A direct attack is when your adversary can anticipate your coming from a distance. It’s a direct attack that loudly signals your presence in the battleground. However, the real strength of your approach lies in your indirect attack.
During the beginning of the 1990s, Southwest Airlines held a dominant position in California’s low-cost, short-haul air market. However, this wasn’t the case when United Airlines began giving even more affordable flights.
United Airlines initiated a direct offensive, prompting an immediate response from Southwest Airlines. Southwest restructured its ticketing system to lower expenses. At first, it appeared that these two airlines were engaged in a direct attack for dominion over California’s airspace.
However, a different strategy was at play. Although United was preoccupied with countering Southwest’s cost-cutting in short-haul flights, Southwest quietly executed a harmful indirect assault.
Based on Sun Tzu’s teachings, the primary aim of a direct assault is to divert the opponent’s attention, making it less likely to detect a more destructive, indirect strike. The indirect attack catches the opponent off guard and is the one they least anticipate. Direct attacks attack the rival directly, while indirect attacks target the opponent’s flank. The flank means the weak part of an army when the army is engaged in a direct attack.
Southwest Airlines, United’s weak point was obviously its lucrative long-haul flights. In response, Southwest began giving long-haul flights. Due to that, they were encroaching on a completely diverse part of United’s customer base. United, caught off guard, saw itself unexpectedly wagging war in multiple battle fronts. It suffered financial losses in various main markets, while Southwest kept on increasing its number of flights and achieved profits. Through its clever, two-pronged approach, Southwest Airlines effectively incorporated Sun Tzu’s principles by targeting its opponent where it was least anticipated.
Chapter 6 – Leaders need to have five main attributes while refraining from several others.
From old civilizations in the time of Sun Tzu to the present day, the ongoing question has persisted: What defines a great leader? What attributes are necessary to inspire their groups to win or prosperity among their constituents?
In the contemporary business field, this question remains relevant. What kind of individual can drive their workers toward success? Furthermore, what distinct traits identify someone as an unfit or potentially perilous choice for leadership?
As said by Sun Tzu, the primary and vital attribute for leaders is wisdom. Wisdom allows leaders to know when circumstances are changing and make prudent and beneficial choices. The second attribute a leader must possess is boldness and to grab opportunities as they see them come up.
The third essential attribute of great leaders lies in their humanity – their ability to empathize with their team and recognize the sacrifices made by their members. The fourth attribute is that leaders need to be sincere, ensuring their team can count on receiving due rewards for their contributions. Fifth, great leaders need to maintain discipline, creating an environment where their team respects the repercussions of misconduct.
All of these leadership attributes are equally significant in the business world. Business leaders who are smart possess a knowledge of their company’s strengths and weaknesses, as well as those of their rivals. Exceptional executives complement their intelligence with courage and act decisively on their judgments. Humanity as well as sincerity also hold importance. Treating workers right is essential for getting their best performance. Lastly, great leaders demonstrate the discipline required to follow through with approaches and ensure their successful execution.
Now, in terms of what we should avoid in leaders, Sun Tzu identifies various warning signs in leadership. Recklessness is one of the red flags to avoid in a leader. Recklessness is where leaders impulsively rush into risky circumstances, causing harm. Another trait to avoid is cowardice, if a leader prioritizes their own well-being above every other thing, the leader tends to miss valuable opportunities.
Sun Tzu also includes compassion as a potential red flag attribute in leaders. Compassion, on its own, is a commendable quality. However, if leaders are excessively compassionate, they become overly focused on alleviating the difficulties of their followers, often at the expense of long-term success in a way of avoiding harm. As we’ve come to understand, a leader’s ultimate objective is success. It’s time to apply the teachings of Sun Tzu and allow them to steer you toward achieving your own success!
Sun Tzu and the Art of Business: Six Strategic Principles for Managers Mark McNeilly Book Review
Careless corporate leaders commit strategic blunders by attempting to copy their rivals’ achievements and engaging in direct conflicts with their main competitors. However, genuinely skilled leaders employ a more subtle strategy. They steer clear of direct confrontations, identify vulnerabilities in their rivals’ defenses, and make sure that their works are swifter, more daring, and better-informed than any other player in their field. These types of leaders are the ones who effectively implement Sun Tzu’s principles.