Why Wall Street Loves “The Art of War” – A 13 Point Plan To Mastering Business Strategy
Contemporary business-speak has drawn many ideas from the lexicon and argot of military strategy. Alongside Machievelli’s Prince, Sun Tzu‘s “The Art of War” has been one of the texts cited regularly as a source of razor sharp strategic thinking for the Business world, as much as the political sphere. Ever wondered why it’s so famous? Never heard of it? This post demystifies The Art of War’s ancient treatise on military strategy – I offer my basic interpretation and spell out step-by-step, its 13 gems of strategic thinking, plain and simple.
If you remember Wall Street; that celluloid homáge to Capitalism, you may remember one of its best quotes taken from Chinese philosopher Sun Tzu :
“If your enemy is superior, evade him”
Read on to discover the key elements in this priceless handbook on strategic and tactical thinking.
Master Business Strategy with 13 Tactics from The Art of War
# 1. The Laying of Plans, Calculations and Estimations
The Book states: before any steps are taken, research and planning are the key to any venture. My Interpretation? Any blueprint or business plan has to be compiled with reference to 5 basic points:
- Seasonal Factors and Timing
- Landscape or Operational Terrain,
- Leadership Qualities – wisdom, sincerity, benevolence, courage and strictness
- Management skills – covering logistics, methodology and organizational structure
- Moral Law – The Way of the World and the Laws of human Nature.
This strategy handbook proceeds to lay out 7 methods for forecasting based on your capabilities these factors. In short it calls for a SWOT Analysis .
Here, it also calls for leaders to adhere to classic principles in Project Management. It advises you to have awareness of your capabilities and surroundings, adjust your plans to suit your resources, and track or monitor your operations against possible deviation from the original plan. Get back on track as quickly as possible, he says.
Once plans are in operation we have to outwit our competition by not betraying our course and be subtle in our direction. One of the most succinct quotes from this treatise says:
“All warfare is based on deception.”
# 2. Waging War – The Challenge
The next segment focuses on the importance of decisive behaviour, correct timing and economy in your actions. Before embarking in any ventures, we can minimize challenges, conflict and ensuing costs by:
- Focusing on the Logistics of any plan and prevent over-extension of your company’s resources.
- Maintaining organizational Morale and keeping the “Troops” motivated and well resourced.
- Sun Tzu provides us with a clever tip – If you are low on resources and want to save: focus more on exploiting your competitor’s weakness rather than throwing more cash/resources at the problem.
- Consider the wisdom of having effective Exit strategies in place if something does not work. That reminds me of the (Colin) Powell Doctrine.
My favourite takeaway here is something all marketeers can relate to:
“let your main object be victory, not lengthy drawn-out campaigns. “
# 3. Attack by Stratagem or Planning Offensives
Here Sun Tzu echoes that old adage, its Not Size but Unity that determines strength and organizational effectiveness. He makes that now-famous quote:
“the skillful leader subdues the enemy’s troops without any fighting”
In other words, avoid competing head on and avoid using up resources directly against competitors. Aim instead for excellence so that no other organisation would even dare compete. In short, create a natural Monopoly.
- In a business environment, I interpret this as taking the initiative and being first to market or innovate. Engage a pre-emptive “attack” on your competitors with your superior offering thus demotivating any would-be contenders with your superior market share. Invent the most innovative product, process, occupy new territory or be the first to secure the marketplace.
- Failing that, “Surround them” assuming you have adequate resources to cover the market and try for a Me-too approach.
- If you have insufficient resources, a Divide and Conquer approach maywork. Segment the market or break your problem into parts and attack each individually.
- Failing that – your only option is to meet your (enemy) competitor head on. In business terms I interpret this as a potential Price war.
- Failing that you will be forced into a Siege Mentality which is costly for both attacker and the attacked.
- Once you run out of resources, will have to Retreat or drop out of the market – become the victim of shake-out.
Sun Tzu also points out ways you can really screw things up as a leader:
- Having insufficient vision and a poor overview of the situation.
- This resultsin using the incorrect amount of resources or methods to meet the right challenges.
- Not being decisive or flexible enough to exploit opportunities – not knowing when to act / when not to act
- Running an organization that does not have the means to respond to your directives & isn’t able to act on its own initiative when required. Recruiting of decisive and strong management is essential here.
- Conversely, not communicating your Goals clearly and leaving your team to their own devices – the mark of a poor leader who has an undisciplined team.
- Poor human resource management skills that utilize the wrong people for the wrong task, the inability to motivate your team or facilitate it.
In other words:
“If you know neither the enemy nor yourself, you will succumb in every battle”
# 4. Tactical Dispositions or Positioning
This phase of his treatise emphasises Defensive behaviour; securing and consolidating the resources you have and using them effectively as a solid base for exploiting new opportunities when they occur. I see this as a reminder to business to get yourr housekeeping in order, be efficient and lean cost-wise. Have insurance or fail-safes before embarking on anything new or risky.
This line says it all:
“One may KNOW how to conquer without being able to DO it”
# 5. Energy & Direction
This Chapter is about capturing momentum and synergy.
“The quality of decision is like the well-timed swoop of a falcon which enables it to strike and destroy its victim.”
Sun Tzu outlines Direct and Indirect / Subtle methods of accomplishing your mission or let us call them obvious versus not-so-obvious downright sneaky methods. He encourages us to use these 2 approaches creatively and in tandem.
Being able to alternate methods generates momentum and ensures sustainable results.
Tips on how to “win” the battle include
- The Element of Surprise
- Deception: Masking your true strength when trying to outflank or outwit your “opponent”
- Using Bait to outwit your oppononents and draw their true intentions and positions.
- Not relying on any one person but instead focusing on the discipline and unity of your team.
# 6. Weak Points and Strong / Illusion versus Reality
Here Sun Tzu helps us spot the best opportunities for attack, how to spot weaknesses in your opponent and position yourself in the most advantageous way. In business terms, I interperate his advice as follows:
- Take the initiative rather than play catch up – you may waste more resources playing catch up than in taking entrepreneurial risks.
- Be aware of your Competition’s weakpoints, expose them and hasten to do better in these areas quickly.
- Be aware of markets or territories where your Competitor has no presence and exploit these gaps.
- Be aware of Competitive advantage. Maximise your resources where you possess natural barriers to entry.
- Be a Moving target and make it hard for your Competitors to guess your next move.
- Never overextend yourself and focus on your Core Competencies. If you have weak organisational flaws, consolidate your resources in strengthening a few critical areas not all of them at once.
- Timing is everything- make sure you research the accurate moment with which to activate your plans.
My favourite Line:
“Do not repeat the tactics which have gained you one victory, but let your methods be regulated by the infinite variety of circumstances.”
# 7. Maneuvering and Dealing with Direct Conflict
There will be times when we will still have to meet difficult challenges head on and may not circumvent them. Sun Tzu advises us to maintain the following if we are to emerge unscathed and maximise our tactical advantage.
My key takeaways here:
- Personnel - Maintain harmonious relationships between all levels of your hierarchy and create a unity within your organization that operates to an internal discipline. Ensure they get a share of the “spoils” to keep them motivated and help them buy into company Mission.
- Logistics – Always ensure clear l lines of supply secured to sustain you throughout your campaign.
- Local Knowledge – Make sure you have good local knowledge of your market with an insider’s view if possible.
- Competition – Know when they are operating at peak strength and only launch your attack when you know they are recovering from another campaign or when they are on downtime.
- Do not enter into an Alliance until you are certain as to the motives of your partners
”The difficulty of tactical maneuvering consists in turning the devious into the direct, and misfortune into gain”
# 8. Variation in Tactics aka The Innumerable Changes
I believe this section talks about the art of Judgement. Good tactics also means knowing What NOT to do. It is not enough to know your business and environment well, you also need Versatility of Mind.
- In business terms I interpret this as: knowing what paths not to follow, markets that are not worth pursuing or contracts & alliances that are a No Win for your business.
- If subordinate to a higher command, Sun Tzu implies there are situations where you must not even obey your superiors. You could even say it may be a good thing to flout conventional wisdom.
- In everything you do, always have the versatility of mind to inhabit the thinking behind Competitors or Customers’ actions.
- Take a 360 Degree approach to everything you do and be mindful of all your stakeholders in any action you take, this allows you to escape hidden pitfalls or exploit every potential advantage/opportunity not just obvious ones. The sort of thinking can be found in guerrilla marketing approaches or CSR marketing that exploits non- obvious opportunities.
”in the midst of difficulties we are always ready to seize an advantage, we may extricate ourselves from misfortune”
# 9. The Army on the March / Moving the Force
This segment focuses on observing the right signs in your “enemy”. I interpret this as the ability to read your environment correctly and forecast effectively based on the current behaviour of your competitors, economy, potential customers and even stakeholders. He goes on to detail clever practical tips for reading your enemy’s behaviour on the battlefield.
A great leader has the ability to read the signs around him, track history and therefore be alert to deception or sudden changes by correctly extrapolating future behaviour.
He gives an Acute reading of human behaviour here:
”When envoys are sent with compliments in their mouths, it is a sign that the enemy wishes for a truce.”
# 10. Terrain or Situational Positioning
In anything we do – we will encounter points of resistance. How we position ourselves may result in assorted advantages and disadvantages. In the original text, he inventories the types of geographical terrain an ancient army may encounter and prescribes the best positions to take.
My takeaways? Sun Tzu emphasises:
- A Point of Vantage. Make sure that no matter where you are, you have a clear view of the endgame.
- Sneaky tip 1: when no one makes the first move or you don’t know where your competitor is : do a false retreat to draw out your prospective opponents
- Sneaky tip 2: if your competitor has a superior position than you , entice them to focus on something else and fool them into vacating their no.1 spot
- Secure Lines of supply and good Communications throughout your organization are essential otherwise there’s a disconnect between your best laid plans and execution on the ground.
- Find yourself trying to match up to your competitor and always trailing behind? Me – Tooism can be a destructive acitivity that eats up too much resources. You should reconsider the campaign in the first place.
6 signs you are failing as a leader
- Flight: when you pit your organization against a superior force with no preperation
- Insubordination: when management is weak and discipline falls apart.
- Collapse: when workers are under resourced
- Ruin: when Management does not buy into the organizational mission and rebels.
- Disorganization: when there are no clear organizational rules, roles or best practice laid down.
- Rout: when the wrong resources or tactics are being used
”The power of estimating the adversary, of controlling the forces of victory, and of shrewdly calculating difficulties, dangers and distances, constitutes the test of a great general.”
# 11. The Nine Situations / Terrains
According to Sun Tzu, there are 9 common stages in any campaign. He prescribes reactions to each one in terms of old world battle scenarios. Some prescriptions are obvious..
1) On Home ground; don’t waste too many resources campaigning here.
2) On Entering New territory; keep pushing aggressively early in the campaign as long as nothing gets in the way, and as long as you have a clear easy exit strategy. You aren’t too heavily invested at this stage and can turn back if needs be.
3) Contentious ground or Strategically Essential Territory; Do not be the first to move without smoking out your competitors’ intentions first and understanding their strategy too. Hide your true interests and distract the competition where possible from discovering them.
4) Open ground or easily Accessible territory - don’t get in the way of other competitors assuming their activity is of no strategic relevance to your mission.
5) Ground of Intersecting Highways, where there is activity from more than one interested party or contender – form alliances with others.
6) Serious ground; where much effort was required to secure this territory and you are in a precarious position. It may be hard to exit and hard to move forward – A “ Winning Hearts and Minds ” policy is required here. Do not antagonize any stakeholders and do your best to sustain all of your business relationships at their optimum levels.
7) Difficult ground or difficult conditions in which to operate – keep going and don’t stop until you are in a safer position. In Business terms I interpret this as consolidating resources, being cost conscious and keeping your productivity high, maintaining and pushing for higher targets.
8) Hemmed-in ground; where it is difficult to extricate oneself from this situation – Resort to Deception, Intrigue and Stratagem.
9) Desperate ground; where there is no exit possible – once there you have to stick it out and give it everything you’ve got, its all about survival.
Sun Tzu compares a Skillful tactician to a species of mountain Snake due to his ability to react quickly :
“Strike at its head, and you will be attacked by its tail; strike at its tail, and you will be attacked by its head; strike at its middle, and you will be attacked by head and tail both.”
# 12. The Attack by Fire
This next segment does seem a little esoteric especially if trying to apply to contemporary business models – Sun Tzu talks about 5 ways to attack by fire. Nevertheless I see it as a reminder on the strategic ways you can mount an offensive campaign to any competitor (from the inside).
- The Soldiers – Poach their personnel , demotivate them or use them ?
- The Stores – Attack your competitors financial investments ?
- The Baggage Trains – Their logistics, lines of supply or key suppliers?
- The Arsenal and Magazines – Attack your competitors cash-cows and sources of Revenue?
- Hurl fire on your enemy as Artillery – Attack their operations, throw a spanner in the works ?
Most importantly – Follow up the internal attack with your own offensive on the outside and be resourced, time it right and don’t get caught up in the fire.
“Unhappy is the fate of one who tries to win his battles and succeed in his attacks without cultivating the spirit of enterprise; for the result is waste of time and general stagnation.”
# 13. The Use of Spies / Intelligence
Sun Tzu warns us against wasteful campaigns that expend a lot of resources or hours of labour when a simple use of intelligence or Foreknowledge would be more efficient.
According to the text it can only be obtained through scout masters, reconnaissance or 5 kinds of spies:
1) Local spies;
2) inward spies;
3) converted spies;
4) doomed spies;
5) surviving spies.
Key pointers here:
- Reward your spies liberally and be sagacious yet sincere when dealing with them. Above all keep this operation in utmost secrecy internally.
- If you wish to convert someone into a spy – spoil them. A converted Spy is your greatest asset as they can help you recruit more.
“Spies are a most important element in water, because on them depends an army’s ability to move.”
The Art of War On Video
For a more entertaining (if not slightly hokey) background to the book, I found this Documentary for those military enthusiasts amongst you: The Art of War documentary from the History Channel:
Lovers of chess and the Japanese game “Go” will find his book an affirmation and a helpful guide too.
Other interpretations of the Art of War
- The Business Insider Magazine War room does a quick handy overview too in The Art of War – Sun Tzu
- In this article: Productivity and “The Art of War”: Applying Sun Tzu’s Teachings to Business Tucker Cummings translates its teachings into modern goals for productivity.
- There’s even an Art of War App for the busy executive : The Art of War in Business
Throughout my interpretation of The Art of War, runs is a misleadingly simple idea that touches on a fundamental thread in Far Eastern thinking – that paradoxical notion of Doing by Not Doing and Illusion. You will find similar ideas in Taoism, Kung Fu, Fengshui, Zen Thinking and many other Asian practices I will be exploring in the future. Conversely Conflict and disruption are anathema to Far Eastern sensibilities and their philosophy considers chaos and disruption a sign of failure, not a route to success.
In other words, if we can position our businesses into a Harmonious operation with the world around us – beyond the reach of any threat by being superior & indispensible, practising excellence and manipulating our environment to remove all obstacles, success is within our reach. The building blocks you might say of most strategies cited in any Marketing 101 textbook.
Nevertheless I suspect, as time goes by I shall unearth deeper or different inteprretations from this book as I understand more of the world.
Have you read the book and have a different interpretation? I would love to hear your biggest Business Strategy takeaways from this enduring classic.
Footnote & Credits
All quotes used in this post are referenced from the following site www.suntzusaid.com a site created by John Watson. General information on the Structure of the Art of War was taken from Wikipedia using translations of chapter headings by Lionel Giles (1910), R.L. Wing (1988) and Ralph D. Sawyer (1996)
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