The Art of ‘Ware [version 2.0] by Bruce F. Webster
[Copyright (c) 1995, 2008 by Bruce F. Webster. All rights reserved. Last updated 04/30/08]
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The test of leadership is to deal with events that are thrust upon you, as well as those which you or those under your stewardship have brought about. You must recognize each situation, evaluate it honestly, and handle it appropriately. Of course, you’ll have to do all that while still dealing with your employees, your customers, and the competition. But no one ever said this would be easy.
Sun Tzu, in Chapter 11, talks about the nine tactical situations that a general may have to deal with, and the corresponding demands for both internal leadership and external conflict. But he sums up the chapter, and perhaps the whole book, with a single comment: “To gather his army and lead it into danger — that is the duty of the general.”
In competing for a market segment, there are nine situations in which you may find yourself: stalemated; tentative; critical; cooperative; vital; ascendant; difficult; trapped; desperate.
These names are shorthand for various market conditions you may face within a given market segment (or perhaps in your entire market). Each situation is defined by the degree of market penetration, the business opportunities, the requirements and demands of the customers, and the present and potential competition.
When you and the competition trade attacks from the safety of your respective segments, the situation is stalemated. Don’t worry about the competition; instead, focus on how well your company is functioning internally.
In this situation, neither company is making a dent in the other’s market. There is no real threat, but there is no real growth, either.
Don’t waste resources on the competition, because you and they don’t have the same market base. Spend your resources on your products and on your customers. There is no immediate threat, so concentrate on getting the company moving toward a common goal.
Companies tend to be unified when facing great challenges, but there’s a risk of internal disputes before commitments have been made.
When the company is deep into a given commitment or faces serious outside challenges, the employees and manager tend to pull together. But when the commitment has not been made and the risk is not yet there, there can be a lot of disagreement about what to do and how to do it.
All the divisions in your company should be able to work together. You may wonder, “Can marketing, engineering, and administration really work together?” Yes, they can. After all, many bitter marketplace rivals have joined forces when threatened by a common foe.
In other words, if competing firms can set aside differences for the sake of mutual profit and survival, then surely groups within the same company can do the same.
Different divisions and individuals can then be focused on key tasks as the market situation requires.
With universal commitment and the ability to work together, the company can bear down and solve problems.
This is the essence of management: to have a uniform level of commitment from the CEO down to the humblest employee.
Two points. First, there must be a sufficient (if not superlative) level of commitment. Second, it must exceed some given standard at all levels. Too little commitment at any level can lead to cynicism, frustration, and burnout on the other levels.
When you have lightly penetrated the competition’s market segment, the situation is tentative. Don’t slow down your marketing efforts; focus on communication within the company.
When you first start to take customers away from the competition, you are most vulnerable to a strong response from them, particularly using the criticism of your product as being nonstandard (“Everyone else uses our product; why take a risk on theirs?”).
To deal with this, press ahead rapidly, gaining customers and market share as fast as possible. The competition is going to respond at some point, and you need to have as large a base as possible. This can become a risky situation very quickly; the different divisions need to communicate and coordinate well in order to continue to gain market share.
Take advantage of the competition’s blind spots, enter the market by ways they don’t expect, penetrate areas where they are weak.
In other words, be unpredictable. Also expect the competition to attempt all these efforts against you.
Appear tentative at first, so that the competition will underestimate you; then move rapidly and surely so that they cannot keep up with you.
Few things are better than to have the competition think little of you. It leads them into complacency and disdain; they will cease to pay attention to you, and they will be unprepared to respond to your actions.
When the market segment can give significant advantage to you or the competition, the situation is critical. Don’t worry about engaging the competition; instead, bring all your resources to bear to capture the segment as quickly as possible.
The first one established there can have a significant advantage over the other and may be very difficult to dislodge.
If the competition got there first, don’t waste resources attacking the competition; it isn’t necessary. Either you or the competition will gain that key segment, do focus on securing it as quickly and completely as possible.
The deeper and more successfully you cut into the competition’s market share, the greater your company morale and enthusiasm, and the harder you are to overcome.
Success breeds success. It also breeds excitement, confidence, and fun. You will keep your existing personnel and attract excellent ones from outside the company. With luck, it will have the opposite effect on the competition, causing discouragement and defections.
When the market segment can be readily shared by several firms, the situation is cooperative. Don’t leave openings in your market approach; focus on your weak spots.
There are some markets where multiple products, or multiple sources for a given product, are desirable or even required, such as microprocessors. Or the situation may demand the products from different companies work well with each other, witness the ongoing cooperation, sometimes grudging, in the marketplace for Internet/Web software. In these cases, cooperation becomes essential.
Fill every nook and cranny of this market that you can; otherwise, the competition may do so and slowly force you out. Look for areas where the competition might leverage itself and push you out of the segment a bit more.
When the market segment opens the door into several other segments, the situation is vital. Branch out quickly into those segments, but first do customer research and pre-marketing in each.
There are both direct and indirect versions of this situation. In the direct version, capturing a key segment gives you a tremendous advantage in moving into other segments. This is what Microsoft accomplished by winning the desktop GUI segment, and Microsoft has leveraged that position highly in productivity application software.
In the indirect version, capturing a key segment gives you a “back door” opportunity to move into other segments. This is the “Trojan Horse” strategy, and it allowed Apple (via the iPod and iTunes) to move the Macintosh into consumer homes in a way that they would never have been able to do otherwise.
When you capture such a segment, use it to move quickly into the other connected segments, even while securing your position in the vital segment. But first talk with customers in connected segments to get product feedback and to secure cooperation in selling them. Don’t assume that the approach that worked in this segment will work in the connected ones.
When you have made significant inroads in the competition’s segment and have won over important customer accounts, the situation is ascendant. Aggressively seize market share; make sure you have devoted all the resources necessary to do so.
This represents successful capture of market share from the competition.
Capture all the market share and customers you can and milk to situation for all it’s worth, both to gain resources for yourself and to deny them to the competition. The worst mistake is to pull out dedicated resources because of the success to date; this can jeopardize what you’ve gained so far. Instead, pour more resources into it and ensure complete success.
Milk rich markets to support your company. See to the growth and wellbeing of your employees; do not burn them out. Enroll the employees in the company vision and hold back from all-out effort until it is essential.
Too many companies treat employees as expendable as resources, to be used up, discarded, and replaced. That attitude may yield short-term results, but it is ultimately self-destructive, because no one will want to come to work for you.
When you enter a segment that is hard to sell and that requires special support and development, the situation is difficult. Decide quickly to either get in or get out.
You should push ahead only if the return for your efforts is great, either because of immediate payoff or because the segment is vital.
Make a quick decision: stay with the segment and make it a success, or pull out of it altogether and cut your losses. If others have responsibility, make them decide quickly to push through to success or abandon the segment completely.
When a segment ties up significant resources for an extended period of time, allowing the competition to challenge you with fewer resources, the situation is trapped. Rethink your approach while seeking to block the competition’s inroads.
Even if the eventual return from this segment is significant, the demand on resources prevents you from competing as well in other segments, and your overall return may decline.
Do you really need this segment? Is there some way that you can get a better return with fewer resources? Is there a more general (or more custom) approach you can take? While seeking these answers, find ways to nullify the competition’s attempts to attack you.
How do you deal with a well-organized, well-financed company about to attack your market directly? Gain control of something they desire, and use it for leverage.
Face it: you’ll probably lose a direct competition with them. Your solution, then, is to develop or acquire technology, products, and/or customers that they want or need and use that as a base for negotiation.
When you have to respond quickly to the competition or lose the segment all together, the situation is desperate. Fight back hard; let the company know how serious things are.
This is when you’re on the receiving end of an ascendant situation: the competition has made serious inroads into your segment and has won key accounts.
Hang on to every customer, every account. Make it clear to your customers and to the competition that you are not giving up, and that they are going to have to devote increasing resources to that segment. Make it very clear to all the employees just how bad things are going in the market, to help unify them and get their best effort.
Place your employees in a do-or-die situation against powerful competition, and they will move heaven and earth to accomplish what is asked of them. When all employees from the CEO downward face the same risks, than all will put forth the same effort. When faced with overwhelming odds and nowhere to go, the employees will give their all.
The key in all of this: “when all employees from the CEO downward face the same risks”. In an age of mobile executives and golden parachutes, it’s going to take some serious commitments on the part of upper management to convince the rest of the company that risks really are shared.
In this situation, the employees do what is needed before being told, give trust and loyalty without being asked, and cooperate with one another without causing problems.
There may be some who, even under the circumstances previously described, will continue to cavil and slack. Fire them.
Stock options aren’t enough to make employees remain, nor are payroll cut-off dates enough to make them give their all.
Golden handcuffs and dire threats don’t always work, especially with engineers and other developers. Indeed, they may have the opposite effect, driving them away from the company.
When faced with the final do-or-die effort, employees may act upset or be stressed, but once the effort starts, they work hard, long, and without complaint.
Anticipation is worse than the fact, and once they see the shared commitment and effort, the employees settle in to the task.
It is the nature of people to defend when challenged; to strive hardest when there is no alternative, to expand when superior.
Use this nature to focus their efforts according to the various situations you face.
As CEO, you guide the company into a high-risk situation, as if crossing a river and then burning the bridge behind you. Once in that situation, you focus and release the energy of the company. You make irrevocable decisions and guide the company ahead, for there is no turning back.
In short, your responsibility is to unify the company and lead it into areas of risk.
Both tasks are necessary. Without unity, the company will splinter under the pressure of risk; without risk, the employees will not give their best effort.
Learn to deal with the nine situations, with market expansion or contraction, and with the plans and reactions of others.
There are specific leadership challenges associated with each of the nine situations, with the state of success in the market, and with how the employees and the competition react to these conditions.
As CEO, you should be calm, confidential, even-handed and organized.
Four principles. Calm: you need to keep your head and wits about you. Confidential: you need to be able to keep a secret. Even-handed: you need to be fair and balanced in managing, rewarding, and disciplining others. Organized: you need to know what is going on and can be able to convey that information to others in a timely fashion.
You should be able to deal with highly sensitive information, keeping it from employees when necessary.
Do not confuse employees with dishonesty, though. Lying to your employees will almost always backfire in the end, corroding their trust, loyalty, and respect, as well as your own ethics.
Remain unpredictable to your competitors and keep your true intentions secret.
A general principle is that the less the competition knows about you and the less they can predict your actions, the more broadly they have to prepare or respond and the more resources and effort they consume.
Be prepared to change product specification and to alter marketing plans as required to keep the competition confused.
Be sure, however, that you don’t confuse your own marketing and engineering divisions in the process.
If you don’t know the plans of other companies, you cannot form appropriate strategies and alliances.
You need to know what’s going on in the rest of the industry — not just among actual or potential competitors, but among all relevant companies.
If you don’t understand the marketplace, you cannot create successful products.
Your product must meet the needs and/or desires of the potential customers so well that they are willing to spend their money to buy instead of any competing product or any other use they might have for that money.
If you don’t hire experienced developers and marketers, you cannot fully exploit development technologies, distribution channels, and market opportunities.
Get people who know what they’re doing and who know what you want to do. If you’re going to do multimedia applications, hire experienced multimedia developers, experienced multimedia product managers, experienced multimedia marketers.
A CEO who doesn’t understand even one of these three principles shouldn’t be running a company.
To summarize: know the competition; know the market; hire the right people.
Reward employees appropriately, regardless of company policy.
While there should be established guidelines for promotion, bonuses, profit sharing, etc., do not be limited by those guidelines. When appropriate, give rewards above and beyond the norm: cash, promotions, extra vacation, a paid trip somewhere, a custom T-shirt. Recognition for effort and accomplishments goes a long way.
Guide the company without worrying about precedence.
Too many decisions and policies are shaped by inertia and tradition. Be willing to make the right choice, regardless of how things have been done in the past.
Tell the employees what to do without divulging all your plans. Focus on the benefits and rewards; minimize company troubles.
There is a fine line here between keeping the employees focused and hiding important information from them. The guideline: if the issue is likely to be resolved without a significant impact on the employees, then you probably don’t need to discuss it at large. At the same time, you need to be aware that, as mentioned before, an information vacuum will fill itself, often with rumors and ever more frantic concerns.
Finally, as said before, don’t lie. Withhold information if you must, but don’t lie.
Lead them into high-risk situations, and they will make it through. Present them with impossible challenges, and they will surpass them. When faced with the greatest dangers, your employees can achieve the greatest success.
When there is a true high-risk situation, use it as a rallying point for the employees. Do not underestimate what they can and will accomplish when faced with insurmountable odds. But, and this is critical, all in the company must share the risks and the efforts, as well as the rewards. Employees who think they may lose their jobs, but don’t see a similar risk for you and other senior managers will be more focused on lining up a new job in advance than in helping you succeed.
If you do this, you can manage a large company as if managing a single person.
The company will respond to direction as would an individual.
Time to market is the essence of competition.
This applies to both initial product release and to significant revisions: the product that gets there first has a major advantage over all others.
Time to market can be measured from several points: (1) when the competition learns of your development; (2) when the industry learns of your development; (3) when potential customers learn of your development; (4) when the product becomes relevant (and when it might become irrelevant or obsolete); (5) when customers voice their desire or demands for the product. Good security can effectively shorten time to market in the first three cases; market forces influence the fourth. The last case is the most critical situation: you risk both angering your customers and handing the competition a great opportunity to take market share from you.
When you are ready to roll out your product, tighten security and shut down communications with your competitors.
Go quiet shortly before launch; create uncertainty in the competition’s mind as to what you’re releasing and when.
When an opportunity appears, move rapidly to take advantage of it. Discern what the competition wants and strive to gain it first, anticipating their plans.
This is probably easier to do with equipment and hardware than with software and other forms of information and entertainment, but that makes it all the more important to be able to do this in all categories. Anticipate the competition so that you can block them from markets that you would like to capture.
When you go up against a powerful competitor, you must distract and divide the opposition. You need make a good showing against that competitor and thus cause hesitation and doubt in those that might ally with them.
Other companies will tend to side with the firm that they think will be the eventual winner. You must sow doubts among those firms, so that they don’t throw in with the competition and thus make your success even more difficult.
In this way, you can undermine potential alliances and win customers back.
Many of the “strategic alliances” of the past, especially those designed to establish “standards,” have failed because competing companies shipped a desirable technology today as opposed to an uncertain technology tomorrow.
The essence of competition is to observe others closely as a guide to your own actions.
Again, to ignore the competition as you push ahead is dangerous and can be fatal. You must know what they are doing and understand why they are doing it.
Your key task is to appear to accommodate the plans of your competitors.
The more you seem to play into their hands, the more unprepared they will be for your actual course of action.
With total focus on your competitors, you can render their leadership ineffective at a distance. This is the height of skill.
This idea: use a variety of methods, actions, information, and misinformation to lead the competition into decisions that benefit your company.
Again, you need to recognize the different competitive situations in which you can find yourself, and you need to respond to each appropriately, both externally and internally. You call forth the best of your employees by putting them into high-risk situations and then rewarding them, individually and collectively, when they come through.
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