For all the analogies, war is not business. Sun Tzu will not tell you much about business strategy.
The Financial Times finds it difficult to celebrate summer. It is faced with thinness of events, editorial material and advertising, and readers with time on their hands. So it is offering a serialisation of business classics.
And where else to begin but with the oldest work on strategy – Sun Tzu’s The Art of War. It is fashionable in today’s New Economy to argue that what we knew last year, or last week, is already out of date. But it is also fashionable to look much further back in time. To people who could not conceivably have envisaged any of the business situations we face today- Adam Smith, Machiavelli, Sun Tzu. Military strategists in particular must have lessons for modern executives. After all, it’s a battlefield out there.
The military analogy has a powerful hold on business thinking. The very term strategy is a direct acknowledgement of this. And yet it is a profoundly misleading analogy. We talk of the Cola Wars – the competitive jockeying between Coke and Pepsi which has taken place over decades and around the world. Similar ‘battles’ take place in many other industries. And yet there is an obvious, immediate difference between the Cola Wars and the war in Kosovo, or the great world wars of this century.
In all of these military conflicts, the object was to inflict damage on the enemy until, unable to tolerate such damage further, one protagonist gave way to the wishes of the other. The two players in the Cola Wars, however, have gone on being successful, prosperous companies. And the more vigorous the ‘war’ the better they have done. The rivalry between them has expanded the market and stimulated their efficiency and resourcefulness in ways that have benefited both their customers and the companies themselves. In all probability the ‘wars’ will continue for ever. Not in Pepsi’s wildest fantasies does it imagine that the conflict will end in the second burning of Atlanta.
Military conflict is about mutual destruction, and generally ends in defeat or exhaustion, which is why the scale of resources available to each side is crucial. Business competition is rarely of this kind. There need be no fundamental inconsistency between the objectives of the different players. And business competition is usually of indefinite duration.
Occasionally business situations do have some of the characteristics of military conflict. There are battles to establish market standards, as with Microsoft’s dominance of the PC market with MS-DOS and Windows, or JVC’s success with VHS in the video-recorder business. These do have a single victor and conclude when the defeated party withdraws. But even here the analogy is far from exact. Direct damage to the other side, even if legal, is rarely an important or effective tactic. And these are particular and unusual, instances. In the main, business competition works to everyone’s long run benefit, which is why sensible public policy is in favour of business competition and against military conflict.
Still, the military analogy retains a powerful hold on our thinking.. Boys in business, deprived of other outlets for their aggression, vent it in memos about competitors. Too often, these end up in the hands of anti-trust authorities. Perhaps the arrival of more women in the boardroom will change this. But the evidence so far is not encouraging. As with the first women soldiers, some female executives seem to feel a need to prove themselves with equally vigorous assertion of a macho culture.
It is easy to see why the image of the CEO as commander-in-chief appeals to many who hold, or aspire to, these positions. It is satisfying to think that one’s detailed strategy will be translated into action by platoons trained and disciplined to unthinking obedience. But the distance between the plans drawn up in the war room and the experience in the trenches is also mirrored in many corporations.
And the military analogy is often in the minds of those who believe that size is the main, or only, source of competitive advantage in business. Yet here most of all military conflict and business competition differ. The outcome of the Second World War was inevitable because of the sheer magnitude of the resources that the United States and Soviet Union were able to bring to bear. If that were true in business, the rise and fall of great corporations would be like the rise and fall of great powers – a matter of centuries rather than, as we have learnt, a matter of a few years. In war, resources lead to success: in business, success leads to resources. And this is a fundamental difference between the processes of war and competition.
It was not always so. Our ideas about the nature of military conflict are formed from the century of total war. States were, for the first time in history, able to mobilise the whole of their population and their economies in support of their military objectives. Our modern ideas about the nature of business competition are equally formed from the century of expanding capital markets, in which anyone with a sufficiently good idea can attract the resources to establish a business.
Once, military adventures were often designed to obtain more resources to fight more wars. Once, business development depended on the favours of already rich men. This was the world in which Sun Tzu lived. It is why his teachings are more relevant to modern business than we might expect. Most of all, Sun Tzu understood that the most successful battles are those you do not have to fight. Modern business people obsessed by military analogies would do well to remember that.