Introduction: Timeless Lessons from History’s Military Geniuses
In the competitive world of corporate strategy, the wisdom of ancient military strategists like Genghis Khan, Alexander the Great, Napoleon Bonaparte, and Sun Tzu offers invaluable insights. Their unique ability to identify and exploit overlooked strategic options is not just historical lore but a practical toolkit for today’s corporate strategists. On The Innovation Show podcast, Outthinker Networks founder, Kaihan Krippendorff, discussed the strategic wisdom revealed in the 36 Stratagems, an ancient Chinese text.
The 36 Stratagems: A Creative Toolkit for Strategists
The 36 Stratagems is a collection of metaphors that go beyond colorful phrases to provide a creative thought process for various business scenarios, including negotiations, mergers, and acquisitions. Krippendorff has spent decades studying the stratagems and how companies have utilized them. In his book, Hide a Dagger Behind a Smile, he transforms these ancient metaphors into a modern-day strategic toolkit.
Yin-Yang Polarity: Balancing Opposites in Strategy
The first law, “Yin-Yang Polarity,” focuses on the Eastern philosophy of balance and the interdependence of opposites. This concept challenges the Western linear progression model, advocating for a holistic approach to corporate strategy that acknowledges the interconnectedness of success and failure, growth and decline.
“To catch something, first let it go.”
This stratagem overturns the Western preference for first-mover advantage, advocating instead for practicing strategic patience. Let your competitors get ahead, but follow closely enough that you can learn from their experiences. Once the business model is proven to work, you can jump in. Microsoft leverages this stratagem – they let others develop servers or web browsers and followed close behind. Coke and Pepsi also follow each other when introducing new flavors or packaging. Neither would benefit from getting too far ahead of the other because they would lose some opportunities to learn from and adopt the other’s innovations.
“Partner with someone unexpected.”
Forming unconventional alliances is an increasingly important stratagem in ecosystem-based competition. It encourages corporate strategists to look beyond traditional competitors and form alliances that can provide new strategic advantages. Ask, “Who else benefits if I win?” You can then look outside of your sector. Honda did this when they wanted to expand into the Indian motorcycle market. Instead of partnering with local motorcycle providers, Honda partnered with a bicycle company that had a nationwide distribution network of bicycle shops that could be trained to sell motorcycles.
“Influence through a third party.”
The stratagem says, induce your ally to attack your enemy in order to preserve your strength. Another man’s loss is your gain. As the ecosystem mindset becomes more dominant over direct competition, the meaning changes. Instead of directly pursuing your target, you find others that have influence over them. An example: Coca-Cola buys NutraSweet aspartame from Monsanto to make Diet Coke. The patent for NutraSweet was about to expire. Coca-Cola wanted to buy a cheaper generic version, but customer tests revealed that people preferred the logo of NutraSweet over generic. Coke wanted to get Monsanto to sell the sweetener at a non-branded cost but keep the brand. Strategically, Coke encouraged a home sweetener to go into business, promising to buy it from them. But just before the patent expired, Coca-Cola signed a long-term agreement with Monsanto at close to market price. Coke used the home sweetener company to attack their supplier. As a marketer, think about who your core customer is and who else has influence over them.
Wu Wei: Incorporating the Wisdom of Waiting in Your Strategy
The concept of Wu Wei is about going with the flow and waiting wisely until the opportune moment to act. In Latin, there are two words for time. Chronos is the chronological time measurement we usually use that says things happen at a certain time. Kairos measures time by moments of opportunity. A confluence of factors come together to create the right moment to take action.
“Beat the grass to startle the snake.”
The metaphor is this: You’re walking along an open plain and you see a bush. You don’t know for sure, but you know there might be a snake hiding inside. To find out, you beat the grass with a stick to see if a snake appears. In business, choose an attack that reveals information about your situation or your competitor. Microsoft does this by trying something small, learning from it, then doing it again until they eventually figure it out. Today we know this as agile experimentation or frugal innovation. Rita McGrath calls it Discovery-Driven Planning. Make small bets to observe what happens and collect the learnings, then adapt.
“Seize the opportunity to lead the sheep away.” (Seize the deer in the headlights moment)
The story goes, there is a beggar who sees a flock of sheep. He thinks, If I had one of those sheep, I could eat it to stave off hunger or sell it to make some money. But a shepherd looks over the flock. Then, the beggar notices the shepherd has gone uphill and isn’t watching. The beggar calculates that even if the shepherd sees him, he will logically sacrifice one sheep to protect the flock. The beggar seizes the moment to grab the sheep.
This stratagem is what gave birth to Sony. At the time, the company that would become known as Sony made rice cookers. When the transistor was invented, most companies were using vacuum tube radios. Sony decided to create a radio with transistors. Other companies who had huge businesses selling TVs with vacuum tubes said it would take a decade to incorporate the transistor. They didn’t want to cannibalize their “flock of sheep.” Sony introduced transistors much more quickly and took over the radio market. Later, they would be disrupted in the same way when Apple introduced the iPod and put thousands of songs in your pocket.
At times it is better to pretend to be foolish and do nothing than to brag about yourself and act recklessly. Gandhi said, “First they ignore you, then they laugh at you, then they fight you, and then you win.” In many cases, the incumbent laughs at a newcomers strategy, thinking it’s flawed or it’s a joke or it’s crazy. It could be Richard Branson jumping off buildings to get publicity for Virgin Airways. Or Elon Musk telling everyone he’ll make a high-performing electric vehicle. Jeff Bezos said, “If you’re going to do anything meaningful, you’ll have to tolerate long periods of being misunderstood.” The trick is to get your competitors to think you’re crazy while you get your team and organization on board with your vision. Leaders must remain resilient during these periods.
Wu Chang: Embracing Continuous Change in Corporate Strategy
The Chinese term, Wu Chang, emphasizes the importance of continuous change. Your mental model about change and how it affects you has a powerful impact on your actions. It invisibly guides your thinking about what actions to take and when to take them. Clinging to your mental models makes you rigid and predictable.
“Continuous Change” presents a stark contrast between Eastern and Western perspectives on change. For corporate strategists, this means adopting a more dynamic and adaptable approach, recognizing that change is not a linear path but a cyclical process with inherent ups and downs.
“Exchange the role of guest for that of host.”
People are more likely to invite you into their house if they view you as a supporter, not as a threat. Krippendorff shares the story of his cousin, a factory owner in Bangladesh. He fears that WalMart will come to him and offer to pay a high price for a small amount of factory capacity. He’ll be tempted to keep giving WalMart capacity until the balance of power shifts. This happens with Apple products when a customer buys a phone or a computer, which then links to music and connects to the entire Apple ecosystem. The customer is less likely to change phones because then they would have to change everything.
“Borrow a road.”
A large kingdom wanted to attack another kingdom but they didn’t have direct access, so they created an alliance with a smaller kingdom that would provide access. The large kingdom passed through the smaller kingdom, won the battle, then took over the small kingdom on the way back. The alliance is temporary.
Lenovo was originally a Chinese company called Legend. When HP wanted to enter China, they created an alliance with Legend. Legend would help HP sell and learn the HP way. Once they were good enough to do it themselves, they started competing with HP and renamed themselves Lenovo. In the same way, Logitech started distributing webcams and peripherals for European companies into the US, they learned and took over the manufacturing their own. When you form an alliance, contemplate what the end might be and make sure you’re set up to be happy with the end result.
“Shed your skin like the golden cicada.”
Every few years, cicadas shed their skin and leave their hollow shell behind, like a facade. In business, this is how profit pooling enables companies to make money from different places. A UK company, Thompson Travel sells flights to international locations. Once they sell you a flight, they’ll offer tours and other upsells. Then you might get on a charter airline operated by the owner of Thompson Travel. They pool the profits into the charter airline business. Think about it this way: If your current business were actually a facade and you weren’t making money from it, where would you make money?
Shang Bing Wu Bing: The Art of Indirect Action
The fourth law, Shang Bing Wu Bing, relates to the art of indirect action. In the West, we play chess. In chess, you line up your pieces against your opponent, and then you attack them. In the East, Go is a popular game. In Go, you don’t hit the enemy. Instead, you surround them and indirectly attack by going around them. Indirect action.
“Take the unorthodox path.”
In the story, a king is in exile and wants to get out. His captors have ripped up the road back to his kingdom. He starts openly repairing the walkway. His captors watch him and think they know how long it will take to rebuild. Meanwhile, under the cover of night, the king takes an army and marches around to surprise the enemy and attack. The core of the stratagem is: They think you’re coming one way and instead, you take an unorthodox path.
Many companies that went on to dominate their industries were founded on this principle. Salesforce was the first software company to go indirect as a cloud service. Companies used to develop software, then use integrators to install the software onto company servers. Salesforce skipped installing onto company servers and allowed customers to access its own servers through an indirect path of a web interface. In your industry, what is the orthodox path that people assume is the way? While they’re fixated on that channel, what is another way around it?
Conclusion: Leverage Ancient Strategies for Contemporary Business Challenges
These timeless lessons are not only a tribute to historical wisdom but also serve as practical tools for strategists seeking to navigate the complexities of the modern business environment. By integrating these ancient strategies, corporate leaders can develop more innovative, resilient, and successful strategies in today’s competitive world.
Learn more at Kaihan.net.