Judo Strategy: How to beat stronger competitors?(3)
Xing Zong: For many small companies, they are growing too fast to maintain its balance. For example, they constantly can’t resist the temptation to embark on another lucrative market, and distract its energy and attention. Prof. Yoffie, in your opinion, how to avoid overextending and creating an opening for the competition while keep a quick moving forward?
Yoffie: One of the key ideas in Judo strategy is the ability to maintain your focus. Think about a judo match, if you lose focus, you lose balance. You get knocked out. If companies lose their focus, while try to take advantage of every opportunity out there, that might work fine, but not in a situation where they have dominant competitors, loss of focus can kill you.
Xing Zong: As a strategist, the last thing you want is to get locked into a tit-for-tat struggle or a war of attrition. Could you please elaborate?
Yoffie: In any head-to-head battles between players of different sizes and capabilities, it is generally the case that the large players will win. Therefore the critical issue is to find ways in which you to avoid tit-for-tat. For example, when large companies, such as Microsoft, during the internet boom tried to attack E-bay, E-bay could not afford to go head-to-head. They would have had no chance of winning. Instead, eBay stayed highly focused. They maintained their model and selectively responded in those areas where their competitors didn’t have good ideas. It was not a matter of matching every move, but rather selectively matching moves that were good ideas.
Xing Zong: I especially like the following point that you made: anything that represents a significant investment can become a barrier to change. And by exploiting these barriers, you can find the leverage you need to win. But it is easier said than done. In the current business world, executives seems to have a preference of large scale, and as a result merge and acquisition happen everywhere and everyday! Prof. Yoffie, what is your comment on that?
Yoffie: Judo strategy is similar to other types of strategy: if you don’t executed well, your results will be problematic. I don’t think that’s special to Judo strategy.
But question deals with what happens when companies make specific investments, which lock them into a particular path. In highly competitive situations, these dynamics are dangerous. The important insight from Judo Strategy is that you shouldn’t go down a path which locks yourself into a particular investment. Instead, you must understand the tradeoffs, and constantly be aware of potential opportunity for competitors to attack.
Xing Zong: As the saying goes, “the enemy of my enemy is my friend”, which leads the last rule: leverage your opponent’s competitors. But there is another saying, “no permanent friends and no permanent enemies, only permanent interests.” So my question is: how to deal with the enemy of your enemy so that they can always be your friends? This relation is actually quite difficult to maintain, do you agree?
Yoffie: Relationship with any set of partners is always going to be fluid. There is no such thing as permanent in business, unless you merge and create a hierarchical structure. The key insight is that competitors can also have opportunities to get together. It is a particularly difficult problem for companies to respond when only way for them to respond it to work with the competition. It requires that they put their own products at risk.
Xing Zong: Last question. You probably know that Google in China has less market share than Baidu.com, the largest Chinese search engine, Yahoo is defeated by Sina.com and sohu.com, Ebay also takes a retreat because Taobao takes free transaction approach. So I would like to add Technique no.11 to your article: although this is a flat world, you can still take great advantage of your home game because you are the deeply rooted in this culture. Prof. Yoffie, what do you think?
Yoffie: (a hearty laugh) Well, what I would say is that isn’t a Judo Strategy rule, but maybe a generic piece of advice worthwhile for all local companies to consider.
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