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Sun Tzu and the Art of Business

#### Introduction

## What’s in it for me? Strategize your way to victory.

Mark R. McNeilly Sun Tzu and the Art of Business Six Strategic Principles for Managers Narrated by Stephen Schiller and Alex Vincent The world of business is like a battleground. There's a war going on. For customers, visibility and market supremacy. So how do you come out on top?
How can you force your competitors into a retreat, capture their territory and emerge victorious? That's where these blinks come in. Based on the philosophy of ancient Chinese military general Sun Tzu, they explain how you can use classic strategies of warfare to prosper in business. Sun Tzu wrote The Art of War over 2,000 years ago, but the wisdom and insights from his famous texts are still relevant today. From leadership to resources and surprise attacks, this is your go-to manual for beating your competition and securing long-term prosperity.

#### Chapter 1 of 6

## Capture your enemy’s territory but don’t destroy it in the process.

Blink 1 of 6 What does the ancient philosophy of Sun Tzu have to do with building a successful business? Before we answer that question, we need to decide what success even means. Broadly speaking, Western culture defines a successful business as one that gives shareholders a return on their investment. Asian culture, on the other hand, generally views a successful business as one that provides people with employment.
But before a business can achieve either of these aims, it needs to be surviving and prospering. These are your fundamental goals as a business leader, and they're exactly what Sun Tzu's strategic principles will help you achieve. The key message here is, capture your enemy's territory, but don't destroy it in the process. In The Art of War, Sun Tzu instructs his readers to take all under heaven intact. This means that military leaders should seize control of everything their enemies have without damaging these assets. In business, take all under heaven means you should aim for market dominance by controlling a larger share of your market than any of your competitors.
Market dominance is so crucial because it usually means profit. Businesses which dominate the market benefit from improved economies of scale, increased customer loyalty, and higher revenues. This all adds up to a bigger bottom line. Now Sun Tzu's principle isn't just to take all under heaven, but to take it intact. Applied to business, this means you shouldn't destroy or damage the market you're seeking to dominate. After all, damaging a market usually means draining it of its profitability.
For a clear example of this, look no further than global tobacco firm, Philip Morris. In 1993, Philip Morris' Marlboro cigarettes was one of the most profitable brands in the world. But the company was facing a problem. Rival discount brands were selling their cigarettes cheaper and gradually taking market share away from Marlboro. Philip Morris decided to take blunt aggressive action. It took the fight to the discount brands and dropped the price of Marlboros by 20%.
But the discount brands struck back by dropping their prices even further. Soon, the whole industry was losing money, including the Marlboro brand. Philip Morris continued to be a major player, but it had ignored Sun Tzu's advice. The company may well have been dominating the market, but it was now a sick and unprofitable one.

#### Chapter 2 of 6

## Avoid your enemies’ strengths and attack their weaknesses.

Consider a river speeding down a mountainside. It washes away everything in its path. But where does its power lie? According to Sun Tzu, the answer is the fact that a river always flows downhill and never uphill.
Taking everything from your enemy can sound like a daunting prospect. But if you seek to be like the river, it can be done. To win in war and business, don't rush toward the difficult heights. Seek the easy lowlands instead. The key message here is, avoid your enemy's strengths and attack their weaknesses. Many businesses seek market dominance by attacking their competitors' strongest products or capabilities, often through imitation.
If a competitor is known for discounted pricing or quality manufacturing, these businesses tend to provide even bigger discounts or make even higher quality products. This might seem like a promising strategy. After all, if it's worked for your competitor, why wouldn't it work for you? But consider the tale of communications company AT&T, and you'll see why attacking your enemy's strengths is a big mistake. In the early 1980s, executives at AT&T saw that other communication companies were successfully branching out into the computer industry. So they decided to imitate their rivals and began developing their own computers.
They thought, IBM and Hewlett-Packard have done it, so why can't we? But this strategy turned out to be a serious failure in judgment. Despite AT&T's cutting-edge research center and massive resources, it failed to win any significant share of the computer market from its competitors. Eight years later, it had lost billions of dollars and thousands of employees had lost their jobs. When you attack your competitor's strengths, you'll likely find yourself fighting an uphill battle, like a river trying to flow upstream. Your fight for market dominance will span years, and by the end, whatever the outcome, your resources and morale will be exhausted.
To avoid this fate, you should flow toward your enemy's weaknesses instead. Find the weakest link in their value chain and ruthlessly exploit it. That's exactly how many Japanese companies, such as Toyota, Sony, and Honda, came to be such global market dominators today. After identifying that their American competitors were weak on manufacturing quality, they made high-quality manufacturing their top priority.

#### Chapter 3 of 6

## Conduct in-depth research into your competitors.

Blink 3 of 6 So now you know to target your enemy's weakest points. But this knowledge gives you nothing if you don't actually know what their weakest points are. When it comes to planning an attack, you need to know your enemy. According to Sun Tzu, the wise general emerges victorious because he has foreknowledge of his enemy's plans, capabilities, and even his state of mind.
But you can't gain this foreknowledge by looking at what your enemy has done in the past, nor from making abstract calculations. The only way to gain true insight into your enemy is by talking to those who actually know what your enemy's situation is. The key message here is, conduct in-depth research into your competitors. It's not enough to know your competitors' annual turnover, the size of their workforce, or what they produce, though this is a good start. You need to go into far more detail than this. This means buying their products and dismantling them so that you can gauge what their manufacturing costs are.
It also means reading interviews that their executives have given in the press or industry trade journals to see if they reveal their strategy or mindset. But you need to go even further than this. If you want to truly know your competitors, you need to figure out what their culture is. You need to uncover the values, beliefs, and assumptions that are driving their behavior. The best way to uncover your competitors' culture is by delving into the backgrounds of their senior executives. Where did they study or work previously?
What experiences have shaped them? Try to determine if they're risk-takers or if they prefer to play it safe. Find out what sources of information they use to make their decisions. Putting all this information together will help you predict what their next move is likely to be. Once you know what your competitors' plans are, you can easily respond to their attacks. This is what fast food giant McDonald's did when it discovered that its rival, Burger King, was planning an attack on its french fries.
Armed with this information, McDonald's took action. It sent a memo to all of its restaurants instructing them to take special care over the cooking and salting of their fries. Ultimately, McDonald's was able to repel Burger King's attack and successfully defend the reputation of its fries.

#### Chapter 4 of 6

## Speed compensates for a lack of resources.

What's most essential in winning a war? Sun Tzu's answer might surprise you. Rather than military might or overwhelming resources, he believed that the crucial component of successful warfare was speed. According to Sun Tzu's writings, when the enemy gives you an opening, you must be as swift as a hare.
The reason for this is simple. A fast-moving army is capable of defeating an army much larger than itself. When your army marches with lightning speed, you can target enemy units individually and defeat them before the rest of your enemy's forces have time to respond to your attack. That's how you pick off a bigger army, piece by piece, moving rapidly from one unit to the next. Your slow-moving enemy never gets a chance to concentrate its forces in one place to confront you. The key message here is, speed compensates for a lack of resources.
Being fast makes up for being small. This holds true in business, too. Imagine you're leading a small company and your goal is to win market share from a big competitor with many employees. If your salespeople can successfully complete a sales call in 30 minutes, but your competitor takes two hours, then you only need a quarter of its staff to compete with it effectively. Plus, by having a smaller but more effective sales team, you get a bigger market share. By having a smaller but more effective sales team, you get a bigger return on your investment than your competitor.
Communications giant IBM is a perfect example of a company which used speed to increase its return on investment. By splitting up its enormous single production line into several more efficient lines, it reduced the time it took to make a personal computer from five days to just eight hours. This innovation not only boosted IBM's production speed, but also let it reduce the size of its team by a third. Its profitability drastically improved, and it was able to control a greater share of its market. IBM's success wasn't a one-off. In almost every industry, the fastest companies see a two to five times higher return on their investment.
It's also a fact that speedy businesses tend to grow faster. When retail giant Walmart arrived in the discount retail industry, it was 80% quicker than its competition. Its lightning-fast moves allowed it to grow at triple the speed of other discount retail chains. And the rest is history.

#### Chapter 5 of 6

## Engage your enemy in two places at once.

Blink 5 of 6 It's easy for your enemy to defend against an attack it knows is coming. If you want to really inflict damage in war like in business, you need to shock your enemies and hit them with a surprise offensive. By the time they realize they're under attack, the victory will already be yours. Sun Tzu teaches us a two-pronged approach to surprising your enemy.
You need to use two attacks, a direct attack and an indirect one. Your direct attack is the one that your enemy can see coming from a mile away. This is a head-on offensive that noisily announces your arrival on the battlefield. But the true power of your strategy comes from your indirect attack. The key message here is, engage your enemy in two places at once. In the early 1990s, Southwest Airlines was the dominant player in California's low-cost, short-haul air market.
But this changed when United Airlines started offering even cheaper flights. United Airlines' move was a direct attack, and Southwest Airlines promptly responded with its own. It reorganized its ticketing system to reduce its costs. On the surface, it seemed like these two airlines were locked in a head-on battle to control California's skies. But something else was going on. While United was busy fighting back against Southwest's short-haul cost-cutting, Southwest launched a devastating indirect attack.
According to Sun Tzu, the true purpose of a direct attack is to distract your enemy's attention so that it won't see your more devastating indirect attack coming. This is the attack that your competitor does not expect. Where direct attacks engage your enemy head-on, indirect attacks focus on your enemy's flank. The flank refers to the side of an army which is left vulnerable when the army is engaging in a front-on confrontation. For Southwest Airlines, United's flank was clearly its profitable long-haul flights. And so Southwest started offering long-haul flights themselves.
By doing so, they were eating into a totally different segment of United's customer base. United, taken by surprise, found it was suddenly fighting a war on several different fronts. It lost money across several key markets, while Southwest continued to increase its number of flights and flights of customers. While Southwest continued to increase its number of flights and make gains. With its shrewd, two-pronged strategy, Southwest Airlines embodied Sun Tzu's teaching and hit its enemy where it least expected it.

#### Chapter 6 of 6

## Leaders should possess five key qualities, and avoid several others.

Blink 6 of 6 From Sun Tzu's ancient civilization to our modern times, mankind has asked itself, what makes a good leader? What qualities does someone need to inspire their troops to victory or their people to prosperity? These days, the question also applies in the world of business. What type of person can steer their employees to success?
And on top of this, what characteristics mark someone out as an unsuitable or even a dangerous choice for leadership? The key message here is, leaders should possess five key qualities and avoid several others. According to Sun Tzu, the first crucial quality for leaders is wisdom. Wisdom enables leaders to recognize when circumstances are shifting and to make pragmatic, advantageous decisions. Second, leaders need to be bold and have the courage to seize opportunities when they arise. The third crucial quality for good leaders is being humane, meaning sympathizing with their troops and appreciating their sacrifices.
Fourth, leaders must be sincere so that their soldiers can be sure of rewards for their efforts. And fifth, good leaders must be strict so that their forces remain disciplined and fear the consequences of bad behavior. These leadership qualities are just as important in a business context. Wise business leaders understand the strengths and weaknesses of their own companies and those of their competitors, too. Great executives back up their wisdom with courage and are unafraid to act on their insights. Humanity and sincerity are important, too.
If leaders don't treat their employees decently, then they won't get the best out of them. Finally, excellent leaders have the discipline to see strategies through and make sure they're implemented successfully. So that's what we want in leaders. But what about what we don't want? Sun Tzu highlights several red flags of leadership. One of these is recklessness.
Reckless leaders rush into dangerous situations and cause damage. Cowardice is also to be avoided because when leaders are concerned with their own well-being over all else, they're too hesitant to exploit fleeting opportunities. Sun Tzu also lists compassion as a dangerous trait in leaders. Now, compassion in itself surely can't be derided.
But if leaders are too compassionate, they're so concerned with minimizing the hardships of those they lead that they sacrifice long-term success in order to avoid pain. And success, as we've learned, is a leader's ultimate goal. Time to put Sun Tzu's teaching into practice and let them guide you towards your own success.

#### Conclusion

## Final summary

You've just listened to our blinks to Sun Tzu and the Art of Business by Mark R. McNeely. The key message in these blinks is that reckless business leaders make strategic mistakes. They try to imitate their competitors' successes and openly lock horns with their biggest rivals. But truly skilled leaders are more subtle in their approach.
They avoid head-on confrontation, exploit weak spots in their competitors' armor, and ensure that their operation is quicker, bolder, and better informed than anyone else in their industry. These are the leaders who put Sun Tzu's teachings into action. Got any feedback? We'd love to hear what you think about our content. Just drop an email to remember at blinkist.com with Sun Tzu and the Art of Business as the subject line and share your thoughts.
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Sun Tzu and the Art of Business
Mark R. McNeilly
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