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The Art of the Strategist
By William A. Cohen AMACOM Books
Copyright © 2004 William A. Cohen
All right reserved. ISBN: 0-8144-0782-X
Chapter One
Take the Indirect Route to Your Objective "Avoid a frontal attack on a long-established position; instead, seek to turn it by a flank movement...." B. H. Liddell Hart
"You can tell a man's character by the way he makes advances to a woman."
Admiral Isoroku Yamamoto
Chris Zane is the founder of Zane's Cycles, a bicycle store near New Haven, Connecticut. As he was trying to get established, the competition was tough and he had to fight hard for every customer. How to compete against Wal-Mart, Kmart, and other giants, much less the established independent dealers, was a major challenge for this small retailer.
Zane soon decided that he couldn't compete directly. For example, he couldn't offer a substantially lower price, a more extensive cycling inventory, better products, or a phalanx of products that had nothing to do with bicycles.
Because direct competition having to do with the product, price, and distribution were standard, he decided he'd have to differentiate his business in another way by taking an indirect approach. Zane decided to emphasize customer service, specifically the length of time that the service was to be provided.
Of course, everyone says they offer superior customer service, including extended guarantees of one time period or another. In his business, the norm among all his competitors was to offer a thirty-day guarantee on routine parts and service. Zane decided to jump up his guarantee to one year. It took his competitors two years to realize they were losing market share to Zane's Cycles, due to this indirect approach on "the flank" of the mainstream way of competing.
Competitors finally caught on and eventually matched Zane's one-year guarantee. Unfortunately for them, Zane immediately doubled his guarantee to two years. When competitors tried to play catch-up and followed him again, he went to a five-year guarantee. In the end, Zane offered a lifetime guarantee. Competitors thought that at last this was as far as he could go, but it wasn't. Those competitors that could reluctantly extended to a lifetime guarantee. However, even that wasn't the ultimate. Zane soon extended his lifetime guarantee to everything in his store! By then, he had plenty of additional cycling products to offer. By taking an indirect approach, Zane had found a way to compete at which his competitors were always behind, and at which he had the advantage, even though his competition in some areas was far stronger and more powerful. As a result of his indirect strategy, Zane grew pretty powerful himself; soon he was the number-one bicycle retailer in size for his geographic area.
Zane's Indirect Approach: An Analysis
If you think that Zane's approach was sheer bravado and terribly risky, better think again. This strategy may have involved some risk, but it was perfectly calculated. Early on, Zane noticed that few buyers brought their bicycles or accessories in for repair after the second year of purchase. An analysis of sales data showed that even for those who did come in for repairs after two years, Zane still made money.
In addition, Zane calculated what any customer was worth to him over a buying lifetime. That's why when a customer came into Zane's store with a six-year-old pump that was completely worn out from use, Zane happily gave him a brand new pump. Let's look at his economic analysis for this pump. This six-year-old, worn-out pump was a top-of-the-line item originally costing $60. So you might jump to the conclusion that Zane was out $60. However, the pump's cost to Zane was only about $30. Moreover, in this case, because of his relationship with the manufacturer, he was credited with the $30, so giving the customer a new pump actually cost Zane nothing.
Even if the pump had cost Zane $30, replacing it for free still made economic sense. The next two times this customer came in to his store, he bought $200 in accessories. Zane netted about $100. Moreover, when the customer decided to buy his next bicycle, where was he likely to go? So, Zane made even more. And, what about word-of-mouth advertising to other prospects? That's probably worth a lot more.
Conceptually, what Zane's Cycles did is shown in Figure 8-1. Zane's Cycles did not meet the competition head-on, but maneuvered around the competition's flank to strike in an area of Zane strength against competition weakness.
As this is written, Zane's Cycles has grown to become one of the top five bicycle retailers in the nation. No wonder that Texas A&M invited this Connecticut Yankee to come out to Texas to teach as part of the college's executive-in-residence program!
The shortest distance between two points may be a straight line, but that is in geometry, not strategy. It isn't necessarily the best direction to take to reach your goal when facing competition. Any football, basketball, hockey, or soccer player or coach can tell you that. Feinting in one direction and going toward another, drawing off the competition in one direction and then passing to someone unexpected to score the goal is standard fare in team sports. It would be utterly foolish and predictable to simply head directly toward a goal, especially if it's in a direction where the competition's concentrated, simply because it involved a shorter measurable distance.
The Indirect Approach Mystifies Until It Is Too Late
If you have ever seen a magician's performance, you may have wondered at his ability to perform what appear to be impossible feats. In fact, his ability to "do magic" is based on an application of the indirect approach. While you are being misdirected by him to focus on something unimportant, he accomplishes something that you may well have noticed if you had not been distracted.
For example, consider the simple trick of rubbing a coin into one's elbow until it disappears. One easy way of doing this is to announce what you are going to do. You then begin to rub. You "unintentionally" let the coin slide off your elbow and fall to the floor. You pick the coin up and begin to rub again. You again "unintentionally" drop the coin. You can repeat this clumsiness a third time. However, this time, as you pick up the coin, you look directly at your audience and comment that this is a slippery coin. You begin to rub again. Suddenly, the coin is gone. What happened? While you looked at your audience and distracted them with your comment, no one noticed that you picked up the coin with your other hand!
Liddell Hart's Analysis of Successful Strategy. Basil H. Liddell Hart was one of the leading military strategists of the twentieth century. Some would go further and say that he was one of the greatest strategists of all time. Liddell Hart spent a lifetime studying the strategy of war and wrote numerous books on his analysis of the subject. Leading practitioners on both sides of many conflicts acknowledged his contribution to their successes, and his fellow theorists from many countries recognized and acclaimed his brilliance.
The central theme of all of Liddell Hart's work was that of the primacy of the indirect approach to achieving any goal. Liddell Hart concluded that the indirect approach was a law of life in all spheres and a truth of philosophy.
He went on to show that in all areas of life related to the influence of mind on mind, direct confrontation only encountered, and in some cases actually provoked, a stronger and more stubborn resistance. However, resistance could be diminished, and thus success was far more likely, if an approach was taken that avoided the areas of strongest resistance. In most cases, this means sidestepping the position where the competition is the strongest and making your approach where it is weaker. Although, as we'll see shortly, there is more to it than simply going where your competition is not, that indeed is one consideration.
The Indirect Approach Applied to a Strategy for Romance. Some years ago, while conducting research into strategy, I heard a story during an interview that tended to confirm Liddell Hart's contention that the indirect approach is the basis of successful strategy in all human endeavors involving mind-to-mind confrontation.
One executive told me that he had competed for his wife with another suitor. Alas, the other suitor was wealthier and was able to take this young woman on more dates and to better places than he could afford.
Rather than go head-on in a competition he knew he could not win, this man took the indirect approach by signing up for a community college real estate course that he knew his future wife was also taking. His competitor could not take the same course, because of his business schedule. Sitting next to this woman in class, and taking her home afterward, allowed the man to spend a lot more time with her, at no additional cost. "It only took one semester," he said, "and we were engaged." Thus, the power of the indirect approach is confirmed for romance, as well as in warfare and business.
How You Can Apply the Indirect Approach in Your Strategy
The indirect approach requires more than merely avoiding a competitor's strength to approach a goal in an indirect manner. If this alone were all that were required, applying this concept to strategy would be routine and simple. But, it is not.
If all you do is avoid a competitor's strength and avoid approaching a goal directly, an adversary may spot your intentions, and he will take steps to redeploy his resources to counter your strategy, if he can. You will gain nothing. Taking advantage of this principle means that your indirection must have some finesse. You must distract your competitor and get him to focus on something else of lesser or no importance-just as the magician does with his audience.
The Story of the Smuggler. There is an old story about a customs inspector stopping an expensive, brightly painted yellow car at the border to his country. The car and the man in it looked suspicious. The inspector made a search of the vehicle but could find nothing, so he let the car pass.
The next week, the man and his car were at his inspection point again. This time he made a more thorough inspection. He could find nothing. Every week, the same car came to his post. Every week, he searched the car more thoroughly than the previous week, but every time he came up empty-handed. Finally, the customs inspector received permission from his superiors to pull the car out of the line. He had mechanics waiting, and they completely disassembled the car. They spent several hours doing this, but they could find nothing. The man returned with his car the following week, and for several more weeks after that, but eventually, the man and his yellow vehicle were no longer seen at the border.
Years later, after his retirement, the former customs inspector saw the suspected smuggler in a bar. After these many years it still bothered him that he could not discover what the man was smuggling. He approached the smuggler, who recognized him right away.
"I know you are a smuggler," said the former customs inspector.
"Not anymore," replied the smuggler.
"I know you were smuggling something through my post," said the ex-customs inspector. "If this is true, would you please tell me what it was you were smuggling and how you concealed it? It's driving me crazy not knowing."
"Certainly," said the smuggler. "The fact is, I didn't conceal what I was smuggling. I was smuggling yellow automobiles." The smuggler was a master of the indirect approach.
Business "Battle Maps" Begin with Mapping the Industry
Using the indirect approach requires a thorough analysis and calculation of the possible results of your action, and your competitor's ability or inability to react.
One way of doing this is through business "battle maps." It was probably William E. Rothschild of General Electric who first suggested some sort of mapping to investigate competitive positions. With what Rothschild called a competitive arena map, an entire industry could be plotted out. First, define your business in terms of the need you intend to fill. For example, it might be an educational need, a transportation need, a computer need, a food need, and so forth. Next, develop a matrix, or map, of this business arena. The vertical axis documents the products and services that fill your arena. Along the horizontal axis, various types of customers in your arena are designated. In Figure 8-2, the horizontal axis may be categorized by land, sea, air, and space customers, or by Army, Navy, Air Force, NASA, or Department of Energy customers for government marketers. The competitive arena map encompasses the entire industry.
Constructing a Segmentation Matrix Map
The competitive arena map encompasses the entire industry. The next step is to construct a segmentation matrix business battle map. Here we get down to the specifics. First, select those products and services you are going to analyze, along with those of your competitors. Then determine how they can best be described. This may be by pricing, company size, quality, complexity, function, or positioning. It is what you feel is the most important product breakdown in this particular situation. This description goes on the vertical axis. The horizontal axis is used to segment the customers into groups, but the segmentation is more precise than with the competitive arena map. You can segment your customers any way you want. Again, select what you believe is important, given the situation you face. While there are an infinite number of ways to segment your customer, typically you can do this by geography, demographics, psychographics (i.e., how your customers think), or lifestyle. A fictitious segmentation matrix battle map for toothpaste is shown in Figure 8-3.
If you construct one of these "battle maps" over a period of time, say one per year, you will gain tremendous insights regarding your competition's intentions, coming potential threats, and potential opportunities for the future. Of course, these maps shouldn't be the end of your analysis, only the beginning.
Creating a Three-Dimensional Battle Map
Perhaps the ultimate in business or marketing battle maps is shown in Figure 8-4. You can add a third dimension to show more information, to make the map more useful in planning, to analyze the strategies of the competition, and to analyze both the threats and the opportunities in every situation, so that you can develop an effective, indirect approach.
In Figure 8-4, the dimension that has been added is total market potential. Total market potential is calculated by multiplying the number of potential customers in the segment by the average price of the product sold.
Continues...
Excerpted from The Art of the Strategist by William A. Cohen Copyright © 2004 by William A. Cohen. Excerpted by permission.
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