Sun tzu and the art of business

S U N Tz u

A N D TH E

A RT OF

BUSINES S

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S U N Tz u

A N D TH E

A R T O F

BUSINES S

S I X STRATEGI C

PR I NCIPLE S

F O R MANAGER S

MAR K

New York • Oxford • Oxford University Press • 1996

MCNEILLLY

To my parents, James and Esperanza, for their love,

To my wife Sandy, for her help and support in all things,

To my children, Alex, Logan and Kenzie, for being themselves,

And to God, who makes all things possible.

OXFORD UNIVERSITY PRESS

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Copyright © 1996 by Oxford University Press, Inc.

Published by Oxford University Press, Inc.

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Oxford is a registered trademark of Oxford University Press

All rights reserved. No part of this publication may be reproduced,

stored in a retrieval system, or transmitted, in any form or by any means,

electronic, mechanical, photocopying, recording, or otherwise,

without the prior permission of Oxford University Press.

Library of Congress Cataloging-in-Publication Data

McNeilly, Mark.

Sun Tzu and the art of business :

six strategic principles for managers / Mark McNeilly.

p. cm. Includes bibliographical references and index.

ISBN 0-19-509996-6

I. Strategic planning. 2. Sun-tzu, 6th cent. B.C.—

Views on management. I. Title.

HD30.28.M3857 1996 658.4'oI2—dc2O 96-26080

13579864 2

Printed in the United States of America

on acid-free paper

PREFACE

Sun Tzu's The Art of War has proved to be a classic work on strategy,

applicable to both military and business situations. While it has been

relatively easy to apply the military concepts to wars, both past and

current, it has proved much more difficult to translate Sun Tzu's stra￾tegic concepts into successful business strategies. The purpose of this

book is to crystalize the concepts and ideas put forth in The Art of War

into six strategic principles that can be more easily understood and

applied in the world of business. These principles are then illustrated

by business examples, which explicitly describe how the principles can

have a direct impact on the strategies of real companies around the

world.

My interest in writing this book resulted from the combination of

insights I gained working as a business strategist for a major global

corporation, the thoughts I'd compiled from my readings as an amateur

military historian, and my interest in Sun Tzu's strategic philosophy.

These three forces led me to begin work on Sun Tzu and the Art of

Business five years ago.

It should be of comfort to the reader that, in the process of re￾searching this book, I found more and more evidence of the soundness

of its principles. For example, when I started writing, I began by using

business examples that were still in the process of sorting themselves

out. Many of the companies I followed were involved in situations that

only came to closure as the book neared its final draft. It was very

reassuring that the examples I had chosen of good and bad implemen￾tation of strategy turned out as the principles of Sun Tzu had predicted.

The problems of Kmart, AT&T Global Information Systems, and Philip

PREFACE

Morris as well as the effectiveness of Southwest Airlines, to name a few,

proved that the principles are extremely useful in predicting business

success or failure and implementing strategy. I believe that if you un￾derstand and use the principles of Sun Tzu and the Art of Business ap￾propriately, you too will see their effectiveness.

Zumbrota, Minnesota M.R.M.

May 1996

VI

ACKNOWLEDGMENTS

This book has been several years in the making, and through that time

I've had the opportunity to have my strategic thinking influenced by a

number of people. Their insights and actions have made a significant

impact on me and have made this book better.

Joe Pine, author of Mass Customization: The New Frontier in Business

Competition, has been a great friend and advisor. Julie and Tom Furey,

Bill Zeitler, Vic Tang, Emilio Collar, Roy Bauer, and Larry Osterwise

were all instrumental in introducing me to business strategy and sharing

their wisdom. Jack Scheetz, Bruce Jawer, Bill Meinhardt, Don Mitchell,

Pete Hanson, Michael Cheng, Niall Coughlin, Nelson Martel, Steve

Gessner, and Bill Leskee were great sounding boards for ideas and each

in their own unique way helped me develop my thinking further. All

my good friends and co-workers throughout IBM, especially those in

the AS/400 Division, have helped me personally and professionally. The

faculty of the Carlson Business School, University of Minnesota, gave

me an excellent academic base on which to build, and my classmates

from the Carlson MBA program broadened my horizons.

I am also very grateful to my editor Herb Addison for his excellent

insights on improving this book and the reviewers, James Blandin, Dean

of Management and Security Studies at the U. S. Naval Postgraduate

School, Ming-Jer Chen, Associate Professor of Strategic Management

at the Columbia Business School, and Weijian Shan, the Chinese Busi￾ness Representative for J. P. Morgan in Hong Kong whose ideas added

value to this work. I would also like to thank the heirs of Samuel B.

Griffith, who graciously allowed Griffith's translation to be a major part

ACKNOWLEDGMENTS

of this book. Thanks are due as well to Terry McManus, Deb Benson

and Deb Garry for cheering me on to finish.

Lastly, I want to thank my wife, Sandy. She read and reread each

chapter, gave honest and insightful feedback, and provided me the time

and support necessary for completing the book. Most important, she

shared the dream.

Although I have written this during my employment at IBM and

some of the examples are from the computer industry, I have taken

great care to be objective and factual in my analysis in those instances.

Furthermore, IBM has neither supported nor hindered my writing of

this book and all comments, interpretations, and errors of fact are my

own.

V I

CONTENTS

Introduction 3

1. Win All Without Fighting:

Capturing Your Market Without Destroying It g

2. Avoid Strength, Attack Weakness:

Striking Where They Least Expect It 23

3. Deception and Foreknowledge;

Maximizing the Power of Market Information 40

4. Speed and Preparation:

Moving Swiftly To Overcome Your Competitors 59

5. Shape Your Opponent:

Employing Strategy To Master the Competition 90

6. Character-Based Leadership:

Providing Effective Leadership in Turbulent Times

7. Putting The Art of Business into Practice 141

Notes 155

Suggested Readings of The Art of War 165

Original Translation by Samuel B. Griffith 167

Bibliography 251

Index 257

1 1

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S U N Tz u

A N D TH E

A RT OF

BUSINES S

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Introduction

Some time around 400 B.C., during a period in China known as the

Age of the Warring States, there arose a general from the state of Ch'i

known as Sun Tzu. His ability to win victories for his warlord gained

him fame and power.

To hand down the wisdom he had gained from his years of battles,

Sun Tzu wrote a book, The Art of War, that became the classic work

on strategy in China. His book, which details a complete philosophy

on how to decisively defeat one's opponent, has given guidance to

military theorists and generals throughout the ages, both in the East and

the West. The Art of War not only contains Sun Tzu's insights but also

provides additional elucidation by military commentators who came

after him, such as Li Ch'iian, Tu Mu, and others. In The Art of War,

military readers found an holistic approach to strategy that was powerful

yet succinctly communicated—it is truly a masterpiece on strategy.1

Uses of The Art of War

In China, the first Emperor Qin Shihuang studied The Art of War.

Adhering to its principles, he united China for the first time around

200 B.C.2

Twenty-one centuries later, Mao Zedong used Sun Tzu's

writings to defeat Chiang Kai-shek and the Nationalists in 1949, again

INTRODUCTION

reuniting China. Sun Tzu also influenced Mao's writings on guerilla

warfare, which in turn provided the strategy for communist insurgencies

from Southeast Asia to Africa to the Americas.

Japan was introduced to Sun Tzu's •writings around 760 A.D. and

her generals quickly absorbed its lessons. The three most well-known

of her samurai—Oda Nobunaga, Toyotomi Hideyoshi, and Tokugawa

leyasu—all mastered The Art of War. This mastery enabled them to

transform Japan from a collection of feudal states into a single nation.

In the West, The Art of War first made its appearance in 1772 in

Europe after being translated into French by a Jesuit missionary. It is

possible that Napoleon read and was influenced by Sun Tzu's work,

given both his interest in all things military and his culture's interest in

Chinese literature.3

B. H. Liddell Hart, the British military historian whose theories on

armored warfare led to the development of the German blitzkrieg, was

amazed at the depth of Sun Tzu's military philosophy and instruction.

He was impressed by how closely Sun Tzu's ideas mirrored his own

theories of warfare and thought that, had The Art of War been more

widely read and accepted by World War I generals, much of the terrible

slaughter of trench warfare could have been avoided.4

The principles discussed in The Art of War have been used suc￾cessfully in countless battles throughout time. Speed was an essential

factor in the victories of Genghis Khan and his Mongolian horde. Shap￾ing their enemies by the skillful use of alliances allowed the Romans

to expand and maintain their empire. Secrecy and deception were used

in major World War II battles, both by the Japanese in their attack on

Pearl Harbor and by the Allies to mislead the Germans about the exact

location of their invasion of France. The use of intelligence was critical

to American success in the Cuban missile crisis. The Viet Cong lived

by the rule of avoiding strength and attacking weakness, while the Red

Army used this principle to deal Germany's Sixth Army a devastating

defeat at Stalingrad.

Most recently, Sun Tzu's principles were put to the test in Desert

Storm. By controlling the air both to follow Iraqi movements and mask

his own troops' movements, General H. Norman Schwartzkopf fooled

Saddam Hussein as to the location of his attack. Threatening an am￾phibious assault in the east, Schwartzkopf did an end-run on the Iraqi

army in the west, thus winning a stunning victory with extremely low

casualties. Deception, speed, and attacking the enemy's weakness—all

part of Sun Tzu's philosophy—added up to amazing success.5

4