Chapter 31

Business as War

Managers have always fancied themselves in the officer class. Strategy is what separates them from the sergeants.

—John Micklethwait and Adrian Wooldridge

As had happened with the military, the reaction against the business planning models of the 1950s and 1960s led to attempts to rediscover the essence of strategy as practiced. Just as the experiences of Vietnam and a sense of developing Soviet strength encouraged defense reformers in the United States to return to the classics of military thought and insist on addressing the harsh realities of war and battle, a harsher competitive environment also encouraged businesses to think more in terms of victory and defeat, and the need to infuse their strategies with the mental toughness and passion required in battle. Chief executives might imagine themselves as generals, leading their troops into battle, with an appropriate blend of cunning, charisma, and calculation. The resemblances between intense corporate tussles and war were a regular theme in management books, and the language of campaigns, attacks, and maneuvers could seem quite natural.

At the popular end of this tendency were the regular suggestions that lessons for the boardroom could be drawn from the battlefield exploits of such figures as Alexander the Great or Napoleon. Military figures, even some with mixed reputations, were turned into business models from which relevant leadership tips might be taken. In addition to the obvious candidates (Alexander, Caesar, Napoleon), Albert Madansky has identified books drawing on the strategic wisdom of Attila the Hun, Sitting Bull, Robert E. Lee, Ulysses S. Grant, and George Patton.¹ The bestselling Leadership Secrets of Attila the Hun by Wess Roberts, for example, while not quite offering Attila as a role model hailed him as an exemplar of leadership, for he “accomplished difficult tasks and performed challenging feats against ‘seemingly’ insurmountable odds.” This implied for Attila and his Huns “a slightly more positive image than can perhaps be found elsewhere.” Great chieftains adapted rather than compromised, dealt with adversity, learned from mistakes, did not ask questions for which they did not want to hear answers, only engaged in wars they could win, preferred victory to stalemate, and they had tried their best even if they lost. And so on. There was only a vague hint of the sinister when reference was made to the importance of loyalty and how it might be enforced. In general, the chieftains emerged as enlightened and inspirational leaders—taking seriously their responsibility for the welfare of Huns, explaining to them what they were doing and why.²

When examples were picked selectively, and carefully extracted out of their context, historical events and figures could be used to illustrate a variety of business theories. In such books strategy became collections of aphorisms and analogies, often contradictory, trite, and at most pithy restatements of best practice—exactly what the social scientists with their careful methodologies sought to avoid. They were unlikely to lead to much behavioral change among their readership or affect corporate performance and plans. In the back of one such book, for example, there was a list of maxims and quotes. What was the business manager supposed to make of “War is cruelty and you cannot refine it” (General W. T. Sherman), or “Shoot them in the belly and cut out their living guts” (General George C. Patton), or “War, by definition, means a suspension of rules, laws and civilized behavior” (General Robert E. Lee)? This author dismissed “smiley-face, win-win, love-thine-enemy kinds of business thinking.” Business, he insisted, “like war, is basically a zero-sum adversarial game with economic and professional stakes of the highest order.”³ Similarly Douglas Ramsey described modern business as a “brutal battlefield,” sharing the goal of “victory.” His aim was to show how some of the key principles of warfare, such as clarity of objective, unity of command, economy of force, and concentration of strength could be as relevant for chief executives as for generals. He did note that when it came to their strategic decisions, few business leaders drew on wartime analogies. There was, however, a clear inference that they might be better off if they did so.⁴

The influence of most books in this genre was limited, more of an enjoyable read than a manual to be kept at hand. There were occasions when business rivalry took on the appearance of a fight to the finish, but as often as not the competition was continuous, ebbing and flowing, with many participants. Moments of decisive victory would be few and far between. In fact, the elements of military experience, captured by the concept of “friction” or by examples of stunning incompetence, warned about how campaign plans could go very wrong. In a declining or stagnant market, where the spoils would go to the last firm left standing, a fight to the finish employing ruthless strategies might be encouraged. But in growing markets competition might be less intense, and in those marked by complexity there were opportunities for cooperation and even collusion as well as conflict. The military metaphor, if taken too seriously, could lead to inappropriate and unethical behavior. An enthusiasm for a fight and a reputational fear of losing might lead to “price wars” or “takeover battles” being pursued well beyond the point of possible gain and possibly into substantial losses. As with all metaphors, warfare could be illuminating for business so long as it was not mistaken for the real thing.⁵

Yet some of the standard tropes of military strategy could appear pertinent. As early as the 1960s, in his more conceptual musings about strategy, Bruce Henderson of the Boston Consulting Group⁶ drew explicitly on Liddell Hart, emphasizing concentrating strength against a competitor’s weaknesses. He sensed the drama of competition, which was lost when it was presented as “some kind of impersonal, objective, colorless affair,” and discussed the trickery that might be employed to divert competitors. Strategy would be about exploiting differences in management style, as well as matters such as “overhead rate, distribution channels, market image, or flexibility.” He noted how competitors might become friends when a system needed stabilizing. The fundamental strategic rule was: “Induce your competitors not to invest in those products, markets, and services where you expect to invest the most.”⁷

In a seminal 1981 article, Kotler and Singh argued that the need of businesses “to develop competitor-centered strategies to win market share will lead managers to turn increasingly to the subject of military science.”⁸ Marketing Warfare, published by Al Ries and Jack Trout in 1986,i used Clausewitz for inspiration. Marketing strategy was distinct from military strategy because at stake was the mind of the consumer rather than territory (although few military strategists doubted the importance of psychology). Just like the strongest armies, the strongest companies should be able to use their power to stay on top. A company dominating the market had more resources to devote to keep prices down and develop products. Therefore, to have a chance, small companies, like weaker armies, must employ guile and not brute force. Better people, products, or even productivity would not be enough. A well-entrenched defensive position could only be overwhelmed by a much larger force. Nor, following Clausewitz, was surprise likely to compensate for weaker numbers.

Ries and Trout offered four strategies for a marketing war—defensive, offensive, flanking, and guerrilla—with market share determining which was appropriate. Those with the greatest share were interested in market domination, while those with the smallest could concentrate on survival. In the face of a serious challenge the strongest had to respond: if they failed to do so they would progressively lose market share until their dominant position was threatened. The second in the market could mount an offensive to gain some market share from number one, but this would best be done on a narrow front against a critical weakness in the leader’s position. The weakness must be chosen carefully: if it was simply high prices, for example, a firm with sufficient resources would be able to respond by cutting prices. If an offense was too risky, a flanking attack could be mounted with a clearly differentiated product. The risks here involved unfamiliar territory and insufficient signaling to competitors. Small firms were best advised to adopt a guerrilla strategy, in a market segment all of their own, avoiding any serious competition with larger firms and staying nimble, ready to move in and out of an area as circumstances changed. Approaching the enemy indirectly a la Liddell Hart, and then attacking in strength at the enemy’s weakest point, a la Clausewitz, were the key principles imported from military theory. The core advice was to avoid a frontal assault against well-established positions.

During the 1980s, there was a shift toward Sun Tzu.¹⁰ Sun Tzu’s influence was attested to by two references in popular culture. In the movie Wall Street, the villainous Gordon Gekko advises Bud Fox: “I don’t throw darts at a board. I bet on sure things. Read Sun Tzu, THE ART OF WAR. Every battle is won before it is ever fought.” Fox later used Sun Tzu to prevail over Gekko: “If your enemy is superior, evade him. If angry, irritate him. If equally matched, fight, and if not, split and re-evaluate.” Wall Street was a morality tale involving junior stockbroker Bud Fox caught between his blue-collar father, a foreman and trade unionist who represented the virtues of hard and honest labor, and the ruthless, cynical Gordon Gekko, a corporate raider whose motto was “greed is good.” Bud became wealthy by following Gekko’s methods until he realized that a plan to buy the airline where his father worked was all about asset-stripping. The movie appeared in 1987, the year of a Wall Street crash, and seemed to capture the financial mindset that had created both financial mayhem and a loss of moral bearings.

Another villain, Tony Soprano, the eponymous mob boss in The Sopranos, was told, somewhat sarcastically, by his psychiatrist Dr. Malfi: “You want to be a better mob boss, read The Art of War.”¹¹ Later Soprano reported back to her: “Been reading that—that book you told me about. You know, The Art of War by Sun Tzu. I mean here’s this guy, a Chinese general, wrote this thing 2400 years ago, and most of it still applies today! Balk the enemy’s power. Force him to reveal himself.” Soprano clearly felt that his introduction to Sun Tzu had given him a competitive advantage; “Most of the guys that I know, they read Prince Machiavelli.” Soprano claims to have found Machiavelli, whom he read in a study guide, no more than “okay.” Sun Tzu, however, “is much better about strategy.”¹² As a result of Tony Soprano’s endorsement, Sun Tzu became Amazon’s bestseller in New Jersey.

Sun Tzu’s discovery by business strategists generated a whole library offering insights from the master. Mark McNeilly in Sun Tzu and the Art of Business promised explanations of “how to gain market share without inciting competitive retaliation, how to attack a competitor’s weak points, and how to maximize the power of market information for competitive advantage.”¹³ The value of Sun Tzu was seen to spread wider. One book suggested that careful study of The Art of War would help “preserve your marriage vows, and attain the marital bliss that you and your partner deserve to help with marriage.”¹⁴ Following The Art of War elevated the strategist. Instead of encouraging managers to be mini-Napoleons, it urged them to use their wit and outthink their opponents. It was also far less dependent on the Clausewitzian “business-is-battle” metaphor.

Sun Tzu and Liddell Hart appealed to business strategists for the same reason they appealed to military strategists. They required intelligence, imagination, and nerve. There was no skill in outspending a weak opponent, other than possibly getting round anticompetitive regulation. The real skill was in creating new products and developing new services—even new markets that the most likely competitors had missed. Sun Tzu added a degree of moral complexity, illustrated by his supposed attraction to the fictional rogue trader who used insider information to get rich, and the gangster who got rich through extortion and intimidation. As with the tricksters of classical times, this could prompt admiration about their cunning but a deep unease about how this was used to better those who led more virtuous lives. The ability to deceive and outwit an external foe might be celebrated, but there was still something inappropriate about using these tactics at home to gain an unfair advantage.

Another reason for the fascination with Sun Tzu was that it might provide a clue to Asian thinking. Japan, the country defeated so decisively in the Pacific War, had gained a remorseless competitive advantage by adopting business methods that Americans might once have known but appeared to have forgotten. The Art of War suggested a distinctive philosophical outlook, a reliance on patience and intelligence, gaining advantage through a superior grasp of dynamic situations and an ability to conceal one’s own capabilities and intentions while seeing through those of the opponent. By comparison, American managers had become myopic, fixated on finance and the short term, while their opponents thought long term and focused on products. Miyamoto Musashi, a swordsman of the seventeenth century, was a key Japanese figure. When close to death he set down his philosophy for his disciples in The Book of Five Rings (Go Rin No Sho). Although he did participate in a variety of battles, his main skill was in dueling, an art he practiced constantly after opening his account at the age of 13. Musashi’s approach to dueling allowed for a degree of trickery (for example, arriving late to unnerve his opponent or early to catch him by surprise), but there was no doubting his strength and skill. He could fight with a sword in each hand and was still able to throw his short sword. During his life he is said to have fought at least sixty duels without defeat. Although Musashi claimed that his philosophy was relevant to all forms of combat, the duel provided a distinctive perspective, especially when it came to its objective, which was simply to cut down the opponent.

In terms of an overall approach, there was a lot in common with The Art of War, which Musashi almost certainly had read.¹⁵ Musashi described strategy as “the craft of the warrior,” to be enacted by commanders. He explained the importance of his insights by noting that “there is no warrior in the world today who really understands the Way of Strategy.” He urged the development of the sort of intuitive wisdom that comes from hard study of everything that could possibly be relevant (“Know the smallest things and the biggest things, the shallowest things and the deepest things”), stressed staying calm in all circumstances, urged flexibility and a change in tactics (as an evident pattern would enable the opponent to identify vulnerabilities), and was wary of head-on clashes. In order to strike when the enemy was not properly focused, he urged getting to the high ground, checking whether the opponent was left- or right-handed, and trying to push him into difficult terrain. Timing was important, which meant varying pace and staying alert. His preference was to attack first, but attention had to be paid to whether the enemy’s strength was waxing or waning.

Whether, as some claimed, a winning Japanese business strategy could be adduced from all of this was less clear. The Book of Five Rings was not intended for a general reader but for those being trained in a particular martial arts style and attuned to its distinctive spiritual foundations. One authority described it as being “terse to the point of incomprehensibility” and suggested that its “unintelligibility” allowed “the text to function as Rorschach inkblots within which modern readers (businessmen, perhaps) can discover many possible meanings.”¹⁶ To the extent that Musashi was taken seriously in Japan it was as likely to be less as a source of strategic insight and more as something of a role model, as a Samurai hero celebrated for his humility, inner peace, courage, strength, and ruthlessness.

George Stalk, who was sent by the Boston Consulting Group (BCG) to work in Japan in the late 1970s, was less interested in the softer side of Japanese strategy than in its harder, tougher side. He developed his ideas in a 1988 Harvard Business Review article and then a book.¹⁷ This focused on the importance of time as a source of competitive advantage. He picked up on the similarity between his views, which stressed making decisions and implementing them faster than competitors, and those of John Boyd and his OODA loop, encouraging getting inside the decision cycle.¹⁸This led to a line of argument (and language) familiar to anyone who had been following the military reform debate in the United States. In a competitive situation, he noted, strategic choice was limited to three options: seek peaceful coexistence with competitors, which was unlikely to lead to stability; retreat, which meant getting out of markets or limiting exposure through consolidation and focus; or attack, which was the only option that offered growth. But a direct attack through cutting prices and expanding capacity carried high risk, so the best option would be “indirect attack,” involving surprise, leaving competitors caught by the speed of the attack or by their inability to respond. He described how the Japanese did this by tightening up their “planning loops,” from the start of the development of a new product to getting it to the customer. This not only saved money but also left competitors struggling to catch up.¹⁹

The serious question underlying the “business-as-war” literature was whether the two activities were sufficiently similar for military strategy to work in a business context. In some areas, where companies were competing hard for market share, trying to protect themselves from acquisitive predators, repulsing sneaky insurgents, or going on the offensive against a vulnerable establishment, the similarities could appear compelling. By and large, the case studies in this literature involved companies competing head-on (Coca-Cola versus Pepsi-Cola was a classic). Once companies could be represented as armies in battle they could be subjected to the same principles. American military strategists in the 1970s and 1980s began to explore the relevance of Sun Tzu and Liddell Hart, and contrast the virtues of maneuver warfare with unimaginative and costly attrition. Encouraged by John Boyd, they considered how to get inside the decision cycles of opponents to leave them disoriented and confused. With a certain lag, these themes were also picked up by business strategists. A number were certainly well aware of Boyd’s work.

Military strategies were tested only occasionally in one-off encounters that might not always be as decisive as hoped but could be expected to change the terms of any future encounters. Business strategies were tested daily but did include opportunities that could be quite unique to one company and once exploited could create a durable advantage. It was not true that military strategy only involved states as fixed and unchanging entities. Though rare, states could disappear through takeovers and new ones come into existence through fragmentation. With business this was, however, far more normal and possibly its most important distinguishing feature. Companies could break up, be taken over, or simply go out of existence as new ones formed. This made the interaction of internal organization and external environment much more complex. The strategic literature, however, paid surprisingly little attention to this interaction. Arguably, the disciplinary divisions in the social sciences did not help. By and large, economics addressed questions of the relationship of firms to their markets. Its eventual forays into organizational structures were influential but generally disastrous. To understand organizations, sociology was much more helpful but provided few tools (and a disciplinary lack of interest) for analyzing relationships to operating environments. The division in the literature means that our account must follow the first of these strands, led by economics, before it can return to the second, led by sociology.