Big Ideas for Small Business Managers
The future is not detached from the present. If you want to make an accurate guess of where your business will end a few years down the road, all you need to do is answer this simple question: How do you define your ‘business strategy’? If your business strategy isn’t clearly defined, you will find impossible to develop and achieve growth, while also failing to meet your personal goals as an entrepreneur and business leader.
There are a dozen directions to achieve success in business but at the core of every path is the fact that you should be realistic, both about what you can achieve with your existing resources and what opportunities the market has to offer. The key is to focus on your strengths, curb the weaknesses and find a way to leverage these strengths to oust competitors. And this is where your business strategy helps you out.
Specifically, business strategy defines what needs to be done to meet business goals, which also means that it helps you make sound decisions related to resource allocation. And while all departments need to work independently and innovatively, a business strategy ensures that that there is no conflict between what each department is doing with the overall direction of the organisation.
In short, your business strategy can be a short single page full of bullet points or a complete booklet that defines the purpose of the business, its strengths, target market and product line-up.
Strategy doesn’t have its roots in business applications. Its origin comes from ancient Greeks and is derived from the word ‘strategos’, meaning to lead an army or generalship. Generals over the centuries have relied on military strategy to conquer territory and gain power. These generals wanted to outmanoeuvre competing forces, gain territory and power and conserve resources while expanding their influence. While the terminology varies, these challenges are not much different from those of business.
The military viewpoint provides five primary strategy principles that can strengthen your understanding of strategy, which you can apply to meet most of your competitive challenges. These principles include direct attack, indirect attack, envelopment attack, bypass attack and guerrilla attack.
No manager is justified in launching a marketing campaign against a competitor who is entrenched in an actively defended market-leader position. A direct attack should be avoided at all costs, especially so for the smaller business. Most often it results in exhausting budgets, demoralizing employees and using hard to replace resources without achieving your objectives.
Even if you do achieve some minor objective, such as obtaining minimal sales or gaining a foothold in a market niche, after the exhausting battle, a few resources will remain for penetrating the market and realizing its full potential. Using the military parallel, no resources are available to “get off the beaches” before the opponent counter-attacks and succeeds in pushing them back “into the sea”.
Support for the above assertions come from history. A study was done about the 12 wars that decisively affected the entire course of European history in ancient times and 18 major wars of modern history up to 1914. In all, these 30 conflicts embraced more than 280 major military campaigns and spanned 2,500 years. The study revealed that in only six of those campaigns did a decisive result follow a direct frontal attack. And of those six, most began with an indirect attack but were changed to a direct attack due to a variety of battlefield conditions.
Thus, reviewing the overwhelming evidence of history, we can conclude the following:
(1) No general is justified in launching his troops in a direct attack upon an enemy who is firmly in position. (2) In like manner, we can interchange the above terms and state with strong confidence that no manager is justified in deploying sales, marketing and other resources in a direct manner. (3) Campaign against a competitor who is firmly entrenched in an actively defended market-leader position will be very costly. If there is little or no differentiation in such areas as product, promotion, pricing or distribution - as perceived by the market - there is minimal chance of success.
Just how much stronger is the defence against a direct attack? The military experts say that a three-to-one advantage is needed to break through a defender’s line in a direct frontal attack.
This means having three times more armour, artillery and land and air-support, as well as employing three times more logistics than available to the defender. Therefore, even if a breakthrough does occur by using a massive infusion of resources, inadequate human and material resources would remain for follow-up and penetration.
In business terms, a three-to-one advantage translates into three times more salespeople, advertising expenditures, product development, logistical and administrative support, which is a huge expenditure of resources for little, or perhaps, no return.
An indirect attack relies on differentiation and concentrates on market segments that are emerging, neglected or poorly served by competitors. If the direct attack requires the aggressor to expend an enormous quantity of resources, thereby depriving it of strength for further market penetration, then an alternative approach must do the opposite. Such an approach is to place the competitor at a disadvantage by concentrating
on its weaknesses.
The indirect attack is the most fruitful approach. It has the greatest chance of success while conserving the greatest amount of strength.
When an indirect attack is applied as a business strategy, the attacker concentrates on a weakness in those market segments that are emerging, neglected or poorly served by competitors. For instance, strategies could consist of a product, price, promotion or distribution. Once entrenched in the initial market segment and able to establish market presence, a customer base and a supply chain network, the attacker can more easily secure additional parts of the market previously dominated by competitors. This critical follow-up to entry is called market expansion.
With the abundance of business examples and with evidence from military history, there is never any justification to undertake a direct frontal attack in today’s competitive market. It is more advisable to use an indirect approach to find opportunities in unattended, poorly served or emerging market segments.
You can create a competitive advantage by using your product/service, price, promotion and distribution in a configuration that cannot be easily matched by competitors. Then apply your maximum strength against the weaknesses of your opponent. Mobilize all your available resources on fulfilling the unmet needs and wants of the selected market. Then work diligently at solidifying relationships with your customers for the long term. Expand into additional segments of the market in a planned, deliberate approach that keeps in mind the overwhelming advantages of the indirect approach.
Business and war do have one significant thing in common: they are both intensely competitive. No matter what your business, there is a battle-ready competitor out there who’s ready to take your customers. Business has always looked to military thought for strategy and tactics.
(Next week: Envelopment attack, bypass attack and guerrilla attack)
(Lionel Wijesiri, a corporate director with over 25 years’ senior managerial experience, can be contacted at email@example.com)