“Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win” ― Sun Tzu, The Art of War
Whether you are a start up or about to launch new products / services of a large corporate, you are destined to war, can you make it your destiny to win?
Strategy is about winning. Anything else does not matter. What you define as a win is dependent on what your business has set out to achieve. Strategy is emergent in nature. Cast it in stone and soon you may find yourself buried under it, as the ground you tread is shifting continuously and so is your enemy.
So where does one start.
Start with the Battlefield: Battlefield (industry) you are entering plays a very important role in your future success or lack of it. The state of the industry and its structure can put you on high ground or have you surrounded. Entering a highly competitive industry will have you encircled and require significant investments to garner a share of the market to build a sustainable business. Entering a niche or relatively less competitive markets may require less resources to acquire profitable customers.
Next step is to identify the terrain and existing structures in this battlefield that may support or resist your forward march. If you customers have more options, you will need to amp up your power i.e. better product/service, more features, better quality, better price - a better value proposition. Suppliers with monopoly positions, limited capacities, preferred geographical locations, specific supply chain capabilities etc will impact your cost structure and negotiating power. Competitors may be deeply entrenched (high market share, strong distribution, restrictive supplier agreements) with deep pockets and likely to retaliate with strong price cuts, promotions, buying supplier capacity etc. Each of these exteraneous factors in the battlefield you are about to enter must be assessed for impact on your business and planned for one by one.
Choose your theatre of war: Will you fight across board and therefore invite upon yourself the wrath of the mighty or will you use a flanking strategy to win smaller markets first or will you create a small niche in the same market. Will you be better off offering a unique and a distinctive advantage to a smaller set of customers ? The decision you take will have direct consequences on the resources needed and the internal business structures you must create to achieve a win. No one approach is better than the other, however each has its very distinct characteristic and requirements.
An across board assault requires strong and well developed business structure and access to huge resources. While the top lines may be very large and attractive, the bottom line is likely to be under great pressure. In such scenarios, who covers more ground first becomes the immediate ‘win’ rather than who is more ‘profitable’. High damage (losses) is common. eCommerce industry today is a classic example of this with the biggies pouring in huge amount of resources to buy growth, acquire customers while incurring huge losses . If you were a start up in this brutal battle field, would you aspire to take on Amazon, or will you be better off offering some unique advantage addressing a specific customer demand while being in the same industry. So ask your self – where would you rather dig in.
Move first and win – Really? Often heard is the statement 'we have a huge advantage because we are moving first'. That unfortunately is not true. The bar code was patented in 1952. It was first used at a retail store in 1974 on a pack of wrigley chewing gum! Does attacking (a market) first, guarantee success? Corporate history is full of examples where first movers have been left on the sidelines by late entrants. Think Kodak - the inventor of Digital Photography.
Moving first, in itself does not create an advantage, it is what you do with the opportunity that creates the advantage and presents the possibility of winning now and in the future. The opportunity presented is one to create standards, create benchmarks, set rules, set customer expectations for others to follow. If you can do that effectively, others will be forced to follow your lead and a long term advantage would have been created. It’s the pioneers that get the arrows in the back. So remember to leverage the first mover opportunity to create those shields (advantages).
Choose your position: Where will you position yourself and fight. There are only two routes that lead to higher ground (profitability) - Cost leadership or Differentiation. You can’t take both positions and can't be in between and expect to win (be profitable). Any attempts towards differentiation while aspiring cost leadership will meet with limited success similarly driving cost leadership while aspiring to create a differentiation will deliver limited success at best. Cost leadership and Differentiation two sides of the same coin, you can only have one facing you.
Whether you are a cost leader or provider of a highly differentiated product or service, your entire business system will need to be organized in a way so as to deliver on that positioning. Organisations who attempt to straddle both, end up with low market share and low profitability. At the same time, organizations that consciously strategise and arrange their business systems to deliver on either end of this spectrum deliver a high return on investment as well as a high market share. Some great examples are Walmart – cost leadership, Harley Davidson, Zara, Ducati – differentiation. So don’t get stuck in the middle, make those trade offs, make those choices and get ready to get more profitable.
Create business wide systems to support your positioning: Strategy guides the creation of internal structures, systems and processes. When effectively implemented, these structures and sets of activities work in tandem with the purpose of delivering a clear positioning. By doing so the firm creates a competitive advantage. An advantage that is very difficult to emulate. Discount retailers existed before Walmart as they do today. However Walmart has been able to create business wide set of activities that impact its merchandising, sourcing, supply chain, operations and marketing activities in a way that they all help support its cost leadership which in turn delivers every day low price to customers. It may be easy for a new player to come in and set up a discount store but it would be nearly impossible to replicate the business wide activities of Walmart that actually is its competitive advantage.
War is inevitable and strategy is your roadmap to that win. So evaluate the battlefield carefully, chose your theatre of war (where do you have the best chance to win), choose the position you will fight from (differentiation or cost leadership), ensure that resources are secured and structures created, and you, like a clever and a successful general might have just won before going to war. Godspeed General!